INTRODUCTION: Italian Prime Minister Arnaldo Forlani is facing growing opposition to austerity measures announced by his four party government on Sunday (22 March).
GV EXTERIOR Bank of America, in Rome
CU PULL BACK TO SV Bank to Italy doorway
SV Crowd of people changing money in bank (3 shots)
CU PULL BACK TO GV Ham hocks and sausages hung with price signs
SV People buying vegetables in market (3 shots)
SV Customers buying fruit in market (3 shots)
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Background: INTRODUCTION: Italian Prime Minister Arnaldo Forlani is facing growing opposition to austerity measures announced by his four party government on Sunday (22 March). The Communist Party, trade unionist and many leading industrialist have condemned the six percent devaluation of the lira and tight credit, curbs imposed. The measures are aimed at halting the widespread bankruptcies and unemployment in Italy, and represent only the first phase of an economic package that will also need a 5,000 billion lira (5 billion U.S. dollars) cut in public spending.
SYNOPSIS: The announced increase in the bank rate of 2.5 percent brought it to a highest ever 19 percent. This and the increase in compulsory reserves the banks must keep, were aimed at slowing inflation in the money supply and borrowing.
The announcement created a rush at bank exchange counters on Monday morning (23 March), but despite the six percent devaluation, the lira fell by only about two percent against leading European currencies.
The Treasury Ministry said the decision to devalue was made to counter a record balance of payments deficit of 1.6 billion dollars in February alone.
Italy's chronically high inflation rate is expected to rise by another one percent to 21 for a time before reacting to the changes.
The inflation and correspondingly high consumption has been fuelled by an index-linked wage system jealously protected by the trade unions. The powerful opposition Communist Party and unions are promising to oppose the proposal to freeze public sector pay.
Union officials said half a million workers responded to calls for two-hour random stoppages on Tuesday (24 March) to protest at the measures. More stoppage and industrial action was expected to follow.