The Guardian

Stock markets recover after crucial Italy vote

Mario Monti's survival after Italian senate approves austerity package boosts optimism, but Greece is hit by new protests

• Katie Allen and Graeme Wearden
• guardian.co.uk, Thursday 22 December 2011 18.44 GMT
• Article history
Hearse owners protest in central Athens, Greece, over a change in the status of their vehicles imposed by the government which has raised their tax bills. Photograph: Alkis Konstantinidis/EPA
Stock markets around Europe regained some poise on Thursday after Italy's new leader survived a make-or-break vote on his austerity plan and investors snapped up bank shares after emergency funds for the financial system were made available. Mario Monti's decision to link an Italian senate vote on his €33bn (£27.5bn) budget package to a vote of confidence risked plunging the country into fresh political chaos. But in the event he managed to get the plan approved and will now set about balancing Italy's budget by 2013. The programme includes higher VAT rates, a local housing tax, health spending cuts, an increase in the state pension age to 66, and a higher retirement age.Trade unions said the burden would fall heavily on the poorest in Italian society. There were signs of growing discontent in Greece, where hearse owners became the latest to demonstrate their grievances, by staging protest drives through the country's two main cities. They are worried that a sharp rise in annual road taxes could put them out of business. The protesters say their cars have been reclassified as private instead of business vehicles, which means they will pay up to six times more in road tax. "How can you call a hearse a regular car? Our passengers are deceased," said protester Aris Karvounidis, a member of the Funeral Services Association of Northern Greece. But the tone was somewhat more upbeat on financial markets, where the FTSE 100 added 1.3%, France's CAC40 gained 1.4% and Germany's DAX rose 1.1%. Banking stocks were in demand as investors reassessed the strong take-up of loans from the European Central Bank on Wednesday as at least providing some liquidity, even if it did highlight the precarious state of the financial sector. There was some defrosting of Franco-British relations, which had grown strained following David Cameron's EU veto and French comments on Britain's suitability for a credit downgrade. Alain Juppé, the French foreign minister, called time on the war of words. He said recent comments by president Nicolas Sarkozy and Jean-Pierre Jouyet, head of France's financial regulator, went "further than their authors wished". Sarkozy is said to have described David Cameron as a "stubborn child" and Jouyet said Britain's right were the "stupidest in the world". Juppé also sought to calm EU break-up jitters, adding: "We will not allow the European Union to unravel. The explosion of the euro would be the end of the EU. It would spell catastrophe that could end up for the worst." The Bank of England's governor, Mervyn King, did little to downplay concerns about the sovereign debt crisis. Speaking in Frankfurt, he highlighted worries about the resilience of the financial system and "deteriorating growth prospects". "Dependence on central banks has risen and signs are intensifying that stressed financial conditions are passing through to the real economy," he told a press conference in his role as vice-chairman of the European Systemic Risk Board.