Business

Italy debt: The budget that cannot be built in a day

  • 14 July 2011
  • From the section Business
Colosseum
Life in the Italian capital appears normal - but behind the scenes there is much work to be done to stabilise the country's finances

Standing on the roof of a Roman aristocratic palace, looking out over the city, it is easy to forget Italy has any money worries at all.

The Vatican, the Colosseum and many other ancient monuments stand proud on the skyline, with a resilience that has kept them there for thousands of years - something the Italian economy could do with a bit of now.

The city looks like it is without a care in the world.

The sun is shining and plenty of tourists are spreading their euros about in busy cafes and shops.

But behind the scenes life is far from normal.

If you believe the critics, Italy is on the verge of a financial crisis. If you believe the government, there is nothing to worry about - it has got it all figured out.

Balancing act

The Italian plan is £42bn (48bn euros; $68bn) of spending cuts, which the Economics Minister, Giulio Tremonti, says will have the books balanced by 2014.

Fiorella Kostaris: "If the budget is passed by Friday it will be the fastest in history"

The government wants this budget agreed as soon as possible, but these things are not built in a day and the plan has two more stages to pass through before it becomes a reality.

The aim is for it to be passed by Friday, which the government hopes will reassure the rest of Europe and the financial markets that the Italian economy - the third largest in Europe - is under control.

But University of Rome economics professor Fiorella Kostaris believes the cuts should be deeper.

"We need to go 10 billion euros higher to get us out of this," she said.

"This budget, if passed by Friday, will be the fastest in Italian history. I think it shows just how serious this situation is."

But others believe any spending cuts will have a negative affect on growth.

Leonardo Simonelli Santi is president of the British Chamber of Commerce in Italy which has 10 million members. He said: "This country relies too heavily on others. We need to export more. Our businesses need help to grow."

The scooters whizzing round Rome are dangerously close to everything and everyone, creating a fear that if one hits the kerb, others will come crashing down around it - just like the debt-laden countries in the eurozone.

But despite this, it is still easy to find the Italian optimists.

Savings cushion

Film director Giuseppe Rechichi says: "It's very positive that all the parties in the government reached an agreement. This is very, very important.

"We might be struggling to grow at the moment - but Italians are very good at saving.

"We don't spend what we don't have, that's our tradition and I think that's what will save us from this mess."

There are also plenty of others who admit the cuts are needed even if they will hurt.

"These cuts are very important. Italians are strong, they will tighten their belts if they have to, no problem," shouted one passer-by when he heard me talking to others about the austerity measures.

Leonardo Simonelli Santi: "This country relies too heavily on others"

It is difficult to work out whom the Italians blame for the country's £1.8 trillion debt.

Some blame bad management of the eurozone network, while others point the finger closer to home.

Italy's Prime Minister, Silvio Berlusconi, is the name that crops up most.

Opinions divided

One taxi driver I spoke to, Anthony, said: "Soon I think we will have less than nothing. It always feels like it is the poorest who are hit, never the rich like Berlusconi himself."

But one taxi ride later another driver, Carlo, gave the opposite view. "I like Berlusconi, he is doing right for the country. He just needs the opposition to help him now."

For Carlo, a former UniCredit banker, Rome's chaotic traffic is a welcome refuge.

UniCredit is one of the banks that has seen its share price slide over recent days because of its heavy investment in its own country's sovereign debt.

"For 40 years I worked for UniCredit, but I took redundancy three years ago and now I'm driving to keep myself busy and practise my English.

"I am glad I got out when I did. The economy is in a terrible state. If I had to sit behind that desk now working out the numbers, Mamma mia, I'd be panicking."

But there are two things on which everyone I spoke to agreed.

First, they don't want a Greek tragedy, and second, they need to work together to make sure that does not happen.

Just whom they trust to oversee that work - let alone what tactics they should employ - is less easily agreed upon.