New Italian Government vs. Labor Strikes

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