Italy's Growth Plan

http://www.futureofcapitalism.com/2011/11/italy-growth-plan

From a news article in Bloomberg:

Berlusconi presented his resignation last night to President Giorgio Napolitano after the Parliament in Rome approved measures to spur growth and reduce the euro-area's second-biggest debt....His economic policy will initially focus on cutting debt, before seeking to revive expansion in an economy where growth has lagged behind the euro-region average for more than a decade, la Repubblica reported today, without saying where it got the information....Monti is considering resurrecting a property tax on first homes that was abolished by Berlusconi, introducing a wealth tax and speeding up asset sales, the newspaper said. He will follow with an overhaul of labor-market laws that could make it easier for companies to fire workers...He's been an international adviser to Goldman Sachs Group Inc. for six years.

The BBC has details on the austerity measures passed by the Italian parliament, including "An increase in VAT, from 20% to 21%" and "a special tax on the energy sector."

Well, making it easier for companies to fire workers is probably a step in the right direction. As for the rest of it, it's not clear to me that a property tax, a wealth tax, an increase in the value-added tax, and "a special tax on the energy sector" taken together will "spur growth." At best it is a departure from the Keynesian orthodoxy that bigger government deficits are the way to spur growth. At worst it's a series of job-killing tax increases. To be fair, the Italian "austerity" isn't all tax increases, but also reportedly includes a freeze on public-sector salaries and a gradual rise in the retirement age for women, which is now lower than that for men. If it doesn't work in Italy, the American Keynesians (that's you, Professor Krugman) will probably blame the "austerity" part of it, as they have in Britain, rather than the tax increase part of it.

by Editor  |  Nov 14, 2011 at 6:56 am Related Topics:  Europe, Goldman Sachs, Paul Krugman, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list