The government of the new Italian prime minister, Mario Monti, has approved new austerity measures of $40 billion. The cuts now move on to the nation’s parliament. But they may be overruled by Italians, who could take to the streets in numbers that could well be in the hundreds of thousands. Politicians may buckle because they fear for their jobs. That nearly happened in Greece, and the threat is even greater in Italy.
The Italian austerity package looks similar to the ones set by other weak eurozone economies and the UK. Early results of the UK decision are troubling. The government has said the economy slumped even further this year than it did last. Even greater austerity measures are, therefore, under consideration. The link between the UK’s expenditure cuts and new tax rates may not be directly linked to the problems with GDP, but many economists insist they are.
Greece faced riots when it was about to implement its austerity measures. Those riots may not be over. The Greeks often have argued that they cannot maintain their standards of living under the new rules. Unemployment levels in Greece already are more than 13%, so the argument that the economy needs stimulus and not austerity has merit. Unfortunately, merit was not the deciding factor in the government’s austerity plans. The need to get more loans from its neighbors to cover national debt was.
Italy’s citizens will make an argument nearly identical to that made by Greek citizens. Government support of their standards of living are essential to an economy that is already teetering on recession. The new government will argue that the entitlements many citizens have enjoyed should never have been put into place. These entitlements undermined the normal course of capitalism and killed a system in which the free markets should have set employment and wages.
Italians do not care about how markets were run over the past several decades. They want the lifestyle to which they believe they are entitled. They also understand that the eurozone might have survived the financial demise of Greece. The same cannot be said of Italy. Whether or not that is fair, labor unrest could undo what Monti has tried to create.
Douglas A. McIntyre
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
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