Italy's grand coalition government, which combines the centre-left and centre-right blocs, has managed to irritate everyone with its 2014 budget.
Three trade union confederations said this week that they would hold rolling strikes and protests against the plan, which aims to trim the budget deficit to 2.5% of GDP next year, down from a projected 3% in 2013.
Employers and big business, meanwhile, are less concerned with cuts, but say the package does too little to ease the tax burden and impose structural reforms to raise Italy's long-term growth prospects.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
What the commentators said
The key item was a small reduction in labour taxes, one of the main reasons Italy is so uncompetitive. That won't change in a hurry: to close the gap with Germany in this field, the government would have had to go 20 times further.
The problem, continued Munchau, is that the left bloc in Italy is one of Europe's "last unreformed socialist parties", so it opposes trimming bloated regional government or selling off state industries, which would free up money for tax cuts.
On the other hand, the centre-right grouping, "the ultimate special interest party" rather than truly reformist, won't countenance any tax hikes. The "margin for budgetary manoeuvre" is practically zero.
So Italy's economy, which has barely grown for over a decade, will not get the adrenaline shot it needs, said Richard Barley in The Wall Street Journal. The judicial system, red tape for entrepreneurs, and labour market inflexibility are all key areas that need to be tackled.
The result is that the nation's debt mountain of 120% of GDP won't come down anytime soon. Concern over Italy's solvency is likely to mount.
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
