Italy joined the eurozone in 1999, with Prime Minister Massimo d’Alema of the ‘Democratic Left’ party. This fateful participation, which entailed the complete loss of independent monetary policy, is undoubtedly the main cause behind the disappointing performance of the Italian economy.
The country’s GDP currently stands at €1.75tn and its growth rates are extremely anaemic, reaching just 0.9%. real per capita gross domestic product (GDP), according to reliable calculations. This increased in the period 1969-1998, when the country had its national currency, the lire, by 104%, while in the period 1999-2016, where the country had already adopted the euro, it fell by 0.75%. On the other hand, in the period 1999-2016, Germany’s real per capita GDP grew by 26.1%, making the citizens of that country the wealthiest among the main economies of the eurozone.
Italy, at the same time, has the third largest state debt in the world after the US and Japan, and therefore its rescue is impossible, since it exceeds the capabilities of European states. The country’s debt, as a percentage of the GDP, currently stands at 132% and in absolute figures to €2,336tn, while in 1999 it was 109,7%. So, one can easily notice a significant increase.
Simultaneously, since 1999, Italy’s steep downhill course in terms of development had begun. Fiat has ceased to dominate the European car market, and the country lost its leading position as a producer of white household appliances. Many factories shut down and several large businesses relocated to other countries. In addition, millions of small and medium-sized enterprises (SMEs), which were based on the periodic devaluation of the currency, to offset the inadequacies of the Italian economic system, could no longer compete outside the Italian border. What are these inadequacies? Labour market problems, low public and private investment in development and research, high government bureaucracy, a dysfunctional, costly and slow-moving justice system, high levels of corruption and tax evasion etc.
Unemployment is about 11% of the labour force, the fourth highest in the EU after Greece, Spain and Cyprus. Meanwhile, unemployment among young people aged between 15 and 24, which, according to the latest statistics from the Istat Statistics, amounts to a very high percentage of 30.8%, clearly reflecting the deep economic and social crisis which swept Italy.
Poverty rose to its highest level since 2005. The latest Istat report registered 5 million people in absolute poverty in 2017. On a percentage basis, 6.9% of Italian households live in absolute poverty, namely, in a situation where it is not possible to cover the minimum monthly expenses for goods and services which, Italian families consider necessary for a minimum acceptable standard of living.
Italy has a largest number of bank branches per inhabitant across Europe, which is an additional characteristic of a faulty business model, surviving only by interest and corporate loans. Thus, given that the interest rates in the eurozone are zero, banks are operating not profiting, having accumulated insecurities (red loans) that currently reach about €260bn (15% of the GDP), of which much is lost.
The Italian economy, the third largest in the woefully-designed monetary union, loaded with debts and red loans of the Eurozone, which is an incredibly rigid system, an iron-clogged space for 19 different countries in productivity, inflation, trade balance and technological progress.
Therefore, the eurozone is nothing else but a field of conflicting interests among its member countries. Thus, what is of great interest to Italy is not of any interest for Germany. However, reconciling interests over the years of the common currency has proven to be impossible. This is because Germany as the primary economic power has managed to rule and dominate, using the euro for its benefit, while other countries instead of resisting and even colliding, bowed and obeyed.
However, the cost of delaying Italy’s exit from the eurozone—which has so far prevented an apparent fear of the Italian political system of any short-term exit negative effects—will ultimately prove to be far greater than the rupture cost in the beginning of the economic crisis.
The recent decision by the coalition government of the Movement 5 stars M5S and Lega, formed in May 2018, to submit a budget for 2019 with a deficit of 2.4% of the GDP is clearly in the right direction, because reinforcing the Italian economy is important by strengthening domestic demand. What is also important is the prosperity of Italian people, and not Brussels’s strict fiscal regulations imposed by Germany and which do not allow it.
Italy must at last cease to succumb to Berlin’s commands and fear a break with the German eurozone because it is able to return to the lire and thus regain its political, economic and institutional sovereignty. Despite current problems, it still has the second largest euro industry after Germany and the fifth largest in the world, with participation of 19% of the country’s GDP. Italy manufactures aircrafts, cars, weapons, electronic systems and perfumes, shoes and clothes. Italy also needs energy, which is cheap oil and gas, and that it does not have. But it could secure oil from its former colony, Libya, and gas from Gazprom. Thus, with low production costs and a flexible national currency, it would become extremely competitive.
To sum it up, Italy, will sink numerically if its political leadership does not take, as long as it is still time, the ground-breaking and dynamic decision to return to its national currency.
Isidoros Karderinis was born in Athens in 1967. He is a novelist, poet and columnist. He studied economics and has completed postgraduate studies in the tourism economy. Articles of his have been republished in newspapers, magazines and sites worldwide. His poems have been translated into English, French and Spanish and published in literary magazines and literary sections of newspapers. He has published seven poetry books and two novels. His books have been published in the US, the UK, Spain and Italy.
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