The Italian unions are threatening to strike against pension reform, while Berlusconi says government plans to reform Italy’s expensive welfare system are “necessary, fair and wise” (Silvio ‘el savio’?). The Unions say: “There is no pensions emergency. The government…is dramatizing the pensions problem. It doesn’t correspond to reality,” while Corriere della Sera finds a new Berlusconi, one who is a ‘reformed’ character who “For the first time…..turned his back on the miraculous optimism and creative economic recipes of the last two years and smiling persuasively,……tried to reassure people, to win more of their trust”. Meantime one Bank of America economist is reported as saying that “the reform is very weak. They should have gone for something much stronger but that’s more to do with internal opposition rather than the union threat”.

So where are we, is the pension reform question simply an excuse to have a battle with the unions, or is there a real problem in Italy? My own feeling is the latter. In a way I find myself agreeing with Pedro Solbes (which is why, pragmatically I would prefer him not to resign over the Eurostat scandal, although ethically I think he probably should). We have focussed too much on the question of the 3% limit on the decifit, and not enough on the level of the debt (Italy’s debt is currently over 100% of GDP). Even with this small reform Italy’s financies still look very precarious. But cutting pensions, as we can see, is not popular. So which is it? Can Europe reform itself and face up to its demographic reality, or are we going to have to go for ‘fiscal trainwreck’ US style? Do our politicians have more in common with the US ones than we like to imagine?