the Italian could change their financial culture overnight. The Italians, like the Greeks treat tax evasion
as a time honored tradition. The big money in both countries is already fleeing to safe havens as the Italian and Greek governments try to beggar their neighbors with additional bailouts from Euroland. This story is
well covered by Zero hedge and can be read here.
The PIIGS Fleecing Of Europe Continues Even As Italy Promises To Implement Another "Austerity" Package Imminently
The first Italian austerity package has not even properly failed yet (despite labor union protests to the contrary which for some odd reason believe that it has some chance of passing), and already Italy is preparing for a new round of "austerity" to appease those naive fools from the ECB so they buy Italy's otherwise bidless bonds for a few more weeks. From Bloomberg: "Italy may need a new budget- adjustment plan next month because a 54 billion-euro ($76 billion)austerity package to be voted on today won’t convince the European Central Bank to continue buying the nation’s bonds, the chairman of the Senate Finance Committee said. “How long can the ECB continue to buy Italian Treasury bonds?” Mario Baldassarri said in an interview in Rome today. “We may need another adjustment in three, four weeks which will be the real answer to the European Commission and to markets.” Because this time, unlike a month ago, it will be different. Berlusconi promises. As a reminder, Italy will vote on the current massively watered-down plan which is anything but austere later today, in a vote largely expected to pass. Said passage, however will do nothing to please Trichet, who will continue to remind Italy just who calls the shots now (oddly enough the ECB thinks that would be them... which explains the loving relationship between the Central Bank and a electorally challenged Angela Merkel). None of this changes the underlying dynamic which has become all too clear: the PIIGS have called Europe's bluff, and Europe blinked. Going forward expect much barking from the ECB and Luxembourg, warning the periphery to get its house in order... and absolutely no bite. Because everyone by now realizes that the balance of power is entirely on the insolvent countries' side. Europe can threaten to kick out a country, but as UBS demonstrated on Monday, the consequences of such a move, which would end the euro, would be up to and including that Keynesian wet dream: war.
More:
A revised austerity plan passed by Prime Minister Silvio Berlusconi’s Cabinet last night faces a confidence vote in the Senate at 8 p.m. The package includes an increase in value-added tax by one percentage point to 21 percent, a 3 percent levy on incomes over 300,000 euros and a higher retirement age for women. It amends a plan passed by the government last month to balance the budget in 2013, which was drafted to convince the ECB to buy the country’s bonds amid a surge in bond yields.To ensure ECB continued, Italy may have to pass another package with more “spending cuts and not tax increases, structural reforms in terms of liberalization, privatizations, sales of public buildings and so on,” Baldassarri said.The current plan relies excessively on projected proceeds from the fight against tax evasion, the lawmaker added.“You cannot say ex-ante how much tax revenues will be, you can say that only ex-post, in three or four years, whenever you get evaders and you make them pay taxes,” he said.
And therein lies the rub: just like all Keynesian programs, which are based on inbound cash now, and outbound promises later, the same thing applies to Italy: just give them the money, or in this case monetize the bonds, and all shall be well: they really mean it this time.
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