Italy PM wins 2nd confidence vote on debt measures

Italian Premier Mario Monti's new government has won a second parliamentary confidence vote, securing its mandate to deal with the country's debt crisis.

The lower Chamber of Deputies voted 556-61 for Monti's government of bankers, CEOs and university professors. On Thursday, his government won the vote in the Senate 281-25 after he warned that all Italians would need to make sacrifices to get the country out of its massive debt hole. Still he promised to fairly distribute the pain.

Before the vote, Monti urged lawmakers to not "pull the plug" on his government before elections in 2013, no matter how politically painful the measures in his plan to spur growth and cut debt.

Monti is under enormous pressure to boost growth and bring down Italy's high debt, not only to save Italy from succumbing to the debt crisis but to prevent a catastrophic disintegration of the common euro currency.

He said his strategy had three main pillars: Budgetary rigor, economic growth and social fairness. He pledged to reform the pension system, re-impose a tax on homes annulled by Berlusconi's government, fight tax evasion, streamline civil court proceedings, get more women and youth into the work force and cut political costs.

"Europe is experiencing the most difficult days since the end of the Second World War," Monti told parliament Thursday. "Let's not fool ourselves, honored senators, that the European project can survive if the monetary union fails."

Too big to bail out

Europe has already bailed out three small countries — Greece, Ireland and Portugal — but the Italian economy, the third-largest in the 17-nation eurozone, is too big for Europe to rescue. Borrowing costs on 10-year Italian bonds were at 6.75 per cent Friday, after spiking briefly over seven per cent Thursday — a level that forced those other countries into bailouts.

In a conference call Thursday, German Chancellor Angela Merkel, French President Nicolas Sarkozy and Monti agreed that their countries have a special responsibility to the eurozone as its three largest economies and founding members of the European Union.

Still, it's not clear how many sacrifices already-stressed Italians are willing or able to make. Students demonstrated across Italy under the banner: "Save the schools, not the banks."

Monti's ambitious plans overhaul just about every aspect of the Italian economy — from the organization of local governments to the selection process for teachers. Monti indicated he would seek to lower taxes on labor, while raising those on consumption. And he pledged measures — such as setting a limit on cash transactions — to tackle tax evasion, which he estimated is worth 20 per cent of GDP.