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Monday, 5 December 2011

Italian PM Mario Monti Takes one for the Team

italy, austerity, Fornero, current affairs, cry

UK Purchasing Manager Index Services (PMI) increased to 52.1 points in November; a rise of 0.8 from October’s figure of 51.3. The result surprised analysts who had expected a drop to 50.7. Chris Williamson, Chief Economist at Markit Economics who compiled the statistic, warns against unwarranted optimism for the UK regardless of PMI scores higher than Germany (50.3) and the EU (47.5). “The service sector saw a modest expansion again in November, holding up in the face of growing gloom about the health of the domestic economy and heightened uncertainty regarding the Euro area’s debt crisis. However, with manufacturing contracting at a steep pace, the weak growth of services means the economy is likely to have stagnated in the fourth quarter.”

Italian Prime Minister Mario Monti has taken a €30 billion austerity package to Italy’s parliament to help remedy the country’s dire debt crisis. The measures include a new property tax, a new luxury purchases tax, an increase in value added tax, a crack down on tax evasion and rising the retirement age. In a token of solidarity Monti himself has agreed to renounce his salary; a gesture that has been met with praise from the majority of media outlets in Italy this morning.

The Daily Libero, an Italian newspaper that backed Monti’s predecessor Silvio Berlusconi, derided the measures and published a sensationalist headline: “The government is crying whilst it screws us,” in reference to Welfare Minister Elsa Fornero breaking down into tears as she announced the package on Sunday night that will cause a cut in income for many pensioners. FIM-CISL, a large union that represents metal workers, has planned a two-hour strike on Wednesday claiming that the programme is focussed too heavily on workers at the lower end of the economic scale: “Yet again, the sacrifices demanded fall mainly on salaried workers and pensioners and on the weaker sections of society.”

The budget developments were met with positive response from investors initially with the Pound falling to daily lows of 1.162 against the Pound from daily highs of 1.166. The GBP/EUR rate settled around 1.163 at midday.

German Chancellor Angela Merkel and French Premier Nicolas Sarkozy are meeting today to discuss fiscal policies in an effort to align their stances towards a positive direction that is governed by unity. Sarkozy opposes Germany’s push towards a more federal EU system that would allow the EU to veto euro state’s budgetary decisions that had previously been voted in democratically. Whilst Merkel is in strict opposition to the implementation of euro-wide bonds or increased European Central Bank intervention. The pair, dubbed “Merkozy,” will have to agree on some form of common ground to announce at the European Union summit in Brussels on December 9th. Markets will be looking for strong signs of solidarity that pave the way to a successful future for the Eurozone; prosperity not austerity.

Cutting Edge Current Affairs Courtesy of:
Josh Ferry Woodard

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