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Monday, May 21, 2012 1:02 PM

Comments from Italy on "Financial Terrorism", Taxes, General Economic Condition, and Mario Monti

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Financial Terrorism

Reader Andrea from Italy (who now lives in France) has some interesting comments regarding my post on Saturday Italy Deploys 20,000 Law Enforcement Officers to Protect Individuals and Sensitive Sites; Anecdotes From Italy via Canada: Taxed Out of House and Home.

Andrea writes ...

Hi Mish,

I would like to give your readers a better understanding of terrorism in Italy. Italy went through the seventies with a very hard season of terrorist acts.

In the worst period you could count one terrorist act per day: killing or bombing of politicians, managers, journalists and trade unions representatives. The main terrorist organization during those years were the "Brigate Rosse" (Red Brigades).

The climax happened when they managed to kidnap, jail and eventually kill the Italian PM Aldo Moro. Their "five point star" logo is still today symbol of fear and terror in the country.

Along with the "Brigate Rosse", other minor far-left armed organizations have been spreading terror in the country and also many far-right organizations. An involvement of Italian and US intelligence has sometimes been guessed for some these acts. Those years passed to history as the "years of lead", by the metal bullets are made of.

The period of terrorism roughly ended in 1982 with the liberation of US Army Gen. Dozier, kidnapped by Red Brigades. Most of their masterminds and killers have been caught and put in jail or spontaneously surrendered by that time.

Since then, from time to time, some acts are still claimed by Red Brigades.

So the matter of terrorist acts is very, very sensitive in Italy. Unfortunately, the difficult economic environment creates the conditions for a comeback of terrorism.

Best regards,
General Economic Conditions, Taxes, and Mario Monti

In a followup on general economic conditions Andrea writes ...
Hi Mish,

I was in Italy a couple of weeks ago and so I have some fresh updates.

The article you mention is mostly correct, but it is worth to add some things and some facts to describe the full picture.

For starters, Italy has a very long and strong "habit" of tax evasion and tax fraud compounded by an extremely high level of criminal activities and presence of criminal organizations in the economy.

This "habit" goes far beyond the economically difficult circumstances, and includes professionals (dentists, doctors, lawyers), retailers and small business.

The phenomenon is so widespread and dramatic that a few figures should help explaining it. Statistics show that owners of luxury cars, yachts or private planes declare in average very few tens of thousands Euros income per year, much less of the value of the objects they own. Clearly, this is simply mathematically impossible!

So far, no government has been able to tackle this issue, for a lack of will and a lack of capacity at the same time. But increasing debt, pressure from financial markets and increasing spending has increased so much the fiscal pressure on those that cannot evade that the problem now could no longer be avoided.

The recent governments have put in place a more and more efficient organization to fight this phenomenon and Prime Minister Mario Monti has now empowered this organization with powers that are really at the limit of democracy, a kind of Orwellian powers including some of the things you see described in the article but also much more. For example, the state now has the power to look into your bank account at any moment without any intervention from your bank.

In principle I do not like these enforcements, as it sounds quite tyrannical but at the same time nothing else seemed to work so far.

Coming back to the point: restoring fiscal loyalty is absolutely necessary for Italy and those measures seem to have effect to this respect.

The problem is that this "fiscal machine" is not making any difference between a fiscal fraud or robbery and simple problems of people that cannot pay because they have no money and they have troubles with their firms.

The latter group should be helped to keep their companies alive during these troubled times. Instead, stories of people that commit suicide after getting a tough payment request from "Agenzia delle Entrate" can be heard almost every day in Italy along with weapon aggression to “Agenzia delle Entrate” employees.

While a fair tax system is needed, this way is going to kill Italian companies.

As I said, nearly every day you can hear and read about entrepreneur suicide stories in the mainstream media. Even Monti had to comment in a press conference.

A mix of things is responsible for this desperation.

  • Public Administration delayed payments. PA in Italy is currently years behind in payment.
  • Private customers payment delays or non-payments
  • Bank unwilling or unable to make loans
  • Taxes and tough demands from the new "fiscal machine"
  • Lack of demand in the wake of austerity measures, tax hikes, and general European slowdown

Note the injustice: Central and local governments are agonizingly slow (as in years late) in paying bills but now demand citizens to pay immediately.

Monti approval is now rapidly declining because of tax increases and because of waste of public money.

Best regards,
Mike "Mish" Shedlock
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