News from Italy

Not only is 2012 a year of important elections (with some results, like the Russian presidential one, entirely predictable) but May will see a number of them. May 6 will be the date of the Greek election, which is likely to result, I am told by one friend and blog reader, in the old coalition cobbling together another government of not dissimilar kind; it will also be the day on which the French President will be chosen; and in Italy there will be local elections, also on May 6 and 7, in which around 11 million voters, or a quarter of the whole, will be expressing their opinions on what has been going on.

The Centre for Policy Studies has an interesting blog post up on the subject, the first of quarterly updates on Italian poliitics by the Centro Einaudi. Little of it is unexpected even to those who have followed events from a distance but it is always good to read analyses from insiders. Here is a brief account of Mario Monti's government, its initial popularity, which might come as a surprise to some rather hysterical eurosceptics, and the gradual loss of that popularity as some very necessary reforms were enacted.

The new government’s first decision was to enact a bill on pension reform, which was immediately passed by the Chambers. As a result, the Italian pension system, one of the biggest drains on public finance, was put under control, providing automatic adjustment not only to economic growth (and, by the same token, to fiscal revenues) but also to population ageing. However, with the pension reform came a swathe of new taxes on property and income, and a VAT rise.

In the weeks that followed, the tensions on the financial markets eased, while the opinion polls suggested that Mr. Monti enjoyed wide support. Buoyed by this, the Cabinet then started to implement the recommendations to the Italian government specified by the ECB in August 2011 and reinforced by the EU Commission President, Olli Rehn, in November 2011: these required not only the reform of the pension system but also a number of measures of privatisation and liberalisation, particularly of the labour market.

It was then that the honeymoon between the government and its multi-coloured majority ended: while the centre-right objected to measures directed at liberalizing professions (such as notaries, lawyers, chemists, taxi-drivers, etc.), the centre-left found it almost impossible to accept an easing of the hire-and-fire rules on the labour market, strongly opposed by the leftist CGIL union. The result was a much watered-down ‘liberalisation’ law and an impasse on the labour-reform bill.

In the meantime, Mr. Monti tried to soften the German stance on fiscal rigour and the introduction of Eurobonds: but these attempts, which for a few weeks at the turn of the year had looked almost successful, appeared at last to have failed. The tensions on the financial markets rose again, with the spread on the Italian public debt climbing up and the Italian stock exchange losing all the gains it had accumulated in the first weeks of the year.

It is particularly interesting to note that the centre-right objected to the liberalization of professions and the centre-left to the liberalization of the labour market - a neat summary of the difference between the two in Italy (and a number of other Continental countries) or, in other words, no difference at all.