Italy's government on Tuesday approved the release of €4.8 billion ($6.4 billion) from state coffers to fund strategic infrastructure projects aimed at stimulating economic growth.
The funds will pay for highway projects, high-speed railways and retractable underwater barriers to help protect Venice from flooding. They were released as part of Premier Mario Monti's program to help Italy exit the sovereign debt crisis and build market confidence to save the euro currency.
Monti, an economist and former EU commissioner who took office less than three weeks ago, announced emergency measures on Sunday that seek to save €30 billion through austerity measures, and reinvest €10 billion of savings from those measures to enhance growth, stuck at zero for a decade.
The emergency decree allows the funds to be released immediately, but Parliament must still convert the measures to law. Approval is expected by Christmas, although major parties on the right and left want to make changes.
Monti has combined the powerful economic development and infrastructure ministries under Corrado Passera, formerly CEO of Banca IntesaSanpaolo, to ensure good coordination on projects that can boost economic growth. Many of the projects have been stalled in progress or stuck in planning due to a combination of local resistance and interruptions in state funding.
Economists have mixed views on how effective infrastructure programs are for spurring economic growth, with most favoring privately funded projects for better stimulus. Still, longer-term projects, like railways, usually require state funding because the investment period is too long for many investors.
The new funding includes €2 billion to upgrade the Treviglio-Brescia and Milan-Genoa railway lines, both in the north, to highspeed, €598 million for highways, and €600 million for the Venetian lagoon mobile barriers, a project already more than two years behind schedule due to financial problems.
The projects are expected to stimulate growth through putting people to work, as well as keeping construction contracts flowing.
The gates — called Moses, after the Old Testament figure who parted the Red Sea — would be activated when the tide reaches 110 centimeters (43 inches), which happens on average four times a year. St. Mark's Square floods when the tide reaches just 80 centimeters (31.5 inches) — and most of the city's artistic treasures are kept above 2 meters (6.6 feet) for their protection.
Other measures taken by the Monti government include raising the pension age and seniority requirements, slimming down provincial governments, reinstating a tax on first homes, raising taxes on large boats, high-performance cars and private jets and helicopters.
Monti has described the measures as a first step by his government of technocrats tasked with reforming the Italian economy, balancing its budget and spurring moribund growth. He has emphasized that he will step down at the end of his mandate, which could run into 2013, a fact that frees him from re-election pressures that have hampered long-needed reforms.
Unicredit economic analyst Chiara Corsa said the measures appear "sufficiently bold" to allow Italy to balance its budget by 2013," even with recession looming.
"In turn this should allow Italy's debt-to-GDP ratio to enter a downward trajectory soon," she said.
Italy's debt of €1.9 trillion, or 120 percent of GDP, is considered too big to bail out if the eurozone's third-largest economy cannot continue to turn over its debt.
Monti's measures come on top of €59.8 billion in adjustments made by Silvio Berlusconi's government, before he resigned after proving unable to take even more stringent, politically costly, steps.