Bank of Italy: Gov't must not retreat on austerity

[August 30, 2011]  ROME (AP) -- The Bank of Italy has warned that the government's revamped austerity plan must not cut back on the proposed euro45.5 billion ($65.9 billion) in new taxes and spending cuts needed to meet European Central Bank demands for a balanced budget.

Premier Silvio Berlusconi and his allies late Monday revised the planned austerity measures after widespread public anger, deciding to scrap a special tax on high earners and spare small town governments from consolidation and cuts.

The new measures tinker with retirement age and call for a reduction in the number of lawmakers, among other things.

The Bank of Italy's vice chief Ignazio Visco told parliament committees Tuesday that he hoped the market's response to the fiscal retreat "isn't too penalizing." He said the overall austerity plan "cannot be reduced."

[Associated Press]

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