ITALY: Analysts say markets likely to remain unimpressed following amendments made by government to austerity package

Record ID: 731118

  • Title: ITALY: Analysts say markets likely to remain unimpressed following amendments made by government to austerity package
  • Date: 31st August 2011
  • Summary: ROME, ITALY (AUGUST 30, 2011) (REUTERS) REUTERS SENIOR FINANCIAL CORRESPONDENT WORKING IN NEWSROOM (SOUNDBITE) (English) GAVIN JONES, REUTERS SENIOR FINANCIAL CORRESPONDENT, SAYING: "I don't think it will calm anyone, if anything I think it will probably cause more confusion. I don't think markets will be very pleased to see these constant changes, constant negotiations. What they (the government) produced last night was obviously the result of a political compromise and we have seen the solidarity tax removed and we have seen the cuts to local government authorities watered down quite alot and replaced by fairly unspecified measures on combatting tax evasion. Analysts are always a bit skeptical about that unless they are very specific, because the revenues from measures against tax evasion are notoriously uncertain."
  • Embargoed: 15th September 2011 13:00
  • Keywords:
  • Location: Italy, Italy
  • Country: Italy
  • Topics: Economy,Politics
  • Reuters ID: LVANXWRH8X1Z1Z6IUV3QB6JSYFX
  • Story Text: Prime Minister Silvio Berlusconi announced on Tuesday (August 30) that his government's agreement on changes to its austerity package proved his ruling centre-right coalition was solid.
    But Berlusconi's words in a telephone call to an Italian television news channel are unlikely to calm market fears.
    Analysts have said the uncertainty surrounding the package meant that markets would continue to remain suspicious of Rome's ability to control public finances.
    "I don't think it will calm anyone, if anything I think it will probably cause more confusion," said Reuters Senior Financial correspondent Gavin Jones.
    "I don't think markets will be very pleased to see these constant changes, constant negotiations," he said.
    The plan was agreed after heavy pressure from the European Central Bank, but the government has since dropped parts of the package including a proposed levy on high earners and also promised to ease funding cuts to local governments.
    "What they (the government) produced last night was obviously the result of a political compromise and we have seen the solidarity tax removed and we have seen the cuts to local government authorities watered down quite alot and replaced by fairly unspecified measures on combatting tax evasion," Jones said.
    "Analysts are always a bit skeptical about that unless they are very specific, because the revenues from measures against tax evasion are notoriously uncertain," he said.
    Berlusconi, who risked a split with his Northern League coalition partners over the mix of tax hikes and spending cuts, has also been reported to have had strained relations with his Economy Minister Giulio Tremonti.
    "I don't think (Economy Minister Giulio) Tremonti has the same, is quite seen, as the asset he was seen before," said Jones.
    "Tremonti is looking, I wouldn't say side-lined, but certainly not the indispensable figure that he was before," he said.
    The new round of amendments are unlikely to impress Italians, with the removal of the solidarity tax the sentiment on the streets seemed to indicate that normal citizens felt they would be bearing the brunt of the additional costs.
    "Who's pensions are they playing with? Theirs or ours," said pensioner Valerio Colangeli.
    "I only get 500 euro (per month) it seems as though they want to give me even less," he said.
    Italy's largest union, the CGIL, has called a general strike on September 6 to protest against the austerity measures. The strike will bring trains, buses and the airport brought to a standstill.
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