Wednesday, April 13, 2005

Pensions, tax, deficits, demographics, the Euro, and Italy

The Financial Times leads today on mess that is the UK pensions strategy, or rather the lack of it. See - Kicking pensions into the long grass

The editorial notes that - "Providing a more generous state pension could reduce means-testing and make saving more attractive without compulsion."

The problem with this is that it means taxes will have to rise, and making tax increases seem politically appealing is a task that even the most cynical masters of political spin might well find daunting! This is true not just for the UK, but for many EU member states; all are facing the same so called demographic, and pensions “time bomb”.

Speaking of tax increases it looks as though they may be the only solution to what the Financial Times describes as Italy’s fiscal folly

What really caught my eye in the editorial was this little gem -

For the Commission, the looming dispute could determine whether the single currency area can continue as a rule-based system.
Indeed! If Italy treats the warnings from the Commission with the same disdain that Germany and France have then I would say that the rules that underpin the €uro will be well and truly redundant, with all that implies for the stability of the single currency.