The People’s Budget

Breaking with EU austerity politics does not necessarily imply a departure from neoliberal politics. The struggle between EU austerity and ‘popular sovereignty’ is a quandary from which left-wing politics should disengage.

The Fiscal Pact must be overcome in the interest of consistent investment and employment policies as well as socially just fiscal policies. To this end, we need different economic and industrial policies. However, the current budget proposal makes no mention of this, and in this sense the current government hardly differs from its predecessor. While individual items remain unknown, out of €36.7bn (approx. €22bn from new borrowings) around €9bn are earmarked for the introduction of a so-called “Citizen’s Income” programme and increases of minimum pensions and low wages to €780. A further €7bn have been budgeted to amend the pension reform launched by the Monti government in 2012. The government has announced early retirement at age 62 for those who have contributed to pension funds for 38 years. About 150,000 public sector employees could make use of this in 2019. Yet, there is no plan for swift recruitment of new staff to prevent a collapse at local government outlets.

Certainly, the introduction of a flat tax, i.e. a non-progressive taxation system, which the government has also put forward, would be neither constitutional nor desirable from a left-wing perspective. For the past 25 years, tax rates on corporations and high incomes have been systematically reduced, but were increased on lower incomes to the benefit of financial returns and the rich. The incumbent government is continuing this trend.

SMEs, which have been affected disproportionately by the economic crisis, certainly need help—the government is partially to blame for their suffering, owing SMEs a total of €57bn for services rendered. Nonetheless, it is unacceptable that the government tolerate tax evasion to the tune of an estimated €110 to 130bn annually while further sparing tax dodgers through tax breaks.

The draft budget only earmarks €3.5bn for investments. Details on the individual items have hitherto remained unknown. In spite of the alarming state of the country in terms of ailing infrastructure, collapsing schools, bridges and roads, startling soil erosion mostly caused by unfettered speculation in the construction sector over the past decades, devastation caused by earthquakes and ultimately climate change, public investments decreased by a staggering 30% between 2008 and 2018. This government, too, feels this is no reason to take action. Education and culture (again) go unfunded. Students recently took to the streets, demanding ‘the 8 billion back Berlusconi took from us ten years ago!’

The “Citizen’s Income” is akin to an Italianised Germany’s controversial Hartz IV unemployment package. It is no coincidence that the Minister of Economic Development and Social Policy, Luigi Di Maio (Five Star Movement) paid his German colleagues Hubertus Heil and Peter Altmaier a visit in early October, who as Di Maio claims have shown understanding and are willing to cooperate. The “Citizen’s Income” is supposed to function—as it does in Germany[1]—as an institutionalised monitoring system, within which those receiving benefits cannot use the money they receive in the way they choose. This hardly is welfare state politics, and just like the monitoring mechanisms envisoned by EU Fiscal Politics (conditional benefits as e.g. for Greece) are located within the overall concept of neoliberalism in its current state. Only electronic payments are permissible and benefits must be used up fully each month. Unemployed people may refuse up to three job offers, while further education and eight hours of work “beneficial to society” are mandatory. Non-Italian citizens, too, provided they have been registered in Italy for at least five years, may access these benefits. Benefit fraudsters are to be punished by up to six years in prison. “Immoral purchases shall not be permitted” Di Maio has warned. It is still unclear what benefit payments may not be used for (apart from alcohol, tobacco and gambling) and how people receiving benefits are to be monitored. One billion Euros has been budgeted to set up or redesign employment agencies. Currently, there are 552 of such centres employing just fewer than 8,000 staff, who have been able to place not even 3% of those looking for work in new employment. Half of them do not even have an up-to-date information system. The number of potential recipients of benefits is estimated to be around 5 million. They mostly live in the South, where employment agencies are even worse equipped technically (72%). To transfer benefits, they would need to be able to verify claims and to this end need to be able to coordinate their efforts with the tax authorities, banks, and customs. How this is supposed to be implemented by April 2019 is a mystery to many experts.

At the same time, the budget for integration is being cut. Local public refugee centres are planned to be closed. Local governments have already been opposing this move, since these centres are prime examples of successful integration. Without these centres, migrants had not choice but to sell themselves as trafficker or prostitutes to criminal organisations or slaves to the shadow economy, to the detriment of domestic security. But the Minister of the Interior, Matteo Salvini, in his campaign against the mayor of Riace, a much-lauded model of integration, intended to make an example of a city in the region of Calabria of al places, the stronghold of one of the most powerful criminal organisations globally, N’drangheta. Customs and police officers should rather be employed to fight tax evasion and organised crime rather than to spy on potential ‘benefit fraudsters’ or ‘illegal’ refugees. Intriguingly, nothing is being done to stem the tide of emigration (estimated to be at 250,000 to 300,000 people per year since 2013), which in contrast to immigration is a worrying problem especially in Southern Italy. Minster of Defence, Elisabetta Trenta (Five Star Movement), agreed to increase the defence budget (currently at 1.5% of GDP) to meet the NATO target of 2% by 2024. In contrast to what the Five Star Movement had initially promised, Italian will purchase the controversial F-35 fighter bombers from the US at €10bn. Cuts as per the draft budget (€60m in 2019 and €531m in total for 2019-2031) are rather organisational corrections rather than a general defence policy shift.

Attempts to fight workforce casualization and deindustrialisation by means of a so-called ‘dignity decree’ (August 2018) are commendable in principle, but remain insufficient. Businesses receiving public support must not relocate for five years. Temporary labour contracts of more than 12 months may only be extended to 24 months for objective reasons. Any other contracts may be extended up to four times (rather than five). These measures might of course cause greater false self-employment. There are first signs of this: In the past couple of months, the number of permanent and temporary employment contracts alike has dropped compared to the same time in 2017, while the number of self-employed workers increased.

It remains questionable if this can have a positive impact on development in Italy. We can hardly speak of a societal break from neoliberal EU austerity politics. In spite of certain nuances, this government pursues a trajectory which will further deepen the social divide and insecurity. The Five Star Movement has been co-opted by the Lega Nord, a xenophobic party which grounds its actions in agitation against Southern Italy and people from the South and which out of opportunism recently turned into a ‘national’ party. Mattarella, Italy’s President, did not want a Eurosceptic finance minister, but surprisingly did sign an unconstitutional security decree, albeit not without concerns.

What Italy needs is—in addition to a great investment plan—an economic and industry strategy to create jobs and to overcome the tremendous imbalance between Italy’s North and South. Adding to solutions to be implemented at the national level, EU-wide economic, tax and income policies should put an end to the Fiscal Pact and competition within the EU by implementing minimum social standards. This would contain the relocation of businesses to low-wage member states offering low tax rates, which is to blame for the loss of jobs, and can also contribute to keep employment and skills locally as well as to differentiate. A left-wing alternative to the current European Union should be the construction of a space of social human rights, which firmly fights the life-threatening effects of climate change while at the same time potentially creating tremendous employment opportunities.

The struggle between EU austerity and ‘popular sovereignty’ is a quandary from which left-wing politics should disengage. Incumbent EU governments invoking said sovereignty promote neoliberal politics and curtail the rights of all those deemed ‘foreign’. This way, social rights become concessions made by an authoritarian state stigmatising the ‘foreign’, those with a non-mainstream lifestyle and the poor and giving rise to ever greater injustices. Exclusion, curtailing of civil rights and surveillance mania are an aggravated level of antisocial neoliberalism pursued for the past 30 years. Italy, too, with its incumbent government appears to choose this path with what Di Maio called the ‘people’s budget (manovra del popolo).


[1] In conversation with Di Maio, Hubert Heil reportedly said: “I finally understood that this is not transfer payments but an active labour market policy measure like German Hartz IV.“ Il Fatto quotidiano, 9. Oktober 2018