The Italian budget vote
Article added on July 15, 2011 at 18:38 Riga time, last details corrected and updated at 20:39
  
The Italian debt stands at some 120% of GDP. In a rare sign of political consensus and responsibility, both the Berlusconi government and a part of the opposition decided to push through an austerity budget by Friday (July 15) to calm down worries at the debt market. It was the fastest Italian budget vote in history.

In the Chamber, the Lower House of the Italian parliament, 316 MPs voted for the austerity measures, 284 against it, 2 abstained from voting. The main center-left opposition Democratic Party (DP) had decided to vote against the measures but not to block its passage. However, the DP asked for early elections after the vote.

Yesterday, July 14, in the Senate, the Upper House, 161 MPs had voted for the austerity budget, 135 against it and 3 had abstained from voting.

However, Nichi Vendola, the governor of the Apulia Region and leader of Italy's left-wing Sinistra Ecologia Libertà party wrote on July 14 in a Guardian article that the austerity program proposed was “dead wrong” for Italy.

The plan by Economics and Finance Minister Giulio Tremonti is to balance the budget by 2014 through an austerity package including some €48 billion in spending cuts. At least according to the initial plan, the deep cuts would only occur in the electoral year 2013 as well as in the last year. That is why the markets were not so convinced in the beginning. It looked like another lame political move by Prime Minister Silvio Berlusconi.

In the end, Finance Minister Giulio Tremonti came up with an 79 billion euro austerity plan which, according to the Corriere della Sera daily, will cost an average family some 1000 euro in additional taxes over two years. Health care will become more expensive. A salary freeze for public jobs has been decided. On high pensions above 90,000 euro a year, a 5% to 10% solidarity tax will be introduced in 2012. From 2012 to 2014, the retirement age will increase one to three months. The petrol tax will increase. On the regional and local level, some services may have to be reduced and/or privatized.

Italians are not highly indebted and they did not witness a real-estate bubble. But it is a low-growth country. Under Berlusconi, economic stagnation was the rule. The Italians' favorite pastime remains to go on strike. Italy has a tax evasion problem, a large black economy with people not paying taxes as well as a multi-billion dollar Mafia economy.

In addition, Finance Minister Giulio Tremonti's close aide Marco Milanese had to step down on June 28, 2011 [date corrected on July 18]. He had stumbled over a corruption scandal. A Mister Viscione who, like Milanese, had grown up in the town of Cervinara in the province of Avellino, had been forced to give Milanese money, cars, luxury watches and more worth roughly one million euro. At the same time, three days a week, Minister Tremonti had benefitted from a free apartment in Rome offered by Milanese. As soon as the scandal broke, Tremonti moved out of the apartment.

The investigators tracked down the man who sold three Swiss luxury watches to Marco Milanese. According to the salesman, he bought a Franck Muller ladies watch as well as two Patek Philippe gents watches. The total retail value of the three watches was about 50,000 euro. The salesman said that one watch was for Tremonti. The minister told magistrates that he had never received such a gift. The Viscione-Milanese scandal is still under investigation. Tremonti said he had no intention to step down.

The spread between Italian BTP bonds (multiyear Treasury bonds - Buoni del Tesoro Polianuali) and German bonds remains substantial. Italy is not Greece. It has many internationally competitive companies. But so do the United States. Even successful countries can go down if they behave irresponsibly.

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Sheet music by Giuseppe Verdi