The broken relationship between Italian politics and debt originated in the Cold War and on loan from Bonn. Italy is saved once again for 2020. As long as Christine Lagarde, the President of the European Central Bank (ECB), uses the "Pandemic Emergency Purchase Program" (PEPP),
the ECB's emergency aid program, to buy debt securities of the euro countries for 750 billion euros, Italy can still cover almost half of its credit needs. The emergency aid program is expected to continue until the end of 2020, so until then Rome is safe from insolvency.
Italy's debt level should reach around 155 percent of economic output by the end of 2020. New debt is planned at EUR 173 billion, plus bonds that expire in 2020 and need to be renewed: another EUR 316 billion. Less the "cash" in the state treasury,
currently 13 billion euros, Italy needs 479 billion euros in fresh money this year. In Rome, it is assumed that the ECB will buy Italian bonds disproportionately for 220 billion euros.
One would have to borrow another 259 billion euros on the financial markets, where Italian bonds were downgraded in the Fitch rating to BBB-. This is only one level above "junk bonds", waste bonds, which entails correspondingly high interest premiums.
Italy is caught up in its debt dilemma, but why is it actually a chronic debtor to Europe? It is striking that in Italy there is an enormous contrast between public poverty, government overindebtedness and private wealth.
According to Credit Suisse's "Global Wealth Data Book" at the end of 2019, the average net worth of an Italian adult was $ 234,139, while a "wealthy" German adult had an average of only $ 216,654. The Italian families own 80 percent of their apartments,
and they use mortgage rates and repayments precisely. How does that fit in with a state made up of the same citizens, but which has been operating almost continuously in the red since the early 1970s? The economics professor. Sandro Brusco replies very briefly,
"This is actually a basic problem in Italy. As an explanation, I can think of only one term: the amoral familism". It was in 1968 that the debt drama started. In response to the social revolts, Rome significantly increased social spending,
but without having the corresponding tax revenue. The United States wanted this politically. Italy had the largest Communist Party in the West, but was also NATO's outpost in the Mediterranean. The country was under no circumstances allowed to "fall" under Soviet influence,
according to the political logic at the time. But social spending was offset by little revenue. Income and VAT were not introduced until five years later, but a quarter of the taxes are evaded. By the way, those who evade taxes in Italy need not be afraid.
He just has to wait for the government to announce another "tax cut" again. The first came in 1973, with another six large and numerous small ones to follow. The tax offender has to pay part of the evaded taxes as "penance", default and penalty interest are waived.
This means that all financial and legal consequences are "buried", as it is fittingly said in Italian: "Grab-Ablass" (condono tombale). The lacquered are the honest taxpayers: every indulgence is a direct invitation to subsequent tax evasion.
In order to pay social benefits, money was printed diligently. In 1974 inflation soared to 25 percent. Italy was insolvent when Chancellor Helmut Schmidt came to Italy on August 31, 1974. At the urging of the International Monetary Fund,
the Hamburg-based government presented Mariano Rumor with a check for $ 2 billion so that Italy could pay its oil bill. As a guarantee, Italy had to pledge part of its gold reserves to Germany.
The most expensive legacy from the 1970s that Italy still pays for today is the "baby pension". From 1973 to 1992, a state employee could retire after 20 years of service with the state with around 40 percent of the last salary,
after 25 years if he was employed by a municipality, or even after 14 years and 6 months if it was a married woman acted with a child. This still costs taxpayers 7.5 billion euros a year.
The baby pension was also a major cause of the increase in government debt to 124 percent by 1994. A pension that is adjusted for inflation, like all pensions in Italy. The baby pension only disappeared at the time of the "Mani Pulite" corruption scandal in 1992,
which swept away the party landscape at the time. The budget was renovated up to 2001: with a special tax of 6 per mille on account deposits, a maximum savings budget of 35 billion euros and a devaluation of the lira of 25 percent.
At the time, the future ECB President Mario Draghi negotiated the special conditions for Italy's entry into the euro. This means that a country that "tends to" meet the Maastricht criteria can join the euro. With the media mogul Silvio Berlusconi, in power again from 2001,
all renovations came to an end immediately. Instead of using the "interest dividend" by introducing the euro of 500 billion euros to reduce the mountain of debt, as Belgium, among other things, had done, Berlusconi distributed election gifts again.
Two years ago, the next mega election gift to retirees followed baby pensions, whose recipients are gradually dying: The "Quota100": If the sum of your age and years of service is 100, you can retire.
That was Lega's campaign hit, and it has cost taxpayers another 6.5 billion euros a year since 2019. Economist Giampaolo Galli: "Who lends you money for a god of rewards?" "All over Europe, governments now support companies with a total of 1900 billion euros," continues Galli,
"Of which Germany alone gives 1000 billion, that is 52 percent of the total funding in Europe. Italy only 17 percent. Germany can do that now because Berlin reduced its public debt significantly before the crisis. In contrast, nonsensical government spending pushed up the debt,
and on top of that, massive tax evasion was tolerated. Mistakes that we pay dearly today. "
@threadreaderapp please unroll
