By Steve Scherer
ROME (Reuters) - When Prime Minister Mario Monti called on all Italians to make sacrifices to avert a Greek-style crisis, the political class that backs him in parliament wasn't listening.
While most voters face higher taxes, stagnating wages and rising unemployment, Italy's army of politicians and senior officials are clinging to fat salaries that far outstrip those of their peers abroad.
Monti, a technocrat who relies on party politicians to get his austerity policies through parliament, recently issued a decree which will prevent public servants earning more than U.S. President Barack Obama. Many now earn considerably more.
Ordinary Italians are paying the price for a decade of political stalemate, profligate spending and corruption.
Monti, who made his appeal for sacrifices when he took office last year, has imposed an austerity package adding 24 billion euros to Italians' tax bills in 2012 alone. But Italy's wealthy, including its politicians and senior bureaucrats, are hardly carrying their share of the burden.
"There has not been an equal distribution of sacrifices," said Monica Montella, an economist at state statistics office ISTAT. "In proportion to their salaries, higher incomes are paying less."
Renzo Bossi, the 23-year-old son of a powerbroker, offers an example of how the political class enjoy the spoils of office.
Renzo struggled to earn his high-school diploma and failed his final exam three times. But never mind - his father was Umberto Bossi, head of the Northern League until a funding scandal engulfed his party, and chief parliamentary ally of Monti's predecessor as premier, Silvio Berlusconi.
Aged 21, Renzo Bossi became the youngest ever member of Lombardy's 80-strong regional assembly. This job in local politics earned him more than 150,000 euros a year ($196,200), 13 percent more than members of the U.S. Congress made in 2011.
"Elected politicians at all levels are paid more than those in America," said Antonio Merlo, head of the University of Pennsylvania's economics department and co-author of the book "The Ruling Class".
Renzo resigned on Monday as the party became the focus of an embezzlement probe. He hasn't been accused of any wrongdoing.
His case is just one of many, and some politicians feel free to let the state fund their private lives.
In 2007, former justice minister Clemente Mastella took his son to see the Italian Grand Prix at Monza, just like many parents in Formula One-crazy Italy. Instead of driving or taking the train like everyone else, they went by state jet.
The one-day plane ride from Salerno to Milan cost taxpayers 20,000 euros.
A THOUSAND LAWMAKERS
Italy has almost 1,000 national lawmakers, twice the U.S. number even though Italy has just a fifth of the population - and they earn more than their U.S. counterparts and most of their European peers too. The majority have a base salary of 11,283 euros per month before tax, plus 3,503 euros for expenses which they do not have itemise.
By contrast, the lowest-earning households are being hurt most by rising fuel, property and sales taxes. They live on less than 8,000 euros per year, or 667 euros per month, after taxes.
Berlusconi, who was forced to make way for Monti last November, launched his own austerity drive even though he himself is a billionaire and led a life of legendary extravagance, including holding parties which have drawn charges that he paid for sex with an underage prostitute.
Austerity drives are nothing new in Italy. In 1992, then Prime Minister Giuliano Amato asked Italian taxpayers to make "blood and tears" sacrifices following a currency crisis.
Amato now enjoys two state pensions worth more than 31,000 euros a month, before taxes.
Things are very different at the other end of the pay scale. In a study for economic think tank lavoce.info, ISTAT's Montella used Bank of Italy data to calculate that the poorest families already lost almost 12 percent of their real income between 2006 and 2010, more than double the national average.
Unlike their leaders, ordinary Italian families are traditionally thrifty but austerity has forced them to change. Last year households saved only 12 percent of their gross income, the lowest level since 1995.
And some are so desperate that they see suicide as their only option. In March, a Moroccan worker in Italy set himself on fire to protest against not having been paid for months, and an Italian businessman did the same over a tax dispute. The Moroccan survived but the businessman died.
Italians are increasingly dissatisfied with the parties and politicians that led the country for the past two decades, with more than 40 percent saying they wouldn't vote for any of them if there were an election today, polls show.
Yet the parties have shown little readiness to change, despite growing calls for an overhaul of party funding rules,
Renzo Bossi, who according to court papers drove an Audi A-6 bought with party funds, highlights the sense of entitlement shared by Italy's political class, where family members regularly receive top-paid jobs and party funds can find their way into private, offshore bank accounts.
Election campaigns, parliamentary groups and even party newspapers are funded by the Italian state, and cost more than 400 million euros in 2011, Corriere della Sera newspaper calculated, while the state spent 5.9 billion euros on campaign financing between 1974 and 2012.
Even after a minor cut to lawmakers' expense accounts made earlier this year, they continue to be paid 60 percent more than the European average, but past efforts to rein in the excesses have all run into the sand.
A special committee appointed last year to fix lawmakers' and top bureaucrats' earnings to a European average resigned last week, saying it didn't have the authority to impose the salary cuts.
The constitution does not allow Monti to slash political salaries directly, but he can intervene to cut those of public managers.
Monti has signed a decree setting a salary ceiling for public managers at 293,658.95 euros ($387,000), just below Obama's $400,000 annual pay. The decree should become effective by the end of April, a government source said.
This will more than halve the annual income of the highest salaried public servant, Antonio Manganelli. As director of the police force, Manganelli makes 621,253.75 euros ($818,539) a year - more than four times what U.S. Federal Bureau of Investigation Director Robert Mueller earns.
Cutting back the cost of politics will be hard in a country where pork-barrel public spending is commonplace, said Sergio Rizzo, co-author of the book "The Caste" about Italy's extravagant political class.
"A big part of Italian public spending is unproductive and supports political patronage," he said.
Rizzo cites the Sicily's regional government which has 19,000 full time employees, six times those of the northern Lombardy region in Italy's business and industrial heartland.
Sicily also has another 27,000 temporary workers, even though the island's population is about half that of Lombardy.
Overall, Italian public expenditure is more than 50 percent of annual gross domestic product, which is in line with many European countries that have extensive state services and welfare privileges.
"But the quality of the public services is not nearly as good in Italy as in Denmark and Sweden," Rizzo said.
Parliamentary Affairs Minister Pietro Giarda aims to hand over a preliminary spending review detailing where cuts can be made by the end of this month, and some reductions will come by the end of the year, a government source said.
But the process is slow, and each minister will have a say over what cuts can or cannot be made at their ministry.
Meanwhile, fuel taxes rose in December and regional income taxes increased in March. More is to come: the first stage of a new property levy is due in June, and value-added tax jumps by 2 percentage points in October to 23 percent.
All this makes Italians feel that Monti wants the shirt off their backs, and maybe even more.
A picture many are posting on their Facebook pages shows a man in his underpants sprinting down a street with five policemen in hot pursuit. "Stop!" shouts one of the cops. "Monti doesn't want your underwear too!"
(Additional reporting by Giuseppe Fonte; editing by David Stamp)