Tuesday 26 September 2017

Monti's €30bn package to 'save Italy' is approved

Pension overhaul and crackdown on tax cheats ahead as country tries to fight rising borrowing cost

People wait in line to receive food from the Orthodox Church of Greece in Athens yesterday. Poverty has visibly increased on the streets of the capital of four million, where people huddle in sleeping bags in empty alleys and can be seen rummaging through garbage containers, looking for food or scraps of metal or glass to sell. Photo: Reuters
People wait in line to receive food from the Orthodox Church of Greece in Athens yesterday. Poverty has visibly increased on the streets of the capital of four million, where people huddle in sleeping bags in empty alleys and can be seen rummaging through garbage containers, looking for food or scraps of metal or glass to sell. Photo: Reuters
Thomas Molloy

Thomas Molloy

ITALIAN Prime Minister Mario Monti's emergency budget plan won final approval in parliament yesterday as Italy struggles to tame surging borrowing costs before facing €53bn in debt repayments early next year.

The Senate voted 257 to 41 to approve the €30bn package in a confidence vote in Rome.

The legislation, dubbed by Mr Monti as the "Save Italy Decree" and the nation's third austerity plan since June, was passed by parliament's other chamber last week.

The plan includes a pension overhaul, a levy on primary residences and a crackdown on tax cheats; all measures aimed at convincing investors Mr Monti is serious about cutting the euro region's second-largest debt and meet the commitment of balancing the budget in 2013.

It may also push Italy, which must sell €440bn in debt next year, deeper into a recession that is forecast to begin in this quarter.

"The austerity package will be sufficient to bring the deficit-to-GDP ratio down to zero," UniCredit economists Chiara Corsa said. "The pension reform is by all means a major achievement, which shows the government's commitment to reduce public spending in a structural way."

In Greece, there were signs that talks between the IMF and the owners of Greek government bonds had run into problems, unconfirmed reports said yesterday. Greece's creditors were resisting pressure from the IMF to accept bigger losses on Greek government bonds, unidentified sources said.

Creditors

A representative from hedge fund Vega Asset Management resigned earlier this month from a group of private creditors which is leading talks with Greece and its international lenders over a restructuring of its debt, two sources told Reuters. The hedge fund walked out amid differences over how to proceed with the "voluntary" bond swap.

Lenders want the €70bn of new bonds the government will issue in return for existing securities to carry a coupon of about 5pc, sources told Bloomberg.

The IMF is pushing for creditors to accept a smaller coupon than 5pc to reduce Greece's debt-to-gross domestic product ratio to 120pc by 2020, a key element of the October agreement by European Union leaders.

National Bank of Greece's chairman Apostolos Tamvakakis told shareholders in Athens yesterday that he hoped talks on the debt swap would end soon. Greece's debt would balloon to almost twice the size of its economy next year without a write-off accord with investors, the IMF said.

IMF and EU leaders are trying to bring the country's debt down to a sustainable level. (Additional reporting Bloomberg and Reuters)

Irish Independent

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