Italy's budget

Emma Marcegaglia, head of the employer's federation Confindustria, is in my view one of the few impressive public figures in Italy. She has just pronounced on the budget, or manovra, rightly pointing out that it consists largely of taxes, whereas what Italy needs is expenditure cuts and growth measures. What she regards as the only useful bit, the employment measures, has been denounced by the left who say they will not accept it.

For myself I never really believed that the Government had any intention of putting this stuff into practice; they just wanted to silence the markets. Unfortunately the markets are in possession of, and can understand the real figures. We are not talking about fooling the Gazetto dello Sport here.

But Ms Marcegaglia takes it seriously and so should we. Italy's problem is that the State is too big and the individual is too small. It's not just that the public debt is too large - in fact it is at almost comic proportions - it is that this state of affairs, seen mainly in undeveloped and dirigiste economies, encourages idleness, corruption and the favouring of special interest groups (it's the squeaking wheel that gets the grease) at the expense of the overall economy and thus of the people. Even without the debt it would be necessary for Italy to reduce the size of the State; with the debt it is only a question as to whether they can do it in time.

Instead, Italian politics is a matter of balancing the various vested interests and the Government, wary of upsetting the wrong people (that is to say important people, not the people themselves) has relied on raising taxes.

Italian growth has for years lagged behind that of the rest of Europe, and raising taxes will inhibit growth, reducing the country to stagnation and inflation while it remains in the euro and cannot devalue.

Many commentators believe that for the necessary reforms it will be necessary to remove Berlusconi, but I think that misses the point. Berlusconi is a butterfly, and if there were a massive popular movement to cut back the state, he would flutter in that direction. But there isn't, and most people realise that the left returning to power would be even worse, even more anti-reform.

All that can save Italy, and perhaps Europe, is a massive stirring of the political pot. For myself I hope that Ms Marcegaglia rises to the top.