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Almost entirely missing from the mix, however, are the liberalising reforms that Italy urgently needs to get its economy moving. He has made some effort to open up competition within Italy’s cossetted professions and trades, few of which are natural constituents of the Left. The rest — public sector reforms, privatisation and overhaul of education, pensions and health — he says must wait until approval of the 2007 budget. Yet the budget is witness to the lock-hold the left-wing members of his coalition have on policy.
The balancing act that Tommaso Padoa-Schioppa, the capable Finance Minister, was called on to perform was admittedly difficult. He had to reverse the rise in Italy’s unsustainably high public debt, bring the current budget deficit within sight of the 3 per cent ceiling dictated by eurozone rules and still find money to cut payroll taxes and stimulate growth. To avoid antagonising the Left, he found most of the cash by raising taxes massively. Not a single major item of government spending was significantly cut, and under pressure from the Left, such cuts as he made have been further diluted.
To plug the gap, the Government has raided the redundancy insurance scheme, paid for by employers and workers, to pad out its national insurance budget: an accounting trick that counts as revenue money that has been “borrowed” from the workforce.
The result is a budget that postpones the day of reckoning. There is nothing to help Italy to reduce its deficit. Worse, the recent fragile improvement in the economy is likely to be halted once the new taxes kick in; and these tax rises, the reverse of what Italy needs, will feed the national addiction to tax evasion. This display of timidity has only emboldened the Left. To have 250 budget amendments proposed by your own side is worse than unfortunate: it is near-chaos.
This week’s confidence vote was the eighth in six months. The Government will go on winning them out of fear of electoral defeat (at least until the two-year point in the Government after which MPs draw fat pensions for their “public service”). But by failing to stand up to the enemies of modernisation, Signor Prodi gives the impression that political survival is his only solid goal; and that he is content, to borrow from the British political lexicon, to be “in office but not in power”.
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