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Monti plans 'Greek-style' takeover of Sicily to avert default
Italian premier Mario Monti is mulling emergency action to take direct control of Sicily’s regional government before the island spirals into a full-blown financial crisis, fearing contagion to the rest of Italy.
A woman begging in the street in Sicily. Regional councillor Andrea Vecchio has warned the island has run out of money. Photo: Alamy
Ambrose Evans-Pritchard
By Ambrose Evans-Pritchard
8:43PM BST 18 Jul 2012
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Mr Monti held an “urgent” meeting with the country’s president Giorgio Napolitano on Wednesday to grapple with the constitutional issue after it emerged that the region faces a deficit of up to €7bn (£5.49bn) this year and is in danger of default without sweeping cuts.
Sicily’s regional councillor Andrea Vecchio warned that the island has run out of money. “I’m afraid we will soon no longer be able to pay civil servants’ salaries,” he said.
“The developments in Sicily are very serious,” said Prof Giuseppe Ragusa from Luiss University in Rome. “It is just the sort of negative shock we don’t want right now. Everything has to go perfectly for Italy to pull through.”
The full extent of Sicily’s crisis came to light just before Moody’s downgraded a string of Italian regions, cutting many to levels even lower than Sicily. Piedmont, Abruzzo, Calabria, Lazio, and Campania were all slashed. The City of Naples fell to junk status, plagued by “systemic pressure” from a deep social and economic crisis.
“We mustn’t let the disaster in Sicily infect Italy,’’ said Pier Ferdinando Casini from the liberal PDC party, leading a chorus of politicians and business leaders calling for a takeover along the lines of the EU-IMF troika operations in Greece.
This is a highly delicate situation. Sicily has had a special status since the Second World War — reflecting its long tradition of separatist revolt — with control over health care, schools, and regional affairs. Rome has power to suspend the government in Palermo but only for “grave violations”.
Sicily’s governor Raffaele Lombardo is under investigation for Mafia ties, which he denies. Mr Monti has demanded that he abide by his promise to resign before the end of month, a move that will clear the way for a control team imposed by Rome.
“Sicily is not at risk of default,” said Mr Lombardo, blaming the crisis on cuts by Rome itself under its EU-imposed austerity regime. “We face a liquidity crisis linked to the recession in the rest of the country. It is hard for lots of regions, and not just Sicily.”
“We are victims of disinformation, lie, and falsehoods. What are we supposed to do? Cut even further? Detonate a social explosion in Sicily? Turn Sicily into a land of desperation where everything is destroyed,” he said.
There is a little doubt that Mr Lombardo’s headquarters in Palermo’s Palazzo dei Normanni is grossly overmanned, with a bigger staff than Downing Street. The EU has suspended €600m of project aid over alleged misuse of funds, a move widely seen as a pressure tactic to force him from office.
Yet Mr Lombardo’s emotional outburst is a reminder that Italy’s drastic austerity measures — net tightening of 3.2pc of GDP this year — is bleeding the regions and causing most hardship in areas heavily reliant on the state. Sicily has developed a small technology belt in computers and cell phones in the Etna Valley but depends on public sector jobs and subsidies from North Italy.
The Bank of Italy expects the Italian economy to contract by 2pc this year as cuts start to bite, while the Confindustria industry lobby fears it will be 2.4pc or worse — pushing the country deeper into perma-slump.
Critics say the austerity measures have gone too far. The primary budget surplus will be 4.9pc of GDP by next year, the best in the G7 bloc. This may prove a Pyrrhic victory if it causes public debt to shoot up to 126pc of GDP this year and erodes political support for the whole reform process.
Mr Monti has said his technocrat government will step down next March. It is unclear whether the splintered political system can produce a stable coalition.
Former premier Silvio Berlusconi is launching a comeback bid with calls for a withdrawal from the euro unless Germany and the European Central Bank step in to stabilise Italian bond yields. A study by Bank of America found that Italy might benefit from breaking free of EMU and restoring competitiveness with a weaker currency.
Sicily is a microcosm of the same misaligned North-South relationship within Italy. Like the rest of the Mezzogiorno — or South — it is caught in a welfare trap, held back by a currency union with a stronger industrial economy in the north.
This is made worse by national level pay deals that do not reflect productivity levels on the island. Sicily’s workforce has been priced out of global markets for decades.
Sicilian patriots say the island was a flourishing hub of commerce under the Normans in the High Middle Ages. It could be so again with full control over its own destiny.
Monti plans 'Greek-style' takeover of Sicily to avert default
Italian premier Mario Monti is mulling emergency action to take direct control of Sicily’s regional government before the island spirals into a full-blown financial crisis, fearing contagion to the rest of Italy.
A woman begging in the street in Sicily. Regional councillor Andrea Vecchio has warned the island has run out of money. Photo: Alamy
Ambrose Evans-Pritchard
By Ambrose Evans-Pritchard
8:43PM BST 18 Jul 2012
CommentsComments
Mr Monti held an “urgent” meeting with the country’s president Giorgio Napolitano on Wednesday to grapple with the constitutional issue after it emerged that the region faces a deficit of up to €7bn (£5.49bn) this year and is in danger of default without sweeping cuts.
Sicily’s regional councillor Andrea Vecchio warned that the island has run out of money. “I’m afraid we will soon no longer be able to pay civil servants’ salaries,” he said.
“The developments in Sicily are very serious,” said Prof Giuseppe Ragusa from Luiss University in Rome. “It is just the sort of negative shock we don’t want right now. Everything has to go perfectly for Italy to pull through.”
The full extent of Sicily’s crisis came to light just before Moody’s downgraded a string of Italian regions, cutting many to levels even lower than Sicily. Piedmont, Abruzzo, Calabria, Lazio, and Campania were all slashed. The City of Naples fell to junk status, plagued by “systemic pressure” from a deep social and economic crisis.
“We mustn’t let the disaster in Sicily infect Italy,’’ said Pier Ferdinando Casini from the liberal PDC party, leading a chorus of politicians and business leaders calling for a takeover along the lines of the EU-IMF troika operations in Greece.
This is a highly delicate situation. Sicily has had a special status since the Second World War — reflecting its long tradition of separatist revolt — with control over health care, schools, and regional affairs. Rome has power to suspend the government in Palermo but only for “grave violations”.
Sicily’s governor Raffaele Lombardo is under investigation for Mafia ties, which he denies. Mr Monti has demanded that he abide by his promise to resign before the end of month, a move that will clear the way for a control team imposed by Rome.
“Sicily is not at risk of default,” said Mr Lombardo, blaming the crisis on cuts by Rome itself under its EU-imposed austerity regime. “We face a liquidity crisis linked to the recession in the rest of the country. It is hard for lots of regions, and not just Sicily.”
“We are victims of disinformation, lie, and falsehoods. What are we supposed to do? Cut even further? Detonate a social explosion in Sicily? Turn Sicily into a land of desperation where everything is destroyed,” he said.
There is a little doubt that Mr Lombardo’s headquarters in Palermo’s Palazzo dei Normanni is grossly overmanned, with a bigger staff than Downing Street. The EU has suspended €600m of project aid over alleged misuse of funds, a move widely seen as a pressure tactic to force him from office.
Yet Mr Lombardo’s emotional outburst is a reminder that Italy’s drastic austerity measures — net tightening of 3.2pc of GDP this year — is bleeding the regions and causing most hardship in areas heavily reliant on the state. Sicily has developed a small technology belt in computers and cell phones in the Etna Valley but depends on public sector jobs and subsidies from North Italy.
The Bank of Italy expects the Italian economy to contract by 2pc this year as cuts start to bite, while the Confindustria industry lobby fears it will be 2.4pc or worse — pushing the country deeper into perma-slump.
Critics say the austerity measures have gone too far. The primary budget surplus will be 4.9pc of GDP by next year, the best in the G7 bloc. This may prove a Pyrrhic victory if it causes public debt to shoot up to 126pc of GDP this year and erodes political support for the whole reform process.
Mr Monti has said his technocrat government will step down next March. It is unclear whether the splintered political system can produce a stable coalition.
Former premier Silvio Berlusconi is launching a comeback bid with calls for a withdrawal from the euro unless Germany and the European Central Bank step in to stabilise Italian bond yields. A study by Bank of America found that Italy might benefit from breaking free of EMU and restoring competitiveness with a weaker currency.
Sicily is a microcosm of the same misaligned North-South relationship within Italy. Like the rest of the Mezzogiorno — or South — it is caught in a welfare trap, held back by a currency union with a stronger industrial economy in the north.
This is made worse by national level pay deals that do not reflect productivity levels on the island. Sicily’s workforce has been priced out of global markets for decades.
Sicilian patriots say the island was a flourishing hub of commerce under the Normans in the High Middle Ages. It could be so again with full control over its own destiny.
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