Italy cabinet approves draconian emergency budget measures

The self-indulgent lifestyle depicted in Federico Fellini’s legendary film, La Dolce Vita, can still be found on the Via Veneto. Waiters in swank cafes lining the winding avenue don’t blush as they demand 30 euros (about $40) for a plate of unremarkable tortellini.

But the comfortable life on the Via Veneto and across Italy is under threat like never before. Faced with the prospect of default on Italy’s colossal debt and the possible demise of the euro, Italy’s new prime minister, Mario Monti, got draconian emergency budgetary measures approved by his cabinet meeting late Sunday in an attempt to save Italy from financial calamity and the euro from ruin.

The 24 billion euro (about $32 billion) austerity package was originally to have been put to the new cabinet on Monday, but was moved forward 24 hours because of the gravity of the economic crisis. It was said to have gutted pensions, increased the retirement age, slashed public spending, including health care, hiked the value added tax and imposed new wealth and property taxes on the rich and others thought to be avoiding paying taxes. The precise details are to be revealed to Parliament Monday with approval expected immediately.

“La dolce vita? That’s finished,” lamented the immaculately turned out Carlotta Miceli, who rents out apartments in her villa in one of Rome’s fancier quarters. “We know that big cuts are coming. People are worried for their houses, for their children. But we don’t even understand why Italy has this problem. Instead of thinking like a football (soccer) team with 11 players, Italians still only think of themselves.”

Referring to her business, Miceli said she was already paying 47 per cent of her profit in taxes and that “it will be a disaster for me if I have to pay anything more.”

The mention of Silvio Berlusconi’s name brought a look of rage and revulsion from an elderly woman rushing to catch a train at Rome’s Termini station.

“That playboy!” she shouted, using the English word because of his reputation for womanizing on a grand scale. As for the sour medicine that Monti was about to dispense, she put both thumbs up and said: “I am ready for it.”

Berlusconi had been widely condemned for fiddling while Italy burned, but the aging media magnate still has his fans. A taxi driver taking a fare to the Vatican Sunday, said that while the former prime minister had a few personal failings he was not so bad. What irritated him was that Monti was unelected and yet had been made a senator for life by President Giorgio Napolitano.

Monti, an economist and academic who has inevitably been dubbed Super Mario, is 68 years old. He has indicated he does not plan to keep for long what is undoubtedly one of the most difficult jobs in the world. He has declined to be paid for his work.

Only a few weeks ago Berlusconi had assured Romans that the restaurants were full and that Italians were still going on vacation.

“It’s true, things looked that good, but they weren’t,” Miceli said. “Many people are afraid right now. The unions won’t accept this. There will be strikes, manifestations, disorder. It is possible that there will be violence.”

Italy’s biggest union, CGIL, has put up posters up across the city declaring that holding on to their jobs was “the only cure for the people.” The syndicate already called for changes Sunday to some of the expected pension provisions.

Greece’s financial problems and how to solve them received a lot of attention this fall. But Italy has the world’s eighth largest economy. Its difficulties are of a far different order of magnitude.

There have been increasingly shrill warnings for several months now that the consequences for the continent and the global economy would likely be catastrophic if Italy goes bankrupt. Spain, Portugal or Greece could all soon be bankrupt. France, whose banks are badly exposed in southern Europe, would likely be stripped of its triple credit rating. Even the mighty German economy and other fiscally prudent countries such as Austria, Finland, Holland, Canada and Australia would be hurt badly.

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