Mario Monti, as is his habit, was cautious and nuanced. But reading carefully between the lines, at the end of the Ecofin meeting, he provided important indications both on the maneuver that will be launched by the Council of Ministers on 5 December, and on the crisis that has affected the entire Euro area and which is going to beyond what Italy can and must do.
As far as our country is concerned, Monti emphasized the fact that the measures that will be adopted will place particular attention on growth. ” Not that rigor – said Monti – and respect for the commitment to achieve a balanced budget in 2013 is not important, but on this point the previous government has already laid the foundations for an effective balance in public spending.
Now, therefore, the intention is on the one hand to rapidly implement the measures already adopted and on the other to launch structural reforms even if capable of having effects of reducing expenses already in the short term”. As regards the guidelines that the various parties and especially the trade unions are placing on the Government on the measures to be adopted, and in particular on trade union opposition to any intervention on pensions, Monti stressed that, alongside the re-proposition by the various forces political and social aspects of their respective historical positions, there are some signs of openness, in the sense that everyone affirms that even unwelcome measures can be taken into consideration, if the package includes other measures capable of rebalancing the sacrifices required in terms of equity.
Finally Monti undertook to explain well to the Italians, not only to the political and trade union representatives, what an extraordinarily delicate situation we find ourselves in and the serious consequences that we and the rest of Europe will have to bear, if by accident Italy were to miss this fundamental step.
But Italy is only a part of the more complex European problem. It is clear that distrust is galloping throughout Europe. The liquidity crisis that derives from the fact that investors do not trust the Euro and that banks no longer lend money to each other can be overcome both with long-term measures capable of improving European governance, amending the treaties and imposing automatic sanctions for countries that do not respect their public finance commitments, either by fully implementing the many measures already adopted such as the bailout fund or budget monitoring.
In other words, Monti has tried to make it clear that the changes to the treaties desired by Merkel are also acceptable by Italy (if it adopts the measures it has promised to take), but that given the urgency of intervening immediately to reassure the markets, alongside the design of a certainly reassuring future perspective, immediate interventions are also needed that can help overcome the liquidity crisis and prevent it from turning into a financial crisis with disastrous effects on the real economy.
The European summit of 8 and 9 December is therefore essential for taking decisions that serve to reassure the markets and to which Italy must present itself with the papers in order, that is, after having approved a robust package of measures that give guarantees not only on side of the consolidation of public finances, but above all of the creation of those conditions that can restart the growth of the entire economy.
Monti did not go into detail. Indeed he reassured the Italian politicians who complain that they know nothing about what the Government is doing, that they have not provided their European partners with more information than what he had communicated to Parliament in his keynote speech. However, the emphasis placed on structural reforms capable of restarting growth demonstrates that the measures that will be adopted will not focus only on tax increases, as newspapers and TV are saying.
On the contrary, it will be necessary to act forcefully on the expenditure side by cutting not only the costs of politics, but all those public expenditures that are ineffective (such as, for example, too many incentives for businesses) or which hide real waste and robbery, such as for example, the purchase of goods or services from private individuals, or the financing of too many useless state and local bodies. The new taxes (property taxes or VAT increases) should be used entirely to finance significant tax relief on income from work and on business income in order to give considerable assistance to the recovery of competitiveness.
The savings from the pension reform and the increases in competitiveness resulting from a serious reform of the labor market should also be directed to this end. A decisive boost to development should then come from the measures, ready for some time, to stimulate the financing of public works by private individuals as well as from a decisive simplification of the procedures currently in force for authorisations.
This would be a package that is understandable by public opinion and capable of recovering some confidence on the international markets. Of course that doesn't mean all our troubles would end. It will take time to make other reforms such as those of the Public Administration, civil justice and above all of education and research which are important in order to truly put Italy in a position to compete successfully on international markets. However, taking the first step well will allow us to get out of the emergency not with the usual patches that have a precarious hold on to the global financial storms, but with a true strengthening of the structure of our economic and social system.
