Excerpts:
“In Italy, as in Greece, Spain and Portugal and eventually France, the welfare-entitlement state has hit a wall. Successive governments on the Continent, right and left, have financed generous entitlements with high taxes and towering piles of debt. Their economies have failed to grow fast enough to keep up, and last year the money started to run out. The reckoning has arrived.”
“If the first step in curing an addiction is to acknowledge it, there is little sign of that in Europe. The solutions on offer are to spend still more money, to have the Germans bail out everybody else, or to ditch the euro so bankrupt countries can again devalue their own currencies. France’s latest debt solution includes raising corporate, capitals gains and sales taxes.”
“This is a crisis of the welfare state, and Italy is a model basket case.”
“An aging and shrinking population is a symptom, but not a leading cause, of the eurosclerosis.”
“But the bulk of the responsibility lies with politicians. Mr. Berlusconi, Italy’s richest man, promised a shake up each time he ran for office (in 1994, 1996, 2001, 2006 and 2008). He was the longest serving premier in post-war Italy, from 2001 to 2006, controlled parliament and could have pushed through reforms. He didn’t. Promises to lower taxes and hack away at regulations and protections for Italy’s powerful guilds—from taxi drivers to pharmacists to journalists—were broken.”
“An unhappy byproduct of a welfare state is that it creates powerful interests that will fight to the last to preserve their free lunch, no matter the cost to the country.”
“But now hard choices can no longer be postponed. And the solution to Europe’s debt crisis must begin with reforming, if not dismantling, the welfare state.”
“The road from Rome may now lead to Paris, Madrid and other debt-ridden European countries. But this is no cause for U.S. chortling, because that same road also leads to Sacramento, Albany and Washington. America’s federal debt was 35.7% of GDP in 2007, but it was 61.3% last year and is rising on an Italian trajectory. The lesson of Italy, and most of the rest of Europe, is never to become a high-tax, slow-growth entitlement state, because the inevitable reckoning is nasty, brutish and not short.”
Link to Full Article
Entitlements contributed to the fall of Rome. Now Italy follows their ancestors into the same error. I wonder if we can avoid the same pitfall?
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