cross-posted from: https://lemmygrad.ml/post/9758413

By Federico Giusti* and Emiliano Gentili –

The International Monetary Fund is targeting European well-being, demanding cuts and “reforms” that pave the way for privatizations, rearmament, and a new austerity. This one-sided political call ignores US debt and jeopardizes social rights, contracts, and democratic cohesion.

The International Monetary Fund (IMF) is relentless in its criticism of the increase in public debt in Europe, very tough on the Old Continent, but undoubtedly lenient with the United States, whose debt is much higher.

It is well known that every IMF recommendation carries political weight, and this warning, too, has a very specific objective: to reduce European welfare, considered the root cause of the problem. If this recommendation were to translate into political decisions, not only would the citizens of the European Union suffer incalculable harm, but the entire social system would be destroyed, along with the rights to education, health, and old age.

The consequences would be positive for the private sector and for privatizations in general, which would benefit from the dismantling of social welfare, especially with regard to healthcare and private social security.

The IMF report published a few days ago, in short, argues that European social welfare is too generous, which would negatively impact the sustainability of public finances. Therefore, it advocates for a substantial reform of the tax and labor systems, accompanied by a drastic reduction in social spending.

It’s difficult to explain to them that in many European countries, especially Italy, the neoliberal years have destroyed an equitable and progressive tax system based on multiple tax rates. Increasing tax revenues would mean confronting, once and for all, an economic and business system in which state aid has saved entire sectors from collapse—sectors that, from a capitalist perspective, are no longer competitive. The IMF’s objective is political: if it weren’t, the warnings would be directed at the country with the largest absolute public debt, namely, the United States.

Ironically, what the Fund writes coincides with the wishes of the United States, which is offloading a considerable increase in military spending onto us, to sustain which the EU has already issued new debt through the SAFE program. The IMF overlooks this detail and focuses only on the projection, by 2040, that public debt will double.

“If reforms and consolidation in the medium term are insufficient, then more radical fiscal measures could include a reassessment of the scope of public services and other government functions, with possible repercussions for the social contract,” the Fund’s note states.

The EU has been curbing public spending for decades, leading entire countries to dismantle their public administrations. For example, in Greece, where selling off large parts of the public sector hasn’t been enough, the working week and average working hours are now being increased (also jeopardizing other EU regulations, such as the one that, in theory, mandates 11 hours of rest between shifts). In Italy, there has been little discussion about what’s happening in Greece under the right-wing government, but these labor counter-reforms could serve as a model for more capitalist countries to follow as well.

By diverting resources from social welfare, the EU could allocate new capital to strategic sectors of the economy—for example, the military—and to research and development of new technologies. But pursuing rearmament leads to increased debt, and therefore the proposed solutions are part of the problem. The great hunt for capital that could be freed up by weakening social welfare has probably already begun.

In his book on competitiveness, Mario Draghi argued that the EU’s exit from the crisis would depend on community investments directed by a single control center, focused on certain strategic areas and not others. At the same time, he called for increased investment, along with a review of the austerity policies implemented thus far, precisely to compete with the United States and China.

Draghi’s recommendations have already been implemented in strategic documents on rearmament, although some structural difficulties have been encountered, such as the presence of European arms manufacturing companies in competing projects.

It is true that countries like Italy, France, and Spain have a debt-to-GDP ratio exceeding 100%. Undoubtedly, the EU will not be able to ignore the IMF’s call and may try to reduce that ratio even further.

If a third or a quarter of European countries were to cut net spending by more than one percentage point of GDP, we would face an increasing number of unemployed and underpaid workers, which would entail a very serious social and economic cost.

However, the IMF points to the European model, which it considers unsustainable, and hence the certainty that governments are moving towards privatization and speculative processes surrounding healthcare, pensions, and education.

Just a few months ago, the Bank of Italy presented the report of the Foundation for Subsidiarity[1], focused on reforming the Italian welfare state. The report analyzed Italy’s shortcomings in research and development, the weakness of its industry, and job insecurity, suggesting that the welfare system needed to rethink all the services it offered, gradually moving towards the Anglo-Saxon universalist model—based on the granting of bonuses and subsidies—and abandoning the Mediterranean model, which is labor-oriented—think of severance pay, unemployment benefits, etc. It goes without saying that the first model, not being linked to union bargaining, guarantees the population no control over the quality of the services provided.

Furthermore, the Bank of Italy’s report, if read today, also contains “prophetic” content, at least according to the latest Istat surveys:

The social welfare system plays an essential role in reducing inequalities and combating poverty. If only income from work and property is considered, income distribution among Italian families is very unequal, with a Gini coefficient exceeding 52%[2].

The social welfare system is not only a guarantee of social equity, but could also contribute to the country’s economic recovery. However, according to the Bank of Italy, for this to be possible, certain structural measures are needed, which are identified, nevertheless, as the privatization of entire sectors. To achieve this goal, the report simultaneously calls for the sustainability of public finances and measures within the tax system. But these very measures could prove even more detrimental, especially if implemented improperly.

Notes

[1] https://www.bancaditalia.it/pubblicazioni/interventi-governatore/integov2025/20250220-panetta/index.html?dotcache=refresh

[2] https://www.istat.it/statistiche-per-temi/focus/congiuntura/analisi-internazionali/

• Federico Giusti, CUB delegate in the public sector, collaborates with the periodicals Cumpanis, La Città futura, Lotta Continua and is active in issues of labor law, anti-capitalism and anti-militarism.

Article originally published on World Politics Blog.