Italian economy has new hope

The new Prime Minister of Italy, Mario Monti, was sworn into office last Wednesday amid economic turmoil that has threatened to cause the Euro to tank. Italy took this new step under significant pressure from the international community, whose interests in Italy lie in maintaining the good status of the Euro.

After forcing former Prime Minister Silvio Berlusconi to resign last week, the new unity government has moved forward to restore the economic status of the state by appointing bankers, high-ranking civil servants, and financiers to positions of influence within the government. Monti hopes that this move towards an apolitical government will allow for significant improvements in the economy.

Monti has made it very clear to the nation that, in order to bring Italy out of the financial trouble it is in, the entire nation will have to make sacrifices. He said that the government will also be cutting back and hinted at lowering the salaries of government officials. To further strengthen the economy, he also spoke of reinstating the property tax, which Berlusconi’s government had abolished.

While many nations have expressed their lack of confidence in Monti’s ability to turn around the Italian economy, they have conceded that the change is a move in the right direction. Among them is Chancellor of Germany, Angela Merkel, who has stated her approval of the move to appoint Monti to Prime Minister. On the other hand, investors are more reluctant to restore their confidence in Italy, and will likely remain skeptical until Monti shows he has a detailed plan to deal with the roughly $2.6 trillion debt that the country now holds.

Although an economist by nature, Monti must also deal with the political establishment he is now leading. With no previous political experience, he will have a hard time passing new laws and legislation through Parliament, which is composed of left-leaning bureaucrats with strong relationships with labor unions and the like. As such, any labor-related laws are likely to stall in Parliament, which could deepen the financial problems facing Monti if he cannot force Parliament to comply.

Further complications have arisen from problems that Monti cannot solve, such as the current bailout plan that does not allow for Italy to borrow from the European Central Bank. Many within the Italian government are saying that until the bailout plan involves the European Central Bank, Italy will not be able to solve its own financial crisis.

In light of the great challenges facing Monti in the month and years to come, Italy must face extreme changes to its culture and lifestyle if it is to survive this financial crisis and grow to be a functional part of the European Union once more. This postwar welfare state will have to be stripped down to the bare skeleton of what it once was and rebuilt to function in the 21st-century world of integrated, globalized economies with high rates of labor participation and democratic involvement.