Italy's window of opportunity

The fall of a democratically elected government and its substitution by a technocratic, unelected one presents a huge opportunity for Italy. True, it was not chosen by the people and true, it is pretty much at the beck and call of the European Central Bank. But this could be a unique opportunity to pass much needed reforms which have failed to go through during the Berlusconi and Prodi governments. But it is also a situation which has an interesting  historical antecedent.

In the 1990's, Italy underwent massive privatization and economic reforms which boosted overall competitiveness, achieved monetary stability and massively reduced corruption following the Mani Pulite Scandal. Inefficient state-owned firms such as Telecom Italia were privatized.
These reforms were not the ingenious idea of some political party. They were pushed through by the European Union so as to ensure Italy met the criteria necessary to join the European Monetary Union. Reforms came to a halt and were in part reversed with Berlusconi because liberalization reforms were seen to undermine his personal business monopoly as well as eliminate a highy profitable source of rent-seeking. Cioffi and Hopner summarize this point exquistly when they claim that "the right-wing Berlusconi government appeared to embrace and embody the incestuous alliances and interrelationships between business and political elites". (http://pas.sagepub.com.gate2.library.lse.ac.uk/content/34/4/463.full.pdf+html)
As a result, Italy has sat stagnant for close to 20 years. Italian GDP growth has averaged around 0.3% over the last 10 years. And patronage, inefficient monopolies and unemployment have run rampant once again.
We now have a unique opportunity to push through much needed reforms because of the external influence of the EU and the bipartisan political climate which has developed in Italy as a result of the crises. This opportunity cannot go wasted and Mr Monti appears to understand this. Of course, even if these reforms are effective, they must be safeguarded against future bastardization. We cannot return to business as usual once the economic situation improves or when Mr Monti's mandate ends in 2013. If history has taught us anything, it is that vigilance on behalf of a citizenry cannot only take place in times of crises. Repeating the mistakes of the past is simply not an option

To conclude, this article does not want to suggest that all the reforms that Monti has proposed will be effective. Some, like the ICI, are dubiously effective at best. But the general climate is moving in the right direction. There is a need to reform the deeply flawed economic system which has proven to not work in the interest of the Italian people. Monti can push forward unpopular pension, trade union and cost cutting reforms using scare tactics. This is obviously not an ideal situation, but in Italy sometimes its the best you can hope for.

What are Eurobonds and why are they so important?

In the last couple of days, the term "Eurobond" is one that has been bounced around continuosly by the media. The news is that Germany opposes the issuing of Eurobonds, while France and (especially) Italy are favourable to them. But just what are they?
A eurobond is a debt obbligation which is issued by the Eurozone as a whole rather than from individual countries. Germany opposes the issuing of Eurobonds, despite the fact many economists say it is the most effective way to resolve the eurozone's financial troubles. The German finance minister, Woflgang Schauble, claims that eurobonds would not solve Europe's problems but rather divert attention from enacting real reforms in Europe's troubled economies.
In this, I agree with Schauble in that the problems affecting countries like Italy and Greece cannot be solved in the long run by joint bond sales. Structural problems led these countries to the brink, along with mismanagment and enormous levels of corruption. Eurobonds might well relieve market pressures for the moment, but it would allow also relieve pressures on these goverments to enact reforms and bring about long term change. At a time when Mario Monti's economic reforms are picking up consensus all over Europe as well as the markets (slowly) regaining some lost faith in Italy, it seems that Eurobonds might distract and ultimately lead Italy and other countries to commit the same mistake that brought them into the crisis in the first place: Value short term fixes rather than long term solutions.

The "auto blu" scandal

The Italian government is expensive to maintain. Way too expensive. In a recent article on the Corriere della Sera, one of Italy's main newspapers, a research showed that there are 72,000 ministerial cars in use by politicians of all ranks. In Italy, these are known as "auto blu" and in recent years have come to symbolize the absurd privileges politicians give themselves using tax payer's money. The article went on to do a comparative study with the UK and discovered that there are only 296 "auto blu" available to British politicians!!Continuing with this embarassing study, the article calculated that the overall maintenance and driver costs for the British government amounted to £7 million. In Italy? Around 1,000,000,000 Euros.

How can this be? The answer is simple: The Italian Government is not an instution whose goal is to serve the people. Rather, it is a mechanism through which favours can be dispersed, rents and bribes can be obtained and personal interests pursued. It serves the interests of a few elites to such an obvious degree that I struggle to find parallels with any other Western democracy, with the exception of Greece.

At a time when the government is asking the people to make sacrifices and "roll up their sleeves" to survive the current crisis, the government should start by setting an example and cutting absurd spending. But then again, that would mean working towards the public good, and I doubt most politicians can remember what that means.

Hi everyone!Welcome to our blog!
We set out to create this blog with very clear intention in mind: to illustrate the situation in Italy in its post-Berlusconi phase. A new government has been enacted with the arduous mission of saving it from the brink of catastrophe that Berlusconi and others before him have led the country into. In this blog, with the help of major newspapers and media sources, we aim to outline the failures, hipocracy and negligence of Berlusconismo and follow the situation in Italy as it unravels. We aim to post new articles on a weekly basis and keep you informed, offer stimulating topics of arguement offer what we believe are some solutions to Italy's woes.