Italy as a country with least technology compared to other countries in EU region will face sever economic pressures as experts suggest that such a country can’t compete with other states in the bloc. Italy hasn’t yet fully crossed over its latest financial crisis, and therefore will adopt policies that would encounter EU and put the problem on the shoulders of EU currency!
The excessive level of debt in Italy and the stagnation of economic activity has led the country to reap contractions in its Gross Domestic Product for two consecutive quarters. Europe focuses attention on Italy, facing the risks that the Eurozone suffers.
As it had been warning for months, Italy enters a technical recession of its economy, after reaping negative results for two consecutive quarters. The excess of debt that the country has and the tensions maintained with Brussels to achieve a path of reducing the deficit have burdened the Italian GDP, recovering drops of -0.2%.
And, as the main monetary and economic organizations warned, the country and its economy were in a position to act and take the reins of an overly indebted economy. Meanwhile, the Italian government, only, was proposing negotiation measures with Brussels so as not to reduce the debt burden so drastically.
As we can see, this series of actions has led the country to enter a technical recession, a scenario in which the country suffers two contractions, during two consecutive quarters, in its GDP. -0.1% in the third quarter and one, more aggravated, -0.2% in the fourth quarter. Some figures that, although the government foresaw them, put the country in the focus of European organizations.
Obviously, although for the Italian Government it was to be expected, the current situation in Italy is not the most suitable. The European economy is under great threat, mainly due to tensions with the United Kingdom and the excess deficits of several countries such as Spain and Italy. This series of risks puts the European economy at a crossroads, which fears a breakthrough in the expected economic slowdown.
With 130% of GDP, Italy is the country with the most debt in the Eurozone in absolute terms. Although the country was among the hardest hit during the sovereign debt crisis of 2011, it had never reaped two consecutive contractions in its GDP. The economic activity of the country continues to show a stagnation that, sustained in the long term, can be quite worrisome.
As we can see, the effects of debt, in many cases, can be devastating. Despite warnings from various agencies such as the IMF, the mismanagement of Italian administrations, as well as the recent entry of a new government into the country, have been encouraging these contractions that the country shows today.
Even if the government does not agree with Brussels, the country needs debt restructuring immediately. The deleveraging process of a debt like that of Italy, in a scenario where the economy is decreasing at times, could have a very negative effect on the country’s economy.
Although the Italian Prime Minister, Giuseppe Conte, could foresee the contraction of the fourth quarter, it can not be a reason to reassure him, as some sources indicate. For the Italian Government, the perception of control over the economy can lead them to make mistakes that, in the future, can have negative effects on the Italian economy.
Now it is time for the country, along with its new government, to take charge of a derailed economy, in order to reactivate a stagnation in economic activity. For this, the first thing is to achieve budgets in line with the path of reducing the deficit demanded by Europe and alleviate those tensions that, on the other hand, did no good to the country.
For the Italian Government, the sentiments are optimistic, since they foresee a growth of 1% in 2019, while the Bank of Italy and other organizations date it at 0.6%. However, these growth will depend on the government’s performance in economic matters. A performance that, to continue as before, do not expect great achievements of a leveraged and paralyzed economy as it is, right now, Italy.
