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Tuesday 20th March 2018

Italy’s Economy at Risk

Business

Roberto Tumbarello

Wed, 31 Jul 2019 13:24 GMT

The state of Italy’s economy has been called into question but politicians do not want to take it into account. The analysts who warn us are accused of ignorance and incapacity. The only ruler to understand the danger that Italy runs in increasing its public debt – because he is a long-term economist – is Economy Minister Giovanni Tria, 71, who, instead, tries to contain the income and this is also supported by one of Italy’s political parties, the 5 Star Movement (M5S). 

The League instead, insists on implementing a Flat Tax for an income of € 50,000, which the European Commission would not allow because it would significantly increase Italy’s already huge public debt, second after Greece, which has one of the highest public debts in the world. 

While anticipating that for the moment in Italy there is no crisis scenario, Standards & Poor's, a financial services company that publishes financial research and analysis, have warned the Italian government of the attempt to circumvent the constraints established by the EU treaties, such as the introduction of a parallel currency or budget measures without financial coverage. 

According to the American agency, the implementation of unorthodox measures could compromise Italy's accession to the Eurozone. A crisis of confidence similar to that which occurred in Greece in 2015, may yet occur. According to S&P, public debt continues to increase, and is dependent on growth that has been too weak since 2010. Italy, in fact, is the only sovereign country to have grown in ten years of 0.6% against 10.6% in the Euro area. 

It is true that Italy's wealth is not comparable to that of Greece – the Greek economy represents 2% of the Eurozone's GDP, while Italian representation is 15% – but the political inability to implement modest initiatives of reforms and ongoing disputes with the EU, can erode the confidence relationship of the markets and impact on the bank’s financing system and, therefore, on the private economy. 

The umpteenth controversy within the majority against Minister Tria, is the difficulty in maintaining the government and the continuing controversy with the EU commission causing tensions on the government bond market. 

According to Standard & Poor's, Italy’s growth has been so low for ten years because bank loans have slowed sharply. Moreover, distrust – which is the most dangerous enemy of the economy – accentuated the propensity of citizens to save rather than invest, affecting the labor market and the entire productive fabric. But above all by slowing down the entry of new capital, which is the most negative impact on GDP. 

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect the views of 7Dnews.

Europe