Living 'La Vita Bella' Italians Leave Fears of Debt Crisis to Others

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Part 4: Tapping Hidden Assets


Italy's former head accountant is sitting in his favorite Calabrian restaurant near Via Veneto in Rome, eating a plate of Mediterranean sole. "Delicious, isn't it?" he says. For 13 years, until 2002, Andrea Monorchio was the "Ragionere Generale dello Stato," which made him the overseer of Italy's debt and fiscal sins under nine prime ministers.

If anyone knows how bad the situation is, it is this elderly man. Monorchio says he would prefer to not comment on "certain politicians" because he doesn't want to spark any more calamities for the government. "But," he adds, "have you noticed that our national debt corresponds to the total amount of unpaid taxes?"

Still, Monorchio adds, Italy has a kind of wealth that is hard to explain to hedge-fund managers in London. "Italian families own real estate worth €4.832 trillion, of which only 7 percent is burdened with mortgages," he explains. "Every family owns one, two or three houses -- and we're supposed to be part of the PIIGS?"

"With about 20 percent of this wealth," he adds, "we could pay the €950 billion by which we exceed the Maastricht criteria for government debt."

As impressive as these numbers are, the problem lies in finding a way to tap this wealth in fiscal terms. Were more Italians to take out mortgages on their houses to buy government bonds, for example, Italy could eliminate its interest-payment problem. Bringing its sovereign debt back into the country and getting it farther away from the global financial markets would make it easier to control.

Not So Bad If You Ignore the Debt

Monorchio, together with Prodi and the later President Carlo Azeglio Ciampi, was one of the three key economists who guided Italy into the euro zone. He is the prototype of the high-ranking civil servant in Italy, never touched by scandal and equipped with a polite contempt for certain newcomers in Italian (and German) politics.

Like many politicians and bankers in Italy, Monorchio feels that German Chancellor Angela Merkel is one of the people mainly responsible for his country's current plight. As he sees it, the iron-willed "Madame No" has hesitated for too long, he says.

"Our primary balance is positive," he notes, "more positive than that of most other euro countries." In fact, thanks to high taxes, the Italian treasury takes in more than it spends -- but only if the interest payments for existing debts are factored out.

Even the IMF finds this commendable. As European IMF Director Borges said in a press conference in late September: "Italy has the best primary budget or primary balance of all the large European economies, even better than Germany."

In other words, Italy's budget would be stable without its interest burden.

Jealousy Issues

But, of course, this is just one way of looking at things.

Indeed, the world would undoubtedly be a better place if its economies were not as isolated as, say, the Tullio Restaurant near Via Veneto. It would also be a better place if the people in London and elsewhere who Karl Marx once castigated as a "brood of bankocrats, financiers, rentiers, brokers, stock-jobbers and stock-exchange wolves" didn't exist. It is because of them and their instincts that the markets are now unwilling to put their trust in Italian certainties.

"In the end," Monorchio says, "the English are just jealous of us." He nods almost imperceptibly to the waiter and says: "Il conto!" Check, please.

Translated from the German by Christopher Sultan

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