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Created on Tuesday, 22 May 2012 09:12

by Mario G.R. Oriani-Ambrosini

Both in good and evil, Italy has produced most of history’s fruits. The Western system of laws, the Catholic Church, banking, financial instruments, insurance, fascism, fashion and good eating were all spread worldwide from there.  Again, for good or evil, Italy may find itself to give birth to a new future, born out of its imminent financial meltdown.

Confronted with a national debt of about US$2.4 trillion at about 121% of its GDP, a public debt per person of about US$39’000, archaic and failing infrastructure and one of the worst government administrations in Europe, Italy recognised that its problems could not be solved by the same politicians who laboriously created them over the past 60 years.   It appointed a purportedly technical government ostensibly to do what no politician would do, but in truth to take the blame for doing little or nothing of what needs to be done, as the political system is incapable of allowing it to be done.

Public finance is cloaked in incomprehensible language and technicalities to prevent common sense to penetrate its machinations, but in the end the broad-stoke picture is simple and the conclusions inescapable.  When in debt, whether man or State, one can only earn more, spend less, sell something, or play around with the debt figures.  For the State, this last option consists of devaluing the currency or devaluing the debt through hyperinflation.  Being part of the EU monetary system, neither of such option is available to Italy. For a government, making more money means increasing revenues either by raising taxes or promoting economic growth so that, by broadening its economic basis, tax revenues can increase.  Faced with this simple dilemma, Italy has chosen the suicide path, which will probably collapse the entire EU monetary system.

The technocratic government has chosen to rob whatever was left with the poor and middle class, to transfer it to the superrich who own the large majority of its national debt obligations.   
In October, Italy will have a 48% income tax, 23% VAT tax, and 8% to 9% indirect or hidden taxes. Whatever after-tax money is left in Italian’s hands, will be taxed again by means of property and vehicle taxes applied indiscriminately to productive and non-productive assets, thereby becoming an additional cost of doing business.  The economic basis will shrink, tax revenues will decline, and the government will need to find other ways to steal more from its citizens.
 
Italy has a tradition of imposing extraordinary taxes, unashamedly called una tantum [in Latin “once only”], hardly an appropriate name for the cyclical ransacking, for the benefit of international banking potentates, of whatever equity is built by families and businesses alike.
 
The rational thing would be to reduce spending by eliminating the unbelievably large number of public entities which Italy carries on its books since when they proliferated under the Bourbon kings, the Catholic state, the various entities which merged into the unified Italy, the fascist era and the post WWII Christian Democrats’ pillaging.   Most of such entities are widely recognised to be useless, such as that established with luxurious offices to put flowers on past kings’ graves, a function a contracted florist could perform.

Italy has four tiers of government besides being part of the EU.  Since 1975, when its regions came into existence, it was agreed that provinces, the tier between regions and municipalities, be eliminated because redundant, but 35 years later, no step has been taken in that direction, save for innumerable seminars and discussions.

When confronted with the obvious need to get rid of such fruitless expense, Italian politicians rise in unison to protect them on account of protecting jobs.  Yet, Italy could save hundreds of billions by giving to all those employed by those entities a life pension which compensates for their lost salaries, while selling off the plethora of ancient and valuable buildings which such entities occupy and eliminating their operating expenses.

Plus, the Italy government has huge assets on its balance sheet, consisting of numerous public enterprises constantly run at a loss only because sugar-daddy State allows it, and vast real estate which supports no public function but cost immensely.  All this requires urgent privatization. In addition, Italy should have the guts to denounce the 1929 Concordato treaty with which the fascist regime ingratiated itself to the Catholic Church by exempting the Church’s vast income and properties in Italy from most taxation.

As the democratic system is unable to muster the political will for such necessary actions, the Italian government is just readjusting chairs on the Titanic’s top deck, while moving steadfastly towards an unavoidable sovereign default.  The Italian sovereign default is bound to trigger a chain reaction of other sovereign defaults within Europe which may lead not only to the collapse of Europe but also to the fusion of the international monetary system.

Probably a totalitarian government could do what needs to be done to cure Italy’s finance, but I would be the last to advocate such solution.  Unfortunately, when confronted with problems, southern Europeans are inclined to run into the bosoms of those who created them and vote socialist, as the French and Greeks did.  Yet, socialist governments can only promise government-funded growth through more national debts, which in this situation will neither help nor work.

The solution which would help democracy to survive lies in the hands of the real sovereigns: “we the people”.   Italians should denounce the State’s debt as being just that: the debt of the State not their own, and disown it.  Only an actual or threatened generalized tax revolt can force government to do what the Italian people would want it to do.

Italy was forged through the will of people who found in their midst great leaders such as Cavour, Mazzini, Garibaldi, Nitti and Giolitti.  Gone are the days in which the spirit of Risorgimento inspired those heroes, yet nothing less than such a spirit is required to infuse courage into Italians to take destiny into their hands and away from a political system as corrupted as those of the pre-unification entities, Bourbon kings and Catholic Church.

A tax revolt, which can yield massive defiance on a single payment of the VAT to the State, would force the government on its knees as it would immediately jeopardize the rating of its bonds and its capability of refinancing its ever increasing debt.  Against that crisis, the space for negotiation would arise out of which government could be forced to cut its spending, sell its useless jewellery, rationalise its operations, and takes its hands out of the pocket of the impoverished Italians.

But, alas, on the horizon, I see no Garibaldi to lead the second Italian Risorgimento. Then what?  If a new and better world is to emerge from all this, the root cause of the problem must be addressed.  The monetary system must be reform to replace privately created debt-based fiat banknotes created by the banking system out of nothing with debt-free silver-backed sound government notes issued from the treasury.  One hopes that if and when it rises out of the ashes of its collapse, Italy may lead the way once more, and be the first country to realize what happed and break away from the international money trusts so as to regain its inalienable sovereign right to own and issue its debt-free money.