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Italian Sovereign Debt Crisis 2011. In March 2011, the European Commission with the European Central Bank started the implementation of the Stability Program, which aims at severely reducing the European average debt. In particular, those countries having a debt above 60% with respect to GDP should reduce it in twenty years’ time; in 2011, Italy exhibits a 120% ratio of debt over GDP, and therefore it is compelled to reduce its debt by 2% each year (i.e. having a surplus).
( In Spring 2011, the discussion about the effects of the program was mostly technical and left to academics ( In March, the Italian Government presented a Budget Law that shifted the implementation of the undersigned program to 2013, after the elections. This inaction was heavily criticised by the EU (Germany and France above all), and in July 2011, the ECB and the EU asked Italy to guarantee a zero budget balance in 2012 and a surplus in 2013, as requested in the program. The ECB asked for the liberalisation of services, which represent over 70% of the Italian GDP, reforms of pensions and protected sectors, and a reform of the public administration, responsible for low labour productivity.
Since the end of July, the Italian Government has been trying to match the zero budget balance, by increasing taxes on fuel and labour and by cutting current expenses (but not those related to the public sector and politics), without any structural approach. In 2013, most of these decisions will have to be renewed or radically modified. Because of this inability to match the undersigned treaty, the financial market is punishing Italy as a debtor. The spread between the Italian and German Bond is above 300 basis points, and the increase in the cost of debt makes the zero budget balance impossible to be achieved.
Editor: Chiara OLDANI