Italy has been on my watch list for many, many years. I never: i) lose a chance to go there for both business (and leisure) and ii) did not understand (nor do most of my Italian friends) how someone like Berlusconi (apart from the fact that his fortune estimated at >$9Bn, owns much of it in Italy’s media and communication assets) became their Prime Minister (3 times since 1994) for >9 years. Italy is a diversified industrial economy, ranked 9th in the world and 4th in Europe (preceded by Germany, France and the UK in that order…) in terms of nominal GDP, driven in large part by the manufacture of high-quality consumer goods produced by small and medium-sized enterprises, many of them family-owned. Also, Italy has a huge underground economy (ranging from agriculture to construction) accounting for another estimated 17% of GDP.
Italy joined the EU in 1952 and like many of the economic unions’ beneficiaries experienced decades of >4% annualized growth. After 1992, this rate slipped below EU averages and since then, the government has been trying to revive the economy by increasing public spending. The public debt, budget deficit and unemployment (>13%) are all at unsustainable levels and the country faces tough austerity measures. In Q4.2013 we thought the recession was at last over, driven by exports (yes, they can…) and a recovery in investments. However, -0.1% in Q1.2014 followed by -0.2% in Q2.2014, are witness a real fall in industrial production. For more information, please see our 08.2014 EU GDP blog. And so guess what Italy is on the EU Commission’s “watch list” and subject to strict programs monitored by Olli Rehn (EU economic affairs commissioner), whose wonderful comment "I wish every Eurozone member state had the same export competitiveness as Germany", says it all.
So now let’s take a quick look at who’s leading Italy, since 03.2014 new in the ring we have Matteo Renzi (at 39, the youngest ever Prime Minister, especially when compared to you know who at 77) brings a refreshing dynamism, a determination and sense of urgency to address Italy’s economic woes. Recent actions have included privatisation, to raise €12Bn selling state assets and reduce the €2.1Tn debt, a small step in the right direction but implementation to date is mixed, reform of the electoral system (less small parties and a clear winner that can govern) and constitutional changes (modifying the senate, which now has less power and strengthening central government to get the job done). Hey this guys’ got what it takes! Wow does that mean we can look forward to i) stable government and ii) real reform implementation? Well we are watching and will keep you posted. If you want more EU economic information on Italy please click here http://ec.europa.eu/economy_finance/eu/countries/italy_en.htm
