The future of the Eurozone crucially depends on how successful Italy will be in reducing its debt compared to its GDP, a study by Centre for European Policy made in Q4 2019 claims, but this study only serves today as a lesson that reality can exceed experts’ imaginations and that their recommendations need to be less că recomandările lor trebuie să-şi dezumfle infatuarea.
The Centre for European Policy recommended to the Italian government to divert spending from consumption to investments, to stimulate the growth of the GDP and, thus, to reduce its disproportionate ratio compared to the public debt. Italy has a debt to GDP ratio of about 135% (surpassed only by Greece in the EU, with 181%).
Through no fault of the author, in the eight months that have elapsed since then, the reality of Italy’s evolution has exceeded any concern expressed in the study, because the coronavirus pandemic has totally ravaged the public system and no one in Italy had the time to be concerned with the debt-to-GDP ratio, when Europe has turned its back on it and Germany banned the export of medical equipment.
The Centre for European Policy had advised the Italian government to increase public investment through cutting spending; to orient public investments towards innovation and education; to reduce bureaucracy, in order to improve the business sector.
But Italy has over 200,000 infected with coronavirus, over 30,000 dead because of the pandemic, hundreds of newly infected daily and is ranked first in the EU se află pe locul întâi în UE în privinţa vătămărilor, pe locul al doilea în Europa (după Marea Britanie) şi pe locul al şaselea în lume, unde în top este SUA.
Innovation, education, computerization, bureaucracy, public investments, consumption, GDP and debts – these are notions of a religion that no longer has many faithful.
Italy is now discussing leaving the EU.
And EU officials are trying very hard to convince people that the notion of „European Union” is still in the dictionary of the contemporary world.
But they are only trying politically.
In secret, they are the ones who have thrown the dictionary away, in the trash bin. (F.G.)
The blow dealt to Italy by the health crisis comes at a time when the country’s economy and finance weren’t exactly the most stable. Italy’s public debt amounted to over 134% of its GDP at the end of last year, according to Reuters, and the estimates for this year predict it will increase to somewhere between 155% and 159%, as the Italian authorities have decided to borrow more in order to offset the impact of a deadlock caused by the new coronavirus. Thus, Italy seems to meet the requirements for „too big to fail”.
Also, the Italian prime-minister, Giuseppe Conte, yesterday increased pressure on the Italian banking sector, asking creditors to accelerate the delivery of state loans granted to companies paralyzed by a nationwide shutdown, to fight the coronavirus pandemic, according to Bloomberg.
„The banking system is contributing, but it can and should do more to accelerate the procedures for the granting of loans backed by the state”, said Conte in a speech to the lower chamber of Parliament. „The liquidity decree allows the delivery of secured loans within 24 hours, especially for demands below 25000 Euros (38.770 USD)”.
Giuseppe Conte’s government and banks have blamed each other for the delays in guaranteeing the companies’ liquidity, as the over two months of emergency measures weigh heavily on the economy. The European Commission stipulates that Italy’s production will fall 9.5% this year, while Bloomberg Economics expects a 13% contraction.
Comments from the Italian PM have created heavy protests in the Parliament from opposition politicians, who have claimed that the government has created a useless bureaucracy to guarantee the loans. MPs of the governing coalition tried to cover up the shouting by applauding during the PM’s speech.
In most cases, banks fail to deliver funds quickly, said Conte: „We cannot tolerate companies being deprived of the money they need to continue their activity”.
Italy, the European epicenter of the virus, has begun on Monday a loosening of the measures against the virus that have kept the entire country deadlocked. Most shops, bars and restaurants have resumed their operation with social distancing rules, and Italians have been allowed to travel to their regions of origin.
Also yesterday, Conte said that „the worst is behind us”, but he warned Italians, epespecially youth, not to gather in groups in the open air, emphasizing the risk of new outbreaks.
He warned: „It remains crucial when we are outdoors to abide by the social distancing rules and use masks when necessary. It is not the time for parties, night life or for groups”.
Starting with May 25, Italy will begin offering free serum tests for a voluntary sampling from 150000 citizens, said the Italian prime-minister. Italy has seen a constant drop of the number of coronavirus cases in the last few weeks.
• 71% of Italians believe that the coronavirus pandemic can destroy the EU
The hesitant actions of the EU members when it comes to the coronavirus pandemic have boosted euroskepticism, which lead to talks about leaving the EU have begun anew.
A poll posted in April on the website of the Italian government shows that 71% of Italians believe that the coronavirus pandemic can destroy the EU, and approximately 49% of Italy’s citizens would agree to leaving the EU and the Eurozone.
Hans-Olaf Henkel, economist and former European Parliament member, warned that Italy should ask for help from its well-off citizens, instead of relying on Germany and other EU countries, to save itself, as it is struggling to turnaround after the coronavirus pandemic which hit it severely, according to express.co.uk.
He has also suggested that the best solution would be for Italy to leave the Eurozone and return to its own currency, which he called „the new lira”. Henkel’s statements come amid the increasing split between the North and the South of the EU, especially Germany and Italy, when it comes to offsetting the economic and social impact.
Manfred Weber, leader of the European People’s Party in the European Parliament, said, according to the quoted source, that there is a need for „strict controls” to prevent Italy and Spain for engaging in massive public spending using EU cash.
Henkel also responded to the notes by billionaire George Soros, who last week suggested that the EU has the obligation to help Italy, which has been affected by the new coronavirus more than any other state in the Union, by spreading the rebuilding costs among the members of the Eurozone. Former EU Parliament member explained: „I share Soros’ opinions concerning Italy, but I don’t think there is any justification to show financial solidarity with Italy because of the coronavirus crisis”.
Henkel further said: „What do Germans have to do with the decisions made by Italian politicians concerning their healthcare system or the very late decisions to shut down Lombardy? On average, Italians’ wealth per capita is way above that of Germans, for instance. So, before Italian politicians like Salvini or Conte or someone else ask for money from other people’s citizens to offset the financial results of their decisions, they should ask their own wealthy people to show solidarity with their own people”.
Henkel further said that instead of allowing Italian politicians borrow money from other countries, Germany should give them a generous gift in exchange for Italy’s exit from the Eurozone and returning to its own currency.
„In doing so, the Italian Central Bank could devalue its currency to become competitive again, would make the economy stand on its own again and Italy would prosper like it did before the Euro”, he said.
• Brussels warns: The coronavirus is threatening the future of the Eurozone
The coronavirus pandemic threatens the future of the Eurozone by creating a huge economic division between the 19 member states amid the predictions that it will be hit by the deepest recession since the Great Depression, the European Commission warned in early May.
EU Economic Commissioner Paolo Gentiloni, said that there is an urgent need for mitigating the inevitable deepening of the existing social and economic rifts, because countries are exiting at different speeds from the unprecedented economic slowdown.
The economic output of the Eurozone could drop a record 7.75% in 2020 and a recovery of just 6.25% in 2021, and unemployment has increased from 7.5% in 2019 to 9.5%, according to The Guardian.
Gentiloni said that economic activity in the EU has „basically dropped almost one third over night” because of the shutdowns imposed by the European governments.
The European Commission has warned that a number of countries will lag behind when it comes to the recovery next year.
Gentiloni said that the rate of recovery of the European governments will depend on the speed at which the deadlocks can be lifted, the importance of services such as tourism in every economy and the financial resources of each individual country.
Italy’s GDP is expected to fall 9.5%, according to estimates.