VINCENZO PINTO
An apparent U-turn by Silvio Berlusconi means there's a reasonable chance Italy will get a national unity government headed by Mario Monti. But three more steps are needed to stabilize the country: a crack-down on "baby" pensions, a wealth tax and privatization.
The prospect of a unity government has helped Italy edge back from the brink. Even so, Rome is still close to being sucked into a debt spiral. In order to move further away from the danger zone, its borrowing costs must drop from the current 7 per cent to around 5 per cent.
The reform program Mr. Berlusconi presented to euro zone leaders last month had a few good elements, mainly by tackling the country's virtual jobs-for-life system. However, the outgoing prime minister did nothing new to reform pensions or bring down the state's debt, which is about 120 per cent of GDP.
So-called "baby" pensions allow Italians to receive generous state pensions provided they have worked at least 40 years, meaning some people can retire at 58. With increased longevity, this is not affordable. It would be better to say nobody can get a full pension until 67. Mr. Berlusconi toyed with abolishing the pensions, but the Northern League, his coalition partner, refused to play ball.
Though Rome's debt is high, its people are rich. The latest Bank of Italy data show that net household wealth was €8.6-trillion, or 566 per cent of GDP, in 2009. Part of the solution to the country's problems should therefore be to transfer some of this wealth from the people to the state.
The Italian state is also fairly wealthy, owning swathes of land and buildings as well as companies. Some of these assets will take time to sell given that they are controlled by local governments which don't want to part with them. But the central government has liquid stakes in oil company Eni and electricity utility Enel, which together are worth about €30-billion. A vigorous privatization push plus a wealth tax could cut Rome's debt level to under 100 per cent of GDP.
Before Mr. Monti accepts the position of PM, he should insist on broad political support for doing all these things. Otherwise he should refuse the job.
Hugo Dixon