Berlusconi’s Bailout Plan Flops As Emperor’s New Clothes Fail to Impress

Italy’s €80 billion bailout has been receiving a grilling, as commentators look into the shady money logic of prime minister Berlusconi.

Shadow economic spokesman Pierluigi Bersani summed it up with the zinger yesterday: “They are moving cardboard tanks for the parade. These funds have already been allocated. Actually they are less than what there was.”

The FT reports today that of the money allocated to the economic stimulus plan, half was EU money already earmarked for spending on the environment, research and development.

A further €16 billion is money redirected from smaller interventions to larger, potentially shady infrastructure projects including a bridge to Sicily (cue Nino Rota). Only €14 billion was set aside for actual tax cuts, and support for banks.

Italian paper Corriere della Sera is reporting that further specifics about actual provisions to support companies and stimulate consumer spending will be revealed next week, as Berlusconi and co. scramble to re-spin the bail out plan. In the meantime Italian Finance Minister Giulio Tremonti has been telling civil servants to save money by turning off their heaters and stop using any paper, while refusing to buy equity in ailing banks, despite JP Morgan estimating that Italian lenders would need €18 billion to boost captial ratios. Sounds like this is far from over.

Posted by Becky North in Hot Money | November 18, 2008 3:06PM |