Italian Economic, Fiscal and Political Developments

           This post is a compendium of significant recent stories reported by ANSA, the Italian news agency.  Other than CNBC, which has been following political and economic developments in Italy because of the European Monetary Union crisis, against which Italy, as the Eurozone’s third largest economy, is a firewall, there has been little reporting in the American media on the subject.

            In economic and fiscal developments, Italy has been removed from “deficit watch” status by the European Union, along with the harsh measures concomitant with such status, as its deficit is projected to drop a tenth of a percent below the 3% of gross domestic product threshold.  The spread between Italian and German bonds continues to be well below 300 basis points.  The grand coalition Government will delay increasing the value-added tax, while it has reached no decision on eliminating and refunding the real estate tax, which was a key demand of the center-right.  The Government is cracking down more on tax cheaters and those who fraudulently receive pensions.  Meanwhile, the government paid tens of billions of euros worth of bills it had owed businesses, which is expected to have an economically stimulative effect.  Italy is enduring its worst recession, characterized especially by unemployment among the youth.  A plan for addressing youth unemployment with a mix of spending and tax incentives was announced by the Government.  The plan also includes more aid for Southern Italy.

            In political developments, the government appointed “sages” to recommend electoral reform.  Parliament approved a measure to study reforming the Italian Republic’s electoral process.  Among the ideas being considered are the following: changing the nature of the Senate, the upper chamber, as a check on the house to a regional assembly; changing the allocation of seats in the Chamber of Deputies, the lower chamber, and the direct election of the president.

            The unprecedented center-right-left government has survived former Premier Silvio Berlusconi’s legal troubles.  He leads the center-right party, which is critical for the stability of the government.