Italy slashes 4.2 billion euros from budget

Stephane Danna
30 April 2012
Shoppers buy bags in Ventimiglia, northern Italy, in 2010

Shoppers buy bags in Ventimiglia, northern Italy, in 2010. The Italian government on Monday slashed 4.2 billion euros from its budget in a bid to avoid a planned hike in value-added tax.

The Italian government on Monday slashed 4.2 billion euros from its budget in a bid to avoid a planned hike in value-added tax.

"The total reduction in public spending is 4.2 billion euros ($5.5 billion), an amount that will avoid the raising of the VAT by two points that was set for October," Prime Minister Mario Monti said after a six-hour cabinet meeting.

The government decided in December to raise the VAT from 21 to 23 percent, but has since deemed that such a move would aggravate the recession that began late last year.

The government predicts that the economy will shrink by 1.2 percent this year.