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Italy: Tax, Suicides, Anti-Politics, and Public Spending Cuts

Italy seems to be hectic at present.  Lots is going on, even if not much change is occurring.  Italy’s technocrat Prime Minister is attempting to put troublesome Italy to rights, but criticism of his approach to solving Italy’s many problems is mounting daily.

It seems that Italians do not really appreciate the size of the task Mario Monti is facing, even if some do appreciate that the politicians who are supposed to be supporting Monti are doing their level best to hinder his attempts to sort out Italy.

Here’s a round up of what is going on in Italy at present.

IMU Arguments

The introduction of the IMU real estate tax is causing much consternation.  Some, such as one mayor who believes paying the tax will “ruin Italy’s families”, are suggesting that Italians should simply refuse to pay this new tax.  In the face of such calls, Mario Monti has retorted that non payment equates to tax evasion.

IMU arguments will continue to rage and will reach a crescendo once the first instalment becomes due.

Italy’s Suicidal Business Owners

Mounting debts and tax bills combined with falling demand have led to just over 30 Italian businesspeople committing suicide in 2012, so far.

Every day there seems to be a new report on some business owner or other who could take no more and decided to take his own life.  Italy is a male dominated society so it should come as no surprise to hear that majority, if not all, of the suicidal business owners are men.

Italy’s traditionally over cautious banks are not helping matters.  Banks in Italy, which are tight fisted at the best of times, have become even more reluctant to lend anybody anything.  As for credit, forget it.

More sad reports of business owner suicides will no doubt appear in the pages of Italy’s newspapers.  Quite a number of the suicides relate to crippling tax debts and reflect the fact that paying money to Italy’s tax collectors far too complex. One solution would be to allow businesses to add tax debt payments directly to invoices – say 10% of the total sum invoiced.  Italy’s government should then ensure that invoices are settled promptly as this will a) help keep money flowing into Italy’s public coffers and b), more importantly, keep businesses afloat thus ensuring fewer Italians end up without work.

Italians who have jobs spend money, while those who do not, don’t, and consumer spending falls with dire consequences for the Boot’s already fragile economy.

Italian Politics and Anti-Politics

Only around 10% of Italians have any faith in Italy’s political parties.  Nearly 50% of Italians indicated in a recent poll that they would not vote for any party in the event of general elections.  The reputation of Italy’s politicians, which has never been particularly high, appears to have gone from bad to worse.  Italians are starting to understand that the inactivity of their politicians is one of the main reasons Italy is in such an almighty mess.

It has also become crystal clear that Monti does not trust his supposed political allies – recent appointments demonstrate this.  A private sector troubleshooter, Enrico Bondi, has been brought in to sort out Italy’s wasteful public sector and former prime minister Giuliano Amato is to take a look at party funding.

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The political parties which claim to support Monti’s troubleshooting activities are finding excuses not to as often as they possibly can.  It is almost as if the parties – Berlusconi’s PdL, the left of center PD and the centre-centre UDC – which make up Monti’s unholy coalition have no wish for reforms to be pushed through, even if publicly they say they support Monti’s efforts.  Others in Italy have seen through the public and hollow political rhetoric.  Italy’s President Napolitiano has noticed that they have noticed and made a very public call for political regeneration.  An Italian Cardinal waded into the fray saying that anti-politics was likely to do more harm than good.

At the time Monti ascended to power, it was feared Italy was about to go the same way as Greece and Italy’s politicians wasted no time in claiming they would act responsibly, and they did, for around five seconds.  Once Monti had extricated Italy from ‘spread-worries’, it was back to normal for Italy’s political parties.

Normal in Italian politics means lots of talk and little, if any, constructive action.  That anti-politics is a bit of a buzz word in Italy is no real surprise seeing as the politicians have resorted to their usual trick of throwing spanners in the works to ensure they maintain their lucrative status quo.

One consequence of Italy’s politicians not doing a fat lot is that public spending levels have continued to climb despite the fact that the nation’s economy was nose diving.  Monti has now turned his beady little eye towards this sticky Italian problem.

Public Spending Cuts Coming

As mentioned before, Monti has appointed a private sector expert to work out how the Italian state can cut the amount it spends.  Monti has said he is aiming to lop $5.5 billion off Italy’s public spending bill.

One Italian commentator, Oscar Giannino, believes that until Italy reduces public spending, and introduces tax cuts, Italy’s economy will not grow.

Giannino, a member of the Istituto Bruno Leoni socio-economic think tank, and who regularly appears on political talk shows and writes for numerous Italian papers, feels that Monti is doing nothing which will genuinely reduce public spending in Italy.

Giannino is far from optimistic about Italy’s prospects and anyone who takes the time to read the Chicago Blog he writes for and runs will conclude that Giannino and his fellow Italy commentators are wholly unconvinced that Monti is doing what is needed to point Italy in the right direction.

Whether Monti’s public spending cuts crusade will bear fruit remains to be seen.

Part of Monti’s plan has been to call upon Italy’s citizens to indicate incidences of wasteful public spending via a kind of online suggestion box.  In the first twenty fours hours since the suggestion box went live, 40,000 Italians obligingly responded with a huge number of indications what Italy could do to save itself a few Euros or so.  An example of true democracy at work?  Possibly, but whether the Monti government will implement any of the citizen’s suggestions is something which will not be known for a while and Italy’s politicians are likely to block any proposals which they believe may undermine the foundations of their ivory towers.

Fluidly Unstable Italy

The situation in Italy is very fluid, although perhaps ‘unstable’ would be a better word.  Much vaunted labor law reforms appear to have stalled.

There are signs that on top of the business owner suicides mounting discontent may lead to violence.

It looks as of Italy is about to pay the price of sixty odd years of largely inefficient government and virtually zero direction.

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