Confronted with a national debt of about $2.4-trillion, 121% of its GDP, a personal public debt of about $39,000, archaic and failing infrastructure and one of the worst government administrations in Europe, Italy recognised its problems could not be solved by the same politicians who laboriously created them over the past 60 years. It appointed a purportedly technical government ostensibly to do what no politician would do, but in truth to take the blame for doing little or nothing of what needs to be done, as the political system is incapable of allowing it to be done.
Public finance is cloaked in incomprehensible language and technicalities to prevent common sense penetrating its machinations. but in the end the broad-stroke picture is simple and the conclusions inescapable. When in debt, whether man or state, one can only earn more, spend less, sell something or play around with the debt figures. For the state, this last option consists of devaluing the currency or devaluing the debt through hyperinflation. Being part of the EU monetary system, neither of these options is open to Italy.
For a government, making more money means increasing revenues either by raising taxes or promoting economic growth so that, by broadening its economic base, tax revenues can increase. Faced with this simple dilemma, Italy has chosen the suicide path, which will probably collapse the entire EU monetary system.
The technocratic government has chosen to rob whatever was left with the poor and middle class, to transfer it to the superrich who own the large majority of its national debt obligations.
In October, Italy will have 48% income tax, 23% VAT tax, and 8% to 9% indirect or hidden taxes. Whatever after-tax money is left in Italians’ hands, will be taxed again by means of property and vehicle taxes applied indiscriminately to productive and non-productive assets, thereby becoming an additional cost of doing business. The economic basis will shrink, tax revenues decline and the government will need to find other ways to steal more money from its citizens.
Italy has a tradition of imposing extraordinary taxes, unashamedly called una tantum [in Latin “once only”], hardly an appropriate name for the cyclical ransacking, for the benefit of international banking potentates, of whatever equity is built by families and businesses alike.
The rational thing would be to reduce spending by eliminating the unbelievably large number of public entities which Italy had carried on its books ever since they proliferated under the Bourbon kings, the Catholic state, the various entities which merged into the unified Italy, the fascist era and the post WWII Christian Democrats’ pillaging. Most of such entities is widely recognised as useless, such as that established with luxurious offices to put flowers on past kings’ graves, a function a contracted florist could perform.
Italy has four tiers of government, besides being part of the EU. Since 1975, when its regions came into existence, it was agreed that provinces, the tier between regions and municipalities, be eliminated as redundant. But 35 years later no step has been taken in that direction, save for innumerable seminars and discussions.
When confronted with the obvious need to get rid of such fruitless expense, Italian politicians rise in unison to protect them on account of protecting jobs. Yet, Italy could save hundreds of billions by giving all those employed by these entities a life pension, which compensates for their lost salaries, while selling off the plethora of ancient and valuable buildings which such entities occupy and eliminating their operating expenses.
Plus, the Italian government has huge assets on its balance sheet, consisting of numerous public enterprises constantly run at a loss only because a sugar-daddy state allows it, and vast real estate which supports no public function but costs immensely. All this requires urgent privatisation.
In addition, Italy should have the guts to denounce the 1929 Concordato treaty with which the fascist regime ingratiated itself to the Catholic Church by exempting the Church’s vast income and properties in Italy from most taxation.
As the democratic system is unable to muster the political will for such necessary actions, the Italian government is just rearranging chairs on the Titanic’s deck, while moving steadfastly towards an unavoidable sovereign default. The Italian sovereign default is bound to trigger a chain reaction of other sovereign defaults within Europe which may lead, not only to the collapse of Europe, but also to the fusion of the international monetary system.
Probably a totalitarian government could do what needs to be done to cure Italy’s finances, but I would be the last to advocate such a solution. Unfortunately, when confronted with problems, southern Europeans are inclined to run into the bosoms of those who created them and vote socialist, as the French and Greeks did. Yet, socialist governments can only promise government-funded growth through more national debts, which in this situation will neither help nor work. The solution which would help democracy to survive lies in the hands of the real sovereigns: “We the People”. Italians should denounce the state’s debt as being just that: the debt of the state, not their own and disown it. Only an actual or threatened generalised tax revolt can force government to do what the Italian people want it to do.
Italy was forged through the will of people who found in their midst great leaders such as Cavour, Mazzini, Garibaldi, Nitti and Giolitti. Gone are the days in which the spirit of Risorgimento inspired those heroes. Yet, nothing less than such a spirit is required to infuse courage into Italians to take destiny into their own hands and away from a political system as corrupted as those of the pre-unification entities, Bourbon kings and Catholic Church.
A tax revolt, which can yield massive defiance on a single payment of VAT to the state, would force the government to its knees as it would immediately jeopardise the rating of its bonds and its capability of refinancing its ever-increasing debt. Against that crisis, the space for negotiation would arise out of which government could be forced to cut its spending, sell its useless jewellery, rationalise its operations and take its hand out of the pocket of impoverished Italians.
But, alas, I see no Garibaldi on the horizon to lead the second Risorgimento. Then what? If a new and better world is to emerge from all this, the root cause of the problem must be addressed. The monetary system must be reformed to replace privately created debt-based fiat banknotes created by the banking system out of nothing with debt-free silver-backed sound government notes issued from the treasury. One hopes if and when it rises out of the ashes of its collapse, Italy may lead once more. One hopes it’d be the first country to realise what happened and break away from the international money trusts to regain its inalienable sovereign right to own and issue its debt-free money. DM