MILAN: Italian public debt has swelled to its highest ever level, reaching 2.014 trillion euros ($2.64 trillion) in October, the Bank of Italy said yesterday — highlighting the country's fragile financial state in spite of the raft of austerity measures and reforms imposed by Prime Minister Mario Monti.
The Italian economy, the third-largest among the 17 European Union countries that use the euro, is in recession as the government has enacted spending cuts and tax hikes to get a handle on its debt.
The latest figures show the debt pile has risen by 3.7 percent since January 2012, when it was 1.94 trillion euros. With debts worth 126 percent of the country's annual economic output, Italy has the second-highest debt-to-GDP ratio in the euro zone, behind only Greece. According to consumer group Codacons, Italy's debt load works out at 82,192 euros per household — up 4,400 euros on the beginning of the year.
"The Monti government would do well to consider that you don't bring down debt only with taxes, but through an increase in revenues due to the generation of more wealth," Codacons said in a statement.
The consumer group also criticized Monti for not doing more to cut waste, and specifically for dropping the battle to reduce the number of provinces during his mandate.
Monti was tapped by Italy's president to lead the country in November 2011 after the then-premier Silvio Berlusconi was forced to step down after international markets lost confidence in his ability to save the country from a Greek-style debt crisis. Monti, a respected economist and former European commissioner, and his government of unelected technocrats won back a degree of international credibility through a series of tax hikes and fiscal reforms that have been unpopular — but largely accepted — at home.
Thanks to a combination of the European Central Bank offering to buy up unlimited quantities of short-term bonds in countries struggling with their debt and Monti's reforms, Italy's borrowing costs have been kept down in recent months.
However, markets were shaken this week when Monti announced that he would resign earlier than anticipated — after Parliament passes its 2013 budget, expected by the Christmas break — saying it was impossible to carry on in government after Berlusconi's political party withdrew its support in two crucial votes last week.
Since then Berlusconi has wavered over whether he would lead his party into the next election, now expected in February. The former premier on Friday said he was awaiting Monti's decision on whether he will run.
"If I am running my party we can retake all the votes of 2008," his last election victory," Berlusconi said on RAI state TV. "The votes of those disillusioned who are still there and haven't gone to other parties."
Monti has not yet indicated if he will participate in elections. But the fact that he has announced he is stepping down removes one obstacle to running a political campaign: Monti, who formally does not belong to any party, will no longer be bound to an apolitical role since his government will not be asking Parliament to back any measures.
The center-left opposes a Monti campaign, which could cost them centrist votes. Party leader Pier Luigi Bersani, who won the party's primary, is adamant that politicians return to running Italy.
Monti refused yesterday to discuss his plans during a press conference at the end of an European Union summit in Brussels.
"It doesn't seem possible or opportune for me to discuss this topic," Monti said.
European leaders have been vocally voicing support for a continuation of Monti's leadership.
In response, Italy's president, Giorgio Napolitano, told diplomats posted to Rome yesterday that there was no cause for alarm due to the political tensions of recent days.
"This difficult passage will be overcome," Napolitano said, adding that the elections will bring "a renewed commitment" to stay the reform course.