"Whatever is necessary, appropriate or possible”. This is the meaning of the expression British The full Monti (which many will remember the title of the film). A play on words that fits perfectly today to summarize the challenge of the new premier Mario Monti. Word of Morgan Stanley who today released a first comment on Monti's new course.
“With household wealth which is a multiple of the government debt – writes the analyst Daniele Antonucci – putting your hands even more into the pockets of Italians could be the way in which financial repression will materialize. But to reduce a heavy debt the new premier will have to focus mainly on both pro-growth structural reforms and fiscal consolidation. If Italy has a strong record of getting the second, not so the first”.
Morgan Stanley notes that thehe wealth of Italian households amounts to 8,7 trillion euros (340 thousand euros per household), the highest in the G7. In the estimates, the portion of residential properties accounts for more than half of the total. In any case this 44,5% of wealth is concentrated in 10% of households while the poorest 50% own only 9,8% of the total. Government bonds (355 billion of which 195 Italian) must remain excluded from the calculation of household wealth because in reality they will have to be repaid through future taxes.
"A tax on wealth - explains Morgan Stanley - could help spread a sense of justice, as substantial sacrifices for lower-income households are likely to persist. But, at best, it could bring a few billion into state coffers. That's why maybe could be accompanied by the reintroduction of ICI on owner-occupied dwellings".
And also asset sales could help boost revenue here: Italy seems to have enough room for maneuver on this front. In Morgan Stanley's calculations, the market value of privatizable assets could amount to 812 billion euros (240 billion monetizable). Just as it could produce benefits cut the tax wedge at the same time raise the VAT. But if the limits of debt sustainability have not yet been reached and greater political stability and the strength of the private sector balance sheet are crucial elements for any action that the government will have to implement in the short term, the real turning point must come from growth. “This is the only thing Italy lacks that could surprise the markets and Europe. Why Italy has a modest record in carrying out pro-growth reforms. There is no shortage of things to do, broad political stability and social cohesion will be necessary”.
