Fidest – Agenzia giornalistica/press agency

Quotidiano di informazione – Anno 32 n° 250

Italy Trashing the lifeboat Rome

Posted by fidest press agency su giovedì, 1 settembre 2011

Silvio Berlusconi, Italy’s prime minister and escape­artist extraordinary, sparked the †rst of several market panics over Italy’s public debt by vowing to water down an already soggy package of deficit­reduction measures. He was forced to retreat by the resulting turmoil. But the threathe poses to the euro was again made clear this week when he pitched his country’s public finances into further chaos, leaving a hole of at least ¤4 billion­5 billion ($5.8 billion­7.2 billion) in the latest of two emergency budgets designed to get his country out of the fix in which it has been trapped for the past two months. Two things now stand between Italy and a debt crisis vastly more menacing to the single currency than any so far on the euro­zone periphery: support for Italy’s bonds from the European Central Bank (which has bought some ¤30 billion­ worth since mid­August), and a ¤45.5 billion deficit­reduction plan that the ECB demanded in return for its help. When this was unveiled by Mr Berlusconi on August 12th, investors might have been forgiven for thinking that‹bar the odd amendment‹the same plan would be set before parliament. But in Italy nothing is safe from modi†cation, and on August 29th Mr Berlusconi unpicked his package, throwing out the measure he most disliked, a surtax on top incomes in the private sector. (Embarrassingly, the multimil­ lionaire chairman of Ferrari, Luca di Montezemolo, o…ered to pay more tax, saying you have to begin by asking it of those who have most.) To placate Italy’s irate local mayors and governors, Mr Berlusconi lightened the burden of savings they were supposed to have made. Some new measures were put in. The government promised to save money by abolishing the provincial administrations and halving the number of national law­makers. But it said it would do so with con­ stitutional laws, which are notoriously difficult to get approved. The immediate savings would come from postponing the retirement of many Italians by excluding from their pension calculations time spent at university or doing military service. The measure was understandably seen as penalising those who failed to dodge conscription, and simply robbing those who chose higher education (since graduates in Italy have to make a payment to the treasury for their university courses to be counted as time worked). The public looks likely to force Mr Berlusconi into a U­turn that would enlarge still further the hole in his former austerity package. That alone is enough to cast doubt on
the ECB’s readiness to continue buying Italian debt. But there is another factor. As the price of intervention, the bank’s president, Jean­Claude Trichet, and his successor­designate, Mario Draghi, reportedly required not only the pushing through of the package that Mr Berlusconi has just undone, but also a comprehensive programme of privatisation and liberalisation. And, of that, there has never been more than a trace in the government’s plans. (from The Economist)

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