Is Italy a basket case?

Irreversible demise.  Deflation.  High unemployment.  Stagnation.  Huge sovereign debt.  High taxes.  A bloated, parasitical and corrupt state sector.  Zero growth.  The sick man of Europe.

These are the very serious problems confronting Italy as seen in this hard hitting article in the London Spectator titled ‘Italy’s in terminal decline, and no one has the guts to stop it‘.  Recently, the FT reported that, on 5 December, ‘Standard & Poor’s cut Italy’s credit rating to BBB- or one level above junk, citing a growing debt pile, low growth and lack of competitiveness. The rating agency predicted growth of 0.2 per cent in 2015, a weak exit from its third recession in six years’.  Italy now ranks below Turkey, Kuwait and South Africa in the internationally accepted ranking of public sector corruption.  It is hard to call the current situation a crisis, notes the historian John Foot, because crises have an end – Italy just keeps declining. Living in Italy and viewing it as an outsider, one gets a sense that, beneath the pizza/pasta/history/art/gelato stereotype beloved of foreign tourists (and many WordPress bloggers), modern Italy has lost its way.  The impact is felt particular strongly in the south.  Walking recently to the Garibaldi railway station to catch a super fast (privately operated) Italo train from Naples to Milan, we saw a crowd of trade unionists and motley leftists assembling to protest against the plans of Prime Minister Renzi to reform Italy’s labour market and in favour of the prevailing ‘job-for-life’ culture in the state sector, something that stifles opportunity and causes youth unemployment.  This irony was lost on the protesting students.  Roads are pot holed.  Bureaucracy is stifling.  Train windows are made opaque with graffiti.  Historic buildings and sites are crumbling.  Corruption eats away at public trust.  The mob feeds off the state like a cancerous tumour.  Industry has fled north.  Many have left Italy to seek opportunity abroad.  Personal living standards have plunged. Another FT article concludes about Italy’s decline:

The consequence: hopelessness…..In Tommaso Pellizzari’s latest novel, a new nihilistic leader exhorts Italians: “Ask not what your country can do for you. It can do nothing, nothing at all.” The historian Paul Ginsborg, grappling for positives in Italy’s past 20 years, says that at least democracy hasn’t collapsed.

This recent criticism may be seen as just Anglo-Saxon gloating.  But if it is to be more that a museum with nice food and weather, Italy certainly needs deep reform.  And it remains to be seen whether the hope invested in Renzi by the Italian people to reverse decades of political graft and economic decline will be rewarded, as he continues to face opposition from serried vested interests clinging to the unsustainable status quo. Image: Nicholas c/o The Spectator.

Advertisements

3 thoughts on “Is Italy a basket case?

  1. As an Italian living abroad (out of choice, not for necessity) I can only partially agree with what you just written down in this post. So please pardon me for this rather verbose reply. And, please, don’t take anything of this personally: you’ve given me the chance to finally write down what I’ve been thinking about for a long time.

    Italy does indeed suffer from many problems. A legacy of happy spending and State protectionism has left us ill-suited to deal with a liberalised Europe that, at the same time, has put some strict rules on deficit and public spending (rightly so, in my opinion). Universities have been churning out graduates in fluffy subjects that the market doesn’t need, all while the State hasn’t become efficient. EU rules have been adhered to by increasing taxation rather than cutting costs. And labour laws are cervellotic as the German ones whilst being irrational as the Brazilian ones, a marriage made in hell. I worked on that for quite some time, it’s easier to set up a business in Russia – bribing included – than in Italy.

    But there’s something that really bugs me, something that every time I read it causes my blood pressure to go up. That’s the patronising attitude of the British press, this we-are-better-than-you. Had they said exactly what I said above, maybe with some more data and flair, I wouldn’t have had anything to say but “Yes, they’re absolutely right”. I’d even have pardoned them for using “Dolce vita” or “Arrivederci”. But no, it mustn’t be that way, never.

    So you have them rambling about S&P’s ratings. Well, ain’t S&P the same that rated AAA Lehman Brothers before they went belly up? And Lloyd’s? And AIG?

    Then there’s the debt. Sure, it’s big. Sure, the expense on interests is huge. Sure, we’re paying years of merry spending before the mid 1990s. But have they noticed how Italy’s deficit-to-GDP ratio is half of the UK’s, or how the UK’s debt is reaching 100% of GDP, or how, in order for George Osborne’s promises to go into positive accounts by 2018, about £55bn in cuts must be made in 4 years?

    I don’t mind critics, but they must be balanced, right, factually correct and not filled with prejudice and hearsay. Better still if they’re actually made by people who can afford to critique, e.g. by countries who’re running healthy budgets, didn’t have to rescue half their banks, aren’t resorting to selling half of their real estate to Qatari funds and who aren’t going out in droves to vote for a fascist party. In a nutshell, get me the Toronto Star to tell me that and I’ll shut the fuck up.

    Sorry, rant over.

    Fabrizio

    • Fabrizio, cracking comment. I tried to be as dispassionate as possible and use articles from respected UK journals which quoted facts from the EU, OECD etc. Glad I didn’t use the Economist or your head may have exploded.

      For non-UK balance here is a recent WSJ article titled ‘Italy’s economic suicide movement’, timely in light of the general strike (!) tomorrow. Here is an Italian article which rehearses the same themes and the risks.

      I think that you may close to ‘shooting the messenger’ – if anything the UK papers are even harsher on the UK economy and past/present government mismanagement than they are on Italy. The bottom line is that Italy’s anaemic economy is in dire straits, unemployment is at record levels, growth is zero, its industry is uncompetitive, its politicians bicker and its unions are unreconstructed dinosaurs. I really hope it can be turned around.

      • I do hope as well. But you cannot overturn 20 years in which we voted someone more interested in fixing its own judicial issues (or, to be politically fair, a collection of parties united only by the desire of not letting that guy win) in a year.
        It’ll take loads of time.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s