Italy Shouts Back

The anti-austerity backlash in Europe has claimed another victim:  Italy's leader of a technocratic government, Mario Monti.  Installed as a caretaker prime minister in November 2011, after the Italian government under Silvio Berlusconi failed to meet European Central Bank (ECB) demands, Monti embarked on a program of reforms to put Italy's fiscal house in order and restore Italy's fiscal credibility.  Such reforms included a much-hated tax on primary residences, a higher VAT rate, higher taxes on luxury goods, raising the retirement age, cuts in pension benefits for future retirees, very modest changes in labor laws regarding the ability of firms to downsize, and some cuts in public spending. The markets seemed reasonably satisfied, with Italian borrowing rates on 10-year bonds having dropped from over seven percent, when Monti took office, to under five percent when the elections took place on 24-24 February this year. If those elections were a referendum on...(Read Full Article)