Against all expectations, Italy's left-wing Olive Tree coalition has done more to rein in profligate spending and to dismantle the welfare state than any of its right-wing Christian Democrat predecessors. The reward may go beyond just a more dynamic economy to include charter membership in the European Monetary Union.
Even the most skeptical Europeans, the Germans, acknowledge Italy's strong progress in bringing annual fiscal spending within the EMU deficit limit of 3 percent of the gross domestic product. While they're at it, the Germans could learn from Italy's deregulation of the retail sector.That said, Italy's accumulated debt remains high - more than 120 percent of GDP. To reduce it to manageable levels, Italy must build austerity and market principles into the system permanently.