Two political parties formed a coalition in Italy and vow to make major changes. The only problem is how they are going to pay for it.
The two parties both have anti-migrant policies, the complete opposite of Germany’s Angela Merkel’s policy that will change Germany forever, and not for the good.
Italy is an economic basket case. Big tax increases have led to the 5-star Coalition as it promises to roll back some of the biggest changes.
The coalition league also proposes Universal Basic Income for the poor that would cost around 17 billion euros ($20 billion) per year.
It would to change over to a flat tax rate of 15 percent for companies and individuals. This move would reduce tax revenues by 80 billion euros per year.
The coalition also wants to rescind an unpopular pension reform. That would cost 15 billion euros. A planned sales tax hike would be rescinded, costing another reduction in taxes of 12.5 billion.
But the biggest idea is a new, special-purpose currency to pay off state debts to firms. Details are missing so far.
“If implemented, it would be the biggest shake-up of the Italian economic system in modern times,” said Wolfgang Munchau, head of the London-based Eurointelligence think-tank.
Italy owes the ECB €426 billion. That’s huge. Observers say that the best alternative for Italy is to leave the EMU.
Italians fear a run on the banks again. It just had the biggest Depositor Run Since 2012. A rerun now, with banks more fragile, would challenge any effort to have a bailout again.
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