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European Central Bank Orders Italy To Reduce Debt
With Italy in the crosshairs of the eurozone debt crisis, the European Central Bank is dictating to Rome the measures it should take to reduce its massive debt mountain.
But the government is divided over draconian measures that go against the grain of Prime Minister Silvio Berlusconi's populist policies.
MP's of the Budget and Constitutional Affairs Committees were summoned back to Rome from their vacations for an emergency session — many of them tanned and fitter than usual.
Finance Minister Giulio Tremonti told them the cabinet has to find roughly $30 billion in savings and revenue. He gave few details of the emergency measures but his remarks indicated how uncomfortable it is to take orders from the European Central Bank.
"The ECB suggests raising the pension age of women in the private sector to 65," Tremonti said. "It also recommends a cut in public sector workers' salaries, but our government will not necessarily approve the latter."
Public sector workers include politicians. Italy has a staggering number, nearly 150,000. They cost each Italian citizen nearly $38 a year, compared to $7 per politician in the United States.
Italy has the highest MP wages in Europe, more than $16,000 a month before perks. These include free phone services, free train and air tickets, high discounts at Rome designer boutiques and a generous lifetime annuity.
Pier Luigi Bersani, leader of the opposition Democratic Party, reacted to Tremonti's report with an austerity proposal of his own. He was met with boos from members of the governing parties.
"Let's start tomorrow by cutting in half the number of MPs," Bersani urged his colleagues. "Then we can start reducing costs in the regions, and cut back the number of provinces and municipalities, liberalize local services and things like that."
While the committees were in session, someone posted on the Internet the Senate restaurant menu. Indignation spread and the menu is on the front pages of Friday's major dailies.
An MP's antipasto of sea bass and radicchio, and a risotto with turbot and zucchini flowers each cost $4.60. A normal restaurant price is more $30. Taxpayers pay the difference.
In his report to MPs, Finance Minister Tremonti rejected the opposition and union suggestion of a wealth tax on private assets.
Susanna Camusso, leader of Italy's biggest trade union, voiced disappointment with Tremonti's report.
"We do not want pensioners and workers to be once again the main targets of austerity measures," says said. "If the package is unfair, we will call a general strike."
It wasn't just opposition and trade union leaders who criticized Tremonti.
Umberto Bossi, leader of the major coalition partner, the Northern League, called the minister's report "murky" and he accused the European Central Bank dictates of being part of a plot hatched by Berlusconi's opponents.
"I fear the ECB letter was written in Rome," Bossi said. "I fear it's an attempt to bring down the government."
The cabinet plans to work through a public holiday Monday. It's not clear what will be in the decree that will likely be made public before markets open again on Tuesday.
What's clear, however, is that the feel-good, optimistic message with which the Berlusconi government has tackled the crisis, now belongs to the past.