Never mind Berlusconi's resignation. The story coming from the European Debt Crisis is hardly fixated around one leader of one country. Instead, the biggest story should be that even the most simple measures of government reform continue to be the most impossible to pass.
Italian lawmakers approved of a measure that would alleviate some of Italy's debt concerns by cutting public payments for retirement and reducing the many different breaks available to private enterprises.
In what may be symbolic of what is to come in the rest of the developed world, Italian lawmakers offered up a minute change to retirement benefits to raise the retirement age by two years, from 65 to 67, by 2026. The bill would also limit the credits available to hire younger workers and cut back on the negotiation benefits public workers receive in setting public sector wages.
All of these policies are quite rational for a country facing a debt crisis. In managing its long term liabilities, Italy can more readily assume higher budget deficits in the short-run as financiers discount the savings to the present day.
Too Late to Fix
The problems that plague world governments are not restricted to any geographic area. Most European nations, along with the United States, face an ever-aging populace that will require more resources, while making up a larger percentage of the voting public. Public policymakers are again too late in reforming popular programs that should have been reformed years before national debts ever became a source of global crisis. Changes that would have been politically possible a decade ago are now an impossibility.
The political problems in Italy underscore the difficulty in making changes to a program as a growing percentage of the electorate begins to consider their eligibility to collect. A recent Florida poll found that 66% of voters disapprove of cutting Social Security benefits or changing the retirement age. Some 70% of respondents said they would not favor cutting Medicare to reduce the deficit.
Italy's Senate Finance Chair committee made clear to the media the kind of policies that prevent action on deficit reduction. According to reports, Italy could save as much as $55 billion per year on public spending, but such cuts would affect some 300,000 Italians, who as described by the leader, are more powerful than 60 million Italians.
If the current crisis were to happen in any other country, one in which the nation had direct control over the printing press, there would be no fear of default. There would be no fear of debt crises or economic contagion. Instead, the generations that have benefitted most from the generous use of the printing press would think that every public good and entitlement were free, as the deficit could be made up with freshly printed money.
Italy is in no worse position than any other country, save for the fact it lacks political and economic clout to demand a bailout by inflation. Italy's debt crisis is the most public, but is by-far not the only crisis currently underway.