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The Washington Post's Lally Weymouth interviews prime minister Enrico Letta of Italy. Letta makes it clear that he sees his mission as restoring confidence in Italy by putting a younger generation in charge in Italy. He describes the Italy he sees as breaking free from the old ways, breaking free from the geriatric Italy where the professors are old, the politicians are old, and where the old ways prevail. Letta is pro-European and sees his major priorities as keeping the credibility of financial markets and economic growth.

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Lack of experience and vague policy positions are leading to the collapse of the Five Star party started by comedian Beppe Grillo in Italy. Unlike the movement against establishment politics started by Mr. Macron in France as a minister in the Hollande government with considerable business and government experience but still an outsider, Mr Grillo and his representative Mr. Maio in the government lack experience in governing. This is leading to its complete collapse only two years after its success at elections winning 33% of the vote. It shows that such movements can be short lived without a clear economic agenda that can be implemented, not mere criticism of the existing arrangements.

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Italy raised 18 billion euros in a record auction on Oct. 18, 2012, meeting its needs for the rest of the year. Italy's yield dropped to 4.64% on Oct 18. Spain raised 4.6 billion euros at 5.32%. Italy sold most of the BTP Italia bonds to Italian citizens with a 4 year bond linked to Italian inflation and designed for Italian retail investors with a new eBay type internet platform, including a loyalty premium of extra 40 basis points. Italian retail investors have 8 trillion euros in net private wealth and household wealth in Italy is more than 4 times the sovereign debt, according to the Bank of Italy. This is a big difference compared to Spain, because the interest on the bonds remains in Italy for consumption and investment. Spanish households are highly indebted after the housing bubble.

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The new government of prime minister Enrico Letta in Italy suspended the summer instalment of the tax on primary residences which was unpopular in Italy. The new government plans to overhaul the tax code this summer to change the way it impacts real estate. This was one of the tax measures taken by the Monti administration. 1 billion euros will go to a wage supplement program, so that companies can retain employees during the economic downturn. Another program to provide business incentives for hiring is being considered. The new government committed itself to bring down the deficit in Italy to under 3% in 2013, which would help keep Italian borrowing costs down.

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Italy's National Reform Plan shows a forecast of GDP contraction in 2012 of 1.2%, up from an earlier forecast. Italy will show a budget deficit of 0.5% of GDP in 2013. Italy's Deputy Economy Minister Vittorio Grilli poitsed out that in structural, cyclically adjusted terms Italy will post a budget surplus of 0.6% of GDP in 2013, that fiscal policy was tightening. This was confirmed by the IMF which said that Italy will achieve structural balance in 2013- which means that if the economy were operating at full potential Italy would have a balanced budget.

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The austerity plan that prime minister Belusconi of Italy set before parliament on August 29th was quite different to the plan he agreed to in negotiations with the European central bank. The negotiations led to support by the ECB with purchase of $30 billion of Italian bonds. Berlusconi left out a surtax on top incomes in the private sector. It also left out savings to be made at the local government level by mayors and governors. Berlusconi proposed a new pension calculation which would postpone the retirement of Italians by excluding military and university service. Also being prosposed by Berlusconi and opposed by unions is the extension of the retirement age for women. Unions say this will make it harder for Italian women to care for their grandchildren in a country without an adequate system of daycare. Slowly the whole package of austerity measures seems to be coming apart and this alarms ECB President Claude Trichet and his successor Mario Draghi.

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The 3 week old government in Italy, led by former EU commissioner, Mario Monti, announced a three year plan of 30 billion euros in tax increases, spending cuts, reform of pension plans, and efforts to boost growth. Monti said at a news conference that "Italians are to blame for our public debt, and we risk compormising everything we've accomplished in the past 60 years." Under the new plan retirement age for women in the private sector would be increased from 60 to 66 years by 2018, bringing it in line with retirement ages for men. Italy's Labor minister, Elsa Fornero, broke down in tears as she described the change, saying it was necessary to avoid "collective impoverishment." Italy faces the difficult task of refinancing $400 billion in short term debt coming up for renewal in 2012, just as bond yields for Italy have spiked to over 7%. Because Italy lacks an extensive day care system, women helped raise grandchildren after early retirement at age 60. Other changes were to impose a 1.5% one time tax on money repatriated back to Italy under a tax amnesty scheme setup by former premier Berlusconi. Action was taken against widespread tax evasion by banning cash payments above 1000 euros. Stimulus measures of 10 billion euros are designed to boost small business and reduce high youth unemployment running at 29%. Companies get tax breaks of 2 billion euros if they hire young people....

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Italy's bond auction of three year debt showed lower borrowing costs and strong demand from domestic investors, even as Moody's downgraded Italy by two notches on July 12, 2012. Italy's Treasury sold 3.5 billion euros of July 2015 BTP, having 6.06 billion euros worth of bids. The interest rate of 4.65% was below the 5.3% paid in mid June. Interest rates were overall slightly higher on 1.75 billion euros of longer dated benchmark bonds. Barclay's described the Moody's move as "somewhat perplexing," conisdering the steps taken at the June 2012 summit of EU leaders, at least moving in the right direction. Italy's Treasury cancelled the Aug. 14 BTP auction, because of improvements in the budget situation.

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Under new rules the whole of Italy is under restricted travel, with people required not to travel outside the area where they live. This is similar to steps taken in China that have helped control the spread in China and reduced the severity of the crisis. Quarantine and restricted travel is seen by health authorites worldwide as the most practical option and required to be taken early.

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Italy's prime minister Berlusconi is changing the terms of the 45.15 billion euro austerity package after political protests. He has to weigh what is doable in the political context with demands from the European Central Bank, which is buying Italian bonds to prevent a surge in borrowing rates for Italy. The new measures as the old package unraveled are: an increase in the value added tax to 21% from 20%, increasing the retirement age for women in the private sector to 65 from 60 in 2014, two years earlier than expected, and a 3% tax on Italians earning above 300,000 euros annually. The street protesters in Bolgna, Milan Rome and other cities, protested that the earlier package unfairly put the burden on the working class. The cuts in local government spending in the earlier package would have impacted spending on items such as nurseries for children, drawing protests from teachers. The debate on an equitable sharing of the burden of reducing deficits is ocurring both in the U.S. and Europe, especially with high unemployment and lack of economic growth....

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The new labor law of prime minister Mario Monti's administration was passed in the Italian parliament by a vote of 393-74 on June 27, 2012. Passage of the major labor law reform was an important piece of legislation for Italy to regain cometitiveness in the eurozone and increase growth. It was seen as a confidence vote in the Monti administration.

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Richard Barley points out that Italy has some breathing room even as the ten year yields on Italian debt reaches 6.15%, up 1.5 percentage points in 2011. Existing Italian debt has an interest rate of 4% and an average maturity of 7 years, according to Morgan Stanley. This means higher interest rates on new debt will take some time to have a serious impact. Fitch's estimates are that if 10 year yields on Italian debt went up to 7%, interest payments would go up to 6.1% of GDP by 2015 from 4.8% of GDP. This gives Italy some time to come up with solutions for competitiveness and growth issues. Italy's growth rate was only 0.1% for the 1st quarter of 2011, and debt is 119% of GDP. Italy also has a primary budget surplus which puts it in a better situation than other southern European economies.

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The IMF predicts GDP decline of 1.9% in Italy in 2012.

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The Bank of Italy, is conducting central bank examinations of Italian banks in July 2013. The loan portfolios of the 8 largest banks are being examined, and on-site inspections are being conducted for 20 other banks. This could lead to Italian banks having to sell assets or take other steps to improve capital positions. During the last central bank examinations in the fall of 2012 Italian banks were required to set aside 3.4 billion euros to protect against bad loan losses. Bad loan losses are increasing at Italian banks as businesses and individuals fall behind on payments with the worsening economy in 2013, and into 2014. Non-performing loans are up to 249 billion euros, or 14.2% of the banking industry's total loans, according to the Bank of Italy. This is up from 157 billion euros, or 8.9% of total loans in 2010.

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Analysts point out that there is not much room for austerity cuts in Italy and Spain without cutting into muscle. This is because these countries have moved to make austerity cuts much earlier. Their budget deficits are actually less than what they were when they joined the euro currency zone. In the case of Italy the budget is actually in surplus, to the amount of 2% of GDP, when the financial position excludes interest on debt. And Italy has now moved to reduce the deficit to 3.9% of GDP in 2011. Under pressure from the ECB Italy has announced its aim of balancing the budget by 2013. Because both Italy and Spain have growth rates estimated at below 1% for 2011, analysts believe it is important to emphasize growth.

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Italy's budget deficit was brought down to 3% of GDP in 2012 under Mario Monti's government. The cost of austerity measures is a expected economic contraction of 1.8% in 2013, according to OECD and Moody's forecasts. There is intense opposition in Italy to the 4 billion euro property tax. The right wing parties under Berlusconi have called for this tax to be cancelled and reimbursing of 2012 payments. Italy's 2013 budget also assumes a one percentage point increase in the value added tax rate, a 4 billion euro additional tax. The new prime minister of a technocratic government, Enrico Letta, faces a delicate balancing act to keep the coalition of the right and left parties together, and still keep the confidence of the EU that Italy will control its deficit. The OECD expects the deficit to grow by half a percentage point in 2013-2014 as steps are taken to promote economc growth.

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Productivity as measured by GDP per hour worked was $44 in Italy in 2009. It has remained the same as in 1999. In the EU-15 (first 15 members of the EU) the GDP per hour worked increased from 47.9 in 1999 to 49.0 in 2009. For the U.S. this GDP in the same period went up from $56.0 to $58.0. This shows the lack of productivity growth in Italy. With the current focus on Italy's slow economic growth efforts are underway to make changes that would increase growth. GDP growth in Italy was 1.3% in 2010, compared to 1.8% for the eurozone, according to Eurostat. Italy's Minister for Public Administration Renato Brunetta says he would like to cut that gap in half. Some of the measures in the recently passed $40 billion spending cuts package, include efforts to help the underdeveloped southern region. This includes cutting red tape for real estate developers, and streamlining accounting for business. Italy's growth comes mainly from exports that make up about one fourth of GDP. But this comes from lower tech sectors such as textiles, chemicals and machinery, where it must compete with China and other countries. In May 2011 industrial output was up by 1.8% in Italy,compared to 7.5% for Germany. Another problem is the large and inefficient public sector and the gap between protected state workers and a younger generation- with one in three Italians 15-24 unemployed....

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Italian cooking in Italy- do's and don'ts for good Italian cooking. Food, agriculture around food is big in Italy. It adds up to $228 billion with huge export potential. Packaged product including pasta at $100 billion and about $136 billion for product consumed in restaurants and coffee shops. UNESCO has given its label to Italy as a top culinary place in the world.

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Slow progress of vaccination drives in the European Union has led to rising frustration. This is leading to action from the EU. The EU and Italy have halted export of 250,000 doses of vaccine bottled at a factory in Rome, that is part of the Astra Zeneca supply chain.

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Italy's referendum is for whether citizenship requirements should be loosened from 10 years to 5 years. Germany, northern Europe and the US are facing serious doubts about the loosening of citizenship requirements that have created segments of the population that lack the basic cultural literacy needed to function as citizens in a free society, and created a certain sense of alienation within society that works to the detriment of the functioning of free societies.

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Lagging growth in GDP per capita, productivity growth, in Italy, with small family business unwilling to take risks for growth, and bureaucratic hurdles for business. To get an idea how Italy has lagged severely behind other countries in Europe, consider that GDP per capita increased by 28% in Spain, and 22% in France, compared to only 8% in Italy during the 20 year period 1993-2013, according to the Conference Board. Productivity growth measured by GDP per hour worked for Italy showed growth of only 13% in that 20 year period, compared to 30% in France and 23% in Spain. Since the 2008 global financial crisis the Italian economy has shrunk by 9% and growth is barely 1% in 2014. During 1993-2003 top performers Germany showed 31% increase in GDP per capita and 32% increase in productivity growth, the UK showed 44% increase in GDP per capita and 38% in productivity growth. Because of slowing population growth GDP growth has to come from productivity increases in Europe. France is the strongest in terms of productivity with $59 of GDP per hour worked, UK $51, and Germany $57. Italy at $45 has fallen behind Spain at $50. Conference Board statistics show GDP per capita in inflation adjusted, purchasing power adjusted 2013 dollars at $35,847 for France, $40,868 for Germany, $30,145 for Spain, $39,904 for Britain, and Italy lagging behind at $31,386. Most of the gains were made before 1993 for Italy, whereas Spain surged in the period after 1993 only slowing after 2008. The struggles in the U.S. auto industry showed how well meaning changes for labor in the early postwar period if not adapted to changes in the global economy decades later can lead to sharp decline before adjustment is made. In Italy well meaning labor laws in the early postwar period not adapted to changes in the global economy decades later, combined with cultural behaviour of entrenched group interests, and a bureaucratic government, have stifled growth and productivity....

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Italy's new prime minister Mario Monti, was frank in his views about depending on austerity alone to meet the debt crisis, views also shared by President Sarkozy of France. Monti told an interviewer from the German newspaper Die Welt, before meeting German chancellor Merkel in Berlin: In the absence of specific help "a protest against Europe will develop in Italy, also against Germany, which is viewed as the ringleader of E.U. intolerance, and against the European Central Bank." He went on to say-"I cannot have success with my policies if the E.U.'s policies don't change." He pointed out that economic difficulties could drive Italy to "flee into the arms of populists."