Italy austerity plan approved

Italy's Chamber of Deputies on Wednesday formally adopted a 54.2 billion euro ($74 billion) austerity package, the second in three months aimed at pacifying markets amid a European debt crisis. The package was adopted after deputies voted 314 in favour to 300 against.A final evening ballot followed an earlier confidence vote aimed at speeding up implementation of the measures after investors' reluctance to buy Italy's debt drove interest rates to new highs. Skirmishes broke out shortly before the evening vote outside parliament between a group of protestors and police officers, with demonstrators throwing flares and cobblestones and chanting "resign!"The government hopes that the package, coupled with a 48-billion-euro plan approved in July, will help balance the country's budget by 2013. The package was approved last weekl by the upper house of the Italian parliament, the Senate. Highly unpopular among ordinary Italians, the package was announced in a hurry in August by Prime Minister Silvio Berlusconi's government in exchange for support from the European Central Bank, which took action in the bond market to ease Italy's borrowing prices. The package was delayed by weeks of opposition as Berlusconi's ruling People of Freedom party struggled to appease its Northern League coalition partner and the country's powerful trade unions, creating no little unease on the markets. The new measures include a rise in the VAT sales tax to 21 percent, which will raise around four billion euros ($5.4 billion) in a move aimed at reassuring markets concerned about Italy's notoriously poor record on fighting tax evasion. A controversial tax on the rich which had been abandoned by the government has been reintroduced, but will be much smaller than previously envisaged, affecting only annual incomes of over 300,000 euros.The retirement age for women in the private sector will be raised to 65 years old from 60, bringing it into line with the retirement age for men by 2014 and not 2016 as previously planned.Severe cuts to lavish parliamentary privileges were scaled back to the chagrin of the public, amid accusations of politicians abusing favours and expenses while the country struggles to stave off financial ruin. In spite of both austerity packages and the ECB's support, Italy is still hampered with a vast debt of over 1,900 billion euros ($2,606 billion) -- around 120 percent of its Gross Domestic Product (GDP).The government's placement of bonds on Monday and Tuesday was dampened by record yields which revealed a marked lack of investor confidence and sparked fears the country's debt may be reaching unsustainable levels. Despite reports that Italy was in talks to persuade China to purchase bonds and stave off a crisis, Rome denied it had called on Beijing for help. Business leader Emma Marcegaglia joined the unions on Wednesday in criticising the austerity package, saying it did not resolve Italy's problems and adding: "If growth does not return, it will not be sufficient."Berlusconi rounded on the left-wing opposition during a meeting with EU official in Brussels on Tuesday, describing criticism of the budget measures as a personal attack on the premier aimed at ruining his image. Others have already begun to put forward ideas for additional measures. Massimo Corsaro, deputy head of the centre-left Democratic Party (PD) has suggested reducing Italy's debt by 400 billion euros through privatisations, estate tax and pension reforms -- a plan supported by several members of the majority in parliament. But the PD, warning against a "spiral of austerity plans such as those seen in Greece," called once more on Wednesday for "a new government" to be formed "immediately" in order to save the country's credibility on the European stage.