Italy's Chamber of Deputies this evening formally adopted a €54.2 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.
The government hopes that the package, coupled with a €48 billion plan approved in July, will help balance the country's budget by 2013. The package was approved last week 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 a lot of unease on the markets.
The new measures include a rise in the VAT sales tax to 21%, which will raise around €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.
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 - around 120% of its Gross Domestic Product (GDP).
Italy's placement of bonds earlier this week 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.
