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April 5, 2012

Italy’s Moment of Truth

For his first hundred days at the helm, Italian technocratic Prime Minister Mario Monti has enjoyed a respite from the political chaos that usually bedevils Italian politics. Approval ratings were high (as high as 70 percent in the beginning), and his support in parliament stemmed from a broad coalition combining the major parties of the center-right and center-left.

Now some of that shine is wearing off. Monti’s poll numbers have been falling consistently since his inauguration, and now nearly 50 percent of Italians lack confidence in his administration, reports the FT. Making matters worse, a proposed labor reform that would make it easier for companies to fire workers is meeting resistance from Italy’s strong labor unions who have threatened to strike if Monti continues to pursue reforms. The unions have significant political backing, and now the center-left half of his coalition is refusing to support these measures as well.

Italy is edging towards a moment of truth. Despite the repeated reminders from international investors that that Italy needs to bite the bullet and accept these labor market changes, it is becoming clear that Italians really, really don’t want these and other domestic reforms needed to put the country back on track.

This puts Monti in a difficult situation, facing down harsh fiscal realities on one side and on the other a public with no appetite for sacrifices. With an election approaching next year, Monti will need to find a way to placate both the Italian public and the international financial community. Monti’s decisions here, and his fate in the upcoming election, will be the clearest indication yet of which way Italy is headed.

Posted in Blue Social Model, Economics & Business, Europe, Politics, Quick Takes
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  • http://fmpait.blogspot.com/ Felipe Pait

    Of course, the issue is that the current fiscal trouble is related to the recession and has absolutely nothing to do with labor market changes, no matter how desirable these may be, and no matter what comes out of the mouths of the international financial community.

  • Jbird

    Monti is starting to tackle the employment law which everyone knows is holding Italy back but those who benefit (older workers) will literally kill to maintain.

  • Jim.

    Thesis:

    On average, people without children will not have sufficient sympathy for the young to resist creating a world that favors them over the next generation.

    Evidence for this situation is apparent in the policies of low-fertility countries, and in the ideas of such childless short-term thinkers as John Maynard Keynes.

    To correct this situation (and ensure the propagation of our culture, nation, civilization into the future) society should broadly encourage people to have kids, and take responsibility for their children. Society should further discourage going childless. This has the further advantage of sharing the time and money burden of raising the next generation more fairly.

    Otherwise, we’re going to end up with Wars on the Young, which will get uglier and uglier until they become Massacres of the Old.

  • Kris

    Most people agree that austerity measures alone will not solve Europe’s problems. Many “progressives” (Hello there, Krugman) even argue against them altogether. The only solution, it is said, is to grow the economy. Well, in the case of the proposed labor reform, we have measures meant specifically to foster economic growth. I am sure we can all get behind this, no?

    Nah! Don’t cut the budget, but rather increase it. Don’t dare make any reform that might negatively impact anybody. Tout va tres bien, Madame la Marquise!

    (One could tie this in to the earlier discussion about antisemitism. If one is so unable to face reality and unwilling to take responsibility for one’s actions, then the inevitable collapse must be blamed on someone, anyone.)

  • Kris

    Jim@3:

    For your entertainment, from Wikipedia:

    Joseph Schumpeter was an economist of the same age as Keynes and one of his main rivals. He was among the first reviewers to argue that Keynes’s General Theory was not a general theory, but was in fact a special case. He said the work expressed “the attitude of a decaying civilisation”. After Keynes’s death Schumpeter wrote a brief biographical piece called Keynes the Economist – on a personal level he was very positive about Keynes as a man ; praising his pleasant nature, courtesy and kindness. He assessed some of Keynes biographical and editorial work as among the best he’d ever seen. Yet Schumpeter remained critical about Keynes’s economics, linking Keynes’s childlessness to what Schumpeter saw as an essentially short term view.

    For the defense, one should note that the problem you note is not characteristic of Keynes so much as of those who take his name in vain. (Granted, the fact his theories are almost universally misapplied, must (in the long run :-) ) reflect poorly on them as anything other than an intellectual exercise.)