Sunday, January 13, 2013

The Monti Agenda

Monti has undoubtedly represented a breakpoint in the morass of Italian politics. He  was appointed by president Napolitano amid fierce economic turmoil in November 2011, helping restore the country’s international credibility. But his government’s tax increases have been unpopular and deepened Italy's recession, the longest since World War II. As he resigned after the right withdrew its support, he called political parties , social partners and citizens to adopt his agenda unveiled on 23 December. 

The “Monti Agenda,” titled “Change Italy, reform Europe” contains a set of   ideas largely inspired by the European agenda. The best definition of his political line is what the Economist called 'radical centrism' (which in a sense is a paradox!). The agenda combines financial rigour to bring down Italy's debt with further reforms, in particular of public administration and institutions and growth-enhancing measures. The aim is to build a"modern and dynamic social market economy" putting more people into employment, increasing the role of women in the society and combating ageing. 

Interestingly, there is a broad consensus on these measures between Monti's centrist coalition and the democratic left. Both parties agree that budgetary discipline should go hand in hand with greater equity and economic growth. However, new resources should be found through further cuts in public spending and fight against tax evasion to reduce taxation in favour of workers, businesses and households and build a modern welfare system. They also pledge for a revision of the recent law on corruption as well as a radical revision of the insittuttional architecture of the State, in particular the provinces and regions. Finally, both agendas point to a better income redistribution between regions as well as social groups and a decisive contribution to the European federal State. But there are also some marked differences, in particular on the need to tackle inequality and the extent of redistribution to the poor.  

On the reform of Europe, which is a central aspect of the agenda, Monti's document may appear rather modest. The underlying analysis of the crisis is that single States lack fiscal discipline rather than ackwnowledging its systemic character.  Each State has to do its 'homework' (that is putting its finance in order") within the European Union framework which essentially works although it needs to be adjusted. The only 'radical' proposal is that the European Parliament should have a constituent role in the reform of  European institutions. But the agenda fails to consider that the crisis extends to the whole Europe and cannot be overcome with orthodox measures. In fact, the only concrete commitments concern the reduction of national debt and the respect of the balanced budget rule, that is the application of the Fiscal compact, approved in March 2012, accompanied by a minimum wage and some taxation on wealth. But the problem is that austerity policies are not sustainable unless there is a decisive move towards a European Federation.

The partisans of  that project do not only focus on institutions. They have a different conception of the crisis and how it affects the life of citizens. The 'fiscal compact' will not help overcome the evil of inequality, unemployment and poverty. In this regard, the Agenda remains on the assumption that sound finance means growth and employment. The alternative project is that, as States are impoverished and cannot stimulate growth and equity, the European Union has to launch a sort of 'New Deal' like in the 30s. The idea was raised since the beginning of the Greek crisis but was opposed by the tenants of liberal orthodoxy. It meant, in practice, a significant increase of Europe's budget - which represents today about 1% of EU GDP  while it is 23% in the US- to foster investments in research, infrastructure networks and energy savings. This is possible with the insitution of two different taxes transferred directly to the EU coffers: the tax on financial transactions and the 'carbon tax' (which alone could provide some 50 billion euros a year).

In American history, Alexander Hamilton realized at some point that the supranational power would take debts of individual States, and gave birth by the Confederation of semi-sovereign States a federation, with resources sufficient to guarantee, jointly and severally a genuine unity. This is what we need today in the wake of a deep crisis in Europe. F. Roosevelt understood the real problems of his country and increased federal spending to invest massively in education, fight against poverty and healthcare. 

Unfortunately, there is no leader in Europe with such a vision and a 'progressive agenda' which can revive growth while tackling mass unemployment and inequality. History is tragic but no one seems aware of it. 


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