http://www.guardian.co.uk/commentisfree/2011/dec/05/mario-monti-austerity-measures-italyOn Sunday evening Italy's recently formed government approved a set of crisis measures aimed at recouping €30bn. Italy's prime minister, Mario Monti, called them a "plan to save Italy". There were tears, literally. The labour and welfare minister, Elsa Fornero, began to cry as she announced changes to pensions that will bring the pension age for women to 62 and for men to 66. The change will also see increases in the minimum number of years taxpayers need to work before being able to retire, and critically the plans will delink pensions from inflation for all but lower payments.
The austerity measures breakdown into €12-13bn of cuts (in addition to pensions, the guillotine mainly fell on local authorities) and €17-18bn of tax increases.
Ahead of the announcement, there had been a lot of speculation in the Italian media that the government was set to increase income tax for those earning more than €75,000 a year. This did not happen. Instead, the government focused its tax increases mainly on property and assets – reintroducing taxes on first homes and raising existing levies, increasing the levy on second homes by up to 75% and increasing taxes on yachts, private jets and luxury cars. Throughout, Monti was adamant in stressing the fairness of his measures – a point he underlined by saying that he won't be taking a salary as prime minister. In addition to taxes on luxuries, the government also introduced a levy on bonds and shares held by investors and a 1.5% tax on capital bought into Italy last year from abroad (this may explain German Bundesbank estimates that €80bn of capital was taken out of Italy in August and September).
The government also announced that VAT would be increased again, to 23%, if needed, in the second half of 2012 – it is very likely this will happen.
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