Stimulus Package – But Not Too Stimulating

Uh oh, here we go with the Financial Times Deutschland again! I swear, when I go looking for interesting European news to pass along, it’s not as if I first head directly to the FTD’s site (or, more accurately, to its RSS feeds). On the contrary, I always do try to cast my nets wide. It’s just that today’s economic report from them has a certain . . . let’s say spice to it, that I’m sure it won’t take you long to pick out.

The article is entitled Italy shocks itself to health, by FTD Milan correspondent Andre Tauber, and no, it has nothing to do with any kind of electro-therapy. It is rather about the fiscal stimulus plan recently announced by Italian premier Silvio Berlusconi. You know: the UK, Germany, Spain, etc. have each announced their own such plans recently (the United States is a laggard for well-known “lame duck” reasons); not only do the perilous financial times require such an initiative nearly everywhere, but in fact that was one thing the parties agreed to at that “G20 summit” in Washington, DC back in mid-November, i.e. that they would each more-or-less at the same time come out with their own stimulus plans, since it is disturbing to currency- and various other world economic equilibria if some nations hold back.

So Italy, too, has climbed aboard this stimulus-plan bandwagon. But, as Tauber reports in his article, Belusconi’s proposal has a few unique characteristics of its own.

The main thing that leaps to the eye at first inspection is that the amounts involved are so small. Of course Berlusconi made his announcement of the plan with a flourish, declaiming that “We are the first government in Europe to enact measures for the support of families and businesses,” but that part about being “first” was already not true. Tauber’s comment: “But the media-professional Berlusconi knows that big words are all the more in order when the deeds give rather a more modest impression.” The additional outlays announced in the plan amount only to some 6.3 billion euros.

It’s not as if Italy were some small country, for which this sum could be enough; with a purchasing-power-parity yearly GDP of USD 1,787 trillion, it ranks tenth in the world. Rather, the Italian government finds itself hard-pressed to come up with the extra money needed. According to Tauber, Italy has the third-highest level of debt on a world-wide basis (no word as to whether that is in absolute terms or else relative to GDP or some other measure), so everyone is justifiably leery about lending it any more money. Also, its central bank can’t just “print” money since it uses the euro.

What that all means, for one thing, is that some dramatic measure for putting money back in people’s pocketbooks like the value-added-tax rate-lowering recently announced by the British government is out – that would be a rather too-generous gesture than what the Italian government can presently afford. Instead it proposes various measures carefully designed to be “pro-family”: mostly a tax-rebate for families, together with further tax relief for interest payments on family-homes.

At the same time, though, the Berlusconi government is following this same “family” theme in searching for additional sources of funds. If your plan is to give more money to “families,” then part of that can be taking money away from “anti-families,” right? Accordingly, the most eye-catching element of his plans was a new tax on that classic Italian exporter, the pornography industry. “Whoever produces or traffics in pornography,” as Tauber describes it, “will have to pay up an additional 25% of income tax.” Naturally, Italian pornographers are already up-in-arms; in search of a representative statement from them, Tauber was clever in going to Riccardo Schicchi (oooh, doesn’t that just look like a pornographic name!), a famed porno-producer but also formerly a representatitve in the Italian lower house of parliament. “Berlusconi is making a mistake,” opines Schicchi. “Whoever taxes Eros loses consensus, and therefore votes.”

As it turns out, Berlusconi might be trying to play a cleverer game here than many would give him credit for. Don’t forget that, even as premier, he remains a major shareholder in Mediaset, the company that runs three of Italy’s national TV channels. One of Mediaset’s main competitors is now Sky Italia, from Rupert Murdoch’s News Corporation – and it turns out that one of Sky Italia’s current successes in attracting viewers is its “Hot Club” channel: you guessed it, pornography.

(Oh, and for any of you still wondering about that headline to Tauber’s piece, Italy shocks itself to health, it’s all rather simple if you just think about it: if Italians want to continue to be shocked – shocked, I tell you! – by pornography they choose to consume, well, then Uncle Silvio has a plan to at least channel their prurient pursuits towards supporting the economy while preserving its fiscal health.)

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