Reasons of the italian public debt
Wednesday, April 18, 2012 9:00:04 AM
In Italy we have got about 1.930.000 million euros of debt.
You may hear the strangest explanations, currently the most popular one is about politicians who "stole" State money. Actually nobody wants to hear the real reason that is:
Since the second half of '60s Italy built a strong welfare system which went together with a direct State involvement in the economy consisting in the owning of big corporations that together made about 70% of the gross product. This allowed Italy to rise the average life standard for citizens but every year the cost for keeping the machine running was higher than the revenues from taxes, it started from -5% and gradually diverged till above -10%. Of course, despite the gradual increase in taxes. This means the State every year since the '60s had to borrow money to pay that difference between incomes and expenses, mostly by offering State Bonds. The bonds imply an interest you must pay to investors, so the next year you must still collect the money for paying expenses plus the interest on the money you borrowed in the past. Meanwhile all the State owned corporations, managed with the only goal of providing as many jobs as possible and benefits, made big losses and failed, so they had to be "privatized", that means auctioned for few money.
Now the system is collapsing because investors seem to believe Italy cannot recover from this spiral of expenses and debt increase.
The previous Prime Minister, Silvio Berlusconi, whose motto was "everything is well", resigned this winter when Italy was in real risk of not being able to collect enough money through State Bonds. A sort of "emergency" government was nominated by the President of the Republic (who is nominated by the Parliament), made of known managers of banking, finance and such.
Now, you would expect the "emergency government" to operate major cuts in the expenses. Nope, what they did was to dramatically rise taxes. In other countries you would expect a revolution but not here. The reason is simple, Italians prefer to pay nonsense taxes but to be provided by the State anyway. Some because of the control the media have over public opinion, some because Italians are well aware they depend from the State and would not have other means to maintain their status. Especially those who belong to "areas" of the Country where the State intervention was massive, public employees, pensioners (in Italy pensions are payed by the State) and generally the center-south regions.
And if you want a broader vision of the issue, lets say since after WWII Italy was basically governed by two big political parties, with their official and unofficial organizations, the "cristian democratic party", supported by USA and tied to the Vatican, and the "italian communist party", supported by URSS. The old parties had to rename and reorganize themselves in the second half of '90s due to some scandals and the global changes induced by the collapse of the Soviet Union. But the ideas and operations are more or less still the same as the '70s.