| Italy's vote timeline, our take on technocratic governments |
| 10.11.11 12:02 | |
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Italy's vote 11/12 November; government to follow The Italian government has drafted the decree for implementing the measures pledged to the European Union (see here for our take on Italy's needed structural reforms, very much in line with EU requirements, though the EU also requires a Constitutional budget balance rule), paving the way for a vote this week and next: the Senate house is due to vote the law on Nov.11-12, while the Chamber of Deputies, the lower house will begin reviewing the package on Nov.12, possibly voting on it that same day or the following day. Once the vote is passed, the current PM said he would resign the same day. The President will then begin consulting political parties on possibly forming a new government or calling early elections. Against this background, it is worth noticing that yesterday the President named M. Monti (Former EC Competition Commissioner) senator, possibly paving the way for him to take a leading role in a new government. There remain three alternatives for Italy: either a centre-right/centre-left coalition led by Mario Monti, or one led by of the outgoing PM's allies, or early elections. The second outcome would not be appreciated by the market because this would suggest little change, but the first type of government has proven effective in the past (1992-1995) in terms of implementing reforms. Mario Monti is perceived as being key to implementing drastic but evenly-distributed consolidation and reform measures. Then a question remains of when to implement elections. Under Italian law, elections must be held within 70 days of the dissolution of the Parliament. The benefits of being technocratic Italy had a successful experience with technocratic governments between 1992-1995 against the backdrop of political instability (5 governments between June 1992 and April 1993). Beginning with the 1992 agreement on incomes policy, successive governments elaborated rules governing tripartite policy processes in fields like pension and labour market policies. The reform process was facilitated by the Parliament giving power to the government for negotiating reforms with the unions and employers' confederation so that the law which was presented by the Parliament had been endorsed by unions before, thus avoiding the type of social unrest seen in Greece. Three main reforms are due to technocrat government actions: 1.) Inflation reform: the end to the "Scala mobile" CLI indexation 2.) Budgetary reform: the deficit to GDP ratio was brought from 10.1% in 1991to 2.7% in 1997; the primary balance went from +0.1% of GDP in 1991 to 6.6% in 1997. 3.) The pension reform increased retirement ages from 55 to 60 for women and 60 to 65 for men. source: Bank of America ML |
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