Summarizing The Terms Of Italian Austerity (Or Here Comes The Piazza Navona Strike Cam)

Tyler Durden's picture

Remember how two months ago Greece came up with a bulletized list of austerity measures it would immediately if not sooner engage in to demonstrate its responsible adult behavior, funded by over €200 billion in European and American taxpayers funds and two bailouts? Well, since then we have learned that Greek GDP has plunged below even the worst case scenarios, even as the country has missed all deficit cut targets. Today, it is Italy's turn, which however apparently was confused and presented the list of austerity before it got a Greek-style rescue. Which is bad. Because within a few weeks we expect the strike (and riot)-cam to be planted firmly in the Piazza Navona and across the streets ot the Trastevere in capturing the latest round of European indignation, oddly enough not caused by local filming of The Jersey Shore. And now that the strawman is out there, when Italy actually needs the money, which will be soon, and is found to be in compliance with precisely zero of its Reps and Warranties (or kinda like a Bank of America RMBS prospectus) it just may make defrauding the middle that much more difficult.

Summary of Italian Austerity

SPENDING CUTS

  • Cuts to the budgets of central government ministries, worth a total of 6 billion euros in 2012 and 2.5 bln in 2013.
  • Funding to town councils, regions and provinces reduced by 6 bln euros in 2012 and 3.5 bln euros in 2013.
  • Unspecified changes to the pension system to save 1 billion euros in 2012.
  • A progressive increase in the retirement age of women in the private sector to 65 from 60 to begin in 2016, instead of 2020 as previously planned.
  • The retirement funds of public sector employees will be withheld for two years after they leave their jobs.
  • A reduction the "cost of politics" resulting in a halving of elected officials and around 55,000 fewer positions in the apparatus of central and local government. However, Berlusconi did not give a timescale for these cuts.
  • Abolition of 34 of Italy's 110 provincial governments and the merging of town councils with less than 1,000 inhabitants. However, this measure will be "for the future" and not become effective during the government's current term of office, Berlusconi said.

HIGHER REVENUES

  • A "solidarity tax" on high earners, to be levied for two years, as an additional 5 percent on income above 90,000 euros per year and 10 percent on income above 150,000 euros.
  • Increase in taxation of income from financial investments to 20 percent from 12.5 percent, excluding income from government bonds.
  • Purchases worth more than 2,500 euros will no longer be allowed to be made in cash, as a means of curbing tax evasion. There will also be tougher penalties, such as suspension from professional bodies, for failure to issue receipts and invoices.
  • All non-religious public holidays, such as the June 2 anniversary of the founding of the Italian Republic, will be celebrated on a Sunday in a bid to increase the number of working days in a year.

REFORMS

  • A liberalisation of national labour contracts giving greater scope to strike accords at the company or local level.

 

Reuters' take on these latest promises scribbled on a non-binding piece of paper:

Italy's cabinet adopted sweeping austerity measures on Friday to cut the fiscal deficit by 45.5 billion euros and balance the budget in 2013, a year ahead of its previous schedule.

 

The measures, which were passed by emergency decree, must now be approved by parliament within 60 days. They come less than a month after parliament approved a previous austerity package, aimed at eliminating the deficit in 2014.

 

Rome promised to re-write and frontload its plans in response to a letter from the European Central Bank, which agreed to buy Italian bonds to arrest a huge market sell-off in exchange for faster fiscal consolidation and economic reform.

 

Austerity measures will now total 20 billion euros in 2012 and 25.5 billion in 2013, Prime Minister Silvio Berlusconi said at a news conference after the cabinet meeting.

 

Economy Minister Giulio Tremonti said the budget deficit will fall to 1.4 percent of gross domestic product in 2012 from 3.8 percent this year, and be eliminated in 2013.

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Citxmech's picture

"Buy the fucking Bunga!" - Bitchez.

(Credit to WB7 for that beauty)

caconhma's picture

This "draconian" Italian deficit reduction plan is not worth a paper it was written on. It is a joke.

It reminds me a street-corner prostitute promising to stay in her business practicing abstinence from sex.

mynhair's picture

Solidarity tax?  Oy....

macholatte's picture

.....an additional 5 percent on income above 90,000 euros per year and 10 percent on income above 150,000........

 

if you wanted to run people out of your country, that's a good start.

 

 

navy62802's picture

Same thing that's gonna happen to Jefferson County Alabama.

Pay Day Today's picture

"if you wanted to run people out of your country, that's a good start."

Where are these rich Italians going to go to? Greece? And are they going to be able to get as high paying a job there with massive unemployment around the EU? And will they really leave behind all their family and friends and networks simply because they have to pay an extra $5000 in taxes a year on their $200,000 income?

If that's as much loyalty as they have to a country, then actually yeah both sides would be better off if they did leave.

Don't be held hostage with idle threats from the rich. Wherever they threaten to move to is quite possibly going to be the site of the next bankster attack anyway. So what are they going to do? Move again?

LetThemEatRand's picture

A ridiculous cult follower who has been proven wrong yet refuses to admit it because cult members tend to be true believers regardless of the facts.  See your anticipated response.

Setarcos's picture

Ayn Rand's fictitious hero ... and guess who worshipped Ayn Rand?  Well Alan Greenspan and Milton Freidman ... the 'intellectual' proponents of where we are today.

Seer's picture

You know, this reminds me of the big sports team owners who regularly hold US cities hostage in order for them to build them (or subsidize) new construction.  It's mostly worked, up until now...

caconhma's picture

Pay Day Today ,

You are so right. These rich Italians will eventually end up in China working for a bowl of rice.

ThirdCoastSurfer's picture

If your tax rate goes up by 10% and you get a pay raise of 12%, what's the net effect? 

The whole reason people in this tax class are able to command the wages they do is because they have the pricing power to demand them.

Most quickly recover if not immediately. 

It is those without pricing power that must ultimately bear the brunt of any increase, no matter who, what or where these increases originate from. 

The good thing is that pricing power, by it's very nature, results from a scarcity, so the burden of the few is passed down to the many and the net effect is very dilutive. 

Trickle down works. 

Pizza spaghetti and mandolino's picture

The fact is that the solidariety tax is newspeak for tax increase. The top personal income rate becomes 57 %. However, dear Tyler, let me bet you, we won't see a revolution in Italy, unless there is world war. You may even see some demonstrations in piazza Navona but not a revolution. That's not typical Italian. Italian successful civil commotions happen only at times of international wars. The only exception in centuries, from the fall of the Roman Empire in 476 AD, has been the Fascist Revolution in 1922 (but also that was connected, somehow, to the Russian Bolschevik Revolution, an international major event).

So you'll see a serious revolution in Italy only if Israel attacks Iran. At that point you may trun out to have had a correct forecast.  

dolly madison's picture

if you wanted to run people out of your country, that's a good start.

I've read before that higher taxes do not tend to make richer people move.

It seems logical to me that they wouldn't want to move every time the taxes changed somewhere.

Pay Day Today's picture

Also the fact that jurisdictions with increasingly low tax rates tend to be increasingly unstable, dangerous or autocratic places to live.

Interesting correlation, that.

masterinchancery's picture

I predict tax revenues DROp if these measures are adopted.  But bureaucrats and politicians never learn.

slaughterer's picture

"Solidarity tax" = "Solidaritaetssteuer" (a fossil from German post-1989 re-unification which never ends in its parasitic eating away at all positive income).  Nice.  Did they send someone from the German Finanzbehoerde to draft this damnation to Hell?  The Germanization of the fun-loving Mediterranean cultures has come.  They will never look the same. Europe has killed off its sun-drenched utopias.   Everything turn to grey.    

Pay Day Today's picture

Grey? Why, Audi's look good in black as well.

Nussi34's picture

Take a look at the proposed tax rates for capital gains. They look very German too. Socialists of Europe seem to unite. The question is if Switzerland will close the borders before or after the EUSSR will build a wall around Switzerland!

swissaustrian's picture

This is 14.300.000.000.000 times better than the US budget compromise... At least they are trying to do something.

topcallingtroll's picture

YOU just hate it that the usa has the financial world's confidence and Europe as a whole doesn't. We are the only country whose bonds go up on a downgrade.

If you really want to run the next world currency you must get rid of spain portugal ireland italy and greece in the ECU.

LeBalance's picture

/whoopie/

$1746 per ounce of that "confidence" and ripping!

/sarc/

/bark/

/in the dark/

swissaustrian's picture

YOU might have recognized that i´m from Switzerland.

disabledvet's picture

really? do u have a cow? we use to have cows where i grew up. i miss those cows.

electronpaul's picture

 "the usa has the financial world's confidence"    hahahahahahahahahahahahahahahahahahaha

Bob's picture

lololol.  You gotta admit, though, "confidence" is what we do.  It's pretty much all we do, but still.

In reality, though, I see it as folks just trying to hide in the ponzi that will be last to fall.  Some confidence that is.  And what an achievement!

luigi's picture

"YOU just hate it that the usa has the financial world's confidence and Europe as a whole doesn't. We are the only country whose bonds go up on a downgrade.


If you really want to run the next world currency you must get rid of spain portugal ireland italy and greece in the ECU."

Muahahahahahaha! No: all it's needed is a powerful fleet and a owning the largest arsenal of WMD in the world, then you can go around telling everyone "try to drop the dollar, if you can" (remember Jack Palance "Pick up that gun" ?)

slaughterer's picture

Good luck with this austerity measure (they have been trying to do this for decades without success):

  • Purchases worth more than 2,500 euros will no longer be allowed to be made in cash, as a means of curbing tax evasion. There will also be tougher penalties, such as suspension from professional bodies, for failure to issue receipts and invoices

itchy166's picture

This is about control, not austerity.  

 

dolly madison's picture

This is 14.300.000.000.000 times better than the US budget compromise... At least they are trying to do something.

I can't help but notice they are only raising the retirement age to younger than we have it at.  We waste too much damn money on corporate welfare and imperialism.

masterinchancery's picture

As Yoda said, "there is no try, only do."

Cleanclog's picture

Basta!  Si si, we have too much debt.  So does everyone!  Japan is worse than we are. So, come on down Senori Allemani and Mangia.

Eat it up!  We aren't gonna get debt free.

Irish66's picture

10% over 150,000

Dang that will case chaos

Herman Strandschnecke's picture

Not if you accept a pay cut to 149.999. There, fixed it.

Pay Day Today's picture

Let's be real, someone on $160,000 will have to pay an extra $1000 tax. No big deal, seriously.

LongBalls's picture

Exactly. That is one heck of a return on a single Euro!

Sudden Debt's picture

actually, 16000€ extra and that comes above the tax they already pay.

The real question should come from billionaires who make 1000€ a month officially!

 

Pay Day Today's picture

"actually, 16000€ extra"

If you read the statement it says that it applies to income over €150,000. In the example I used above only €10,000 worth of income is affected as that is how much rests above the threshold.

cswjr's picture

"Solidarity tax", lol. 

Negro Primero's picture

...meanwhile tutto tranquillo (at least at the Pope's Residence)

http://www.atlantestarhotel.com/webcam.htm

swissaustrian's picture

I would have offered the mafia to launder all of its money without criminal prosecution for a 5% fee. Hell that would have brought some revenues.

Pay Day Today's picture

"I would have offered the mafia and multinational corporations to launder all of its money without criminal prosecution for a 5% fee."

Just an idea.

vocational tainee's picture

That would be  50 % of AMERICAN GDP...

eurusdog's picture

You might be underestimating that a bit.

luigi's picture

Done already two years ago: it was called "the fiscal shield"... People having money abroad were allowed to bring it back with a mere 2% fee and a "tombal deal" with the state not asking anything about where the money comes from and renouncing on any further taxationo or prosecution for fiscal fraud. In fact Tremonti did some real unfair competition to mafia in money laundry...

topcallingtroll's picture

Now this is the durden that we all love and be "we all" I really mean me.

Bring back the junk button, please!

This place was great when we had the great flame wars and anything by GW about israel brought out the internet warriors in full glory.

We need the junk button....but some people didnt like controversy and wanted complete conformity...so junk went to ratings went to nothing at all now....so boring.

BRING BACK THE JUNK BUTTON. LET ZERO HEDGE BE REBORN AGAIN!

mynhair's picture

TCT, you get released from jail early?  Heard the black SUVs got ya....

slewie the pi-rat's picture

*Junked* 

L0L!  who could have seen that coming? 

hey t_c_t!  either way is ok w/ me.  i'm not sure if there are issus with the site staying up better w/out it, tho, in which case, i woiuld say better not, now.