Prime Minister Mario Monti is asking Italians to swallow 30billion euros ($40 billion) in additional emergency economicmeasures even as the nation's fifth recession in the last decadelooms next year.

Monti, whose Cabinet approved the package yesterday, is due topresent the plan to the legislature at 4 p.m. in Rome, withParliament voting on it in the coming weeks. The premier has vowed“shared sacrifices” to cut the euro area's second-biggest debt andregain investor confidence after Italian borrowing costs topped the7 percent that led Greece, Ireland and Portugal to seek aid.Italy's 10-year yield declined 52 basis points to 6.16 percent, itsbiggest drop in four months.

“The huge public debt of Italy isn't the fault of Europe, it'sthe fault of Italians,” Monti, who took over last month afterformer Premier Silvio Berlusconi resigned, told a news conferenceas he detailed the package yesterday. “Together, we will makeit.”

Italian bonds have snapped a seven-week decline amid optimismthat European policy makers may take steps to ease the crisissummits this week, with the 10-year yield difference to Germanbunds down by a percentage point in the past week to 3.94 points.Italy is still paying the highest rates in more than a decade onits debt, and offered more than 7 percent on new bonds for thethird time in a week on Nov. 29.

Monti's plan ties pensions to contributions rather than aworker's last salary, resurrects property taxes and includes a levyon luxury goods. Monti's task in pushing through Italy's thirdausterity package since July may be complicated by a recession nextyear and road bumps in Parliament and in the streets as protestersrally over a perceived lack of fairness.

“You can't choke the economy by imposing more taxes to keeppaying Mario Draghi's pension,” Edward Luttwak, a senior associateat the Center for Strategic and International Studies, a policyinstitute in Washington, said on Sky TG24 on Dec. 1. “Draghi gets a'baby pension' of about 15,000 euros a month from the ItalianTreasury” and “only by cutting these 'golden pensions' will thegovernment be in a position to be more rigorous with other people'spensions.”

European Central Bank President Draghi's early retirement fromthe Treasury, which he left in 2001, is an example of theprivileges enjoyed by officials in the state administration. Aspokesman for INPDAP, the public-sector pension agency, declined tocomment on Draghi's pension, which was reported by journalist MarioGiordano in his book “Bloodsuckers: How Golden Pensions AreBleeding Us Dry.”

Eliminating 'Privileges'

Monti, without giving further details, told reporters the newpackage will eliminate some pension “privileges.” He also said thatin solidarity with Italians making sacrifices, he would give up hissalary as premier and finance minister.

Draghi had to take a 50 percent pay cut when he joined the ECBfrom the Bank of Italy, where he earned 757,714 euros last year asgovernor. That's five times as much as Federal Reserve Chairman BenS. Bernanke's salary. The average monthly gross salary for anItalian is 2,033 euros, according to statistics office Istat.

“To reduce waste would require intervening decisively on theprivileges that thousands of laws guarantee state workers,” authorGiordano said in an e-mail. “In Sicily, there's a law that allows”civil servants “to retire at age 40 with just 20 years ofcontributions.”

The speakers of both houses of Parliament agreed on Nov. 29 tocalculate lawmakers' pensions based on contributions rather than ontheir last income. The change takes effect Jan. 1 and mirrorsmeasures in yesterday's package, which also aligns men and women'sretirement age at 66 starting in 2018 and eliminated the inflationindex on all but the lowest pensions.

Monti's measures were welcomed by Angelino Alfano, the leader ofBerlusconi's party, and also received qualified backing fromDemocratic Party leader Pier Luigi Bersani.

Unions were less supportive. The plan is “indigestible,” and “weare ready to counter the wrong decisions,” said Susanna Camusso,head of Italy's biggest union, CGIL. The group led a nationwidegeneral strike against austerity cuts in September and has vowed totake to the streets again if its demands aren't met. Thirty policeand 20 protesters were hurt in a separate Oct. 15 protest in Romethat turned violent.

Monti's package, 10 billion euros of which seek to boost growth,touches on all aspects of society. Items are aimed at shrinking thesize of the government, forcing transactions of more than 1,000euros to be done electronically to fight tax evasion, raising thesales tax by two percentage points, and giving tax breaks tocompanies to hire young workers and women.

Looming Recession

Italy's economy, whose growth has trailed the EU average formore than decade, will contract 0.4 percent to 0.5 percent nextyear, Deputy Finance Minister Vittorio Grilli told the newsconference. That would be the fifth recession since 2001.

Berlusconi's People of Liberty party, the biggest in Parliament,said last month it would back Monti, though only to implementausterity measures announced before the former premier resigned onNov. 12. Berlusconi also said his party opposes any new levy onwealth or high earners. Grilli said yesterday new taxes will mostlyaffect assets and the wealth.

“Parliamentary backing for Monti will fragment as specialinterest groups seek to defend their positions,” said StephenLewis, London-based chief economist at Monument Securities. “Itseems likely market confidence will erode in the course of hislegislative efforts.”

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