Externe

Italy’s Prime Minister-in-waiting may be energized by grandiose visions of a European counterweight to American power, but most Italians will be more concerned with the dismal state of Italy’s economy. Over 80 percent of the Italian electorate turned out to vote this week, and the economic downturn was by far the most pressing issue.


According to the Economist Intelligence Unit (EIU), Italy’s economic growth has been “the worst among the EU member states in the last 10-15 years. After expanding by just 0.1% in 2003 and by 0.9% in 2004, GDP rose by a mere 0.1% in 2005.”[12] The EIU forecasts that Italy’s GDP will grow at most by just 1.5 percent in 2006-07. Italy’s budget deficit is expected to rise to 4-4.5 percent of GDP in 2006-07, significantly above the 3 percent ceiling set by the EU Stability and Growth Pact.[13] To compound matters, Rome’s public debt stands at 106 percent of annual GDP, forcing the Italian government to spend 4.6 percent of GDP ($79 billion) a year just to service it. In the face of mounting competition from Asia, Italy’s share of world trade has fallen from 4.6 percent in 1995 to just 2.7 percent in 2005.[14]



Italy’s long-term prospects are exceedingly gloomy, with poor demographics adding to the problems of heavy debt and weak competitiveness in global markets. Italy’s population is among the oldest in Europe, and the country has a birthrate of just 1.3 children per woman.[15] Italy has the lowest employment rate among its working-age population in the entire EU, at just 58 percent. Since the introduction of the Euro in 1999, unit labor costs in Italy have climbed by 10 percent.[16]



A Prodi government, held political hostage by the Communists and powerful trade union interests, will likely not have the political will, vision, or ability to implement the market reforms necessary to reverse Italy’s economic decline. Prodi’s pledge to reverse laws introduced by the Berlusconi government to increase competitiveness in the labor market will only further weaken the Italian economy.