Italy must fall in line

Oli Rehn, the EU commissioner of Economic and Monetary affairs, has warned Italy not to surpass the deficit/GDP of 3% lid. Few days ago the italian finance minister Saccomanni gave assurance to Mr Rehn on public finance’s stability after the Italian government abolished the tax on house property.

Olli Rehn (Picture from presseurope.eu)
Olli Rehn
(Picture from presseurope.eu)

After the gathering Mr. Rehn was not convinced by the solution proposeed by the Italian finance minister and after the umpteenth hearing of political instability in Italy, the commissioner frankly expressed his view asking the Italian government to undertake the necessary reforms to strengthen economic growth and requiring a detailed description of the new tax enacted, the “service tax”.

It is an interesting moment in Europe because technically speaking the recession is over because of Germany and France’s growth, beyond any optimistic forecast. UK is doing well either. However, this good news does not cancel the difficulties of Portugal, Italy, Greece and Spain. Italy in this scenario is still in a dark and uncertain position. In the Southern country there are few signs to affirm the recession is over, but the crisis is ongoing. Unemployment is still high, and thousands of small businesses are closing everyday. Meanwhile, yesterday Berlusconi broadcasted a video, where he complained about his recent sentence for tax fraud and publicly declared his innocence. Yesterday’s message conveyed great uncertainty as well concerning the future of the Italian government, which is supported by the ‘Berlusconi’s centre-right coalition’ with 5 Ministers from his side.

Brussels feels nervous regarding the awkward policy-making of the Italian politicians and although the country was brought back again into the list of virtuous countries in respect of fiscal discipline, the commissioner made it clear that he does not exclude any infringement procedures from the EU Commission, if Italy keeps following this foggy path.

 

Ian Ssali

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2 thoughts on “Italy must fall in line

  1. Dear reader,
    thank you for your comment. The situation in Italy is complicated for many serious reasons. The Fiscal Stability Treaty was ratified by all members states of the European Union (expect Czech Republic, Croatia and UK) to enforce the governance of the economic and monetary union. This Treaty is to streghten the single market. Why? Because the crisis showed off how the European Union failed to fulfil one of its founding principles: creating a trading zone highly competitive with full employement in other words a social market economy (art. 3 TEU, Lisbon Treaty). In this article I reported (I must say poorly) what Oli Rehn partially said. He criticised our fiscal situation but must be pointed out how our budget deficit is by far better than Spain (the worst in the eurozone) and France (check here http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-22042013-AP/EN/2-22042013-AP-EN.PDF). We just centered the lid. What really set Brussels over the edge are our political instability and the lack of reforms. In the grand scheme of things, Italy is doing little of what should be done. Too little. Moreover, as I wrote above, our policy-making is awkward. Who is looking us from the outside, does not fully understand what is happening and tend to be suspicious. Unfortunately our fame precedes us.

    As for the measures you mentioned of the public spending, I agree with you. It’s absured. But you must ask yourself which government ratified the Treaty considering so little the need of the country. But now we are in. The only way to solve everything is delivering economic growth. Economic growth by releasing Italy’s enormous potential. Reducing public spending is a must. The State is too big and too inefficient. Italy’s labour market protects too much who is inside punishing the outsiders and needs rebalancing. Small businesses should be bigger than they are and look for other ways to finance themselves instead of loans from banks (for instance, the government should allow them to bring borrow money from the market), stimulating enterpreneurship, reforming the judiciary and so on. PM Letta is tackling the crisis well for now. The measures enacted will show their effects in the long term. Don’t expect any immediate rise. As far as I see, it will not happen until five years, at least. Obviously, if Italy stays on this track.

    I hope to have justified enough my position.
    Thank you for allowing me to clarify some points this article.
    Any further question is welcomed.

    Regards,
    Ian

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