Protests in Italy Against New Coalition; How Long Will Coalition Last?

The new coalition government in Italy is off to such a rocky start, it's hard to say there ever was a honeymoon.

People want more jobs. Instead, the price for a coalition by former Prime Minister Mario Silvio Berlusconi was a rollback in property taxes.

Here is the result: Thousands rally in Rome against cuts.

Thousands of protesters, led by trade unionists, have rallied in the Italian capital Rome against the policies of the new coalition government. Wielding red flags and placards, they urged the centre-left Prime Minister, Enrico Letta, to scrap austerity measures and focus on job creation.

Public trust in his fragile coalition with the centre-right is dropping, opinion polls suggest. The country is experiencing its longest recession in more than 40 years. National debt is now about 127% of annual economic output, second only to Greece in the eurozone.

National debt is now about 127% of annual economic output, second only to Greece in the eurozone. Unemployment is at a record high of 11.5% - 38% for the under-25s.

Before taking office, Mr Letta vowed to make job creation his priority, but critics are unhappy that he has focused on property tax reform.

Soon after being appointed, Mr Letta met other eurozone leaders to convey growing public unrest over austerity measures in Italy. But the new prime minister has to maintain a delicate balance between the policies of his own supporters and those of the centre-right, led by Mr Berlusconi.

Protest Pictures From Reuters, BBC





How Long Will Coalition Last?

Inquiring minds are wondering how long this rocky coalition can last. There is no definitive answer but there are a some general rules.

1. Long enough for Berlusconi to get the tax changes and prosecution immunity he seeks
2. Not much longer than support for the coalition starts to cost Berlusconi votes
3. Not much longer than Berlusconi is pretty sure he can win the next election outright

1. Berlusconi got a suspension of property taxes but not the complete rollback he was seeking. Prime Minister Enrico Letta has not said how he will pay for property tax reform so expect some heat from Brussels.

If Berlusconi does not get a complete property tax rollback, the coalition will likely end right then and there. If he does get the rollback, he will have gotten one of the things he wanted.

2. Support for coalition may be costing Berlusconi votes right now.

3. Support for Beppe Grillo waned after the election so Berlusconi could be closing in on the number now.


In all respects, it appears the coalition will splinter sooner rather than later.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
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