Italy’s main leftwing trades union federation gave warning on Wednesday of possible strike action following budget crisis talks with the government, which failed to calm fears over planned spending cuts.
Susanna Camusso, head of the CGIL federation, said the meeting with ministers and employers’ representatives had failed to clarify how the government intended to cut its budget deficit as demanded last week by the European Central Bank.
“If the austerity budget hits the usual suspects we will mobilize to change it,” said Ms. Camusso. She has repeatedly warned Silvio Berlusconi’s centre-right government not to force lower-income earners and the middle classes to bear the brunt of its austerity program.
Opposition politicians and union leaders are demanding to know the exact contents of a letter sent to the Italian Prime Minister last Friday by Jean-Claude Trichet, head of the ECB, and Mario Draghi, his designated successor and governor of the Bank of Italy.
Banking sources say the letter set out the ECB’s conditions – including commitment to a balanced budget a year ahead of schedule by 2013 – before it would agree to prop up Italian bonds on the market.
Those purchases began on Monday, and by Wednesday the yield on Italy’s benchmark 10-year bond had dropped by 100 basis points. The Treasury was able to make a successful sale of €6.5-billion ($9.2-billion U.S.) of one-year bills yielding 2.96 per cent, down from 3.67 per cent at the last auction on July 12.
Mr. Berlusconi was quoted by Ansa news agency as telling the meeting that the cabinet intended to pass a decree by Aug. 18 that would revise the three-year austerity budget rushed through parliament last month.
The sense of alarm grew on Wednesday as the Milan bourse fell by more than 6 per cent, taking losses over the past month to close to 25 per cent.
Shares in leading banks with large holdings of Italian debt fell sharply, with Intesa SanPaolo down more than 13 per cent on the day.
Confindustria, the main business lobby, urged the government to announce new spending cuts and extra measures to combat tax evasion.
The business association said it was opposed to the possible imposition of a wealth tax, which Mr. Berlusconi is also against. However, Emma Marcegaglia, head of Confindustria, was quoted as telling the meeting that, in this time of crisis, those who had more should give more.
Ms. Camusso said after a second round of talks within six days: “The meeting did not go far enough in terms of the extent of the problems we face and the transparency that is needed.”
Giulio Tremonti, Finance Minister, is expected to come under pressure to release more information on government plans and ECB demands when he addresses parliamentary budget and constitutional committees in a special session on Thursday.