What’s the matter with Italy? By Laurence Knight Business reporter, BBC News
Italy is moving to centre stage in the eurozone debt crisis.
While Greece has generated a lot of noise, it is increasingly seen as a sideshow.
Greece’s debt problems are already widely known and the immediate consequences of a Greek default largely anticipated.
Moreover, the size of the Greek economy is small enough that the direct damage if Greece stopped paying its debts should be quite manageable for the eurozone.
Instead, the big fear is “contagion” – that a Greek default could trigger a financial catastrophe for other, much bigger economies.
That is why European leaders announced in October a significant expansion of its bailout fund, the European Financial and Stability Facility (EFSF).
And it seems it is Italy that is now seen as the lead candidate for that contagion among Europe’s big economies and the main possible beneficiary of the enhanced bailout fund.
Why is that?
Prudent Italy?
According to Germany’s Chancellor, Angela Merkel, “Italy has great economic strength, but Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead.”
As with Greece, she and other eurozone leaders believe the solution is more government austerity – spending cuts and tax rises – by Rome.
However, some economists might disagree with her assessment.
The Italian government’s debt, at 118% of GDP (annual economic output) is certainly high, even by European standards.
But dig a little deeper, and the picture changes.
Unlike their counterparts in Spain or the Irish Republic, ordinary Italians have not run up huge mortgages, and generally have very little debt.
That means that according to the Bank of International Settlements Italy as a country – not just a government – is not actually terribly indebted compared with other big economies such as France, Canada or the UK.
Moreover, the large debts of the Italian government are nothing new. It has got by just fine with a debt ratio over 100% of its GDP ever since 1991.
The main reason is because – unlike Greece – Italy is actually quite financially prudent.
The government spends less on providing public services and benefits to its people than it earns in taxes, and has been doing so every year since 1992, except for the recession year of 2009.
Indeed, the only reason Italy continues to borrow at all is to meet the principal and interest payments on its existing debts.
Grim outlook
So why is Italy in trouble now?
The reason is because its economy is so weak.
Italy is plagued by poor regulation, vested business interests, an ageing population, and weak investment, all of which have conspired to limit the country’s ability to increase production.
The country has averaged an abysmal 0.75% annual economic growth rate over the past 15 years.
That is much lower than the rate of interest it pays on its debts.
And this creates a risk that the government’s debt load could grow more quickly than the Italian economy’s capacity to support it.
In the past, this risk has not materialised, thanks to Italy’s relatively high inflation rate, which has steadily pushed up the government’s tax revenues.
But now the outlook is much more grim.
Self-fulfilling prophecy
Like other southern European economies, Italian wage levels rose too quickly during the good years, and left Italy uncompetitive versus Germany and other northern economies within the eurozone.
That lack of competitiveness is likely to mean many years of even weaker growth and low inflation, as Italian workers find their pay is frozen, or even cut, until they regain a price advantage over German workers.
But lower growth and inflation suddenly make the Italian government’s debt load look much less sustainable.
Further government spending cuts are likely to hurt the economy even more, and – as Greece is discovering – may not even do much to improve the government’s borrowing needs if they lead to a sharp rise in unemployment.
That scary outlook has freaked out markets, and lenders are demanding a much higher interest rate from Italy in order to lend it the new money it needs to repay its old debts as they come due.
To borrow money for just one year, Italy now has to pay an interest rate of 6.05%. Germany, by contrast, must pay only 0.25%.
But of course this higher cost of borrowing makes Italy’s debts look even less sustainable.
That means the market’s loss of confidence in Italy could well end up becoming a self-fulfilling prophecy.
If nobody will lend to Italy, then Italy cannot repay its debts. And if Italy cannot repay its debts, then nobody will lend to it.
And if markets do panic and switch their money out of Italian debt into “safe” German debt, Italy would need an enormous bailout that would dwarf the original 440bn-euro EFSF, agreed in July.
Much of this fund had already been earmarked to support Greek government spending.
Insurance
The new deal is designed to prevent this scenario.
European leaders have agreed to expand the EFSF to, in effect, insure lending to countries such as Italy up to a value of about 1tn euros – three or four times what was available before.
The hope is that this will also reduce the cost of Italy’s borrowing and so make it easier for the country to pay back its debts without drawing on the facility’s insurance.
But the deal comes with caveats – Italy is expected to implement a new round of austerity measures to ensure its debts stay under control.
It is not clear that the coalition government – led by Silvio Berlusconi – is able to implement further cuts.
Furthermore, if the economy then fails to grow – as happened in Greece – and Italy looks even less able to pay back its debts, investors may ask who will ultimately pay for insuring them.
October’s deal did not go into details on how the expansion of the lending facility would ultimately be funded.
Is this really the final end of the Berlusconi era, or just another pause for the Cavaliere to catch his breath?
Will he return on a fresh horse as the savior of an ever-crumbling Italy, as he has done repeatedly for the past 20 years? Will my Italian friends finally be able to travel abroad without a miasma of shame, and not be forced to explain to all what a bunga bunga orgy means? Will the numerous foreigners living and working in Italy, legal, clandestine, and semiclandestine, be able to face their children and say: we did the right thing to come here? Will they say: a new day dawns on the peninsula, the specter of crisis, gloom and crime has finally lifted! Work hard for your future!
These are open questions, and frightening questions today in Italy after yesterday’s dramatic countdown, and Berlusconi’s declaration that he will step down only after passing an emergency law on the Italian economic crisis. United Europe and its presses have closely followed the saga of the decadent emperor. They know that it was global economics and not his domestic scandals that pried the scepter from his hands.
Italians are wondering : whatever next? How badly off is the Italian political culture, which after all is to be blamed for many times that Berlusconi has managed to take and hold power? Where was the legitimate opposition, why were the counter-forces so weak? After the fall of Milosevic in Serbia, the deeply corrupted and dysfunctional state system was hard put to maintain any pretense of a normal government. Can Italy recover, and behave like a major G-7 power again? How is that possible?
Berlusconi was not a genocidal warmonger like Milosevic, but he inflicted years of steady ruination on Italian culture, health, education, research and reputation, not to mention state finance. Whoever comes in power after him will have to either clean cut with the past, or slowly purge the present. Either that, or just accelerate the collapse and scramble for the spoils, as Milosevic did.
What new, fresh faces may emerge from an Italy in moral and financial crisis? Young people without jobs, homes and children, a nation without funds or diplomatic credibility, a health care system without doctors and technology, brilliant students without no prospective but to flee elsewhere for careers, foreigners fighting for their basic human rights, women claiming back their long-fought victories of freedom and dignity.
Berlusconi was refused power by his own majority in the parliament. He loses little by resigning from a state so dysfunctional. Fear is in the air that he will create new elections, pose once again as the last-hope knight on horseback, and win over voters much as he did before. The Dignity people in Italy, together with Se non ora quando women’s movement, anticipate a lot of activism and square action.
Berlusconi and the Italian power-structure seem to have an addictive relationship. Even mutual ruin cannot free them from one another. Sometimes I think that professional parties and politicians should be banned, to give anonymous alternative networks some chance to grow from scratch.
Italian stock markets are crumbling. Twitter messengers are raving. The daily press updates their websites by the hour. Italian TV comedians and stars are improvising political buffoonery like commedia dell’arte. Floods and rains are still drenching Italy, and even Pompeii, that victim of an ancient volcano, is a scene of the modern deluge. – source
Very poetic and idealistic I must say ! You obviously and conveniently forgot to mention 2 important things: Your “knight in shining armour” has always been democratically elected by the majority of the Italian population and Italy has been governed in the past 20 years also by the left-wing parties up until 2008. I really think the comparison with the dictator Milosevic is extremely uncalled for.
“I really think the comparison with the dictator Milosevic is extremely uncalled for.”
– so do I
Well I live abroad and I am proud to be Italian, to be honest nobody here speacks of the bunga bunga parties of Berlusconi,there r much more important things to be solved rather than thinking of Berlusconi’s women. I personally don’t like him and never voted for him, but on the other side in the Italian left wing is there anyone better? Everyone in Italian politics have their scandals but its seems when are done by some one of the left wing it never appears on the papers. What do we say about Sarkozy? He has married Carla Bruni ( and this says it all). And the USA with Clinton that had an affair, nearly had to leave the position of president but if had started a stupid war it would have been a hero, Obama the real American fiasco, he was going to be the change and he has failed. Berlusconi is time for him to leave , but the big question is who is going to take his place in this difficoult situatio.
Wow. I had no idea that Obama was a candidate for prime minister of Italy — the presumed subject of the article in question. It will really set his campaign back to lose the Glasgow vote.
As for “conveniently forgetting” certain key facts, please note that Mr. Berlusconi has been presidente del consiglio since 2001 except for a paltry 18-month government under Romano Prodi. Remember him? He is the former banker who tried to rationalize the Italian tax and economic system, and predicted that Italy was in for exactly the disaster in which it now finds itself.
With one of the largest majorities in the history of Italian politics, Berlusconi has managed to pass not a single important “reform” among the dozens he dangled before voters. Meanwhile, he has made a proud and wonderful nation the laughing stock of the developed world. He responds that his critics are all “Communists.” That would include the chief capitalist publications of the West (“Le Figaro” in France, “The Economist” in the UK, “The Wall Street Journal” in the United States) and the emininently conservative President Nicholas Sarkozy of France and Chancellor Angela Merkel of Germany.
Now, while the fate of the European economy hangs in the balance thanks to his egregious misgovernance at home and absolute loss of credibility abroad, he clings to his office. Why? No doubt because it provides him with legal immunity, the sole thing that has protected him from a well-earned sojourn in prison on so many criminal charges that it requires a calculator to keep track of them.
It boggles the mind that anyone could continue defending him, or trotting out the exhausted and unprovable claim that “his opponents would have been worse.”
ma non si starà mica esagerando un po’ troppo con tutto
questo inglese?
Lutu Giuseppe
Well I never said that Obama is going to run for Italian prime minister, I only said that Obama has its problems and has failed on what he has promised. The thing I said its difficoult to see who can run this country at the moment, the left winf has its own internal problems and that want give any hope. I am with you saying that Berlusconi should leave and go home, but as you know who goes into Italian politics only goes in for personal interest. The waiges and expenses that members of the Italian parliament have are well above the European standards and when there is talks of cutting them both sides (comunists included) stick together to mantain their privileges. I want be voting again for the Italian elections I am disapointed, there are now new faces coming in.
All of these points are right on the mark. Italy no longer has the luxury of waiting until a decent candidate miraculously emerges from a political culture of empty “male” posturing, as Sonia implies, or even more, the crude self-interest to which Gianmarco alludes. We can only hope that an interlude of serious and calm direction under Mario Monti, or someone like him, will set the process of necessary reform in motion. If it fails, la bella Italia has a very bleak future.
Now that the “male assoluto” of Italy has been finally defeated let’s see what others can do !
Ah, you referred to evil rather than uomini. Ironic misunderstanding, isn’t it? In any case, the “male assoluto” of Mr. Berlusconi is surely symbolic of a larger problem — and it is nearly impossible to exaggerate the damage it has inflicted on his nation and its reputation.
I think you misunderstood my last comment !
Si può essere “seri e calmi” (anche mio nonno lo è) ma questo non toglie che si possa essere al contempo degli imperterriti e navigati ultraliberisti.
Così come l’ahimè futuro primo ministro Monti.
Che ci sia bisogno di urgenti e necessarie riforme è palese a tutti, ma non vedo perchè questa gravosa responsabilità debba essere affidata ad un governo “tecnico” risultante da un rimescolamento istituzionale conseguente alla caduta di Berlusconi.
Per quello che so dalle riflessioni di conoscenti un pò più anziani di me (visto che sono dell’87, dunque non potrei saperlo), quello del “governo tecnico” è un classico escamotage da Prima Repubblica che, dietro la facciata di una presunta istituzionalità e prestigio super-partes, nasconde la realtà di pesanti ed impopolari manovre economiche: solo un governo tecnico, che dunque non è espressione della volontà popolare, può arrischiarsi nell’ottemperare la disastrosa agenda politico-economica imposta dall’UE. E’ solo questo il motivo per cui PDL e PD sosterranno il governo a guida Monti, seguiti dal “serio e calmo” Vendola che, forse per non farsi spodestare dal “giovane” Renzi, benedice questa farsa.
Monti non farà che mettere in pratica le direttive della Banca Centrale Europea (non elettiva)e del Fondo Monetario Internazionale (non elettivo), che sono quelle di sempre: prelievo fiscale non progressivo, innalzamento età pensionistica, indebolimento del welfare, flessibilità dei contratti. Figuriamoci se un governo guidato da un uomo delle banche e voluto dalle banche approverebbe mai una tassa patrimoniale, o una tassazione delle rendite e delle transazioni finanziarie (Monti nel 1974 faceva parte della cosiddetta Commissione Trilaterale, segreto ed esclusivo club euro-americano-nipponico di tecnocrati, volto alla conversione liberista del globo…).
Alla fine pagheranno sempre i soliti, e saranno sempre i soliti a salvarsi, ed il PD, associandosi a tale governo tecnico, si assume una grave responsabilità, sia politica che sociale, regalandoci l’ennesimo triste spettacolo di un centro-sinistra sempre più impresentabile ed amorfo.
Non potrà mai esistere un governo “tecnico”: esistono solo governi politici, la cui “politicità” è appunto dedotta dai provvedimenti che appronta. Bisogna stare piuttosto attenti a queste formulette semantiche che non vogliono far altro che rendere la medicina del risanamento meno disgustosa di quello che negli effetti è e sarà.
E soprattutto, prima vengono le PERSONE e la VOLONTA’ POPOLARE, poi i governi, l’astratta ragion di stato e i gruppi privati di interesse sovranazionali.
Ci vogliono dunque le elezioni, subito.
Nel 2011, poetico ed idealistico è credere che basti avere il consenso popolare per poter incidere in maniera profonda e radicale sulla realtà economica e sociale, per non parlare del mondo della finanza e dei grandi movimenti di capitale.
Da Obama a Berlusconi, le politiche nazionali sono in larga parte “commissariate” (come va di moda dire) in molti degli ambiti che un tempo erano di loro esclusiva competenza.
Personalmente, posso anche essere d’accordo con Andrea (ed in effetti lo sono): le politiche ultraliberiste ci hanno portato alla situazione attuale, come possono essere loro a trovare la via di uscita? Eccezion fatta, forse, per un temporaneo riassestamento dei conti, comunque a carico dei soliti noti, cioé di chi non può evitare di pagare le tasse.
Ma ammesso e non concesso che la maggioranza degli elettori scelga di affidarsi ad un modello alternativo (ammesso e non concesso che esista, naturalmente), non credo proprio che una vittoria elettorale sia sufficiente per invertire la rotta.
In questo panorama, è difficile appassionarsi alle baruffe da cortile fra presunti nuovi leader di questo o dell’altro schieramento.
E’ proprio questo scollamento tra il politico e l’economico il problema di fondo e la causa dell’odierna indeterminarezza dei rapporti di dominio in seno alle società capitaliste!
Basti questa citazione (Polanyi, La grande trasformazione):
“La separazione istituzionale della politica dall’economia implica una negazione della validità della sfera politica poichè l’economia veniva identificata con i rapporti contrattuali, che erano visti come l’unico vero regno della libertà. Il resto era vaniloquio.”
E’ appunto il fatalismo a cui i professionisti (anche locali) della politica ci hanno abituato a rappresentare il pericolo maggiore per i miseri resti della “democrazia” odierna.
Quello che volevo sottolineare riferendomi alla volontà popolare non era legato all’elogio di un’alternanza degli schieramenti (che, come dici ragionevolmente tu, non darebbe nessuna garanzia), bensì al fatto che, malgrado tutto, ogni cittadino ha diritto a scegliere l’amministrazione politica del proprio Stato mediante il proprio voto, personale ma anche sovrano. Invece ora ci impongono un governo di tecnocrati pronto a genuflettersi alle imposizioni/imposture degli organismi finanziari transanazionali; noi tutti, studenti, lavoratori, pensionati, siamo appunto i sempre disponibili olocausti da offrire al dio mercato in nome di un risanamento economico reso necessario dall’incontrollata speculazione finanziario-capitalistica.
Una “rotta” in direzione contraria sarebbe pure possibile se…
se finalmente le Chiese Cristiane si ricordassero dell’inconciliabilità evangelica che intercorre tra l’uomo e il mercato, tra la dignità della vita e la sua mercificazione (invece oggi, i magisteri si limitano ad una teologia pansessuofobica!),
e se questo indisponente centro-sinistra la smettesse di giocare a fare la destra,
allora qualche speranza ci sarebbe ancora, o quanto meno, non saremmo ancora così in pochi a sperare in una qualche forma di socialismo solidale e libertario.
Il vero “vaniloquio” è quello dei prestigiatori finanziari, non quello di chi ancora crede in qualcosa di diverso dalle logiche disumanizzanti del mercato.
Come sopra: per quanto mi riguarda, potrei sottoscrivere quasi per intero la tua analisi (mi astengo sul richiamo alle Chiese Cristiane per una cronica insofferenza verso ogni tipo di chiesa, religiosa o laica che sia).
Al momento, però, il “socialismo solidale” (figuriamoci “libertario”) non mi sembra nella prospettiva né dei possibili eletti, né purtroppo degli elettori.
In breve, ovviamente semplificando parecchio:
– Che la macchina si sia rotta è un dato di fatto: l’economia non muove abbastanza denaro per poter ancora garantire certi profitti, spesso slegati dall’ambito specifico della produzione di beni, dal quale comunque dipendono.
– Con qualche costosa riparazione, si cerca di fare ancora qualche chilometro, ma forse sarebbe il caso di pensare a sostituire la macchina, ovvero cambiare le regole del gioco.
– Chi potrebbe prendere decisioni in tal senso (e non mi riferisco soltanto alla politica) non mi pare per niente intenzionato a considerare questa ipotesi.
Concordo infine nell’identificare il fatalismo dei “professionisti della politica” come uno dei pericoli maggiori: se il predominio della politica non lo ristabiliscono loro, chi altri dovrebbe farlo?
D’altra parte, per il cittadino medio, quello che non può o non vuole fare politica a livello di rappresentanza, è molto difficile non cadere in quello che tu chiami correttamente fatalismo.
P.S. Magari, in questo preciso momento quello che potrebbe anche essere definito “Un governo di tecnocrati pronto a genuflettersi alle imposizioni/imposture degli organismi finanziari transanazionali” e che invece il Presidente della Repubblica dice affidato ad una “Personalità indipendente rimasta sempre estranea alla mischia politica e al tempo stesso dotata di competenze ed esperienze che ne fanno una figura altamente conosciuta e rispettata in Europa e nei più larghi ambienti internazionali” può davvero non essere il male peggiore.
Per farsi una risata (amara), rimando a questo indirizzo
Bello l’articolo postato!
Non so perchè ma più andiamo avanti più mi rendo conto che il problema non sono i politici, il problema siamo noi.
Ci facciamo governare da chi non ci rappresenta ( scusi Sonia ma onestamente pur riconoscendo la legittimità del procedimento elettorale non mi sento molto rappresentato ), ci pieghiamo di fronte al malomodo delle Pubblica Amministrazione, tolleriamo la mancanza di servizi a fronte di una tassazione enorme e accanto a questo tolleriamo la solita cantilena “non ci sono soldi” quando vediamo sprecare nei peggio modi e nelle peggio cazzate i soldi che noi con sacrificio versiamo nelle case delle aministrazioni a tutti i livelli.
Tolleriamo la proliferazione di posti inutili nella P.A. e l’esaltazione del restringimento delle competenze di chi ne fa parte con la conseguenza di venir sbattuti da una parte all’altra.
Tolleriamo il sistema di privilegi, sconti, auto blu con autisti plurimi, stipendi, portaborse, mense parlamentari, affitti incomprensibili che questi signori poltronari si autoassegnano …. me l’hanno mai chiesto?
Paventiamo una rivoluzione facendo cortei all’insegna della musica, dei giocolieri quasi come se la situazione politica possa cambiare organizzando il carnevale di Rio.
I politici sono ne’ più ne’ meno come ciascuno di noi. L’indole dell’uomo è egoista, opportunista,spesso cattiva. Il problema è che noi, nella vita di tutti i giorni se vogliamo arrivare a fine mese non possiamo fare come ci pare.
Loro, pur democraticamente eletti, si.
concordo pienamente Simone, bell’articolo. I politici in Italia fanno solo e unicamente i propri interessi sia a destra che a sinistra e la Toscana e’ uno degli esempi piu chiari purtroppo.