ROME : “Every promise is debt – think about it,” screams the message below a huge, ticking “debt clock” that greets passengers at the main train stations in Rome and Milan.
In an unusual foray into politics, Bank of Italy Governor Ignazio Visco warned that parties’ pledges to slash taxes and hike spending “could prove counterproductive, since the problem of the national debt cannot be sidestepped”. The conservative coalition that leads opinion polls going into the March 4 election has what analysts say is the most extravagant program: sweeping tax cuts, higher public pensions and a boost in welfare provisions.
Its flagship policy is a flat tax below 23 percent for individuals and companies, replacing the current staggered rates ranging from 23 to 43 percent. That would cost 50 billion to 80 billion euros {$62.35 billion to $99.75 billion), depending on the rate adopted. The anti-establishment 5-Star Movement and the ruling Democratic Party (PD) are only slightly less generous. They also promise to cut taxes, hike spending and raise the annual budget deficit from levels already agreed with the European Union.
What leaves economists scratching their heads in disbelief is that the parties, conscious of concerns over public finances, also promise to drastically reduce the debt.
Silvio Berlusconi’s Forza Italia (Go Italy!) party, the mainstay of the center-right alliance, says it can cut debt by 30 percentage points in five years to 100 percent of GDP. The PD pledges the same reduction in 10 years. 5-Star promises a 40-point cut in 10 years.
“They are just trying to trick us, they are throwing out random numbers that make no sense,” said Roberto Perotti, an economics professor at Milan’s Bocconi University and a former government consultant on public finances.
