Monday, December 05, 2011
Monti the Knife
That great cartoonist, Vicky (Victor Weisz) got it right more than 50 years ago when he drew the aristocratic Harold Macmillan as the cutthroat Macheath
, Mack the Knife. Mario Monti is as polite and well-mannered as Macmillan and is trying to deal with Italy’s debt in a similarly surgical way.
Yesterday he presented his new budget to the press; today he has taken it to Parliament and tomorrow he’ll start the television round.
The immediate result has been positive with markets going up and the spread between Italian and German bonds going down. If it’s more than a one-day-wonder, there will be hope that next week’s European summit will be able to look at Italy with less trepidation and start working on the European aspects of the crisis.
Monti promised “rigour, fairness and growth”; this budget has the first element but is very weak on the other two. The whole is worth €30 bn, almost three times the figure of €11bn first mooted when he took office a fortnight ago. New taxes make up €17-18 bn and cuts €12-13 bn. A third will go to growth and €20 bn to debt reduction.
Predictably, he has re-introduced the property tax on first houses and will increase their nominal value; luxury items will be hit (bigger boats and cars, planes and helicopters) but Berlusconi proudly claimed a victory as there is to be no wealth tax nor indeed an increase in income tax. There will be a further levy on funds which had been illegally exported and then returned under an amnesty last year. Index-linked pension raises will be stopped or reduced over €1,000 per month and retirement age will be increased to 62 for women and 65 for men. The only reduction in the cost of politicians will be a 10 person limit for provincial assemblies (for the last 30 years all governments have promised they would abolish the provinces altogether, instead another dozen have been created). There are limited tax incentives for businesses.
Monti is wholly dependent on Parliament to pass these measures and both sides have laid down clear vetoes. He obviously thought that the centre-right was more likely to actually use the veto, hence no wealth tax while the unions rather than the centre-left parties will complain about pension reform.
There is nothing dramatic or symbolic in the budget; its most striking features are what is missing. The wealth tax for a start and serious measures to deal with tax evasion (there is an upper limit of €1,000 for cash transactions, supposed to allow great transparency but unlikely to uncover those who do all their business in cash). There was no mention of cutting an order for 131 F35 planes for €15 bn, ordered in 2009. There had already been protests before Monti became prime minister. The thorny issue of la casta, the political class perceived as leaches on the country’s lifeblood, is not addressed. No cuts in parliamentarians’ pensions and privileges, their cars, their phones even their tickets to football matches. No suggestion that Church property used for commercial purposes should pay the property tax (leading to suggestions that the Catholics in the cabinet are a fifth column for the Vatican). Today’s NYT article showed Monti on a television screen dominated by a crucifix on the wall behind, a perhaps not so subtle way of pointing out where power lies. It is true that there is a high proportion of Catholics in the cabinet but often it is the practicing Catholics like De Gasperi or Scalfaro who make the strongest stands against an overbearing Vatican. No one could accuse either of them of not being real Catholics…
Despite the good results on markets, on the home front, there is less jubilation.
The contrast between here and abroad was also evident in how the Labour Minister, Elsa Fornero’s tears at the press conference were covered (she was unable to pronounce the word “sacrifice”. Most Italian commentators thought this showed “a technocrat’s humanity”. But it was devastating for the image of Italy in general and Italian women in particular. A German (female) colleague pointed out the German women have been working to the same age as men for years and both work longer than Italians will when these measures take effect. So what is there to cry about? And Irish journalists asked me, somewhat bemused, “there’s a freeze on index-linked pension increases; where's the drama?” They have been through much worse. A Spanish friend was much more direct “No, Spanish ministers don't weep during press conferences, but they make the electorate weep on a permanent basis”.
There was an interesting contrast between the moment of drama in the Italian press conference and the very low key address to the nation at the same time, by the Irish prime minister, Enda Kenny, also trying to cut spending and increase jobs and who also took over with the job of cleaning up a serious mess. His most telling remark was that next week’s European summit “must not only make tough decisions but implement them”. Touché. He also cut phones and cars for former taoiseachs (PMs). Double touché.
There is another disappointment in Monti’s style rather than substance. Tomorrow, he will go to “Porta a Porta”. This is RAI 1’s flagship talk show run by Bruno Vespa, Italy’s televisual answer to Uriah Heep. He is the man who fawned over Berlusconi and encouraged him to use the progamme as an uncontested soapbox for his views in return for Berlusconi promoting Vespa’s books. Either Monti expects a similarly comfy ride or he calculates that he can rely on the centre and centre-left but has to cover his centre-right flank and is better served there than in some other show. Neither motive is very endearing.
Monti might be imitating Macmillan with the knife but he could better act on that other line of Macheath’s “what is the crime of robbing a bank compared to the crime of founding one?”