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Monti's reforms
Article added on November 2, 2012 at 02:21 Italian time

Not only corrupt and incompetent politicians

Heading the Italian government since November 2011, the former European Commissioner Mario Monti has brought a fresh wind into Italian politics. However, Italy's reform problems remain acute.

The labor market reform of April 2012 was far from convincing. Incompetent politicians, labor organizations and other groups of interest limited its scope. The government compromised too early. The result is a labor reform with limited effects.

Italy's unemployment rate was 10.8% in September 2012. The really worrying number however is the youth unemployment rate of around 35%. One in three young people is without work, which is more than just a social time bomb. In the long run, this undermines Italy's competitiveness. Furthermore, the youth unemployment costs Italy currently €32.6 billion a year, the highest amount in absolute terms in the entire European Union.

Italy needs a system of hire and fire to bring flexibility back to Italy's stagnant economy. The young, often qualified people have to be brought into the workforce. Democracy will only remain widely accepted if the entire population gets the chance to make a decent living. In 2012, the government is expecting a 2.4% contraction of the economy. To get out of the recession, lower, not higher taxes are needed. But people will actually have to pay what they owe the state.

In several Italian regions, scandals have tainted most parties. Former Prime Minister Berlusconi's colleagues of the People of Freedom party (PdL) have been particularly greedy and corrupt. The region of Sicily could only avoid a default thanks to €400 million offered by the central government in exchange for early elections. The regional president, Raffaele Lombardo (Movimento per le Autonomie, a Lega Nord and Berlusconi ally), was forces to step down. In Lombardy with its capital Milan, Roberto Formigoni (PdL) as well as 13 out of 80 regional members of parliament are under investigation for corruption and other irregularities. His colleague Domenico Zambetti (PdL) has been accused of buying votes from the 'Ndrangheta and of being corrupt in connection with public building contracts. The list of corrupt and incompetent politicians in various regions is long. Under Prime Minister Mario Monti, Italy's political machine aka system of clientelism has come under scrutiny.

Italy's political system is broken. People have lost faith in virtually all parties. In the Sicilian regional elections of October 28, 2012 the populist Five-Star-Movement (Movimento 5 Stelle, M5S) of comedian Beppe Grillo garnered almost 15% of the vote. In absolute terms, the Five-Star-Movement won 285,000 votes in Sicily, ahead of the center-left PD with 257,000, the PDL with 247,000 and the UDC with 208,000 votes. However, the non-voters have become the leading “party” in Sicily, whereas Berlusconi's People of Freedom party and his allies totally faltered.

The M5S protest party is even stronger in other regions of Italy. In next year's parliamentary election, the protest movement is currently expected to win up to 25% of the vote.

It is too easy to blame just politicians in Italy. In addition to the tax evasion and organized crime problems, the Italian citizens are responsible for many other clever ideas such as people profiting from pensions of deceased relatives and falsely claiming disability insurance money. The government and the administration are trying to tackle those problems more seriously under Prime Minister Monti than before, but a lot remains to be done. In September 2012, Morgan Stanley estimated Italy's shadow economy to amount to up to over 20% of GDP. The 'Ndrangheta, the Mafia-type organization of Calabria, which largely controls Europe's cocaine trade, is estimated to make some €40 billion a year. Prime Minister Monti's challenges are monumental.

Silvio Berlusconi: a return from the (politically) dead?

At a press conference held in Rome on October 27, 2012 the former Italian Prime Minister Silvio Berlusconi confirmed his intention not present himself at the next elections as his party's candidate for prime minister. He said that this was in order to facilitate the union of all moderate forces in Italy. At the same time, Berlusconi vowed to remain the president of his political movement, a mixed message for Angelino Alfano, who is actually the Secretary of the  People of Freedom party.

Subsequently, Berlusconi went on a rhetorical rampage, attacking Prime Minister Monti, whom he had lauded just a few days earlier, and then accusing former French President Sarkozy, German Chancellor Merkel and the German banks of plotting against him. Furthermore, Berlusconi attacked potential moderate allies.

The reason for Berlusconi's outburst and change of mind - not to comment on current politics - came after an Italian court ruling. A Milan court sentenced the former prime minister to four years in jail for tax fraud in connection with the purchase of broadcasting rights by his Mediaset television company. Berlusconi will of course appeal the ruling. He is unlikely to save any time in prison. The conviction could definitively end any hope for a political comeback. The Milan court pardoned three years of the prison sentence, but barred Berlusconi from public office for five years.

At the October 27 press conference, Silvio Berlusconi said that he had kept quiet and not given any interviews to Italian media and not commented on the new prime minister's work for a year. He had been in support of the new government made up of technocrats.

The great Silvio said in his recent press conference that German Chancellor Merkel and then French President Sarkozy, smiling at each other at a press conference at his expense, had tried to undermine his credibility. Furthermore, he accused German banks of selling Italian public debt titles, implying that all of this was a plot to bring him down.

Berlusconi said that the Italian Constitutional Court is composed of eleven left-wing and only four center-right judges. According to the former prime minister, this is the result of three left-leaning presidents appointing friends of the left to the Constitutional Court. In addition to a reform of the justice system, Berlusconi demanded institutional reforms. According to him, the small parties in parliament only think of their own interests and not of the interests of Italy, which makes Italy a country that cannot be governed properly.

Berlusconi mentioned a few points that are open to discussion. According to the former prime minister, the government of technocrats has taken measures that have deepened the economic crisis in Italy. Higher taxes, including a higher VAT, have sent the country into a recession.

Furthermore, Berlusconi criticized scare tactics by the Italian tax fraud police (Guardia di Finanza). The former prime minister was right to mention that ever higher taxes cannot be the solution to Italy's public debt problem. He went as far as to claim that Italy suffers from the world's highest tax burden. Taxes are indeed to high, but because tax evasion is a national sport.

Berlusconi said that Japan has a public debt of 200%, but pays a much lower interest rate. He insinuated of course that the public debt debate was a false one. In reality, the example was ill chosen. Over 90% of Japanese bonds are held by the Japanese themselves. Bonds are largely issued to finance the budget. In short, the Japanese buy bonds issued by their government, which is unlikely to ever pay it back without a relative high rate of inflation, accepting a ridiculously low rate of interest. As long as the Japanese are ready to finance their government's voodoo policies, this Ponzi scheme will continue. The day the Japanese seriously start to worry about their government being able to pay back its debt, Japan will falter.

Berlusconi presented himself again as the world's most prosecuted citizen. There are surely many left-wing judges just too happy to go after him. At the same time, he has been convicted more than once in the first instance, winning the appeals, sometimes escaping punishment only be successfully pleading the statute of limitations.

Regarding the case of the underage prostitute Ruby, Berlusconi claimed that he had not exerted any pressure on state officials. He said that he did not encourage prostitution. On the contrary, Berlusconi said that he gave Ruby money to become a partner in a beauty parlor.

The former prime minister went on to ask potential political allies such as the Christian Democrat Pier Ferdinando Casini and Ferrari Chairman Luca Cordero di Montezemolo to be part of a united center-right, the only way to beat the left in the 2013 parliamentary election.

As for Prime Minister Mario Monti, Berlusconi said that he could be part of the next government if he presented himself as a candidate. Berlusconi rightly said that the current situation with a government of technocrats had to end. He forgot to mention that it was him who had ruined Italy's international reputation. A cabinet of technocrats became necessary to save Italy from a looming default. It was not the German Chancellor Merkel who had imposed her will on Italy, it was Berlusconi who had run down Italy to the point that it needed a government of technocrats.

Silvio Berlusconi surely addressed some reform problems. However, since he has been Italy's major political force since 1994, he should keep quiet the rest of his remaining days on planet Earth and maybe dedicate himself to

Fundamental reforms are still desperately needed in Italy.
The likes of Silvio Berlusconi should be barred from politics by the Italian voters. Only a decade of government by serious people such as Mario Monti will be sufficient to bring the country back to a sustainable path. First steps have been taken. Much more still needs to be done.

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