The Italian senate passed the government’s emergency budget cuts earlier in the day by a margin of 161 votes to 135. The budget will reduce spending by the equivalent of £42 billion over three years, which is supposed to reduce the deficit to zero by 2014 according Finance Minister Guilo Tremonti’s calculations.
Brussels will be hoping that this quells the disquiet about Italy’s ability to service its very substantial debts. Early indications suggest that investors have regained a modicum of confidence in Rome: 8.570 billion euros were bid for a bond auction a few hours ago, although necessity forced the government to offer higher yields to ensure that the bonds sold.
The task now will be to stick to the course of deficit reduction in order to ease the management of debt. Berlusconi and Tremonti have been at odds over the pace of deficit reduction, with the zestful Italian prime minister preferring a less austere route. Also, Tremonti has suddenly become embroiled in a corruption scandal; but, then again, who in Italian politics isn’t?
Attention now turns to the United States, where legislators and the executive remain at an impasse over raising the debt ceiling, despite the concessions made last weekend. Yesterday, credit rating agency Moody’s stated that it was planning contingencies for US default, including the downgrade of America’s AAA rating. Meanwhile, President Obama is rumoured to be considering inviting the opposed legislators to Camp David for crisis talks.