The Italian government has approved a package of spending cuts worth €24 billion to be implemented from 2011 to 2012.
Tuesday evening’s (25 May) cabinet decision makes Rome the latest administration inside the 16-member eurozone to move decisively to bring down its budgetary deficit.
Concerns over rising European deficit and debt levels have led investors to sell eurozone sovereign bonds, resulting in a 14 percent decrease in the value of the single currency this year.
The Italian measures include a three-year freeze in public sector wages and cuts of roughly €13 billion in funding to regional and local governments. A clampdown on tax avoidance is also planned.
The move means heavy-spending regions such as Lazio and Campania are likely to have to raise business and income taxes, despite repeated promises from Prime Minister Silvio Berlusconi against such moves.
The Italian cuts, equal to 1.6 percent of GDP, are designed to bring the budgetary deficit back under the three percent allowed under EU rules. Although considerably lower than deficits seen in other EU countries, Italy’s debt level is currently 115 percent of GDP, the highest in the region.