World Bulletin / News Desk
Italy's government unexpectedly cut income tax rates for the country's lowest earners while promising to stick to the budget goals it has agreed with the European Union.
After an eight-hour cabinet meeting that ended early on Wednesday, the government said it would also halve a planned increase in sales tax rates to a single percentage point.
Italy holds parliamentary elections in about six months.
"Today we can see that budget discipline pays and makes sense" because "we can allow ourselves some moderate relief," Prime Minister Mario Monti told reporters after the meeting.
The severe austerity imposed by Monti since he took over an unelected government in November has exacerbated a year-long recession in the euro zone's third-biggest economy and been a focus of criticism by all political factions.
He increased taxes and cut pensions to put the public accounts on track and head off a Greek-style debt disaster.
Monti has repeatedly denied he would stand in the election but did say he would serve his country again if asked following the vote.
Italy will reduce by a percentage point the two lowest income tax rates.
The rate will drop to 22 percent from 23 percent for those earning less than 15,000 euros per year, and to 26 percent from 27 percent for salaries between 15,001 and 28,000 euros. The top three rates will remain unchanged.
Italy will balance its budget in structural terms next year, as it has pledged its EU partners it would do, according to a statement from the cabinet meeting.
A second round of cuts to health care spending and other state expenditure, a new tax on financial transactions and "fiscal interventions" for banks and insurance companies will help pay for the measures, according to a statement.
The savings should amount to 3.5 billion per year when at full regime, the government said. Savings from a previous round of spending cuts will total 4.4 billion euros this year, and 10.3 billion euros next year.
Also decided during the cabinet meeting was a reform to the constitution to centralise spending controls over the country's 20 regional governments, which have been the focus of a recent series of high-profile corruption scandals.
That will involve reforms designed to regain coordination of spending on energy, tax collection, and the national transportation network.
Also to address corruption, the position of anti-corruption commissioner, who will be given investigative powers, will be created with the passage of the budget.
Volatility eased as traders focused on the world economy and corporate earnings after a week dominated by the dramatic spike in tensions over North Korea, which triggered a global sell-off before prices bounced back Monday.
Investors greeted the more conciliatory tone after US stocks dropped three days in a row last week on President Donald Trump's vow of "fire and fury" if North Korea continued to pursue its nuclear weapons and ballistic missile programs.
The ultra-conservative kingdom has moved to diversify its traditionally oil-dependent economy following a sharp fall in crude prices.
In its monthly report on the global oil market, the International Energy Agency said, however, that it believes the supply glut is easing, partly because demand is growing faster.
US stocks have been in retreat since President Donald Trump Tuesday issued a fiery warning to North Korea to halt its nuclear program.
The move by one of Japan's best-known firms greatly reduces the chance of an embarrassing delisting from the Tokyo Stock Exchange (TSE).
London's benchmark FTSE 100 index weakened by 0.5 percent to 7,503.39 points.
The approval by the European Commission comes just over two months after the European Central Bank -- which took on the role of the eurozone's banking supervisor in 2014 -- allowed the sale to go ahead for a symbolic fee of one euro.
BP, Chevron, ExxonMobil, Shell and Total have all published results in recent days, showing they pocketed $23 billion in net profit in the first half fo the year.
Higher cereal, sugar and dairy prices pushed food price index by 10.2 percent annually in July
HSBC was also a big riser, gaining three percent at £7.65 ($10, 8.5 euros) in late morning trade after the British banking giant announced a share buyback plan alongside a rise in first-half profits.
Both main crude contracts made strong gains, with WTI testing $50 a barrel for the first time since late May and Brent heading towards $53, while mining giants BHP Billiton and Rio Tinto saw their share price rise as commodities strengthened.