Italian PM Mario Monti will address Italy’s parliament on Monday to offer a new austerity package valued at 30 billion euros. The new package consists of new austerity measures that attempt to reduce Italy’s large sovereign debt and help the Italian economy to recover.
The Italian cabinet approved the new measures during a 3 hour emergency session on Sunday. Monti will seek the support from the Chamber of Deputies and Senate later on Monday.
The austerity package includes tax revenues gained from first time homes, a tax on luxury items such as yachts, and a crack down on tax evasion. The package also includes some cuts with government pensions. Italian pensions will take a hit with a delay of one year for the retirement age.
“We want the Italian economy to recover. We want to give the Italian economy the great weight and have a serene relationship with public opinion on the international scene, particularly in Europe” Monti told cabinet members.
This week ahead will be monumental week in Europe. The European Union Summit will convene in Brussels on Thursday and Friday to address a new strategy for lowering European debt levels throughout the European Union.
The European Central Bank (ECB) will meet on Thursday. Economists are expecting an interest rate cut of .25% which will bring down the interest rate to 1.0% from 1.25%.
Amid new calls for a viable European rescue plan consisting of austerity measures along with a unified EU fiscal policy, Europe’s leaders will seek to adopt new budgetary measures that allows for greater fiscal governance and fiscal integration.
Creating sound fiscal discipline and integrated austerity measures without sacrificing long term sustainable growth is no easy task.
During the last few weeks, European banks have been dumping European government debts, causing their long term bond rates to rise to crisis levels.
When borrowing costs rise to crisis levels, the fear of contagion spreads, and the risk of recession grows more palpable.
Italy’s public debt is 120% of GDP. They have 2.2 trillion in debt.
Trading on Monday
The markets in Europe are responding well to Monti’s latest austerity plan. All of Europe’s stock indexes are now trading higher. Futures are also higher for U.S. markets on Monday.