Italian Prime Minister and Finance Minister Monti unveiled an ambitious EUR 30b austerity package over the weekend to eliminate the budget deficit by 2013. The package includes measures to cut cost of government and combat tax evasion. Monti called these the "Save Italy" measures and pledged to "share the sacrifices" fairly. There would be sharp cuts to regional governments, reintroduction a property tax, prohibit cash transactions above EUR 1k, raising VAT by 2pts to 23% and give incentives for business for new hiring. Retirement age would not be raised to 62 for women and 66 for men, with incentives to keep working until 70.
European Union's Economic and Monetary Affairs Commissioner Rehn welcomed the "adoption of the significant package of budgetary and economic policy measures by the Italian government" and hailed that as "timely and ambitious". Rehn said that "reinforce the credibility" on Italian economy. Investors respond to the announcement well and sent Asian markets broadly higher as the week opens. Economists said that the package is a valid and rapid step in the right direction and it's impressive that Monti's cabinet is in place for less than 3 weeks.
Euro is mildly higher against dollar and yen but the recovery is so far quite weak. Traders remain cautious ahead of key a string of events this week. Germany Chancellor Merkel and French President Sarkozy will meet today to reach a "French-German propositions" on budget policing for the summit, which could involve treaty changes. German will sell 2016 bonds on Wednesday. ECB will meet on Thursday and EU summit will wrap up the week.
On the data front, Australia TD securities inflation dropped -0.1% mom in November. Eurozone PMI services final is expected to be unrevised at 47.8 in November. Sentix investor confidence is expected to improve slightly to -21 in December. Retail sales are expected to rise slightly by 0.1% mom in October. PMI services will be a feature in European session and is expected to drop to 50.5 in November. From US, main focus is ISM non-manufacturing which is expected to to improve to 53.5 in November.
European Union's Economic and Monetary Affairs Commissioner Rehn welcomed the "adoption of the significant package of budgetary and economic policy measures by the Italian government" and hailed that as "timely and ambitious". Rehn said that "reinforce the credibility" on Italian economy. Investors respond to the announcement well and sent Asian markets broadly higher as the week opens. Economists said that the package is a valid and rapid step in the right direction and it's impressive that Monti's cabinet is in place for less than 3 weeks.
Euro is mildly higher against dollar and yen but the recovery is so far quite weak. Traders remain cautious ahead of key a string of events this week. Germany Chancellor Merkel and French President Sarkozy will meet today to reach a "French-German propositions" on budget policing for the summit, which could involve treaty changes. German will sell 2016 bonds on Wednesday. ECB will meet on Thursday and EU summit will wrap up the week.
On the data front, Australia TD securities inflation dropped -0.1% mom in November. Eurozone PMI services final is expected to be unrevised at 47.8 in November. Sentix investor confidence is expected to improve slightly to -21 in December. Retail sales are expected to rise slightly by 0.1% mom in October. PMI services will be a feature in European session and is expected to drop to 50.5 in November. From US, main focus is ISM non-manufacturing which is expected to to improve to 53.5 in November.