Austerity plan in vanishing act

“The austerity plan is in chaos. It is time to go back to the drawing board” remarks La Repubblica in its report on the measures announced less than a month ago by the Italian government. As the daily points out, at the time Italy was the target of speculative attacks on the sovereign debt market which threatened to scupper the euro if nothing was done to quickly reassure investors. However the plan that was supposed to rein in Italian debt (which is the second highest in the world when evaluated on the basis of a percentage of GDP) within reasonable limits has been subject to endless tinkering: mooted changes including a solidarity contribution to be sought from the country’s richest citizens, the abolition of a number of provinces, a drive to cut costs in politics and pension reform, have been modified and withdrawn in the wake of protests from individual parties in Silvio Berlusconi’s majority.

The level of uncertainty is such that it has begun to worry the European Central Bank, which moved to guarantee Italy’s debt with bulk purchases of its sovereign bonds, and other eurozone countries, especially Germany. “Our government is in the process of vindicating the position adopted by conservative German MPs who opposed the decision to increase the capacity of the European Financial Stablity Facility,” writes economist Tito Boeri in the Roman daily: “Not only are we hindering the coordination of fiscal policy that will be vital if we are to resolve the debt crisis in the eurozone, but we are also ensuring that this solution will be postponed.” The Italian parliament is set to vote on the austerity plan on 6 September.