Italy: The Next Financial Disaster?
by Brady Condon
Italy – the problem
Italy is a land of shocking disparity. For much of its history, Italy has faced the challenge of balancing all its status as a center of culture and history with its government’s crippling incompetence. While Italy has one of the most prosperous economies in today’s world, there are major problems lying underneath, which threaten not only Italy but the entire world. I am concerned about a looming crisis that by the sheer grace of Jesus Christ, Chef Boyardee, and whatever gods are left on the booted peninsula, hasn’t already set Italy on fire.
Italian debt – a fun filled adventure
Italy climbs the ladder onto the roof of the train and tries to lock it shut behind him. He doesn’t take the time to find out if it works. He continues his run up the train, only to hear a loud crash behind him; it’s the debt-collector. The train speeds towards a tunnel, only large enough to fit the train itself, nothing on top of it. As he finds itself speeding towards the tunnel, Italy turns to the camera and says, “You’re probably wondering how I got into this situation. Well . . . we need to start at the beginning.” And at the beginning we shall start.
Italy actually used to experience extreme economic growth. At one point in time, Italy had a GDP growth of over 10%, and was once the 4th largest economy in the world, only behind the US, Japan, and Germany, serving as a valuable asset in both NATO and the European Union. Even to this day Italy’s economy remains the 9th largest in the world.
In fact, Italy would be all fine and dandy if they didn’t have to worry about the thing that nearly killed their buddy Greece, debt. Italy’s debt is currently over 130% of its GDP, meaning that Italy cannot pay it off. This threatens to create yet another Euro-crisis, except that this crisis will be much harder for Germany and the rest of the EU to bail out. The causes of Italian debt can be summed up in a few reasons:
1. Economic Growth
Unfortunately for the Italians, tourist traps and Vespas are not enough to keep the Italian economy vibrant. If it’s a good year, Italy has a growth rate under 2%. If it is a bad year, it goes in the red. This is exemplified in Italy’s total GDP, which has yet to return to its peak from a decline in 2014. Without growth, Italy is not able to spend as much on government services without incurring massive debt.
Because Italy is an example of the modern welfare state, government healthcare and all, the citizens are unwilling to give up the luxuries they had when a growing economy, forcing Italy to gain debt. Although modern economics now allows for a country to gain some debt, the amount of debt Italy finds itself in puts it in a very precarious situation when some of its loaners decide to cash in their checks.
2. Italian Mafia
I know it’s cliche, but I kind of have to touch on the Italian Mafia in order to properly explain Italy’s problems. That being said, I have no personal problems with the Italian Mafia, and I will not criticize them for anything. I will simply say that they effectively take $100 billion a year from the Italian government. I’ll leave it at that.
3. The Italian South
All of Italy’s problems are exemplified in their southern region. In large swaths of the South, unemployment is nearly triple some regions in the North. This lack of opportunity is causing young people to flee their homes to the more prosperous North, or, more likely, to a more prosperous country.
Both of these problems are made even worse by corruption in the region, which mainly stems from the power of the mafia there. Overall, if Italy wants to solve its problems, it needs to fix the problems in the South first.
4. They can’t do anything about it
As crazy as it seems, the only way to get Italy out of its slump is to incur more debt by increasing its budget deficit from 2% to 2.4%. The problem is that the rest of the European Union is not in favor of Italy doing this. The European Commission, which gets a say on how a country in the EU controls their budget, chose to freeze European spending in Italy until the Italians lowered their deficit. Finally, in December of 2018, the Commission and Italy came to an agreement, resuming spending in the country, but this merely delays Italy’s crisis from inevitably coming back to a head. The issue with the Italian debt crisis is that they do not have enough autonomy to fix their own economy. Without the European Commission allowing the Italians control over their economy to solve their crisis, Italy is powerless to stop the incoming crisis from taking hold of Italy, and later, the European Union
But yet they are still here
For some reason beyond my comprehension, Italy hasn’t collapsed. Like a chicken with its head cut off, Italy manages to continue running around like nothing is wrong. In researching for this article, I saw articles dating back to the mid 2000s warning of Italy’s collapse, but it still hasn’t collapsed. I do not understand why Italy hasn’t become the world’s next crisis. Maybe I’ll never understand more than chalking it up to Italian incompetency being so potent that it screwed its way to a limbo, where, although they cannot do better, they cannot do worse either.
Maybe if we all leave Italy be, we can forget about them, and like a myth, pass down their story to teach the next generation. Who knows? Maybe aliens will come down centuries from now and stumble upon the anomaly that is Italy, and maybe they can explain what I can’t: how have the Italians made it this far?