Italy

The Italian government backtracked on parts of its widely criticized austerity package on Monday, scrapping a tax on high earners and scaling back cuts to local authority funding, The Globe and Mail reported. In a statement after seven hours of talks at Prime Minister Silvio Berlusconi’s home outside Milan, the government said it would also exclude years spent at university and military service from retirement age calculations, delaying retirement for some people.

Italy, under pressure from financial markets and the European Central Bank to overhaul its economy, is trying to tackle one of its most persistent economic flaws: the lack of opportunities for young people, The Wall Street Journal reported. Italy's Parliament is due to start debating a package of reforms aimed at speeding up growth in late August that includes a tentative move to relax layoff rules. That, the government hopes, will encourage business to take more risks on hiring new, young workers.

Silvio Berlusconi’s ability to pass a €45.5bn austerity decree swiftly through parliament, as demanded by the European Union, is being jeopardised by a slew of amendments proposed by his own coalition and opposition parties, the Financial Times reported. Although the centre-right government was able to speedily approve the fiscal adjustment package, it appears that the parliamentary procedure, due to start next week in Senate commissions, will turn into a time-consuming battle of strength for Mr Berlusconi and will challenge the credibility of his parliamentary majority.

Italian Prime Minister Silvio Berlusconi's government unveiled measures Friday to balance Italy's budget by 2013, a year earlier than planned, by slashing €45 billion ($64 billion) in public spending in a bid to pull Italy back from the brink of the euro-zone crisis, The Wall Street Journal reported. The measures, composed of tax increases and spending cuts, seek to retool a fiscal-tightening package the government passed in July that disappointed investors, driving Italy's borrowing costs up to euro-era highs.

France, Italy, Spain and Belgium have banned all short selling of financial stocks for 15 days in response to sharp share price falls this week, but they failed to convince other regulators to go along with a European Union-wide prohibition, the Financial Times reported. The bans on the controversial practice where investors aim to profit from price falls will take effect on Friday morning. But other main markets, including the US and the UK, have said they have no plans to follow suit.

Just a few months ago, European policymakers were scrambling to erect barricades protecting Spain from the marauding sovereign-debt crisis. But now, suddenly, it is Italy in the crosshairs—deeply transforming Europe's problem and putting policymakers in full retreat, The Wall Street Journal reported. What was a battle to avoid a costly bailout has now become a push to avoid a doomsday scenario. "The line has shifted from Spain to after Spain," said Carsten Brzeski, senior economist at ING in Brussels.

After weeks of uncharacteristic and increasingly unsettling silence, Prime Minister Silvio Berlusconi is expected to address Parliament about the economy on Wednesday. On Tuesday, the financial markets pummeled Italy, sending interest rates on its benchmark 10-year bond well above 6 percent, the International Herald Tribune reported. Most alarming to economists is that Italy’s position in the markets is deteriorating even though the Parliament passed austerity measures last month.

Investor concerns over Italy and Spain are complicating efforts to deliver Greece its next chunk of rescue aid, underscoring the increasing difficulty Europe faces in reining its more than year-old credit crisis, The Wall Street Journal reported. Greece is due to receive the next installment of its original, €110 billion ($158 billion) bailout in September. But Italy and Spain, both of which committed to extend bilateral loans to Greece with other euro-zone countries, have seen their own borrowing costs rise recently.

A lackluster Italian government-bond auction on Thursday underscored persistent concerns of a new escalation in the European sovereign-debt crisis as borrowing costs spiral higher, The Wall Street Journal reported. Italian funding costs soared when the country sold €7.97 billion ($11.45 billion) in bonds, near the maximum amount targeted, as bond investors kept up the pressure on the highly indebted country. The yield on the 2021 Italian government bond, or BTP, surged to 5.77% from 4.94% at the previous auction June 28.

Spain and Italy paid a high price to sell short-term debt on Tuesday, compounding investors' concern that last week's bailout package for Greece left the euro zone's debt crisis unresolved, Reuters reported. Spain's short-term cost of borrowing hit three-year highs and demand fell at its Treasury bills auction while yields at a sale of six-month Italian paper hit their highest since November 2008.