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Mario Monti gets down to work - but as recession looms it won't be easy. PDF Print E-mail
Nov 30, 2011 at 10:18 PM

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Italy's new prime minister, economist Mario Monti, is burning the midnight oil, scurrying back and forth between meetings with European and EU leaders in Brussels and elsewhere cabinet meetings in Rome where he is putting together what is expected to be a 20 million euro austerity package that will be including important structural reforms. The plan is also supposed to include some economic stimuli to ward off the recession that the Paris-based OECD predicted this week for Italy in 2012.

OECD said in report that next year Italian GDP will contract by 0.5%, that overall unemployment will rise from 8.1% to 8.3% (and to 8.6% in 2013), but that prices will rise by only 1.6% compared to 2.7% this year.

The most important of the expected structural reforms is that of pension reform; something that has been talked about for years here but which previous governments have shied away from because of possible political repercussions. This week Italian newspapers predicted that the Monti government of technocrats and other experts would be raising the number of years of work needed to retire from 40, as of now, to 41 or 42. The unions have already said this was unacceptable but it is unclear at this stage if they can be persuaded to go along with the government's plan. It is also being said that the new minister of Welfare, Elsa Fornero, is planning to greatly speed up the Berlusconi government's plan to bring the retirement age for women up to 65, the same as for men.

Strangely enough, for the time being Italy's major political parties, including both Berlusconi's PdL and the left of center PD, seem to be carrying through on their pledge to support the Monti emergency cabinet. Berlusconi has repeatedly said he would oppose any plans for a "wealth tax" (the current talk is of a special levy on annual incomes of over one million euros). But generally speaking he continues to praise Monti, saying he is "working well". The former prime minister, relieved of his government duties, has been spending his time attending court sessions of some of the trials he is involved in; after all, he can no longer claim immunity as head of government. All in all, he has been keeping a low profile which is, most agree, a considerable change for the better, a real relief.

Also striking, and I myself am most surprised by this, the parties seem to agree that the Monti government need not be short-lived, as originally imagined, but could last until the regularly-scheduled elections of spring, 2013. The new premier, however, has reportedly agreed not to get involved in very political questions like a new electoral law. But who knows. The parties may decide that it might not be such a bad idea after all, especially if they can reach an agreement behind the scenes that would avoid the public bickering that has led many Italians to become really turned off.

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