Italy’s largest union has launched a referendum campaign against the EU fiscal compact, a draconian budgetary cap which is set to make austerity permanent across the Continent.
The CGIL is calling for a repeal of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union that was signed on 2 March 2012 by all 28 member states of the European Union (EU), except the Czech Republic and the United Kingdom. In Italy this new turn in the EU austerity screw signifies 45 billion euros annual budget cuts for two decades.
One of the new budgetary rules means a country whose debt / GDP ratio exceeds 60% of GDP must reduce this ratio by a fixed amount each year. It is economically illiterate because countries like Italy – or Belgium – have had decades of public debt at 100% or more of GDP (Japan’s was even at 200%) without generating a crisis, because these debts are simply the result of high rates of household savings. Italy’s debt stands at a record 135% of GDP.
When the full force of the new budgetary rules start in 2017, they will force a massive amount of what pundits call ‘fiscal consolidation’, deep cuts in public spending and/or tax increases just as companies, up to their necks in debt, do the same. A recipe for economic strangulation. Or as the FT’s European commentator Wolfgang Münchau puts it, ‘a long period of slow growth, low inflation, and a constant threat of insolvency and political insurrection.’
For the CGIL, Italy’s economic and public finances problems have other causes and need new solutions: ‘The policies of indiscriminate cuts, a lack of investment in the future of businesses and young people, unsustainable increases in the tax burden, since 2007, have doubled unemployment, decreased the value of the national wealth, worsened public finances and closed three million businesses. With the policies of austerity, the crisis has worsened.’
‘The policy of so-called ‘expansionary’ austerity is a real failure,’ says Danilo Barbi, Confederal Secretary of the CGIL.
‘The idea on which it is based is that the compression of labour costs and the reduction of public expenditure. It was thought, mistakenly, that could increase foreign or domestic private investment, but in reality it was not so. On the contrary this policy has depressed consumption and also private investment. Instead of creating prosperity for all, it has left people fighting for a shrinking economic cake and introduced mechanisms of competition between peoples. ‘
The union has joined economists and lawyers in calling on Italians to sign up for the 4 separate referendum questions in a bid to reverse Europe’s current austerity policies and promote ‘development and employment’. The collection of signatures for the referendums in the Eurozone’s third largest economy begins July 3 and runs until 30 September.
The campaign comes just days after another mass protest against austerity in Rome and an apparent deal secured by Italian PM Matteo Renzi from Germany to allow for more ‘flexibility’ in interpreting EU’s mad budget rules. But critics have heard promises before from centre-left governments – notably in Italy and France – that they had faced down German Chancellor Angela Merkel and Europe’s austerity hell only to find the treaties imposing a permanent downsizing of people’s living standards have remained in place.