WITHIN the European Community's family of countries, Italy is
like an older child who is endearing, talented, yet worryingly
unruly, who despite his age requires an extra measure of discipline.
And Italy, cognizant as never before of the threats to its
future within that family, is showing signs it is finally hearing -
and heeding - the reprimands.
The intensifying warnings from EC officials and elsewhere in
Europe focus on Italy's economic performance and the threat its
high inflation, profligate public spending, and mounting debt pose
for participation later in the decade in an EC monetary union and
But worry extends to the political system as well, since broad
economic reforms will not be possible without deep change in a
patronage-fed, corruption-laced system that inspires little
confidence among the Italian people.
One of the EC's founding members and its third-largest national
economy, Italy has long been considered the most pro-European of
the 12 EC nations. For most Italians, a European monetary union
without Italy's participation remains unthinkable.
Message hits home
So as expressions of doubt have multiplied about Italy's ability
to discipline itself and meet the criteria for monetary union set
in the pending Maastricht Treaty, examples of the message hitting
home have begun to surface.
When EC Competition Commissioner Sir Leon Brittan suggested as
recently as May that Italy cut its budget deficit by slashing
subsidies to industry - which he said account for 28 percent of the
deficit - he was largely ignored.
But last month, when the new government of Prime Minister
Giuliano Amato announced sweeping privatization plans, Industry
Minister Guiseppe Guarino told London's Financial Times, "We ought
to be grateful to Mr. Brittan because he has made us realize we
have to change."
In a tough and unprecedented upbraiding, the EC's council of
finance ministers recently warned Italy that "strong measures
cannot be further postponed" to rein in spending and other economic
imbalances. Moreover, it said Italy's failure to meet Maasticht's
economic convergence criteria by 1996 would cause "significant
adverse repercussions throughout the Community" and relegate Italy
to second-string status in the EC.
The slap in the face was well received by the country's major
business owner and management organization, Confindustria, whose
president applauded the Community for "calling Italy to order." The
heads of such Italian industrial giants as Fiat and Benetton also
welcomed the harsh words.
Reforms seen as timid
Mr. Amato's intial "emergency austerity" deficit reduction
proposals, approved Friday by the Italian parliament, include new
taxes, spending cuts mostly in defense, and the privatization
program. The plan has generally been received in Europe as too
timid, but the prime minister is offering signs he has just begun.
Last week he announced an agreement to abolish Italy's
sacrosanct scala mobile, the 47-year-old system linking most
Italian workers' annual wage increase to inflation. As for the
message he hoped the decision would send abroad, Amato said, "The
most important point for the Italian economy and for those who
watch it from the international markets" is that it should allow
Italy "to become competitive again. …