Italy ain't no Greece
26/7/15 20:59![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
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talkpoliticsJust a few years ago it looked like Italy, with its huge debt, the economic stagnation and the insanely bloated public sector, was bound to succumb to recession, and drag the rest of Europe along with it. But those dark scenarios are nowhere to be heard any more at this point, and neither are the investors betting for or against Italy's survival any more. Still, the 3rd largest economy in the Eurozone remains pressed against the wall, and its future is far from settled.
The new situation requires a new approach. And some Italians may've shown an example of that. Lots of them are now taking much shorter holidays for example, even in August, the sacred holiday month. The reason? Small businesses prefer not to miss that extra revenue.
Because the times when small businesses (say, a pizzeria or a grocery downtown) were flourishing largely thanks to a small devoted clientele who were prepared to spend large on a daily basis, have gone into history. In the course of the crisis, thousands of small entrepreneurs have been compelled to work hard to expand their circle of clients, and count every eurocent, and be strict about every little expense they make. You know: austerity at a daily level. The good thing is, the small businesses in Italy tend to do their best to cut expenses anywhere but in the staff department - that is, laying out employees is considered to be only the last resort. But the tightening of the belts can still be felt everywhere - and this doesn't seem likely to change any time soon.
T'is true that Italy has been showing some signs of recovery as of late. The industrial output has grown by some 3% for the last quarter, mostly thanks to automobile production and the machine industry. The PM Renzi (not to be confused with Ponzi) considers this to be proof that the tax cuts he introduced are finally giving fruit. He also argues that the other result of his policies has been the shrinking unemployment, and the increased number of long-term work contracts that the employers are now signing. But a number of observers are countering that the PM is merely juggling with the stats, since many people have actually completely left the labour market, and are no longer considered part of the unemployment numbers. Tricky nuance, there. And the long-term work contracts are largely not for newly opened jobs - it's just that many people are moving from a temporary to a permanent work contract. Even the apparent overall economic growth could be explained with external factors, Renzi's detractors argue - like low oil prices, the weak euro that facilitates exports (Italy is a very exports-orientated economy), and the extraordinarily low interest rates.
In any case, being the young and energetic prime minister that he is, Renzi has been trying every available option to create the impression in his people that the Italian economy is moving upwards. He recently announced his new "contract with the Italians", which includes tax cuts worth 50+ bn euro for the next five years, including the removal of the very unpopular tax on the "first home".
And yet, Italy's public debt remains about 130% of its GDP, which makes it second only to Greece. Granted, Renzi did support Greece in their request for looser austerity measures and more stimulus, but he eventually joined the chorus that urged the Greeks to accept the Troika proposal. Probably because he knows full well that if Greece defaults and exits the Eurozone, his country would lose 40 bn euro - and that's not something Italy could afford right now.
The trouble with Italy's economy is that the public sector is too inefficient, the taxes are a heavy burden, and corruption is everywhere. Sounds familiar, right? Another Mediterranean economy with the same problems. Still, most Italians are convinced that the Greek scenario is not possible in their case.
Indeed, the only major risk for Italy seems to be if the big financial institutions for some reason decide to target the country, as may've been the case a few years ago, when many of them believed that Italy was too weak. But the Italians have done some urgent reforms since then, and the country was stabilised - ultimately, having accepted the changes that the financial institutions demanded of them. While it's logical and normal to be concerned about the effect of the Greek crisis on Europe as a whole, in fact Italy may've managed to avert that scenario by doing the necessary steps while it was early enough.
True, the country still has its problems - and many of them are similar to those in Greece. Like the fact that a large part of the Italian economy is still in the grey sector. But in reality, Italy has already walked a great part of that road which Greece is yet to embark on.
The new situation requires a new approach. And some Italians may've shown an example of that. Lots of them are now taking much shorter holidays for example, even in August, the sacred holiday month. The reason? Small businesses prefer not to miss that extra revenue.
Because the times when small businesses (say, a pizzeria or a grocery downtown) were flourishing largely thanks to a small devoted clientele who were prepared to spend large on a daily basis, have gone into history. In the course of the crisis, thousands of small entrepreneurs have been compelled to work hard to expand their circle of clients, and count every eurocent, and be strict about every little expense they make. You know: austerity at a daily level. The good thing is, the small businesses in Italy tend to do their best to cut expenses anywhere but in the staff department - that is, laying out employees is considered to be only the last resort. But the tightening of the belts can still be felt everywhere - and this doesn't seem likely to change any time soon.
T'is true that Italy has been showing some signs of recovery as of late. The industrial output has grown by some 3% for the last quarter, mostly thanks to automobile production and the machine industry. The PM Renzi (not to be confused with Ponzi) considers this to be proof that the tax cuts he introduced are finally giving fruit. He also argues that the other result of his policies has been the shrinking unemployment, and the increased number of long-term work contracts that the employers are now signing. But a number of observers are countering that the PM is merely juggling with the stats, since many people have actually completely left the labour market, and are no longer considered part of the unemployment numbers. Tricky nuance, there. And the long-term work contracts are largely not for newly opened jobs - it's just that many people are moving from a temporary to a permanent work contract. Even the apparent overall economic growth could be explained with external factors, Renzi's detractors argue - like low oil prices, the weak euro that facilitates exports (Italy is a very exports-orientated economy), and the extraordinarily low interest rates.
In any case, being the young and energetic prime minister that he is, Renzi has been trying every available option to create the impression in his people that the Italian economy is moving upwards. He recently announced his new "contract with the Italians", which includes tax cuts worth 50+ bn euro for the next five years, including the removal of the very unpopular tax on the "first home".
And yet, Italy's public debt remains about 130% of its GDP, which makes it second only to Greece. Granted, Renzi did support Greece in their request for looser austerity measures and more stimulus, but he eventually joined the chorus that urged the Greeks to accept the Troika proposal. Probably because he knows full well that if Greece defaults and exits the Eurozone, his country would lose 40 bn euro - and that's not something Italy could afford right now.
The trouble with Italy's economy is that the public sector is too inefficient, the taxes are a heavy burden, and corruption is everywhere. Sounds familiar, right? Another Mediterranean economy with the same problems. Still, most Italians are convinced that the Greek scenario is not possible in their case.
Indeed, the only major risk for Italy seems to be if the big financial institutions for some reason decide to target the country, as may've been the case a few years ago, when many of them believed that Italy was too weak. But the Italians have done some urgent reforms since then, and the country was stabilised - ultimately, having accepted the changes that the financial institutions demanded of them. While it's logical and normal to be concerned about the effect of the Greek crisis on Europe as a whole, in fact Italy may've managed to avert that scenario by doing the necessary steps while it was early enough.
True, the country still has its problems - and many of them are similar to those in Greece. Like the fact that a large part of the Italian economy is still in the grey sector. But in reality, Italy has already walked a great part of that road which Greece is yet to embark on.
(no subject)
Date: 27/7/15 08:34 (UTC)(no subject)
Date: 27/7/15 15:50 (UTC)