Italy will introduce cuts of 24 billion euros for 2011-2012. This is aimed to cut the deficit from 5.3 percent of gross domestic product (GDP) to 2.7 percent in 2012. The measures will bring Italy into line with an European Union limit of three percent.
Civil servants will have their salaries frozen for three years, ministers and other officials face wage cuts, and the tax on stock options and private sector executives’ bonuses will increase.
Last year Italy’s debt was 116 percent of GDP, even higher than the United States 86%. Italy’s intent is to reassure investors that it is committed to keeping its finances in order. It is hopeful that the cuts will shore up confidence amid the Greek debt crisis.
Soon the U.S. will be forced by the market to make even larger cuts to shore up confidence.
Eventually the market always wins.
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