Even if a durable political coalition existed to enact austerity measures, there is concern that they will trigger the kind of fierce public backlash that has swept Greece in recent months. Kindling those concerns are Italy’s labor unions, who for years have threatened to thwart any attempt to reform Italy’s labor laws or to trim the country’s bloated welfare state. It is not an idle threat. Back in September, the Italian General Confederation of Labor, Italy’s largest trade union, organized a nationwide strike to protest the government’s passage of an austerity package. Thousands of protestors poured into the streets and effectively shut down the country, disrupting everything from public transportation to hospitals and schools, along with other government services. The prospect of violent Greek clashes replaying themselves on the streets of Rome and Milan may be enough to keep any Italian government from pushing ahead with the kind of reforms that the country so urgently needs.
Ultimately, that inaction is the greater worry. Unaddressed, Italy’s massive debt will trigger a fresh round of panic through Europe’s already fragile markets. In the worst-case scenario, Italy will seek a bailout. Europe would then struggle to come up with a rescue package that large, leading to the possibility of a default that could break up the 17-nation Eurozone and drag down the global economy. Both scenarios are terrifying. As one analyst recently put it: “Italy is too big to fail, too big to save.”
There is still a chance that it may not come to that. For the time being, Italy has been placed on a kind of fiscal probation. The International Monetary Fund is monitoring to make sure that the country puts in place reforms to balance the budget by 2013 and encourage economic growth. Still, there is little immediate cause for optimism. The high-profile showdown over Berlusconi’s government notwithstanding, Italy’s problems are not only political. They are also cultural and structural. In the long run, only a far-reaching economic reform agenda and a government willing to see it through in the face of popular discontent will bring the country out of its debt crisis. Neither has emerged to date.
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This is like the passengers of the Titanic fighting to keep the crew from saving the ship. They know they are going down and yet fighting to keep all the perks that are sinkinig their nation.
Enjoy it while it lasts
It is almost like the world is getting ready to return to feudal Fiefdoms and Monarchs. Would Italy be better off with the Papal States dealing with the King of Milan and Florence? Negotiating one Royal with another? How about France and Britain…should Kingdoms be re-established?
Are we ready for a king?
Eventually, when the entitlement monies run dry, someone will have to step in and demand order. At that instant we are no longer citizens but rather we will have become subjects.
In the name of peace, all hell will break loose.
Not another King, but Italy would be much better off getting rid of the old Kingdom of Naples. The south has been a net drain on central and northern Italy since reunification.
Welcome to the inevitable socioeconomic realities of Euro- Socialism and its collectivist cradle to grave welfare system. Throw in blatant union totalitarianism and thuggery which precludes even modest austerity correction measures and Italy's economic fate is sealed.
Inevitably any state which spends too more public money and allows its wage cost to become uncompetitive will experience rising unemployment and falling economic activity. its social cost will become impossible to bear.
Are the big government "Shack Daddy's" in the Obama camp and Congress paying attention?
Well said. The good thing is that Italy might finally bring down the Euro with it. It might even start the dissolution of the whole EU.
Italy has a few things going for it that Greece does not have, it actually produces things like cars, electrical goods, clothing, shoes, etc., that people elsewhere in the world want to buy? What has Greece produced other then wine, ouzo, olives and big government? Italy also has a tradition of democratically elected and peaceful transition of government, dysfunctional as it is, Greece had a military junta running the country 40 years ago and a string of corrupt professional politicians running the country since who shovel money off the backs of trucks to keep in power. Italy needs a major overhaul and reform but can be fixed, Greece needs to be torn down and completely rebuilt from the foundation up.