"My idea is clear. I have to put the public finances in order but my first goal is growth, otherwise I shall never have the resources to put my budget in order." Prodi: Italy must lift growth or be 'lost'
Prodi: Italy must lift growth or be 'lost'
What would happen if Italy did not grow? What if Prodi did manage a way to get his finances in order by reducing government spending so that he did not have to raise taxes to reduce Italy's budget deficit? In the short term, it would probably be very painful. But once the public finances were "in order", could Italy sail steady as she goes into the future with 0 growth? Rien ne réussit comme le succès.
mafia profits are unfactorable (infatturabili!), and if they were counted in, i think italy could be a little china of economic growth.
first thing, if italy could improve on buying 85% of its energy from abroad, while being europe's slowcoach on alt. energy, think how much capital that is slushing daily out of the country...it should have peeps up in arms, but....
you think that new striker for juventus is worth the money?
did you try chopping the onions into 2 mm squares before delicately bronzng them in the extra virgin olive oil?
no. no. it must be oil from lucca....
cool telefonino etc ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
Unfortunately, the population is not merely declining but also aging. This will put an increasing burden on public finances, because Italy has a pay as you go pension system. In addition, it has a huge foreign debt which will put an increasing strain on public finances as long as the budget deficit is larger than Italy's economic growth. I can imagine three strategies that the country can take.
Italy can try to grow its way out of this crisis, save its way out of this crisis, or work its way out of this crisis.
According to the FT article, Prodi is pursuing a particular kind of industrial politics to increase the country's growth. I very much doubt that this will work out. Liberalising the energy markets should yield a large short-term benefit that can be used to decrease foreign debt. But it is not likely to improve the country's balance on energy imports. And I don't see how furthering mergers and acquisitions through tax incentives will have a large positive effect. It's better to encourage growth from the bottom, I think. The largest potential for growth is in the country's south, which should be better integrated into the economy. For this, there are three policies that can work. EU expansion on the balkans, building a better infrastructure connecting north and south, and cutting corruption.
Saving can be done by drastically decreasing all kinds of benefits and increasing the pension age. However, this will not necessarily increase the labour market participation of older people, for which the obstacles seem to me to be mainly motivational (on the side of employers) and structural. So, it will most likely result in a social tragedy. There are some ways of saving that may avoid this tragedy, such as means testing social security or taxing pensions at the higher end (don't know how this plays into the situation in Italy). But these will not yield the required savings.
Working is the most interesting way of getting out of the crisis. So, what Italy needs to do is finding a way to increase the labour market participation of the 50-75 age group, by solving the structural obstacles and by finding ways to valorise and integrate the services rendered by these people outside of the money economy.
