Italy’s economy is growing again, but it’s still the worst performer in the euro region, souring voters’ spirits before the March 4 election.
With polls before the two-week blackout showing no overall winner, the parties are honing their pitches on the economy, Bloomberg reported.
Former prime minister Silvio Berlusconi promises his tax-cutting plans will drive faster growth. The anti-establishment Five Star Movement guarantees a “citizen’s income” for the most disadvantaged.
The ruling Democratic Party points to the steady recovery from the country’s worst recession since World War II. Yet it’s hampered by unemployment stuck at almost 11%.
Few Italians closely follow the latest economic data from the national statistics agency Istat, but they know the recovery is much patchier than the government’s rhetoric suggests.
Seven Points Show Why
- The economy has expanded for 14 straight quarters, though at the current pace it would need as much as six more years to get back to the level before the financial crisis. Meanwhile, the economy of the 19-nation eurozone is enjoying its best growth in a decade.
- “Made in Italy” still spells magic. That means exports and industrial output are up as the global economy improves.
- Italy has created almost one million jobs since the Democratic Party overhauled labor laws in 2014, but 59% of them are for defined periods. In other words, the unlucky worker may be out on the street afterward.
- Even in the euroland’s third-biggest economy, a collapse into poverty is always waiting outside the door for the most unfortunate. Italians at risk rose by more than three million to 18 million in the decade through 2016, the last year for which data are available.
- Italian personal income taxes, with a top rate including surcharges of 47.2%, are among the highest in Europe and well above the 39% average for the 28-member EU. It’s no wonder that the most discussed proposal in the election campaign is former Premier Silvio Berlusconi’s promise of a 23% flat tax for all.
- More people and small businesses can’t pay back their loans. Regions with high default rates tended to vote Five Star Movement in 2013. That could spell trouble for the incumbents this time around.
- Italian home prices have been falling for more than six years in nominal terms and kept declining last year. A partial recovery in the number of sales is running out of steam.
While the economy has been growing for 14 consecutive quarters, it hasn’t convinced voters that the country has turned a corner toward lasting prosperity. Whoever inherits stewardship of the economy after March 4, is going to have their work cut out for them.
Risks to the Eurozone
- Italy’s forthcoming parliamentary elections must produce a government committed to solving the country’s crippling economic problems via far-reaching reforms.
- Judging by Italy’s poor economic performance since 2000, it would seem that adopting the euro as its currency in 1999 was a big mistake. However, leaving the euro at this stage would not seem to be a viable alternative for the country.
- Most economists would agree that Italy needs faster economic growth if it is to resolve its public debt and banking-sector problems in an orderly manner.
- With an appreciable risk that Italy could crash out of the euro, hopefully the elections produce a united government committed to serious economic reform.
A Political Firestorm
Italy’s center-left government is facing a political firestorm less than two weeks before its general election after a unit of Whirlpool, the US appliance maker, confirmed plans to lay off almost 500 staff near Turin and shift production to Slovakia.
With opposition parties and the media seizing on the plight of the workers and employee activists blocking roads and chaining themselves to the factory gate, the furor comes at a particularly sensitive time in the campaign for the ruling Democratic party.
The PD is struggling to convince voters that the economy has improved on its watch, despite a return to growth and lower unemployment.
It has also put the party on the defensive over its pro-EU, pro-trade stance as Eurosceptic, anti-globalization opposition politicians blamed Brussels for the company’s decision to ditch Italy in favor of Slovakia.
“If you have a single currency and a single market, you compete on labor costs, and companies will shift wherever they can pay their workers less,” said Claudio Borghi, economic adviser and parliamentary candidate for the anti-euro Northern League, part of the center-right coalition leading the polls.
