October 22, 2014
Italy is in deep economic trouble and its woes seem to be worsening with each passing day. Short subsidies that act as relief, such as the weakening of the lira, have in actuality been affecting the country rather badly, whilst the growth rate for the economy has been quite less too.
The country’s political structure needs to be reformed because mid-way through this year, the country fell into a horrid triple-dip recession. This comes pretty close at the heels of the 2008/2009 economic collapse, and right at the doorstep of the one in 2011. Mario Monti and Enrico Letta both went de rigueur with Brussels over recession, and after Matteo Renzi came to power, the economy has been faring well but none of the promises that got him to parliament were kept, such as increasing consumption all-across for homes.
The best possible solution to austerity here would be to think of innovative ways – there has already been a successful implementation of the zero rate of interest by Mario Draghi previously, so rather than repeat more of that or similar quantitative measures more probable in the present EU economic climate, why not try something new?
Why not go for a good amount of lending from the European Central Bank, because previously countries that have borrowed from the Bank are faring rather well now. This is quite an accomplishment because the growth rate for the German economy is quite stagnant, but Greece has thankfully, recovered after several months of disastrous economic consequences and hefty borrowing figures, that initially spelled “economic doom” rather than “economic boom” for the nation.
The ECB needs to invest more in the economic landscape in Italy because private investment isn’t sufficient alone to pull back the economy on the right track. The more you pour cash into the economy, the better it will perform because businesses have to recruit more people to combat unemployment. This could then, in turn, influence the consumption rate, and the situation on ground looks more dire than it might seem actually because every other day more and more shops are closing, unemployment figures are rising, and the manufacturing sector is really not functioning very well at all.
As years go by, the drastic situation in the manufacturing sector take a turn for the very worse with industrial production, grinding to a slow state of a quarter. Private investment in companies isn’t a very positive outlook in all corners for various other reasons too, apart from the weak support hierarchy: many family-owned businesses are just not interested in maintaining the nation’s finances, instead preferring to indulge in spending more to keep themselves wallet-happy.
Successive heads of government changes have left the country in an economic turmoil, which is not what many expected to see but that is how things have become because there is heavy-recession everywhere. The ECB is interested in investment but the government needs to do more towards reforms before it can earn the Bank’s trust. Furthermore, conflict with Russia over various political issues, the situation in the Middle East, and the downing of a Malaysia Airlines passenger airlines right over Ukraine, have been eating into the country’s positivity.
There have been several return of German factory orders from Italy for fashion and numerous luxury goods, which is a cause for concern because Russia is a hub of trade for Italy, and this air of negativity is really starting to affect the entire Eurozone, owing to the fact that most of the countries here are still either not faring too well economically or are fresh from recovering from their economic woes.
Pier Carlo Padoan, the Economy Minister for Italy, has stated that it’s too early for reforms to be in full-swing but with the help of budget measures, which cut off labour taxes, spurn-in better household income, can help to make Italy perform better economically. It’s not that reforms, such as a remodelling of labour regulations, and reduced labour taxes take a lot of time to be introduced because they are already in practice, it’s just that they do take some time to be in effect.
The upper-house Senate took a while to accept these new legislation changes that have dramatically reduced its membership and decision-making abilities, which is going to make sure that lawmaking is going to be an easier process from now onwards. Amongst the commendable labour reforms that have been introduced is the placing of more pennies into the income brackets for low earners, every month.
So, perhaps Renzi and his party should choose to be bolder and brave opposition from any possible grounds, for example trade unions and leftists in his party, over more reforms and put achieving a better performing economy on the agenda, as soon as it is possible. The present climate in the Italian parliament dictates that Renzo is on the right track to accomplish greater control over calling elections, should there ever be too much opposition regarding the reforms, but his energy should really be directed more towards driving the economy upwards.