The Italian government (NYSE:EWI) announced a new round of austerity measures Friday afternoon. The 45-billion-euro plan aims to balance the nation’s budget by 2013, a year earlier than originally projected in July when a previous round of spending cuts were announced. The plan is the result of an emergency cabinet meeting held earlier today.
In order to lower the cost of borrowing, the European Central Bank announced Monday that it would begin buying Italian debt, increasing pressure on the Italian government to balance the budget. Italy’s (NYSE:EWI) borrowing costs were up today before the austerity package was announced, as investors had little confidence in the government’s ability to reduce the deficit.
The austerity measures include 20 billion euros of cuts in 2012 and 25 billion euros in 2013. The measures still need the approval of the Italian parliament to be enacted. They include a “solidarity tax” on high earners as well as cuts to regional budgets, both of which could hurt consumption and slow down growth next year warns Fabio Fois, an analyst with Barclays Capital (NYSE:BCS).