More On The 2007 Budget

Following-up on what I was saying at the weekend about the details of the 2007 Italian budget proposals, Padoa-Schioppa is adamant that the proposals conform with the requirements of the Stability and Growth Pact. Prodi is too:

"We'll meet the European parameters in 2007, not 2008, and we're committed to putting public accounts in line also in the future"

Not everyone, however, is completely convinced:

``The markets will have to analyze the budget carefully,'' said Salvatore Zecchini, professor of economic policy at Tor Vergata University in Rome. ``The spending cuts are one big question mark, and we'll have to see if the fight against tax evasion will generate the forecasted income.''

``Prodi wasn't strong enough to get the budget he wanted,'' said Gianfranco Pasquino, a professor of political science at Johns Hopkins University's School of Advanced International Studies in Bologna, Italy.

``The message of this budget is that the Italian government has been unable to force or convince unions that pension reform is necessary.''

Prodi's effort to raise the retirement age in Italy was excluded from the budget last week, when he gave into demands from union leaders and its communist allies. Three billion euros in pension spending reductions are included in the budget.


In addition the budget itself is not lacking in opponents, whether from the right or from the left, and the government's wafer thin majority in the senate raises the issue of whether or not it will be watered down before finally being adopted. Certainly something to watch.