Italy: Citizens struggle as underworld thrives

Italians already blame the euro for a bout of price gouging when it replaced the lira as their official currency.

Santa Marinella // Italians already blame the euro for a bout of price gouging when it replaced the lira as their official currency. Now they are bracing for a ?25 billion (Dh119.34bn) austerity package proposed by the prime minister, Silvio Berlusconi, as an "essential" part of European efforts to save the unpopular currency. The package, requiring a parliamentary approval that remains in some doubt, also contains measures aimed at cutting Italy's national debt. At 118 per cent of GDP, that is one of the highest in Europe.

Last month, as many as 1 million Italians marched through cities and towns to protest against Mr Berlusconi's austerity budget after the one of the country's biggest unions called a general strike. "We say 'no' to this budget," the union leader Fulvio Mammoni told a crowd in Naples. "It is wrong ? it stunts growth, it does not kick-start production, it doesn't touch the rich and it punishes workers."

In Italy, where the prime minister and close family members control a variety of media outlets, coverage of demonstrations has been muted. "Things are eerily calm," says Rose Hayden, a US citizen living in the seaside town of Santa Marinella, north of Rome. "So much has yet to happen, so much is below the surface, and so much has already beaten down the Italians that it is difficult to predict just how deeply these cuts will hit an already weakened economy."

Undesirable trends emerged in the recession. The biggest complaint was of a widening gap between rich and poor. Italy's sick and elderly were especially hard hit, while political and technocratic elites, as well as organised crime syndicates, flourished. Italian mobs lumped together as Mafia Inc have been buying supermarkets, petrol stations and buildings in high-class metropolitan neighbourhoods, and making loans to cash-starved businesses.

Mob-controlled sales of fake designer goods are booming, investigators say. Middle-class citizens and small businesses are having trouble making ends meet, sending more people to the underground economy for employment. By some estimates, undeclared and untaxed earnings account for about 22 per cent of Italy's GDP. "Many Italians can rely on their extended families for housing and work off the books," says Ms Hayden. She has also noticed a rise in short-term employment as the overall job market has stagnated.

"Today the deal is to give people contracts for six or eight months, no benefits; drop them, wait four months, or whatever the law requires, then give them another short-term contract." In Santa Marinella, several cheap supermarkets have recently opened. People are spending less. Cash is preferred for most transactions and it is hard to obtain receipts for the services of self-employed professionals such as lawyers.

Italy has always been largely a cash economy but less so in cities frequented by tourists. But in Rome these days, restaurants claiming to accept credit cards routinely run into "problems" transmittingtransactions to the banks. Along with cuts to government services and a clampdown on tax evasion, the government plans to lower renewable power incentives. "If the proposal is approved, I will have problems paying my employees and repaying my debt to the bank," Carlo Durante, the chief executive of the Milan-based Maestrale Green Energy, told Bloomberg.