06/11/2011
The Italian Prime Minister Mario Monti announced yesterday that his government has approved a new package of austerity measures through 2014 worth €24bn. The plan includes more than €12bn in spending cuts.
Full details will be presented today to the Italian Parliament at 3 p.m. London time (16:00 CET) and to the Senate at 5 p.m. (18:00 CET). Monti also added that more details on labor reforms will be presented in the “next few weeks”.
In a report published late last night, Barclays listed the following comments on the specific proposals made by Monti and his government in yesterday’s press conference:
1. Reintroduction of a property tax accompanied by a revaluation of the registered value of properties.
2. Increase of standard and reduced VAT tax rates (potentially) by 1-2pp in H2 2012; increase tax on petrol in 2012.
3. Pension reform:
- Extension of the contributive system to all workers from next year.
- Old-age system: increase of retirement age to 62 years for women and 66 for men. By 2018, female retirement age will be 66.
- Seniority system: increase in years of social-security contribution to 42 (men) and 41 (women).
- Pension freeze (at least one year, minimum treatments excluded).
- Social contribution increase for self-employed workers.
4. Wealth tax on luxury goods (yachts, aircraft, cars).
5. Anti-tax evasion measures: track down all financial transactions of at least EUR1k, from 2.5k currently.
6. Spending cuts: transfers to local governments will be further reduced.
7. Fiscal incentives for corporations to incentivize the participation of women and young workers.
8. State guarantee on issuance of bank debt.
9. Pro-growth measures:
- 1st round of opening up of closed professions (pharmacists and petrol stations).
- Incentives to increase firms' capitalization and promote R&D.
- Extension to 2014 of 55% tax incentive for energy friendly residential works.
Full details will be presented today to the Italian Parliament at 3 p.m. London time (16:00 CET) and to the Senate at 5 p.m. (18:00 CET). Monti also added that more details on labor reforms will be presented in the “next few weeks”.
In a report published late last night, Barclays listed the following comments on the specific proposals made by Monti and his government in yesterday’s press conference:
1. Reintroduction of a property tax accompanied by a revaluation of the registered value of properties.
2. Increase of standard and reduced VAT tax rates (potentially) by 1-2pp in H2 2012; increase tax on petrol in 2012.
3. Pension reform:
- Extension of the contributive system to all workers from next year.
- Old-age system: increase of retirement age to 62 years for women and 66 for men. By 2018, female retirement age will be 66.
- Seniority system: increase in years of social-security contribution to 42 (men) and 41 (women).
- Pension freeze (at least one year, minimum treatments excluded).
- Social contribution increase for self-employed workers.
4. Wealth tax on luxury goods (yachts, aircraft, cars).
5. Anti-tax evasion measures: track down all financial transactions of at least EUR1k, from 2.5k currently.
6. Spending cuts: transfers to local governments will be further reduced.
7. Fiscal incentives for corporations to incentivize the participation of women and young workers.
8. State guarantee on issuance of bank debt.
9. Pro-growth measures:
- 1st round of opening up of closed professions (pharmacists and petrol stations).
- Incentives to increase firms' capitalization and promote R&D.
- Extension to 2014 of 55% tax incentive for energy friendly residential works.
- The "fondo di garanzia," which supports the flow of credit to SMEs, will be increased to €20-25bn.
- Private sector involvement in public infrastructure projects
Italian 10 year bonds are rising following the announcement of these new measures, with yields at 6.37%, down by 31 basis points.
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