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Monti to lawmakers: no alternative to austerity and growth measures; world is looking at us
ROME (AP) ' Premier Mario Monti is telling Italian lawmakers there is "no alternative" but to pass his government's anti-crisis package of new taxes, pension reform and growth measures.
Italy's new leader said Europe and the world are focusing their attention on Italy and on Parliament to do what is necessary to avoid financial disaster.
Monti is laying out his rescue formula, calling on the nation to make sacrifices, in a speech to the Chamber of Deputies Monday afternoon.
The non-elected government of Monti, an economist, and technocrats depends on Parliament's political parties to get the measures approved quickly.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
ROME (AP) ' Italy's new premier began trying to persuade a skeptical Parliament that his new plans to cut spending and boost growth will return Italy's ailing economy to health, as Europe entered a crucial week for the survival of the 17-nation euro currency.
Premier Mario Monti was briefing both Parliament chambers Monday on the package, which includes euro30 billion ($40.5 billion) in spending cuts and tax hikes and euro10 billion ($13.5 billion) to boost Italy's anemic growth.
Monti's government agreed Sunday to slap taxes on primary residences and luxury goods like yachts, high-performance cars and private airplanes, increase the age at which retirees can draw full pensions, trim the cost of Italy's political class and give incentives to companies that hire women and young workers.
"Without this package, we believe Italy would collapse, Italy would go into a situation like that of Greece, a country we admire but we don't want to imitate," he told the Foreign Press Association before heading to Parliament.
The package, passed as an emergency decree, takes immediate effect but Parliament must still approve it within 60 days. The Senate president has said he expected passage before Christmas, although lawmakers already were indicating they want changes.
Monti acknowledged Monday that some of the more painful measures might aggravate Italy's looming recession, with the government forecasting an economic contraction of up to 0.5 percent next year and followed by flat growth in 2013. But he said the measures were necessary and if they helped to bring down Italy's bond yields, that would give Italy more financial relief than any negative impact from individual measures.
Markets appeared to welcome the measures: The yield on Italian 10-year bonds was down 0.41 percentage points at 6.14 percent Monday, and the Milan Stock Exchanged traded in positive territory, with banks benefiting the most.
Unions blasted the pension reform as "socially unbearable" and two unions announced a two-hour strike for next Monday. Politicians on all sides called the measures severe but many appeared resigned to "holding our nose and voting," as Maurizio Sacconi, a labor minister under ex-Premier Silvio Berlusconi, put it.
Democratic Party lawmaker Vannino Chiti indicated center-left lawmakers would try to spread more pain to the well-off, favoring more taxes on the wealthy and higher penalties on money repatriated from overseas tax havens.
"They are stringent measures. We will try to distribute them better," Chiti told Sky TG24.
Monti, a former EU commissioner, has been under extreme pressure to come up with speedy and credible measures that will persuade markets to stop betting against the common currency. Italian borrowing costs have spiked since October, which could spell disaster if Italy is unable to keep up payments to service its enormous euro1.9 trillion ($2.6 trillion) debt, which is equivalent to 120 percent of its GDP.
Italy needs to refinance close to euro200 billion ($270 billion) of that debt by May.
Unlike Greece, Portugal and Ireland, EU nations that got bailouts after their borrowing rates skyrocketed over 7 percent, Italy is the eurozone's third-largest economy and is considered to be too big to be bailed out. An Italian default would be disastrous for eurozone and could send both Europe and the United States into recession.
Olli Rehn, the European commissioner for economic and monetary affairs, welcomed Monti's package as "a very important step to shore up the public finances and support economic growth, while preserving social equity and fairness."
He said the "timely and ambitious" measures showed new economic decision-making from Italy.
On Friday, eurozone leaders are holding a critical summit to prevent the collapse of the common currency; expectations are growing that they will agree to a tighter integration of the 17 EU countries that use the euro.
"We need absolutely to avoid one thing, that the euro ' which was born to unite the people of Europe even more ' divides them from a psychological point of view," Monti said.
He said his technocratic government, which has no politicians, was in a position to push through the painful reforms necessary to secure Italy's future because it did not have to worry about future elections.
"We want to save Italy, but we also want to be the technical figures, and then disappear from the scene, with the full trust of the world and of public opinion," Monti said.
Monti said his new measures were designed to be as fair as possible so the sacrifices are equally shared; he is renouncing his own salary as premier and economy minister.
And on Monday, he warned that more financial reforms were on the way: including opening up Italy's rigid labor market and reducing the duplicate functions of provincial governments.
The measures approved Sunday include a 2 percent increase in value-added tax from the second half of 2012 from 21 percent to 23 percent.
Other taxes include a new tax on first homes to replace one annulled by Berlusconi plus higher levies and second and third homes, and new taxes on boats over 10 meters (30 feet) long, luxury cars and private helicopters and planes. The measures left out any income tax increase on high earners, which had been opposed by Berlusconi's conservatives.
Luca Cordero di Montezemolo, chairman of luxury carmaker Ferrari, said the luxury auto tax doesn't "make me the happiest person in the world, but I think when you have to do something, it has to have an effect on everyone."
Church-owned buildings escaped being assessed property taxes; Monti, who has one of Italy's most influential lay Catholics in his Cabinet, said the issue hadn't been considered by the government yet.
At the same time, the measures cut employment costs, give fiscal breaks to companies that invest to grow their businesses and increase investments in local public transport.
The measures raise the pension age to 66 years for men in 2012 and for women by 2018, and also increases to 42 years and one month the years of service for a man to retire with full benefits, 41 years and one month for a woman. The reforms include a hold on inflation adjustments for larger pensions.
Unions and center-left politicians have been particularly critical of the pension measures, saying certain classes of workers, including those who do physical labor, shouldn't be forced to work extra years. They also complained that women who take time off to raise children will have to work well into old age to meet the seniority requirements to draw a pension.
"It is not easy, especially because these cuts hit heavily on the pensions," conceded Italian worker Massimo Gatti in Rome's historic center. "Let's just hope we can resolve the problem, and above all save Italy."
Barry reported from Milan.