Home .Finance Italy Is Not Game Over
Italy Is Not Game Over
Friday, 25 November 2011 00:12

This week we have invited Emanuele Schibotto*, Editorial Coordinator at our knowledge partner www.Equilibri.net, to provide his view on the state of his home country, Italy.

Yes, Italy is experiencing a profound crisis of confidence domestically and internationally.  But Emaneule argues quite convincingly that we should not think this is a game over for Italy.  The country has still huge potential.

Italy is in the midst of a severe political crisis which clearly affects its credibility among international investors.  After the formal resignation of Silvio Berlusconi as Prime Minister, the Head of State Giorgio Napolitano asked Mario Monti to lead a government of technocrats. Mr. Monti, an economist, served as European commissioner for competition policy and is currently dean of Bocconi University.  

Last week Monti's government won a critical confidence vote with record numbers in both the houses of Parliament which allows him to stay in office until new elections in 2013. The new Cabinet will have to face the difficult task of implementing the economic reforms demanded by the European Union and the International Monetary Fund, so as to restore market confidence and reform the economy (GDP will post a poor 0.6 percent of growth in 2011 and 0.3 in 2012, according to IMF). The future path of the new government is to be found in the letter that former Prime Minister Berlusoni delivered to the European Union few weeks ago. Within the next eight months – the letter said – the government will be committed mainly to improving domestic competition (mostly within the service sector); easing the burden of burocracy which hinders an otherwise dynamic private sector; and fixing the dichotomy that badly affects the labour market (insiders/outsiders).

"In a particularly difficult moment for Italy, in a very turbulent European and international landscape, the country must prevail in the challenge of redemption," Monti said after he accepted the job from Napolitano. "Italy must once again be an element of strength, not of weakness, in the European Union, which we helped found and in which we must be protagonists." Monti is going to have the backing of the majority of political parties – and this is going to be fundamental for  real reforms to take place as soon as possible.

True, Italy is under deep and close scrutiny from international markets – and that is just right. Yet, it would be a mistake to consider the country as a dead man walking, for the current crisis belongs primarily to  the political realm. The recovery of the domestic economy could have already been boosted had the necessary reforms been implemented earlier. This is to say that the changing of the political landscape for the better should unleash the potential Italy still has.

The economic significance of the Belpaese still is quite remarkable. Italy is the third largest economy of the eurozone, the 8th largest in the world. It is the 8h world's largest  exporter - it  generates 3 percent of world merchandise trade. Italy has the second largest industrial output of Europe behind Germany. The UNCTAD/WTO 2009 Trade Performance Index places Italy second among the G20 countries, just behind Germany.  “Made in Italy” goods – from fashion to food – are masterclass, worldwide renowned products. 

One of Italy's biggest economic troubles – together with tax evasion and hidden economy, is its massive public debt (122 percent of gdp). However, the percentage of public debt being held by foreigners is 47%, above France and Germany and that its private debt is one of the lowest among developed countries whereas household wealth is one of the highest.   Italy is still a rich country, with its people being the most precious strength.

Italians are creative by nature: from the helicopter to the radio to the Google algorythm, Italians contributed (and still do, often outside Italian borders) to some of the most important inventions of humankind. During the last decade not enough attention has been given to the needs of younger generations - the inventors of tomorrow. According to the National Statistics Bureau, youth unemployement is almost 30 percent high whereas the Neet (Not in Education, Employment or Training) population counts over 2 million people. This means losing out the contry's brighest and most dynamic minds.  Improving these stats should be a number one priority for new government.
 
Italy has now a genuine chance for a reset. A new contagious renaissance could stem from politics and then move to the economic and social spheres, with young generations being eventually its protagonists. 

* The author is PhD candidate in Geopolitics at the Guglielmo Marconi University in Rome. He also is Editorial Coordinator of Equilibri.net, an Italian think tank on Geopolitics and International Relations.

 


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