Italy approves package of tax increases and spending cuts

ROME - Italy's new government yesterday approved a package of tax increases and spending cuts to maintain financial discipline and keep to Italy's commitments to the International Monetary Fund and the European Community, writes Patricia Clough.

The measures, designed to cut spending by 7 per cent to about L154,500bn (pounds 70bn), include higher petrol prices, some increases in value-added tax, stamp duty and other taxes, postage rates for printed matter and higher social security contributions for domestic, agricultural and self-employed workers.

Spending on the railways will be cut by L600bn, while the president's office, the constitutional court and the two houses of parliament will have 5 per cent lopped off their budgets. Public spending commitments will be frozen for the second half of the year.

The previous government, under Giuliano Amato, had launched a series of painful measures to get Italy's runaway state deficit under control, strengthen the lira and pull Italy out of its economic crisis.

The country is also bound to commitments to the IMF and to the EC, from which it took a huge loan.