Courtesy of Mish.
One of the dumbest things a country can do in a recession is raise taxes. Yet, after pronouncing the end of austerity, Italy’s “grand coalition” government, led by Enrico Letta, is going to hike the VAT.
Why? It seems they need to hike the VAT to pay for a decrease in property taxes.
Recall that Silvio Berlusconi was only willing to take part in Letta’s grand coalition on condition property tax hikes were rolled back. Letta agreed to do that, but now Letta says Italy needs revenue hikes to make up for it.
Grand Coalition Splintering
Curiously, the International Business Times reports Enrico Letta’s Grand Coalition Could End Italy’s ‘Lingering Civil War’ .
What nonsense. Letta’s “grand coalition” is burnt toast already.
Eurointelligence gets it right.
Il Corriere della Sera and other Italian papers are leading with the news that finance minister Fabrizio Saccomanni and another cabinet ministers said yesterday that Italy cannot simultaneously afford to cut the IMU housing tax and not implement an envisaged rise in VAT, and would thus opt to raise VAT.
In its coverage, La Repubblica writes that Saccomanni is now becoming a controversial within the coalition, as Silvio Berlusconi appears to appear chosen him as a target for his verbal attacks. The VAT increase is threatening to drive a gulf between the two largest parties, the PD and Berlusconi’s PdL.
Another Italy Convulsion Coming Up
I agree with the following comments from Eurointelligence: “A rise in VAT is probably the worst thing that can happen right now … Italy will miss the 2.9% deficit target, since the economy is likely to go into another convulsion once VAT is raised.”
Beppe Grillo 5-Star Movement Implodes
As a side note the 5-Star movement of Beppe Grillo is imploding as well. …
