Italy’s Leader Offers Tax Increases, but No Deep Reforms

[alp227]

Prime Minister Mario Monti came into office last month with a mandate to restart Italy’s economy and restore Europe’s confidence in the country amid an intractable debt crisis. But the package he will put to a vote in Parliament on Friday consists primarily of tax increases, not the structural changes to the economy that many experts say are necessary to restart healthy growth.

Mr. Monti’s difficulty in carrying out economic reforms could weaken the underpinnings of the accord reached in Brussels last week in which European leaders agreed to greater political coordination to support the euro, combined with pressure to bring Europe’s debt-ridden southern fringe back to growth.

In addition to austerity measures, heavily indebted countries like Italy and Greece are expected to carry out structural reforms that experts say may eventually make their economies competitive with those in northern Europe, particularly Germany’s. That lack of competitiveness has produced a chronic balance of payments deficit in the southern countries that economists say lies at the heart of the euro zone’s troubles.

It was hoped that Italian lawmakers would rally around Mr. Monti’s government of technocrats and make the tough decisions they have avoided in the past. But if his experience with this week’s measures is any guide, his government is bound to hit strong headwinds from vested interests that grip every corner of Italy’s complex, neofeudal economy.

full: http://www.nytimes.com/2011/12/16/world/europe/italys-leader-monti-offers-tax-increases-not-deep-reform.html?pagewanted=all

[David__77]

1. When they say "technocrat," I hear "fascist."

And that's exactly a correct analogy. In the present context, it is meant to refer to the imposition of governments that are nominally democratic, but were imposed precisely so that the public will could be subverted to the maximum extent, and ignored. The parties' principles are for nothing.

[dipsydoodle]

2. Who voted for them other than the people ?

[WilmywoodNCparalegal]

3. No one voted for them

but a technocratic government is allowed by the Italian system and has happened before. Italians don't see it as fascist - it's just a feature of our system. The technocratic government is in place to do certain tasks before the elections next year.

However, the problem is that the Monti government's solutions aren't enough to solve some underlying issues that still remain. Mainly, Italy has a huge tax evasion problem. It's not just the fat cats who aren't filing tax returns or declaring less than what they actually make; it's everybody at every social class.

The other issue is that Italy will never be Germany (and, to a certain extent, that's good) and vice versa. Italy is a very different country with different issues. Italy's south is still too entrenched in organized crime, poverty and corruption, while the north of Italy (especially the Emilia Romagna region, where I'm from) is among Europe's most prosperous regions with a standard of living that surpasses that of Germany.

The new changes include more taxation on second and third home owners, of which Italy has plenty. It also includes raising pension eligibility ages and limiting those crazy early retirement options, with which I'm personally familiar (a family friend who retired at 40, albeit with the minimum pension).

Another issue that is going to affect Italy is that its population is very old on average. There are fewer young people working to pay into the system whereas there are multitudes of older people. Italy has one of the lowest birth rates in the world. Italians marry late and have very few kids. The immigrant population is helping a bit, but even so there are plenty of young people without any real prospects for a permanent job.

Unfortunately, meritocracy is almost a foreign concept in the Italian workplace. There is a brain drain going on because unfortunately it's not what you know, but who you know in the workplace and many scientists, researchers and engineers are leaving in droves to better opportunities outside of Italy. La Repubblica has had quite a few stories about this.

However, Italians have been through worse and somehow they have survived. Italy still produces well educated professionals (a lot of the CERN scientists involved in the search for the Higgs boson are actually Italian physicists), artists, cooks, engineers, etc.

[dipsydoodle]

4. Italy PM warns policymakers against dividing Europe

(Reuters) - Italy's prime minister urged European policymakers on Friday to beware of dividing the continent with their efforts to fight its debt crisis and warned them against feeding "short-term hunger for rigour" in some countries, in a swipe at Germany.

German Chancellor Angela Merkel -- under pressure from the voter-revered Bundesbank to force debt-saddled euro zone countries to reform and save their way out of crisis -- has led a push for automatic sanctions for deficit sinners in the bloc.

This has fed concerns that excessive debt-tightening in southern euro zone countries could send their economies into a negative spiral with no prospect of growing out of the crisis, and a real chance of feeding resentment of the prosperous north.

Italian Prime Minister Mario Monti said Europe's response to the debt crisis "should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigour in some countries.

http://uk.reuters.com/article/2011/12/16/uk-eurozone-idUKTRE7BF0P120111216

[dipsydoodle]

5. Italy's Monti wins confidence vote over austerity

Italian Prime Minister Mario Monti has easily won a parliamentary confidence vote on his government's package of crucial austerity measures.

The Chamber of Deputies (lower house) backed the 33bn-euro (£27bn; $43bn) package of cuts and reforms by 495 votes to 88.

The package still has to be approved by the Senate (upper house).

http://www.bbc.co.uk/news/world-europe-16212405