(Image Source: Bloomberg)  

BY VICTORIA CRAIG

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On the job just two weeks, Italy’s Prime Minister Mario Monti is tackling his country’s debt crisis. On Monday, the new PM unveiled a three-year, 30 billion euro austerity plan that includes, among other things, spending cuts and tax increases on the wealthy. The BBC has the details.

“The proposed measures include raising the retirement age and increasing the number of years of service to qualify for a full pension. The unions are deeply critical of the plan, but Mr. Monti hopes it will show his European counterparts that Italy is serious about tackling its debt.”

As the Wall Street Journal explains, the future of the Euro Zone could well be in Monti’s hands.

“The unraveling of Italy's bond market, one of the world's biggest, amid a vicious circle of rising borrowing costs and investor flight has become the biggest single threat to the survival of the euro. If Italy is unable to refinance its huge debts in the coming year, the rest of Europe would struggle to prop up the country for long, even with help from the International Monetary Fund.”

And a writer for The Economist adds a new austerity plan might not be Italy’s best course of action, saying, Italy’s biggest problem isn’t the deficit.

“Italy's government is likely to run a primary surplus in coming years, even without the austerity plan ... Markets are mostly worried about contagion and growth, and the nasty interaction between the two. Reforms of the sclerotic Italy economy could potentially boost its growth, but Mr Monti has specifically opted not to take on such measures, which would likely trigger a political firestorm.”

Adding to the concern over the new plan, Fox Business’ Cheryl Casone  wonders if the plan is coming too late. One analyst answers, saying, overall the Euro Zone is facing some significant signs of recession, and Italy’s measures might not be enough to pull it out of the trenches.

“When you look at countries like Spain, and Italy, their rate of decline is accelerating. Italy, we think it might have contracted almost one percent in the fourth quarter alone. So, a really steep rates of decline are occurring there... So, there’s lots of negative news this morning about the real economy. But, markets are being cheered because the need for a resolution for the Euro Zone crisis is so pivotal.”

A writer for the Guardian agrees saying he doesn’t have much faith Monti’s plan will work - citing Greece’s precedent just months ago.

“Cuts and taxes are one thing, yet I saw little within Monti's plan setting out measures to boost growth and carry out structural reform. More worryingly, the tone and nature of measures was reminiscent of announcements in Athens, Dublin and Lisbon. Across Europe there seems to a monotonous lack of inventiveness.”

Despite the skepticism, markets are reacting positively to the announcement. In a show of solidarity to his nation, Monti announced he is giving up his salary as prime minister.