ROME—Italian Prime Minister Mario Monti's newly formed government won a Senate confidence vote on Thursday, after he urged lawmakers to back his "government of national commitment" tasked with reinvigorating the country's anemic economy and preventing a collapse of the euro.
In an address to the Senate before the confidence vote, Mr. Monti said his government's agenda would be based on three pillars: fiscal rigor, economic growth and social fairness. The remarks were the first time Mr. Monti and his cabinet faced Parliament after being sworn into office on Wednesday following weeks of political brinksmanship that culminated in the resignation of former Prime Minister Silvio Berlusconi.
Thursday's vote came against the backdrop of continued nervousness in debt markets. The cost for European banks to swap euros for dollars climbed to levels last seen in late 2008, and buyers remained scarce in European bond markets. Pressure also was felt in the U.S., where higher funding costs were registered in markets for commercial paper, interbank lending and securities repurchases, all key sources of short-term financing for banks and corporations.
Mr. Monti's government garnered 281 votes, with 25 votes against it. The Northern League party, which was part of the ruling center-right coalition and is now acting as the opposition, was the only one to vote against the new government.
Mr. Monti's debut in Parliament came amid public protests against austerity measures adopted by Mr. Berlusconi's government as well as those expected to arrive under Mr. Monti's leadership. Thousands of students took to the streets in cities across Italy while teachers, airline staff and public-transport workers went on strike.
On Friday, Mr. Monti is expected to receive broad backing in a confidence vote in the Chamber of Deputies, the lower house of Parliament.
Speaking to the Senate, the premier warned of dire consequences facing euro-zone economies if the monetary union failed to act decisively in stemming its long-running debt crisis.
Echoing German Chancellor Angela Merkel's recent remarks, Mr. Monti said Europe was currently in its "most difficult moment since World War II" and warned that a breakup of the euro would bring its users "back to the 1950s." A solution to the debt crisis had to come from within Europe itselfwhile more "multilateral" governance was needed for the global economy, he added.
Unless lawmakers back the new government's push for tough economic measures, Mr. Monti said, Italy risks losing control of its destiny to European authorities. "We can't be considered the weak link of Europe. Otherwise, we'll find ourselves at the center of a European project that we haven't conceived," he said.
European authorities have called on Italy to loosen its restrictive labor market, overhaul pensions and slash layers of red tape that strangle Italian businesses.
In a note on Thursday, Fitch Ratings said economic deterioration across the euro zone had made the new government's task even more difficult. "Sustaining political and public support for structural reforms and austerity will be challenging in the face of rising unemployment. Convincing investors that reforms will be effectively implemented and will boost economic growth over the medium term will be equally if not more challenging," the ratings agency said.
Slowing growth puts Italy's fiscal targets at risk, something EU authorities have warned they won't tolerate. Mr. Monti said he would consider additional measures—after a €60 billion ($81 billion) austerity package approved in September—in the next few weeks.
One of the biggest obstacles facing Mr. Monti is the generational divide that has developed in Italy's work force. Older workers were hired under contracts with strong job guarantees while many younger workers are hired under temporary contracts that thrust them to the front of the firing lines in economic downturns.
Mr. Monti on Thursday vowed to address the labor system's "disparate" treatment of Italian workers as well as what he said were uneven and distorting effects of the current national pension system.
He also pledged to take steps "in line" with those needed to tackle skepticism about Italy's ability to service its €1.9 trillion public debt, which he said should be cut "gradually but lastingly."
Despite stereotypes of fiscal profligacy, Italy has run by far the largest primary budget surpluses in Europe, but lack of economic growth and the burden of paying interest on legacy debt meant past fiscal sacrifices had been in vain and didn't permanently lower public debt ratios, Mr. Monti said.
Mr. Monti also said he would keep a close eye on Italy's rampant tax evasion, "monitoring" levels of wealth of Italians. He also raised the possibility of introducing a tax on homeowners—a tax Mr. Berlusconi abolished in 2008.
Mr. Monti didn't delve into the question of whether his government will propose a wealth tax—an idea supported by center-left parties and unions.
Mr. Berlusconi on Thursday said his party would vote against any such proposal. "We've already made it clear to Monti we will not back a wealth tax," Mr. Berlusconi said. "It's not the right recipe and it could trigger a negative confidence spiral," he added.
Mr. Berlusconi, who is the controlling shareholder of the Mediaset SpA television broadcaster, said his forces in Parliament, while backing the government in this week's confidence votes, would evaluate the Monti government's legislative proposals on a case-by-case basis.—Giada Zampano contributed to this article.
Reuters: Italian Prime Minister Mario Monti looked on during
a vote of confidence at the Senate in Rome on Thursday.In an address to the Senate before the confidence vote, Mr. Monti said his government's agenda would be based on three pillars: fiscal rigor, economic growth and social fairness. The remarks were the first time Mr. Monti and his cabinet faced Parliament after being sworn into office on Wednesday following weeks of political brinksmanship that culminated in the resignation of former Prime Minister Silvio Berlusconi.
Thursday's vote came against the backdrop of continued nervousness in debt markets. The cost for European banks to swap euros for dollars climbed to levels last seen in late 2008, and buyers remained scarce in European bond markets. Pressure also was felt in the U.S., where higher funding costs were registered in markets for commercial paper, interbank lending and securities repurchases, all key sources of short-term financing for banks and corporations.
Mr. Monti's government garnered 281 votes, with 25 votes against it. The Northern League party, which was part of the ruling center-right coalition and is now acting as the opposition, was the only one to vote against the new government.
Mr. Monti's debut in Parliament came amid public protests against austerity measures adopted by Mr. Berlusconi's government as well as those expected to arrive under Mr. Monti's leadership. Thousands of students took to the streets in cities across Italy while teachers, airline staff and public-transport workers went on strike.
On Friday, Mr. Monti is expected to receive broad backing in a confidence vote in the Chamber of Deputies, the lower house of Parliament.
Speaking to the Senate, the premier warned of dire consequences facing euro-zone economies if the monetary union failed to act decisively in stemming its long-running debt crisis.
Echoing German Chancellor Angela Merkel's recent remarks, Mr. Monti said Europe was currently in its "most difficult moment since World War II" and warned that a breakup of the euro would bring its users "back to the 1950s." A solution to the debt crisis had to come from within Europe itselfwhile more "multilateral" governance was needed for the global economy, he added.
Unless lawmakers back the new government's push for tough economic measures, Mr. Monti said, Italy risks losing control of its destiny to European authorities. "We can't be considered the weak link of Europe. Otherwise, we'll find ourselves at the center of a European project that we haven't conceived," he said.
European authorities have called on Italy to loosen its restrictive labor market, overhaul pensions and slash layers of red tape that strangle Italian businesses.
In a note on Thursday, Fitch Ratings said economic deterioration across the euro zone had made the new government's task even more difficult. "Sustaining political and public support for structural reforms and austerity will be challenging in the face of rising unemployment. Convincing investors that reforms will be effectively implemented and will boost economic growth over the medium term will be equally if not more challenging," the ratings agency said.
Slowing growth puts Italy's fiscal targets at risk, something EU authorities have warned they won't tolerate. Mr. Monti said he would consider additional measures—after a €60 billion ($81 billion) austerity package approved in September—in the next few weeks.
One of the biggest obstacles facing Mr. Monti is the generational divide that has developed in Italy's work force. Older workers were hired under contracts with strong job guarantees while many younger workers are hired under temporary contracts that thrust them to the front of the firing lines in economic downturns.
Mr. Monti on Thursday vowed to address the labor system's "disparate" treatment of Italian workers as well as what he said were uneven and distorting effects of the current national pension system.
He also pledged to take steps "in line" with those needed to tackle skepticism about Italy's ability to service its €1.9 trillion public debt, which he said should be cut "gradually but lastingly."
Despite stereotypes of fiscal profligacy, Italy has run by far the largest primary budget surpluses in Europe, but lack of economic growth and the burden of paying interest on legacy debt meant past fiscal sacrifices had been in vain and didn't permanently lower public debt ratios, Mr. Monti said.
Mr. Monti also said he would keep a close eye on Italy's rampant tax evasion, "monitoring" levels of wealth of Italians. He also raised the possibility of introducing a tax on homeowners—a tax Mr. Berlusconi abolished in 2008.
Mr. Monti didn't delve into the question of whether his government will propose a wealth tax—an idea supported by center-left parties and unions.
Mr. Berlusconi on Thursday said his party would vote against any such proposal. "We've already made it clear to Monti we will not back a wealth tax," Mr. Berlusconi said. "It's not the right recipe and it could trigger a negative confidence spiral," he added.
Mr. Berlusconi, who is the controlling shareholder of the Mediaset SpA television broadcaster, said his forces in Parliament, while backing the government in this week's confidence votes, would evaluate the Monti government's legislative proposals on a case-by-case basis.—Giada Zampano contributed to this article.