The euro debt crisis looks set to claim its biggest scalp after the Italian senate approved a broad range of austerity measures Friday, paving the way for Prime Minister Silvio Berlusconi to resign. A 68-year-old adviser for Goldman Sachs Group Inc., Mario Monti is a leading candidate to take over - but the newcomer has already provoked some critics before he’s even confirmed in the job.
The Italian senate passed the package of austerity measures by 156 votes in favour to just 12 against. The lower house is due to vote on the same bill Saturday. If it passes there, Prime Minister Berlusconi has vowed to step down - perhaps as soon as the weekend.
Italy’s longest-serving post-World War II leader has indicated he would back a unity government, likely to be led by former European Union commissioner Mario Monti.
James Walston of the American University of Rome says investors desperately want to see such sweeping changes.
“I think that Mario Monti is the person that the markets are waiting for. The former EU commissioner, he’s been dealing with competition policy, he’s internationally respected, he’s a very good economist. I think it will bring stability. He will have to face a lot of challenges and it’s not going to be easy,” Walston said.
The current austerity measures are aimed at saving almost 60 billion euros from spending cuts and tax rises.
Public sector salaries would be frozen until 2014.
The retirement age for women would gradually be raised towards 65. Sales taxes would increase to 21%. And cash transactions would be limited to 2,500 euros in a bid to target tax evaders.
Economist Nicola Borri says only a unity government run by a non-political figure could hope to implement such austerity on the Italian people.
“Even in parliament, there are quite large groups of people on both sides that believe these reforms are important, that they should be implemented, but these people do not have enough political power to put them forward. And so the hope is that this person who’s not going to run in the future might be able to do the dirty job. He is going to pass these reforms, maybe people are going to hate him for a little bit but he doesn’t care too much and so these reforms will be in place, ” Borri said.
Markets may approve - but there are many dissenting voices. Newspaper columns and blogs are buzzing with claims that Mario Monti is being imposed on Italy by the European Union.
“There is a serious concern about democracy because people feel that some measures are imposed from above coming from the euro. In Italy, still they remember the euro problem when the prices doubled in the changeover [from the lira] so the euro does not have an exceptional reputation here,” said. Claudio Borghi, a columnist with the Milan-based ‘Il Giornale’ newspaper.
The accusations that the EU is undermining Italy’s sovereignty echo those made in Greece, where a new so-called technocrat Prime Minister, Lucas Papedemos has been sworn in to usher through further rounds of spending cuts.
But such is the gravity of the debt crisis, the European Union insists economic stability must come first.