One of the first moves of Berlusconi’s new government was for the Finance minister Giulio Tremonti to announce that an agreement had been reached with the Italian banking association (ABI) to allow for cash-strapped mortgage-holders to renegotiate their variable-rate loans into fixed-rate ones.

It looks set to be a highly popular move, alongside the abolition of ICI (a property tax) for single-home owners. It will, in effect, put an extra wad of cash into the pockets of many normal families struggling with that brutal combination of high-prices and low-wages.

Showing, it would seem, admirable social conscience the ABI approved the agreement unanimously. President of the ABI, Corrado Faissola said:

“The convention is the first confirmation of the undertaking we’ve announced to the Government to contribute to the recovery of the country and its economy”

The agreement between the banks and the Minister for Finance was presented in glowing and slightly unusual terms by both the press and TV news.

Corrado, for example, gave the following figures:

“The convention could apply to around 1,250,000 families. Considering a twenty-year mortgage of 80,000 euro, the reduction in cost envisioned would amount to about 850 euro annually”

Here the key word is ‘esborso’, translated as cost (or disbursement) – a difficult technical term, perhaps. The media thus, obligingly, changed it to the easier-on-the-ear ‘savings'(‘risparmi’).So, for example, on the TGFin site we get the following:

“Based on the calculations of the ABI, whose committee approved the agreement unanimously, the saving for a twenty-year mortgage of 80,000 euro could be around 850 euros a year.”

A small transformation for the media, a giant feelgood factor for the public. Changing an annual reduction of costs into savings is a good trick, but ultimately not one that is envisaged by our socially-conscious bankers or Minister Tremonti.

Mortgage holders who can avail of the offer will see their currently variable-rate mortgage converted into a fixed-rate, using as the rate the average from 2006 (before the sharp rise in variable rates, caused by various factors including the sub-prime mortgage problem). So far, so good. Were it to be as simple as that, then obviously there would be significant savings to home-owners. The key, though, is that should rates rise further, the duration of the mortgage will increase until all is paid off.

So you pay less annually, but in all likelihood for more years than you had bargained for. Reasonable, perhaps, given successive governments’ conviction that the average retirement age needs to be extended.

It’s a particularly inventive agreement that favours both Tremonti and the banks. Tremonti gets the kudos for putting money into the hands of families. People will, in the short term, see a real improvement in their purchasing power. It’s a cash injection that may also help Italy’s troubled economy. The banks, meanwhile, get a PR coup that takes some of the heat off growing criticism at their seemingly anti-competitive measures.

You see, the previous government introduced a number of liberal reforms that touched on the banks, including one that made it illegal for banks to impose charges on customers wishing to change their mortgage provider. In theory, after the legislation introduced by Minister Bersani, one could change your mortgage to whoever provides the best terms – without penalties. In reality the banks are still imposing various fees on anyone wishing to switch banks.

Tremonti’s deal will do nothing to change the Italian banking system (or their bottom line). It will do nothing to reduce the long-term mortgage crisis building in Italy (as elsewhere in Europe). It will, though, put some money in the hands of normal voters – and that, my friends, is another clear cut example of why people vote for Berlusconi.

More than trasformismo, it brings to mind Yeats:

“The best lack all conviction, while the worst are full of passionate intensity”

1)”La Convenzione è la prima
conferma – ha concluso Faissola – dell’impegno fattivo che abbiamo annunciato al Governo per
contribuire alla ripresa del Paese e della sua economia”. – Mutui: pronta bozza Convenzione ABI-Economia per le famiglie in difficoltà, ABI
2) “La Convenzione potrebbe riguardare circa 1.250.000 famiglie. Considerando un mutuo
ventennale di 80.000 euro, il minor esborso previsto ammonterebbe a circa 850 euro su base” – ibid.
3)”In base ai calcoli dell’Abi, il cui comitato esecutivo ha approvato all’unanimità l’intesa, il risparmio per un mutuo di 80mila euro a 20 anni potrebbe essere di 850 euro l’anno. ” TGFin (Mutui più leggeri, risparmi di 850 euro)