Italy’s latest austerity package was welcomed by the financial markets which slashed Rome’s borrowing costs. The country’s political parties also look set to back it, though some are reluctant given how unpopular the measures are with voters.
Prime Minister Mario Monti has said without the spending cuts and tax increases Italy risked a Greek-style economic collapse.
But even as Italy moved a possible euro zone wide downgrade by ratings agency Standard & Poors left it feeling less isolated as Reuters correspondent in Rome, Philip Pullella, explained: “I think you can almost see it as a perverse sigh of relief, in a sense, because Italy has been used to having the finger pointed at it and other countries, Portugal as well and Ireland for example, and Italy has been at the centre of the market storm for weeks now. What this signal is saying is that we are all in this together, every European country is together.”
As well as getting Italy’s finances back on track Monti will hope that his plan can restore some of the country’s credibility.
The status of the euro zone’s third largest economy has been hard hit with key decisions about the region’s future being made by the top two — Germany and France.
To discuss the euro zone crisis and the new measures announced by the Italian government Enrico Bona spoke to journalist and political analyst Luigi Spinola in Rome.
euronews: “It is expected that the new austerity package presented by Mario Monti will cost each Italian family more than 600 euros on average. What are the consequences for Italians, in particular for retirees and employees?”
“The consequences will be very harsh. This package will hurt some of the main areas of stability for Italian families. Italy is a country of homeowners and houses will be heavily taxed. That’s a “safe investment” that is going to be hurt. Retirees will be under pressure as well, especially those with medium-low pensions of about 1,000 euros (per month), because those pensions won’t be adjusted for inflation. In general, there’s a lot of dissatisfaction: Italians were ready for sacrifices, but they were also expecting a package that was different from the previous ones, more balanced and more creative.”
euronews: “The main political parties that support the government have said they want some changes in the package. The unions have rejected the plan and announced strikes. So, the honeymoon with Monti is over already?”
“The honeymoon is over, but this was anticipated by Monti. The truth is, if a technocrat government has been chosen, this is because a technocrat government is more capable of bearing those pressures, because it’s not concerned about being re-elected. The political parties will take quick action to make small adjustments to the package, without altering the overall amount of expected savings. The PD and PDL (centre-left and centre-right parties) will work on that. Regarding the unions, so far they’re not united with a common position and therefore they’re still quite weak.”
euronews: “On Monday, financial markets showed some relief, but then Standard & Poor’s announced a possible downgrade of the euro zone which raised the tensions again. How do you explain the decision by the US rating agency?”
“The warning from Standard & Poor’s confirms what we all should already know: the euro zone crisis can’t be solved only in Rome, or in Athens, or in Madrid, because it affects more than just the periphery of Europe, it now affects the whole continent, including Paris and Berlin. At this stage, we need an act of political courage, political momentum. That means allowing the European Central Bank to have a more active role, a more aggressive role on the markets. Without this guarantee, without this political commitment, it’ll be very difficult to end the crisis.”
euronews: “Monti said the package is essential for Italy, if the country wants to regain its influence in Europe, when the debate on reforming the European treaties is ongoing. How does Italy deal with the dominance of France and Germany?”
“We didn’t like it, that was inevitable, we resented it: in particular, we resented some statements that were made, we resented being lectured from abroad. On the other hand, Mario Monti himself admitted that our country’s debt wasn’t made by Europe and said that he’ll never blame Europe for the austerity measures that Italians will have to accept. Obviously, we expect a big change in the next few days, as a consequence of the measures by the Italian government. Up until now, Italy was part of the problem, it was the sick man in need of constant assistance during the European summits. Starting from next Thursday and Friday, we hope we can present ourselves as part of a possible solution, but we also will ask the others to do their job and assume their responsibilities.”