ECB gave Berlusconi orders on how to run Italy
Changes to labour laws were largely responsible for the general strike on 6 September
Friday 30 September 2011
The european Central Bank (ECB) told Italy to slash public spending and reform labour laws before intervening to prop up Italian bonds and reduce its borrowing costs, it emerged in a leaked letter suggesting the government kowtowed to EC bankers.
The letter sent to the Prime Minister Silvio Berlusconi on 5 August by the outgoing ECB president Jean-Claude Trichet said the severity of Italy's economic situation made "bold and immediate" action "essential", before going on to demand Italy's budget be balanced by 2013 – a year ahead of schedule – "mainly via expenditure cuts".
The diktat, which was signed jointly with Mr Trichet's designated successor, the Bank of Italy Governor Mario Draghi, also demanded that Mr Berlusconi make radical economic and political reforms, including opening up public services and overhauling pay bargaining and employment rules.
Such changes to the labour laws, subsequently incorporated into this month's emergency budget, were largely responsible for the general strike on 6 September, led by the left-wing CGIL public services union. In particular, new rules making it easier to hire and fire staff infuriated union activists. The section of the ECB letter urging the Berlusconi government to "consider significantly reducing the cost of public employees, by strengthening turnover rules and, if necessary, by reducing wages", might even put some of the more moderate public sector unions on a war footing.
The emergence in yesterday's Corriere della Sera newspaper of the ECB missive – marked "strictly confidential" – brought fresh political embarrassment for Mr Berlusconi as he attempted to celebrate his 75th birthday.
The ECB has always rejected suggestions that its bond-buying programme was linked to demands for austerity cuts. But the publication of the letter suggests otherwise – and opposition politicians were quick to seize on it as further evidence of the Berlusconi government's weakness in the face of the financial storm ranging across the continent.
Experts noted that despite blowing billions of euros on Italian bonds to keep its borrowing cost down, the ECB's measures have failed to have much effect. Currently, Italy is burdened by Europe's second-biggest debt, which at €1.84trn (£1.6trn) is roughly equal to the value of the state's total assets.
Many analysts have claimed Mr Berlusconi's precarious political position, and the inability of his government to act decisively in parliament due to a slim and fragile majority, are adding to market fears over Italy.
- 1 Expert urges cat lovers to own just one animal each
- 2 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
- 3 The Simpsons death: Creator Al Jean would 'kill himself' before character like Homer or Lisa
- 4 British man raped while urinating in bushes at Oktoberfest beer festival in Germany
- 5 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Expert urges cat lovers to own just one animal each
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
British man raped while urinating in bushes at Oktoberfest beer festival in Germany
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
'Women, walk wherever you want' posters taken down in Stamford Hill following 'unacceptable' signs separating men and women
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Mark Reckless becomes second Tory MP to defect to Ukip in a month
Should gay sex be illegal? 16% of Britons think so
- < Previous
- Next >
£90000 - £135000 per annum: Ashdown Group: Head of Marketing (B2C, Acquisition...
£27000 - £30000 Per Annum: Clearwater People Solutions Ltd: Our client who are...
£18000 - £23000 per annum + Commission: SThree: Huxley Associates are currentl...
£18000 - £23000 per annum + Commission: SThree: Computer Futures are currently...