Mody, Α. & Riley, Ε. (2014) “Why does Italy not grow? – The Italian economy has barely grown since it joined the euro area in 1999“, Bruegel Institute, 09 Σεπτεμβρίου.
In April this year, the Italian debt-to-GDP ratio was expected to peak by year-end at 135 percent of GDP. That projection assumed a real GDP growth rate of 0.6 percent and inflation of about 0.7 percent. The projected decline in the debt ratio starting 2015 required a step up in growth and inflation along with historically large primary budget surpluses.
However, at this point in 2014 (in September), the prospects for Italian growth and inflation have weakened considerably—they may well be close to zero for the year. By U.S. criteria, as Frankel (2014) points out, Italy is now in a six-year-long recession. Indeed, the Italian economy has barely grown since it joined the euro area in 1999.
The stakes are high. With the government committed to an austerity mode for several years, growth and inflation are likely to be held back. And households facing tougher times are unlikely to open their pockets and start spending. The public debt ratio could rise relentlessly. An urgent search is on for a restart to Italian growth.
Much hope has been pinned on “structural” reforms to jump start growth. Germany’s Hartz reforms are often invoked as the example to emulate. But as the recent research reaffirms (Dustmann et al., 2014), German growth after the Hartz reforms was due primarily to a prior, nearly decade-long, restructuring of German businesses in concert with labor and new outsourcing networks in Eastern Europe. These investments allowed the leverage of deep German expertise in manufacturing in an unusually buoyant period of world trade between 2003 and 2007.
Italy has been technologically and physically aging for some decades. It has been unable to keep pace with the technological demands of a competitive global economy. The Italian technological lag reflects a falling behind in educational standards: low growth and weak investment in technology and human capital have reinforced each other. The aging population has made reversing these trends a formidable task.
Σχετικές αναρτήσεις:
- Bossone, B., Cattaneo, M. & Zibordi, G. (2014) “Which Options for Mr. Renzi to Revive Italy and Save the Euro?“, Economonitor – A Rubini Global Economics Project, 03 Ιουλίου.
- Tiffin, Α. (2014) “European Productivity, Innovation and Competitiveness: The Case of Italy“, IMF Working Paper, Strategy,Policy and Review Department, Μάιος.
- Bosco, A. & Verney, S. (2013) “Living Parallel Lives: Italy and Greece in an Age of Austerity“, South European Society and Politics, Vol. 18, Issue 4, Διαθέσιμο στο διαδίκτυο: 12 Φεβρουαρίου 2014.