Forex News – Italy’s Senate passes austerity vote; euro strengthens

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The much anticipated vote on austerity measures was passed today in Italy’s Senate. The debt- reduction measures are an attempt to shore up investor confidence and pave the way for a new government after current Prime Minister Silvio Berlusconi steps down and will most probably be replaced by former European Union Competition Commissioner Mario Monti.

The vote was passed by 156 against 12 and was expected to pass as there was intense pressure from European Union authorities, the United States and even Italy’s President Napolitano. The measures also had the support of many members of Mr. Berlusconi’s center-right coalition.

The new reform package is aimed at cutting Italy’s debt of 1.9 trillion euros and to stimulate the economy’s growth. Italy is the third largest euro zone country.

The timing of the ballot was moved forward after Prime Minister Silvio Berlusconi’s’s parliamentary majority unravelled this week, leading bond yields to surge to euro-era records. Berlusconi pledged to resign after the austerity vote. He is expected to officially resign tomorrow after the Chamber of Deputies will give final approval to the legislation tomorrow and Berlusconi will then resign “a minute later,” Chamber Speaker Gianfranco Fini said.

The results of the vote boosted the euro in late European afternoon trading.