The default arrives when it arrives. And then? What will happen? Let’s imagine three scenarios: “soft default”, “almost soft”, “almost in underpants”. The soft default sets out a “lifting from current accounts” (Amato-style),a generalised increase in indirect taxes, the reintroduction of ICI, the raising of the pension age, the block on new recruitment to the public administration, an increase in local taxes, in the costs of transport, water, electricity and gas. However the soft default is improbable with the public debt over 1,900 billion and the banks that are not worth a thing, holding on to 220 billion in State bonds, 85 billion in unpaid loans and an immense real estate patrimony that sooner or later can be devalued. To place our bonds on the market, Tremorti always has to offer greater sums in interest. In 2011 we’ll have to pay between 80 to 90 billion. Perhaps increasing the interest rates is no longer enough. The mid-August bond auction has been cancelled for fear it’ll be deserted.
Now let’s see the consequences of the “almost soft default”. Net patrimony tax on movable and immovable property, elimination of the Provinces and grouping together of the towns and villages with fewer than 5,000 inhabitants (these measures are praiseworthy), rise in direct taxation, rise in Irpef {income tax}, increase in health costs, doubling of taxation of income from financial assets, elimination of tax discounts to the regions and the autonomous provinces, introduction of the “fair contribution” of 15% for every income above 30,000 euro. Obviously added to these measures you add those of the “soft default”. In Italy, there are 19 million pensioners and about 4 million public sector employees that on the 27th of every month, have to receive their pension or their salary. There are millions unemployed and there are hundreds of thousands of companies that have closed down. There’s lower tax revenue for the same costs, covered until now by the debt, by the sale of State bonds, and this will lead to a collapse. The cover given by bonds has become too limited.
Thus let’s go on to the scenario that is practically “in underpants”. Block on the paying back of State bonds when they come due, for Italian citizens, collapse of some banks, cuts to the salaries of public sector workers, cuts to pensions by 20/30%, temporary block on getting access to your current account with a maximum daily amount of 100/200 euro, suspension of credit cards, privatisation of the Eni and Enel quotas and any State good that has a market. Measures to be added to those for the “soft default” and the “almost soft default”. In any case, there’ll be a period of recession and of collapse in consumption; unemployment will go up and secessionist pushes will increase, in the South and in the North. “All is Chaos under Heaven, and the Situation is Excellent”, Mao Tse-Tung.