Italy PM Monti wins votes of confidence

ROME - Reuters

AFP photo

Italy’s government won three parliamentary confidence votes on its budget plans on Nov. 21, paving the way for a sales tax hike to help mend public finances and taking a step toward clearing one of its last big hurdles before elections next year.

President Giorgio Napolitano, who will decide the date of the election and has indicated a March date, has directed that the law must be passed before the end of the government’s term.

The budget, enshrined in a so-called Stability Law, is central to Prime Minister Mario Monti’s efforts to lower Italy’s public deficit to 1.8 percent of output next year from a targeted 2.6 percent in 2012.

Italy’s economy has been the most sluggish in the European Union for more than a decade, fuelling investor concerns about its ability to bring down its public debt of 126 percent of GDP.

The government called the confidence votes to speed approval of the Stability Law, which is expected to be one of the final pieces of major legislation approved under Monti before Italy gears up for a national election.

As part of the wider budget package, the government also signed a deal with employers and unions on Wednesday that will unblock 2.1 billion euros set aside to allow tax breaks on productivity bonuses over the 2013-15 period.

The country’s largest union, the leftwing CGIL, rejected the accord but Monti welcomed the deal, which is intended to address the chronic problem of Italy’s lack of competitiveness, a major factor in its weak economic track record.

The agreement would guarantee national collective contracts but would provide greater incentives for company-level wage agreements in a bid to boost flexibility.