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Italy austerity plan goes to parliament Add to ...

Italy’s austerity plan aimed at warding off a worsening in the euro zone debt crisis goes to parliament on Monday amid a tug-of-war between critics who want to weaken it and those who say it does not go far enough.

The €45.5-billion austerity package is designed to achieve budget balance by 2013 in line with demands by the European Central Bank when it agreed to buy Italian government bonds to rein in a steep rise in its borrowing costs.

The government insists that the overall size of the deficit cuts will not change, but ever since the measures were presented in mid-August to a chorus of criticism, debate in Italy has swirled over what amendments should be made in parliament.

Economists were disappointed at the absence of cuts to Italy’s costly pension system before 2016 and pensions are expected to be one focus of debate in parliament.

Angelino Alfano, secretary of Prime Minister Silvio Berlusconi’s People of Freedom (PDL) party, on Sunday proposed raising the retirement age in exchange for reducing some of the €9-billion of cuts in funding to local government.

However, pension cuts are fiercely opposed by Mr. Berlusconi’s main coalition ally, the pro-devolution Northern League, a position it bluntly reiterated on Monday.

Roberto Calderoli, Minister for Simplification and a prominent League leader, told daily La Stampa that Mr. Alfano’s attempts were “useless” and “pensions can’t be touched”.

Mayors from around the country begin a week of protests on Monday against funding cuts they say will hit crucial services. They also oppose plans to merge administration of towns with fewer than 1,000 inhabitants.

On Tuesday, plans for a potentially more damaging protest for the government will be finalized by the country’s largest trade union federation, the left-wing CGIL, when it meets to decide the date of a general strike.

The CGIL trade union body is angered by cuts to local and central government, plans to liberalize labour contracts and the lack of measures to tackle tax evasion -- which amounts to around €120-billion per year.

In an unusually hard-hitting speech on Sunday, President Giorgio Napolitano called the level of tax-dodging “intolerable from an economic, legal and moral point of view”, and criticized the government for spending months minimizing the extent of the economic crisis.

Other proposals for changes to the austerity plan include replacing a “solidarity tax” on high earners with a wealth levy or an increase in value-added tax, though both are said to be opposed by Mr. Berlusconi.

The government approved its second austerity budget in as many months in response to a letter from the ECB which called for an acceleration of its previous plans to balance the budget in exchange for buying Italian government bonds.

The Senate labour committee will examine the austerity decree on Monday, and on Tuesday it moves to the key budget committee, where it will remain for two weeks before passing to the Senate floor for open debate. Amendments are expected to be tabled by the end of next week.

It must then move to the Chamber of Deputies, where Mr. Berlusconi has a far narrower parliamentary majority, for a similar procedure beginning at the committee stage.

The decree must be passed by mid-October, or 60 days after its presentation by the cabinet. However, Italy will be under pressure from financial markets and its international partners to approve the package considerably earlier.

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