Debt does Italy and its politicians apart

Italian politicians, whose salaries rank above the EU average, are seen as more eager to protect their privileges than the country’s future.

With its elegant marble floors, ornately carved wooden ceiling and flattering lighting, the central meeting point of Italy's Lower House is arguably one of the most beautiful political arenas in the world.

But in recent weeks, Italians have come to view those who frequent the hall — known as the Transatlantico and modeled on the great room of an ocean liner — as a pampered elite, as sheltered from the global economic turbulence as the palazzo's inner courtyard.

On Friday, the month-old government of prime minister Mario Monti easily won a confidence vote on a $40 billion set of austerity measures, including tax increases, changes to the pension system and some growth incentives, with 495 votes to 88. After the vote, the prime minister told lawmakers that Italy was at "maximum risk." He added, "A lot is at stake; we cannot permit ourselves to live the way we did before." He said that much would depend "on our capacity to present ourselves as united and credible before the markets."

Yet even as Monti, a technocrat who has won the confidence of Parliament but not its loyalty, struggles to restore faith in a government asking for sacrifices, he is facing a power battle — and a culture clash — with lawmakers. The prime minister has asked Italians to accept new sacrifices to reduce the country's public debt and restore market confidence. But Italian politicians, whose salaries rank above the European Union average and who are widely seen as more eager to protect their privileges than their country's future, have baulked at the prospect of belt tightening for themselves.

Last week, lawmakers grudgingly agreed to changes in their pension plan following a public outcry after they blocked an effort by Monti's government to cut their salaries as part of the austerity plan.

This has not gone over well with the public. "The gap between citizens and politics is becoming wider and wider," said Giovanni Sermoneta, 54, a shopkeeper in downtown Rome, echoing a common sentiment. "They can't think that they can keep on earning $26,000 a month when workers are asked to work until they are 70 with salaries that are among the lowest in Europe."

Italy's Parliament has 952 lawmakers, 630 in the Lower House and 322 in the Senate, to say nothing of thousands of local politicians in a country of 60 million. Their take-home pay ranges between $18,000 and about $27,000 a month - which covers salary, a per diem for living expenses and a personal (but not legislative) staff. Their many perks include gold-plated medical insurance, free travel within Italy and often a car and driver. According to the Bruno Leoni Institute, a market-oriented policy research organization in Turin, Italy, the Italian Parliament costs about $2 billion a year, or around $34 per capita.

In contrast, the United States Congress - 100 senators and 435 members of the House of Representatives for a population of 300 million - costs about $2.2 billion a year to maintain, or $7 per capita, according to a study by Antonio Merlo, the chairman of the Economics Department at the University of Pennsylvania. And they can easily be voted out of office. In Italy, the climate of hostility toward politicians is magnified by the fact that voters do not directly elect members of Parliament. Instead, under a 2005 electoral law passed by the government of Prime Minister Silvio Berlusconi, they are chosen by party leaders who then present a list of candidates to the voters.

Monti, an economist and university professor, has kept his cool in parliamentary debate that has devolved into the carnival-like. Last week, lawmakers from the anti-immigrant and increasingly euro-skeptical Northern League, a pillar of Mr. Berlusconi's center-right coalition and now the most vocal opposition party, shouted and held up signs calling the austerity measures a "holdup."

As Italy struggles to fend off a sovereign debt crisis, not all MPs appear to grasp the issues. A popular television satire program recently showed that some lawmakers could not explain the difference between public debt and the deficit or define a bond spread (the difference between sovereign borrowing rates and those on the benchmark German bond). Asked what the ratings agency Standard & Poor's was, one centrist member of Parliament answered with a thick southern Italian accent, "I don't know English; I speak Italian."

Even as the Lower House approved the austerity measures and the Senate was expected to approve them before December 25, Parliament said it had to wait to propose cuts to its own salaries until a committee appointed in August finished comparing the costs of Italian legislators with those across Europe. Few Italians are buying it. "I wish there were a commission that evaluates the quality and effectiveness of their work rather than one to bring their salaries in line with the EU average," said Roberta Pellegrino, 24, a law student, as she ate a slice of pizza in downtown Rome. "That is really not a difficult task."

The internal resistance is clear. Many Italians say that politicians should earn no more than average workers do. Asked if he would be an MP for a monthly salary of 2,000 euros, Maurizio Vannucci, a member from the Democratic Party, said he did not like the idea. "No, because since I started I never got the same salary I had earned at my construction company," he said as he strolled in the Transatlantico. "Maybe I'd do it because the political pressure is high," he added.

Nearby, Pierangelo Ferrara, another member of Parliament from the Democratic Party, sat on a leather couch checking Twitter on his iPhone. He said that he earned $18,000 a month, but that after paying for staff members and travel he took home closer to $10,000. Still, he conceded, it was much higher than the $2,600 he earned in his previous job as a high school literature teacher.

Adding to the public outrage, members of Parliament are allowed to keep their day jobs - as lawyers, businesspeople, even journalists - complete with those salaries and private pension plans.

Pension spending, which accounts for 14 per cent of Italy's gross domestic product, has also weighed on the cost of politics. Last week, the Lower House said it would raise the age at which lawmakers qualified for retirement benefits to 60 from 50 for those who have served more than one legislative session, and to 65 for those who served in only one. It also pledged to drop per diems for lawmakers who are absent.

Under other proposed changes, the pensions of parliamentary employees, who number about 2,900, would be based on years of contributions, rather than salary at the time of retirement, as has been the case for many years. After an earlier reform, members of Parliament are entitled to lifelong pensions only after serving a full legislature, which can last several years. In the past, they qualified after even the briefest stint in a revolving-door government.

"The Lower House now spends 41 times more in rent" - for office space outside Parliament - "than it did in 1983," said Gian Antonio Stella, a journalist for Corriere della Sera and co-author with Sergio Rizzo whose best-selling books on Italy's political caste have generated national debate. "Does it mean that we had less democracy back then?"

©2011 The New York Times News Service