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Italy Launches New Welfare Experiment

Italy Welfare Experiment

Italy has launched its so-called “citizens' income” welfare program designed to reduce poverty, and the new  anti-establishment government is clearly hoping to fund the populist spending spree with Chinese ‘One Belt, One Road’ largesse.

The anti-establishment is now the establishment, and it’s populist ambitions have led to an expensive “citizens’ income” program that the EU has strongly opposed.

The policy will provide means-tested income support from $880 a month for a single unemployed person to $1030 for a family. The projection is that this will cost the state around $8 billion this year and 8.8 billion in 2020. 

According to the latest data from statistics office ISTAT, there are more than 5.1 million Italian citizens, or 8.4 percent of the population, in absolute poverty—which means they don’t have enough income to buy a basket of basic goods and services.

Clearly, populism is necessary sometimes, even if it means digging a hole so deep the country cannot crawl out of. The 5.1 million Italian citizens, after all, represents a more than three-fold increase in a decade. The populists inherited a mess.

The largest proportion of poverty-stricken live in southern regions—the bastion of 5-Star’s support in last June’s election.

Italy also has the third-highest unemployment rate in the EU, hitting 10.5 percent in January and the government claims that new measure will help assuage this situation. The new system will work like this: Citizens get their welfare checks in exchanging for enrolling in a job-finding and job-training program. Any company that hires someone in the program will receive the welfare income from that individual for the remainder of the 18-month period.

Funding all of this is of great concern to Brussels, which fears that Italy’s new government will destroy the economy and infect the rest of the Union. After a diplomatic standoff with the EU, Italy’s parliament finally managed to pass this year’s budget. Under a deal struck with the European Commission in late December, Italy lowered its planned budget deficit from 2.4% of GDP to 2.04%.

Italy is saddled with about $2.5 trillion in public debt and the Bank of Italy said in November the cost of servicing the extra debt on the original deficit target of 2.4% could rise to $5.6 billion in 2019--and to more than $10 billion in 2020. Related: Trump Turns To Congress For Help Funding The Wall

Last month, the EU slashed Italy’s growth forecasts to the lowest level in five years, accusing the ruling coalition of pursuing policies that were pushing the country into recession.  

But now Italy’s got the United States breathing down its neck, too, over the country’s plans to join in China’s Belt and Road Initiative (BRI). Italian Prime Minister Giuseppe Conte said he might sign an accord with Chinese President Xi Jinping later this month, saying it was focused on boosting exports, not strengthening political ties. But where it concerns Chinese soft power, you can’t have your cake and eat it, too.

Other EU member countries have also signed BRI deals with China (most recently Greece, in October 2018), but Italy would be the first G7 economy to do so.

By Josh Owens for Safehaven.com 

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