The last three years the European Union has faced the most grave economic crisis in its history. It’s not so much about preserving the «social oriented» market model that it has been so proud of the last three dozen years. The matter is that the poorly thought-out EU extension at the expense of post-socialist states has shattered the financial-economic foundation of the Union and got stranded the old timers that had not distinguished themselves as immune to economic woes…
Greece is actually facing a default. It is still called a technical one, but it doesn’t make life easier for the major part of the country’s population. And there are larger countries looming behind Greece. Nouriel Roubini, the economist who had predicted the current crisis, says: «Spain and Italy may yet come under the gun». What are his estimations based on, especially concerning Italy that he has no hesitation to put into the category of the EU «periphery»?
The Italy’s state debt has reached a record high of €1,935 in January 2012 as the Italian Central bank announced on March 15. It has increased by €37,9 since December 2011. The 2011 resulted in the state debt going up to 120.1% of the Gross National Product (GNP). According to the Central Bank the debt grows along with the service expenditure.
By the end of last year the European markets practically lost any faith in the ability of the Italian leadership to solve the most acute problem of fulfilling their sovereign debt obligations what predetermined the resignation of Silvio Berlusconi. The spread between Italian bonds and benchmark German Bunds has come down below the psychologically important 500-point mark for the first time in history. The Italian bond yields soared to 6.9%, exceeding three times the profitability of German securities.
Nobody dares to predict what’s going to happen even tomorrow. Especially taking into account the fact that oil deliveries from Iran to Italy have stopped. The EU sanctions envisaged the deadline on July 1, but knowing China, India and Japan cannot join, Iran decided to come first. As a result, some countries, Italy included, face difficult times. The oil coming from Iran made up 30% of Italian imports. It resulted in high quality petrol price going up by €1,96 per litre on average throughout the whole country in March. Diesel litre price grew over €1,8. Last December, about the time of Catholic Passover, a petrol litre price went over the psychologically important level of €2.
The fuel prices going up have dramatic consequences for transport, 88% of it going by roads. It’s tough for farmers because production costs go up along with expenditure for transport fuel – 19% on average since the beginning of this year.
Besides, fuel price hikes is the main inflation driving factor in the Apennines. The cost of minimal cost of Italian consumer basket has grown 4% in February compared with the average yearly index. It has gone record high in the last five years along with the general inflation rate of 3,3%.
It won’t be a surprise if under the current conditions the Italian bond yields will rise to 7% in one or a couple of months. Against the background of growing state debt it will mean financial collapse, because the loan markets will simply close. Who would believe in Italy’s ability to service the debts under such percentage, not even talking about paying it off? Meanwhile, according to experts estimates, Italy will have to borrow over €200 billion more in 2012. It’ll also have to redeem € 91 billion of preferential debts till the end of April.
The measures taken by the Mario Monti’s «technical cabinet», that came to power in December instead of the government of Silvio Berlusconi, appear not to bring about positive results. On the contrary they have only exacerbated the situation.
The recession is going on, the economy is being converted into a kind of shrinking «shagreen leather». On March 12 the Italian National Institute of Statistics (ISTAT) reported the national GNP shrank in the IV quarter of 2011 by 0,7% compared with the III quarter, and by 0,4% in annual terms. Internal consumer demand downturn contributes to the slump. The consumer expenditure in the IV quarter went down by 0,7% in quarter terms and by 1,2% in annual terms. Investments into economy dwindled by 2,4% and 3,1% accordingly. The 2012 outlook is hardly a rosy forecast too. The European commission predicts the economy will decline by 1,3%.
«Financial maneuver» against society
The measures taken by Mario Monti’s government, called a «financial maneuver», are aimed at saving €33 billion in the nearest three years. They have obvious anti-social orientation. The critics of «financial maneuver» noted right away that it presupposed an increase of tax burden for all citizens and minimum steps to create incentives for economic growth.
The measures also include the reintroduction of a property tax on first homes, which had been abolished in 2008, that will make up 0,4% of the first home and 0,75% on the second and other homes. The only alleviation measure is a €50 discount for every child till the age of 26. Besides, a 0,76% foreign real estate, luxury cars, yachts and private plane tax is to be introduced. Cigarette excise duties and VAT are to go up too.
One of the most hard hitting decisions is the pension age increase for male and female. According to the government plans male pension age is going to be 66, female – 62 starting from 2012. Since 2018 the pension age is going to go up to 66 even for women. One needs no less than 42 years and one month for a male and forty one years and one month for a female working record to have a right for retirement. Those whose total yearly pension exceeds €200 thousand will have to pay the 15% so called «solidarity tax».
Besides that, Mario Monti’ government has encroached on the article 18 of Labor Manual that has been considered the main social gain of the citizens for the last forty years. The article limited the rights of employers to discharge employees who have permanent contracts, guaranteeing a working place safety. Monti and his ministers have found it to be a drag on labor market that hinders rotation and young people’s employment. It’s great to hire young people. But what to do with the 40-60 years old workers who need to feed their families? That’s what Mario Monti and his «competent» ministers don’t care about.
The mood for protest is on the rise
The «financial maneuver» has been facing tough, though uncoordinated, resistance of the major part of society. By the end of January truck drivers across Italy went on strike. They blocked some central highways paralyzing the whole country. The FIAT factories stopped without parts, Naples faced the waste disposal problem again, Sicily’s food store shelves became empty. The island was also left without petrol and the local mafia used it to its advantage.
Then taxi drivers went on a wide scale strike making the tourists suffer. Soon after that Roman airports Fiumicino and Ciampino staff, railway workers and regional Alitalia-CAI и Meridiana Fly airlines employees went on a nationwide strike. They were followed by pharmacists, lawyers, notaries and petrol stations workers.
Another NO TAV manifestation on February 29 became a real tragedy. The event was held to express protest against the planned construction of a new high speed railway between Turin and Lyon. In Piemonte (the North of Italy) the protesters blocked the roads and set cars on fire. It ended up in clashes with policemen who had to resort to tear gas and water jets. As Italian media reports five men were wounded.
Unemployment, party at fault and the guilty
The situation is getting worse. Unemployment is on the rise. Nothing says it will go down in the conditions of recession. In January unemployment went up to 9,2%. It is the highest rate in the last 11 years according to ISTAT data. In December 2011 unemployment was 8,9%, in January last year – 8,1%. The number of unemployed went up to 2,29 million.
The most dangerous thing for the country is fast rise of unemployment among young people – till 31,1%. That is almost every third Italian young man is without job. It means it’s impossible to leave parents and have a family of your own. The number of such people younger than 35 is 1,1 million. It becomes a national security problem. One can hardly expect social peace to prevail in Italy in the near future.
It’s noteworthy that petty and part of middle bourgeoisie join the protesters. To raise tax revenues the government demands that every trade entrepreneur, even the most petty one, would issue a cheque. What does it lead to?
Il Legno Storto newspaper answers. It says: «The leading media outlets, endless TV programs… serve to direct public discontent from the real party at fault – the politicians, bureaucrats, managers and to start a war between the poor. Grocers and bakers are the enemies. And there are people who believe it. They create websites and Facebook pages to denounce those who don’t issue cheques. Do they have any idea of why the vendors do it? They think the traders are to pay for their fourth car at the time they may be maneuvering to avoid the next bank loan (that nobody wants to give), to pay the 70% tax. It’s a matter of survival at any price because they have nothing else but their businesses. Talking about yachts, it’s not so hard to find their owners. Luxury is an obvious thing. No crime fighting service is needed to see when it’s not clear where it’s coming from…»
Still, no matter intensity and scale of mass protests in Italy, they don’t pose any serious threat to Monti. It appears the further fate of Italy will not be decided in Rome. It mostly depends on the situation in the Eurozone and the EU in general. If Berlin will continue trying to save the euro Italy has unenviable fate of a European periphery burdened by new taxes, the next Montis and separate protests.