Budget Trouble

Italy is not a fiscally responsible country, Italians are not a fiscally responsible people in general. They are known to have a huge black economy on which no taxes are paid (obviously). While that fact hides the true living standards of Italians, it also doesn’t help the international standing of Italy or help their above ground economy get on track. In fact, Standard and Poor ratings agencies recently downgraded Italian government debt to the level of Botswana and Tobago. Neither of which are really considered economic powerhouses. In fact Italy is at risk, (not short-term risk mind you), of getting bounced out of the euro; economic growth is one of the lowest in the EU, and government debt is 107% of the GDP. In short Italy is fucked.

And desperate times call for desperate measures. The budget in Italy introduced by Prodi’s centre-lefty coalition is causing an uproar. The average Italian doesn’t give a shit about EU directives. He cares about taxes and practicality, and the budget threatens his way of life. However, the fact is, Italy was much like another country who’s leaders last name begins with B for the past many years. While Berlusconi was in power the government bothered not with spending at pace with its’ means. The result is that Prodi inherited an economy whose budget deficit was over 4% of GDP, which is out of step with the Maastricht threshold. The big aim of the Finanziaria is to get below the EU mandated 3% budget deficit.

The problem is it may cost Prodi his tenuous grip on power. It has certainly cost him a great degree of popularity, not that he enjoyed an abundance to begin with.
The battle between Berlusconi and Prodi is one between style and substance. Berlusconi doesn’t bother with fiscal responsibility or good governance. He has charisma, wit, charm, plastic surgerons and a football club to endear him to the electorate. Prodi has none of these things, only a commitment to fiscal responsility and sensible leadership. He was fortunate to barely squeak out a victory in the spring election on the strength of these boring attributes. But now he looks to be in trouble because of them.

2006-11-23T09:08:00+00:00 November 23 2006|