Why I despair over Italy.
I am thinking of adding clairvoyant to my CV; amid, what have so far been rather lackluster attempts to get the government to agree to spending cuts and the like, Italy has gone on strike. Well, not exactly all of Italy, but enough to make the day-to-day running very difficult. Some of the BBC’s more creative headline writers are clearly on holiday, one headline I saw on their website said ‘Italian austerity measures prove unpopular’, I think there are few people who would welcome austerity measures at any time, but when there is no money left in the kitty, you have to tighten your beautifully hand stitched leather belt; unless of course you are Italian it seems.
Despite the Italian Senate approving the austerity measures, Berlusconi has been forced to back track on this ruling because of the fractious nature of his coalition government. Various officials have vetoed the following points; cutting local government spending, raising the level of VAT and taxing the highest earners more, something the french super rich volunteered! What puzzles me, is why the Italians think they are above making cutbacks. Don’t get me wrong, I love Italy; I have Italian family and I have some very dear Italian friends, but this refusal to take responsibility for their massive debt is incomprehensible. It does not reflect well on them as a nation and does not do a great deal to bolster confidence in the market. The ECB have tried to curb the raising cost of government bonds, but when the Italian government cannot put together a credible austerity package (the only major concession was to come down harder on tax evaders), then one wonders why they bothered in the first place. It plainly shows that as Prime Minister, Silvio Berlusconi has little or no control over his cabinet (but that I suppose is what happens during a coalition), I would even go so far as to say it might be time for him to step down. It also doesn’t help that Berlusconi promised the people that his government would “never put its hands in the pockets of Italians”, a rather foolish claim to make, but one that I suppose is typical of Berlusconi. The ECB are putting more pressure on the Italians to force through the austerity plan; and German Chancellor Angela Merkel has compared the Italian economy to the rather ragged condition of the Greek one.
There have also been renewed calls for some form of central treasury for the Eurozone. It’s difficult to know what is for the best however; speaking to the Treasury Select Committee, John O’Neil (formerly of Goldman Sachs) has argued that the Eurozone itself consists of too many members, while Gerard Lyons of Standard Chartered suggested that“For this system to survive in its format, it needs, in my view, to become a political union with one central Treasury.” I’m not sure this is the answer personally, it would create yet another layer of bureaucracy which would not be necessary if government spending was under control. It should however demonstrate that the Euro is not as robust as once thought and seems to be very much a ‘fair weather’ currency. If we are to find one silver lining in all this, the whole situation seems to have entrenched Britain’s Eurosceptism even further. Personally this is a bit gratifying as I would hope that any government (be it Coalition, Labour or whatever) would realise that broaching the subject of joining the Euro would be political suicide, so the chances of us joining it are pretty slim!