Italy's Economic Report : A Shrinking Giant and European Powerhouse .

when people talk about the biggest economic problem in the EU, they always refer to Italy… but that’s because Italy matters more. Unlike Spain, Portugal, or Greece, Italy is one of the top 10 GDP countries in the world and - unfortunately - also has a rather large debt. So, of course, if Italy crashes, it will have a much more negative impact than Greece crashing or a potential crash from Spain. Italy has the fourth gold reserve in the world, the fourth highest reserve after Germany, the United States, and the International Monetary Fund and therefore it is the country that holds a third of the gold in the world; and the largest number of works of art in the world (which is priceless). Also the savings of Italians are more than double the public debt of the country (this without counting the value of the land and real estate properties held by 2/3 of the Italians). Italy is now the third European economic power, after Brexit. Most of the Italian public debt is domestic, so Italy is in little debt with other countries, and the majority of its debt is towards Italians, and therefore it has the freedom of maneuver that other countries don’t have. Moreover, the Italian public debt is in all European banks, and the public debt of almost all the countries of the world is also in Italian banks, this means that an Italian bankruptcy would lead to bankruptcy practically all of Europe and to a terrifying global economic crisis. To this, we must add that Italy is the shield and the mediator between Europe and Africa, and in this historic moment, no European country can be safe without the help of Italian law enforcement agencies. Italy is too rich and powerful to fail, and it is unthinkable to treat it like Greece, the repercussions in the world, especially in Europe, would be terrifying. Welcome to The Atlantis Report. Whilst the North of Italy is very well developed and not too distant from Germany, the South of Italy is unfortunately still much less developed. Political, historical, and geographical reasons all contributed to this. Italy has a long history with many different cultural influences! And with the north being closer to what is now Austria, Switzerland, and France, these regions had an industrial influence on it, which shaped the industry and, therefore, the type of jobs found between the north and south. This has led to the rise of certain stereotypes between the two regions. For example, you might hear: “Northern Italians are snobbish and consider job, money, social opinion, branded clothes, shoes, and accessories, fine talks and prestigious companies, good restaurants and excellent wine” of most importance. While about southern Italy, you might hear: “Southern compatriots are often referred to as Terroni. The term is used to underline the laziness and ignorance of Southern Italians.” Straight after World War 2, Italy was in tatters, but thanks for foreign investments, the economy boomed in the ‘50s. Thousands upon thousands of small factories were established, and quickly, Italy became the manufacturing hub of Europe. Low costs, creativity, and ability to come up with innovative designs, made Italy one of the largest manufacturing nations in the world. Italians made pretty much everything. Cars, motorcycles, bicycles, trains, boats, white goods, clothing, shoes, machinery, house-building products, etc... Fiat was one of the largest factories in Europe, building cars, trains, aircraft, trucks, tractors, military vehicles and had large shares in a number of different sectors. However, during the mid-late ’90s, something changed dramatically. Production of low tech products, especially clothing and shoes, but also white goods and later on motorcycles, house building products, and most low tech products shifted to China. In 1985 Italy’s GDP was almost twice that of China. In 1990 Italy was the third-largest economy in Europe while China’s economy was smaller than Canada’s. However, by the year 2000, the Chinese economy had surpassed the Italian economy for two reasons; firstly because the Chinese economy grew and secondly because Italy’s economy contracted. There are, of course, other important factors like a high public debt, which started in the ‘60s, corruption, and political incompetence. The south of Italy that unfortunately, due to a number of reasons, is not as productive as the north and many more that have affected the Italian economy. However, all such factors have always been there, even when the Italian economy performed much better. Some may argue that the introduction of the Euro is to blame, and that may be partially true. However, other Euro countries like France and Germany, for instance, continued to grow as their economy, unlike Italy’s, is less reliant on low and mid-tech products. Italy's economy in the 21st century has been mixed, experiencing both relative economic growth and stagnation, recession, and stability. In the late 2000s recession, Italy was one of a few countries whose economy did not contract dramatically and kept a relatively stable economic growth, although figures for economic growth in 2009 and 2010 averaged in the negatives, ranging from around -1% to -5%. The late-first decade of the 21st-century recession has also gripped Italy; car sales in Italy have fallen, and Italy's car workers' union said, "The situation is evidently more serious than had been understood." Analysts have predicted Italy had entered a recession in the second quarter or would enter one by the end of the year with business confidence at its lowest levels since the September 11 attacks. Italy's economy is contracting in this Century. Italy had several cycles of high public debt, the first one caused by the creation of the Italian state which occurred immediately before then 1870–1890 depression, and of the Banca Romana scandal. The following two high debt crisis occurred due to the two world wars. The final high debt explosion started in the early 1970s and has an entirely different origin. In the 1960s and 1970s in European countries started investing more in the welfare state, whose expenditure rose on average from the 29,5% to 48% of the GDP. In Italy, though, this increase was relatively limited, as it only reached 40,6%, so it should not have caused a major deficit. The problem is that in Italy, growth started becoming lower. After the oil crisis in 1973, Italian economic growth has been badly stunted. With low economic growth (and high inflation through the 1970s and 1980s), Italy has been unable to absorb moderate growth in terms of public expenditure, so the debit built. Part of the continuing problem is that the EU requires Italy to reduce its deficit, but no Italian government has been able to propose a plan of increased expenditure aimed to create economic growth. Since 1992, when Italy entered the Maastricht area, governments have only been able to either reduce the welfare state o order to cut the expenditure or to create more debt with transitory and very costly measures that do not help Italy grow (which is what the current government is doing). Italy's lack of growth, in turn, is connected to its historical problem with crime (see mafia, etc.), which reflect at all levels with the state management (Italy is one of the most corrupt countries in the world). Other aspects of the problem are an extreme level of bureaucracy, high tax evasion, a population with low schooling levels (and quite poor schools that are not able to produce a good level of culture), inefficient services (such as the postal system). In the very end, Italy’s main problem is not the high deficit. It is low growth. Italian politicians have long been unable or uninterested in creating more growth, but until the focus does not shift from the debt to the lack of growth, Italy’s debt will only increase. Today Italy has a falling economy with plummeting industrial production; It decreased by 4.3 in one year. ITALIAN TOURISM ALSO Collapses: HOLIDAYS ( minus 8.4%) AND BUSINESS TRIPS (minus 12%). THE PRODUCTION OF VEHICLES IS BAD, WHICH LAST YEAR DECREASED BY 13.9%. Overall unemployment, however, is about 9.7% per July 2019. In the fourth quarter of 2019, industrial production in Italy fell by 1.4% in economic terms. Istat notes this, explaining that this is the strongest drop since the fourth quarter of 2012. Furthermore, the drop follows those of the second and third quarters. Applying the GDP standards, one could say that the sector is going through a 'recession' phase. Another figure regarding industrial production which fell by 2.7% in December 2019 compared to November, marking the sharpest drop since January 2018. Istat notes that on an annual basis, it shows a decrease of 4.3%. The annual figure is also down in raw terms, but the contraction becomes less extensive (minus 1.3%).   Again according to the Institute of Statistics, in 2019, industrial production returned to decline after five years. For the past year, it is estimated a 1.3% drop on average compared to 2018 when there was a 0.6% growth. This is the first decrease since 2014 and the largest decrease since 2013, therefore for six years.   ITALIAN TOURISM SLOWS DOWN IN 2019, minus 9% TRAVEL. The travels of residents in Italy in 2019 are 71 million and 883 thousand (411 million and 155 thousand overnight stays) with a decrease on the previous year, which interrupts the recovery that began in 2016. Holidays are down (minus 8, 4%) and business travel (minus 12%). In the summer, 37.8% of the population takes at least one vacation. 76.2% of trips have an Italian location as destination (minus 12.8% in 2018), 23.8% are directed abroad. It emerges from Istat's report "Travel and holidays in Italy and abroad" on last year. The drop, therefore, has nothing to do with tourism problems related to coronavirus. VEHICLE PRODUCTION DOWN IN 2019, minus 13.9%.   Industrial production in the automotive sector in 2019 marks an annual decline of 13.9%. Istat notes this. This is the strongest decline since 2012. Looking at the last month of 2019, December, there is a tendential decrease of 8.6%. The level of indebtment of the government is too high. The tax pressure is too high. The real GDP growth it’s too slow. The country had several years to make reforms, but it seems like everyone wants to live at the expense of everyone else: no cuts on inefficiencies, no improvement in the bureaucratic processes, it’s not easy to fire people for good cause and judges can reinstate somebody who fakes being ill and goes to play soccer during working hours and force the company to pay the fake sick. Italy has a population of 60 million people. 23 Million workers. 16 Million people not looking for jobs or looking but not able to find! The reminder 21 Million is not working age. If 13 Million people aren’t in need of looking for a job, perhaps they’re too rich, or they receive too many resources that do not encourage looking for a job - thus being productive and raising the GDP while lowering government spending and/or taxation. The only way to raise GDP in the long term (which is the only timeframe that counts), is either via (a) increased productivity of hours worked, or (b) increased hour worked, i.e., employ more people. The productivity can be enhanced through R&D and innovations. Italy is in the G8, and yet the 26th country per R&D, they spend half what Germany or the US spends. They employ 38% of the population. The Banking sector is troublesome, most banks are trading at half the book value, At bargain prices, European banks attract value-hungry investors, it wouldn’t be this way if the sector and the economy was healthy, but you may tell me the market is wrong and it doesn’t get it. The way I see it, most of their assets are overstated. Banking sector and the whole Italian economy live on the edge: even a small hike in taxation, a larger than expected loss and a large company going under could bring one bank down and then the whole sector and then credit would crunch, and the Italian economy would be in a huge mess. What will happen in 10 years? I don’t know, but it doesn’t seem good. It’s also at least since the ’92 that foreign investors believed the Italian economy is going to collapse. Twenty-six years, and it has not collapsed yet. Could it be that we have to wait for another 26? This was The Atlantis Report. Please Like. Share. And Subscribe. Thank You.














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