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Why Italy Could Be the Epicenter of the Next Financial Crisis

166 points by jedwhite 8y ago

pokemongoaway 8y ago
This reads as EU/UN propaganda - or a threat to Italy if they don't cowtow to the globalist will. Why shouldn't they become more nationalistic and self-sufficient? I didn't see any real arguments as to why the low tax plans wouldn't benefit Italy and help it continue to recover.
riffraff 8y ago
> The proposed budget has exposed the seams in Italy’s governing coalition, where one party favors small-business-friendly tax cuts and the other enormously expensive welfare programs. this has not really happened, the choice by the government has been: "let's do both tax cuts and expand welfare, finance it with debt, growth in the next few years will fix everything". This is the worrisome bit, not that there is any widening seam in the government; the governing coalition is granitic until now, even in the face of things that the electoral body thought would never be compatibile.
cm2187 8y ago
God knows what will happen but there are a lot of small and not so small fires everywhere: - Trade war - Chinese growth faltering - Chinese debt bubble - Brazilian crisis - Turkish crisis - Italian populism / Italian debt - US student loan bubble - Real estate market slowing down in the US and the UK - Brexit - Over leveraged private companies because of the intense private equity deal making - Tech companies reaching market saturation (internet access, smartphone or pc ownership, social medias, ecommerce), tech industry ceasing to be a high growth industry I may forget some. Perhaps the next financial crisis will be the result of a combination of all of these rather than a single event (like the 2008 financial crisis was the result of a combination of a real estate market slowdown, a subprime debt bubble, and an over leveraged and complacent banking system, followed in 2011 by a sovereign debt crisis, of which Italy was already the most worrying elephant in the room).
- agumonkey 8y ago
  2016 felt like a first wave, Europe resisted well, it seems the second one is coming .. surprise surpsrise.
- novaRom 8y ago
  - geopolitical tensions - natural catastrophes
  - danieldk 8y ago
    Increasing tension between countries that reduce emissions of greenhouse gasses and developing countries that immediately undo the reduction with growth. Growing immigration as a result of flooding and draught.
- alecco 8y ago
  Small fires are a good thing. It usually makes the system prepare for the big ones. The big problem in hyper-connected systems is feedback loops.
  - drdeadringer 8y ago
    Small fires, yes. Small fires all together as OP describes may be the problem.
    - alecco 8y ago
      What I'm saying is we should analyze if those problems will fuel a feedback loop or not.
      - coldtea 8y ago
        All the systems we have created only serve to foster feedback loops...
- misja111 8y ago
  Those are small fires, but there's a sleeping volcano as well which is fed by the historically low European interest rate. This is leading to inflated housing prices, company valuations and increasing private and corporate debts. The longer the ECB is keeping its interest rate at zero, the larger this bubble will become.
raverbashing 8y ago
It certainly could cause a crisis Or it could be the student loans bubble bursting. Or the deficit increasing tax cuts in the US
Nasrudith 8y ago
> “We care about markets,” Mr. Di Maio said in a television interview last week. But faced with a choice between bond yields and the Italian people, he added, “I choose the Italian people.” That demagogic rhetoric comes up commonly and it makes the same fundamental mistake or perhaps not wanting to understand that serving your creditors serves you as long as you need credit. The consequence for defaulting is not getting any more loans. Setting up an unsustainable system is setting up for a nasty fall. Reminds me of some claiming that Greece being able to print the drachma would give them an easy out to their crisis. Even if they did it just plain wouldn't work last I heard Greece was still very dependent on imports for things like pharmaceuticals. Hyper-inflating their own currency relative to growth would not be a solution - it does nothing for the cost of imports which they depend upon and is worse than disease it is meant to cure. Less extreme inflation relative to economic growth could boost relative competitiveness of labor costs is their own slight advantage but even that would call for a decline in standard of living as a corollary. Which brings to mind a thing about loans in general and fiscal wisdom - one should take out a loan only if it is an investment in some way - either generating more money or reducing long-term expenses in some way. It may in fact go bust but it has actual potential to pay for itself. The same seems like it would apply to countries and investments can also include some humanitarian purposes - a healthy and well educated workforce can generate more and is a case of everyone wins.
- sgt101 8y ago
  > Less extreme inflation relative to economic growth could boost relative competitiveness of labor costs is their own slight advantage but even that would call for a decline in standard of living as a corollary. The question is do you focus on the "real" economy or the spreadsheet? If you are able to devalue and take the increase of import costs and generate competitive advantage by adding more value at a lower cost then the possibility is that your real economy will grow. More activity will create more actual wealth, which will help your fiscal position and restore standards of living over time. There are a lot of dependencies there, but there is a possible out. On the other hand you can do what happened in Greece, stand behind the currency, slash spending. The problem is that this cuts the real economy without improving competitiveness. The Greek solution (and IMF standard) is to liberalise, sell assets and introduce more market activity into controlled sectors. The problem with this is that you have to actually do it and not just talk (Greece largely hasn't) and also while sometimes it has worked it seems that the precondition for it working has to be that the sectors in question are healthy and straining at the leash... which is not the case in crisis economies in general.
mexicanandre 8y ago
Having spent the last two months the in Italy it’s really sad to see what it is like. Some parts are beautiful but other parts are filthy and feel thirdworld like. I don’t understand how the worlds 10th largest economy is so dirty in such a poor state
- cedivad 8y ago
  10th largest? Last I checked we were the 7th and that was just a few years back. Go back another couple of decades and for a brief moment we held 4th place just after Germany. I believe this decline explains most of what you are seeing.
  - lapnitnelav 8y ago
    Yeah but how do you explain the decline? Do the systemic problems that have always existed getting worse? New ones?
    - cedivad 8y ago
      I don't know what I'm talking about but I cannot resist the urge to tell you what I think. As a bit of a background I've been living outside of Italy for many years now, I was there last week for the first time in 8 months. I can think of several reason: - Italy used to handle Europe's low end manufacturing, like textiles, thanks to our relatively inexpensive wages and nice location. This all disappeared in the last 15 years with production moving to Asia, you can say we got outcompeted at our own game. Here is one example of one such factories in ruin (https://it.wikipedia.org/wiki/File:Valdagno_Marzotto.jpg https://it.wikipedia.org/wiki/File:Valdagno_Marzotto.jpg) I saw last week. That thing is massive. - You heard this before, but taxation is huge. It's one of the reasons I left and it is especially depressing given the next to nothing we have to show for it. We do have a corrupted political class we can't seem to get rid of. I didn't really follow but it seems that in the process of replacing it we ended up with a worst evil, that is populism. I guess stealing a bit from everyone for your own profit is a thing, stealing from future generations for feel-better political manoeuvres is even worse. - The huge divide from north to south. It's a long story, but if you ask the north they will tell you the south is spending all their taxes, if you ask the south they will tell you the north conquered them and stole all of their wealth 200 years ago. The region I'm from, Veneto, used to be one of the wealthiest in Europe until very recently. The big majority of our taxation ended up being redistributed in the south, again, with nothing to show for it thanks to corrupted politicians, mafia and I will add, a general disinterest in improving one's condition due to the very nice weather and the very little you have to do in life to live comfortably in the south. Which I hope doesn't sparkle any debate, it's something I believe you can observe in the whole of Europe taking a train from Sicily to Norway. - English. We don't speak it. If we do it's just a notch above barely. With the internet and international commerce that is holding us back more than you would expect. I wish we had cartoons and movies with no dubbing on national TV. On the positive side, one Indian friend of mine jokingly told me his parents still buy textile machines from Italian companies, which is a nice example of the kind of industries that managed to survive in Italy to this day.
DrNuke 8y ago
The EU is not working for people as it worked for peace and banks. There is nothing shameful in that, the process is difficult and has so many enemies within and outside Europe. Italy often acts as a politics lab, let’s see what happens in May 2019 with the general European election in the EU.
- mexicanandre 8y ago
  I think Italy’s issues are more to do with its government and corruption than the EU. The EU seems to be working for a lot of the other countries just fine economically.
  - danieldk 8y ago
    Despite the shortcomings of the EU, national politicians are also using the EU for shifting the blame of their own failings. In the longer term, this undermines trust in the EU and gives rise to populism. That’s not to say that people who vote populist don’t have a point. It’s hard to understand why companies are making billions in profits, while people are scrambling to make ends meet.
    - Applejinx 8y ago
      I would think that was very easy to understand. Unless you are stuck on some axiom that what's good for the companies is good for… humans. I think it's fairly self evident at this point that you've got people, you've got companies, you've got capitalism as a whole. It's a pecking order and they are somewhat to extremely antagonistic. People, as the most powerless entities in the equation, are very much on the way out.
      - Applejinx 8y ago
        You can downvote all you like, but all this is to be expected and is unsurprising. Humans are to these large collective entities or even larger self-organizing entities like political systems, as cells are to humans. There is no reason to assume a humanocentric viewpoint here, and if assuming one leads to continuous dismay and surprise, you've got to widen your perspective and acknowledge higher-order organisms when they're this obvious. It's like a sort of Singularity. Why would it be surprising if we fail to immediately recognize it for what it is?
AllegedAlec 8y ago
We should kick them, an all other questionable economies, out of the Euro, to tbe frank.
- craigsmansion 8y ago
  But what problem would that solve? Of course it's easy to say "It's their own fault, let them stew in their misery", but that doesn't enhance stability. The EU isn't about making everybody rich, but it is about preventing poverty to such a degree that people en masse would start to panic vote for the first strongman who promises to fix everything. If your solution is the same as the anti-EU politicians from a country ("We should revert to sovereign currency so we can print our way to wealth") it's likely not the best solution for the long term interest of the bloc.
  - AllegedAlec 8y ago
    > Of course it's easy to say "It's their own fault, let them stew in their misery", but that doesn't enhance stability. Neither does having a country have their economy fail every few years.
    - alemhnan 8y ago
      I don't recall Italian economy having failed in recent times.
- alecco 8y ago
  There can be a middle ground. Keep the basics of a trading block and other small but essential concepts. But let them be adults and manage their debt and currency. Currently their populist government doesn't care about yields because pappa EU will guarantee that debt, like they did with Greece. They even own a good chunk of it!
  - AllegedAlec 8y ago
    That's why I said 'euro', not 'EU'.
LoSboccacc 8y ago
here's a better analysis https://www.ineteconomics.org/perspectives/blog/why-hysteria-over-the-italian-budget-is-wrong-headed https://www.ineteconomics.org/perspectives/blog/why-hysteria... this is the usual monthly forecast that gets dropped in the hope that, maybe this time, it'll be true. we had the italy, france, greece, chinese, spanish, portoguese, greece again articles in the last six or so month. at some point people should realize there's a pattern of just yelling loom hoping it sticks and that most of those "articles" when their forecasts are tested are worse than a coin toss, because their core goal is bringing views, not being accurate.
nkjoep 8y ago
I just think politics has never generated employment. Organization and the real economy do. I think planning more debt is a mistake, especially when they have a clear (or smart) way to spend it. (see corruption, mafia, bureaucracy etc...)
alanfranzoni 8y ago
I think that what the last financial crisis shown us is that "too big too fail" is the way to go. If you're big enough, you'll be saved and forgiven, because your fall could create too many problems. This government, with all its shortcomings, is the first in some decades that tries to put italian people first, rather than finance, the euro, or banks. That said, the bet is risky. Salvini started his activities by showing how the EU is inept at solving the issue with immigrants from Africa and Middle East (eu countries could not agree on an eu-wide solution, leaving border states to deal with it). Now the government wants to transfer that ineptitude feeling to the economy. Is Italy actually too big to fail? We'll see. Disclaimer: I'm italian.
- siscia 8y ago
  > This government, with all its shortcomings, is the first in some decades that tries to put italian people first, rather than finance, the euro, or banks. Sorry, but this is just false. In which way they are trying to put the italian people first? The abolition of Fornero (pension reform) will not solve any issue but will only cause more problem down the road, similarly for the re-branding of the "unemployment benefits" into "citizenship income". I am afraid that Italy is both too big to fail but also too big to be saved.
  - IloveHN84 8y ago
    And what do you suggest?
    - siscia 8y ago
      This idea that if someone critics something MUST also propose a solution is destroying any kind of sensible political discussion. Anyway I would suggest to focus on long term growth strategies, simplification of the business, incentive for companies growth. Our economic system is formed by too many small medium companies that simply cannot compete anymore in the global market.
  - alanfranzoni 8y ago
    > In which way they are trying to put the italian people first? I'm not saying they are succeeding. I'm saying they're trying. > The abolition of Fornero (pension reform) will not solve any issue but will only cause more problem down the road It will solve the problem for people who are, right now, too old to stay at work. At least they're not saving pointless banks, aren't they? But, sure, it could be even worse for young people. > re-branding of the "unemployment benefits" into "citizenship income". Universal Basic Income is deemed necessary even by people like Elon Musk, do you know that? Sure, citizenship income won't work the same way. It's quite small in comparison with UBW. What I agree is that, probably, Italy, like other countries, would need totally different and more drastic measures. It's hard to change things in a country where retired people earn large sums of money that they don't deserve (because they haven't saved for that). But, I don't trust the markets, the finance sector or the economic system to change that; those "tools" are used by people who just want to extract the maximum rent, and they'll always use them to achieve that: extract the maximum rent. Unless we start aiming at a different target, which could be "a fair distribution of basic wealth and income", we won't reach a different outcome. All of that, IMHO.
0xferruccio 8y ago
I’m a 21 year old italian from Milan studying my last year of engineering and can’t see a future for myself in this country. As soon as I finish my degree I’ll move somewhere else, most of my friends (that attend the best universities in the country) want to do the same. The only reason most of us stayed here for uni are the incredibly high quality universities that are super cheap. Here are some of the problems we face in my point of view: https://ferrucc.io/italy-s-problems/ https://ferrucc.io/italy-s-problems/
- Theodores 8y ago
  Given how super fast your website is I think that you have a bright future in Italy helping businesses get their online presence up to speed. I checked the Chrome dev tools 'Audit' for your site and I have not seen another website that ranks so highly for performance. Not hard when you just have a simple blog, but the rest of the world is struggling with this.
  - user5994461 8y ago
    A single page with no pictures, no analytics and no ads. Of course it loads fast but sadly it has no business value. No business wants a site with no picture where they can't monitor what people where looking at.
    - Theodores 8y ago
      Most real businesses sell real products and they really do not want adverts for rival products showing on their website. Not having 'ads' is a bonus. If you live in a Silicon Valley bubble where the 'customer is the product' and all you have to sell is advertising space then you might not understand this. Adding images to this website does not necessarily undermine the 'audit' metrics. Clearly this has to be done with sensibly sized images otherwise those metrics will be affected negatively. Small to medium sized real businesses do not necessarily need Google Analytics with people on the payroll to troll the rest of the company with petty 'SEO demands'. If a company has established relationships with distributors or if products are supplied on an 'OEM' basis to a handful of partners then the website need be no more than a glorified 'contact us' page. Server side analytics are fine for such an internet presence. In some ways better as there is no need to have a silly 'cookie' notice. You have a very narrow idea of business value if it is all about stalking your potential customers and ramming adverts that they did not want down their eyeballs, wasting their time and bandwidth in the process.
Bombthecat 8y ago
Yesterday one of my friends said that the EU won't be anymore around 2040, 2050. Sadly i was too drunk to ask why. I don't think it would be the usual answer. Like credit, debt, economic fail etc. He is a professor in cluster economics ( no idea how to translate that) basically he researched development of states, cities and clusters around certain thinks like how a city develops around a river or sea or what happens around a coal mine or easy cheap internet access (his last research) So I kinda wonder now, why he thinks the EU won't exist after 2040/ 50..
- TomMarius 8y ago
  Please do ask him!
timwaagh 8y ago
I dont think the EU will want to sanction Italy over a budget that is, all things considered, within the usual 3% deficit limit. They are already in enough trouble picking more important fights with Poland and Hungary who have downgraded their democracies.
hal9000xp 8y ago
I watched EU debt crisis since 2012. In 2015, I watched this animation about EU debt crisis on Bloomberg: https://www.youtube.com/watch?v=j4_tyEl84IQ https://www.youtube.com/watch?v=j4_tyEl84IQ Since 2016, I spoke with many greeks, spanish and it looks to me that vast majority of them believe in wrong things. Therefore they will continue to vote for left or right populists no matter what. Their left and right are anti free market, anti fiscal conservatism, pro spending, pro welfare, against businesses. In very long term, EU is unsustainable. Too many countries with different interests and huge moral hazard.
- toyg 8y ago
  Since 2001, I spoke with many Americans and they believe in wrong things. Therefore they will continue to vote for left or right populists no matter what. Their left and right are warmongers, anti-internationalists, anti-peace in the Middle East, anti-immigration, anti-poor people, against universal access to medicine. In very long term, US is unsustainable. Too many states with different interests and huge moral hazard. (Of course, I don't really believe this; I'm just showing you how your populistic generalizations can be equally applied to any federal state on the planet. Please try to see beyond the propaganda you are subjected to.)
  - hal9000xp 8y ago
    Usually, people who trade smarter than those who vote. So stock market is constant voting machine for expected future earnings, it's fair to say that indexes provide pretty accurate overview of economy. With that in mind, if you look at SPY (US) and compare it with EWI (Italy) and EWP (Spain), you will see that Italy and Spain are not going anywhere since 2008 and US at that time made huge progress. https://www.marketwatch.com/investing/fund/spy https://www.marketwatch.com/investing/fund/spy https://www.marketwatch.com/investing/fund/ewi https://www.marketwatch.com/investing/fund/ewi https://www.marketwatch.com/investing/fund/ewp https://www.marketwatch.com/investing/fund/ewp Now, take a look at GDP of US: https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:USA&ifdim=region&hl=en&dl=en&ind=false https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&... And compare it with sad picture of Italy and Spain and Greece: https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:GRC:ITA:ESP&ifdim=region&hl=en&dl=en&ind=false https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&... US has populists but their debt denominated in their own currency and on top of that US economy is very diverse and strong. US is much more business friendly than Italy, Spain and Greece. And their debt denominated in currency they can't print. If you are anti-business and pro-welfare, then your business won't flourish and at the same time you will accumulate huge debt.
revel 8y ago
What is not discussed in this article is the staggering amount of Italian debt the German government is exposed to as a legacy from the 2008 financial crisis. An Italian default would be like an atom bomb going off in European markets and the ECB no longer has the means to do much to stop it. Post 2008, the ECB forced a lot of unpopular economic restructuring measures, but it never forced bondholders to take the large haircuts necessary to allow the countries to properly delever. Instead the solution was more debt at favorable rates and forced adoption of contractionary fiscal policy. The result is that you have countries like Greece and Italy that were crushed under a wave of austerity and slowly ballooning debt whose economies never really recovered because of the toxic combination. Germany was largely acting out of self-interest when it provided the financing the countries were asking for so now German banks were terribly exposed to all that debt. The German bailout of European nations moved bank exposure to the German taxpayer. There's some lingering resentment amongst the German public about propping up the Greeks, in particular, but they ain't seen nothin' yet! The next financial crisis doesn't even have to start in Italy in order to trigger the Italian debt bomb and wreck the European economy. A no-deal Brexit could do it. A sharp drop in the American economy could do it. All of this is to say that we've been crossing a shaky rope bridge across two mountains for quite some time and I'm not sure that we'll get to the other side. Happy Sunday everyone!
- atq2119 8y ago
  > and the ECB no longer has the means to do much to stop it This is incorrect. The ECB is the emitter of Euros. They run the whole system, so they always have the option to buy government bonds, for example. Now, whether the politics will allow that to happen is not necessarily obvious. But that's a separate question, let's not get confused about that.
  - krona 8y ago
    > The ECB is the emitter of Euros. They run the whole system, so they always have the option to buy government bonds, for example. There is a 33% limit imposed on the total amount of any country’s public sector debt that can be held by the ECB. Now what you're saying is not just that the limit be increased but also that the ECB only buys Italian bonds, creating a moral hazard arguably as bad as any other outcome.
fibo 8y ago
This is exagerated propaganda. Italy will do it well.
fibo 8y ago
Those articles usually claim also that Italy is full of racism, I leave in Italy and that is completely wrong. Media play with information and can happen that media spread wrong information.
apexalpha 8y ago
I love how, left or right, it always ends up being someones fault. Except Italy. Same story as every thread discussing Greece.
- nkjoep 8y ago
  I couldn't agree more. I am Italian and I think it is only Italian bad administration's fault. All bad choices taken in the last 20 years are showing their effect now.

166 points by jedwhite 8y ago

This reads as EU/UN propaganda - or a threat to Italy if they don't cowtow to the globalist will. Why shouldn't they become more nationalistic and self-sufficient? I didn't see any real arguments as to why the low tax plans wouldn't benefit Italy and help it continue to recover.

riffraff 8y ago

> The proposed budget has exposed the seams in Italy’s governing coalition, where one party favors small-business-friendly tax cuts and the other enormously expensive welfare programs. this has not really happened, the choice by the government has been: "let's do both tax cuts and expand welfare, finance it with debt, growth in the next few years will fix everything". This is the worrisome bit, not that there is any widening seam in the government; the governing coalition is granitic until now, even in the face of things that the electoral body thought would never be compatibile.

cm2187 8y ago

God knows what will happen but there are a lot of small and not so small fires everywhere: - Trade war - Chinese growth faltering - Chinese debt bubble - Brazilian crisis - Turkish crisis - Italian populism / Italian debt - US student loan bubble - Real estate market slowing down in the US and the UK - Brexit - Over leveraged private companies because of the intense private equity deal making - Tech companies reaching market saturation (internet access, smartphone or pc ownership, social medias, ecommerce), tech industry ceasing to be a high growth industry I may forget some. Perhaps the next financial crisis will be the result of a combination of all of these rather than a single event (like the 2008 financial crisis was the result of a combination of a real estate market slowdown, a subprime debt bubble, and an over leveraged and complacent banking system, followed in 2011 by a sovereign debt crisis, of which Italy was already the most worrying elephant in the room).

agumonkey 8y ago
2016 felt like a first wave, Europe resisted well, it seems the second one is coming .. surprise surpsrise.
novaRom 8y ago
- geopolitical tensions - natural catastrophes
- danieldk 8y ago
  Increasing tension between countries that reduce emissions of greenhouse gasses and developing countries that immediately undo the reduction with growth. Growing immigration as a result of flooding and draught.
alecco 8y ago
Small fires are a good thing. It usually makes the system prepare for the big ones. The big problem in hyper-connected systems is feedback loops.
- drdeadringer 8y ago
  Small fires, yes. Small fires all together as OP describes may be the problem.
  - alecco 8y ago
    What I'm saying is we should analyze if those problems will fuel a feedback loop or not.
    - coldtea 8y ago
      All the systems we have created only serve to foster feedback loops...
misja111 8y ago
Those are small fires, but there's a sleeping volcano as well which is fed by the historically low European interest rate. This is leading to inflated housing prices, company valuations and increasing private and corporate debts. The longer the ECB is keeping its interest rate at zero, the larger this bubble will become.

raverbashing 8y ago

It certainly could cause a crisis Or it could be the student loans bubble bursting. Or the deficit increasing tax cuts in the US

Nasrudith 8y ago

> “We care about markets,” Mr. Di Maio said in a television interview last week. But faced with a choice between bond yields and the Italian people, he added, “I choose the Italian people.” That demagogic rhetoric comes up commonly and it makes the same fundamental mistake or perhaps not wanting to understand that serving your creditors serves you as long as you need credit. The consequence for defaulting is not getting any more loans. Setting up an unsustainable system is setting up for a nasty fall. Reminds me of some claiming that Greece being able to print the drachma would give them an easy out to their crisis. Even if they did it just plain wouldn't work last I heard Greece was still very dependent on imports for things like pharmaceuticals. Hyper-inflating their own currency relative to growth would not be a solution - it does nothing for the cost of imports which they depend upon and is worse than disease it is meant to cure. Less extreme inflation relative to economic growth could boost relative competitiveness of labor costs is their own slight advantage but even that would call for a decline in standard of living as a corollary. Which brings to mind a thing about loans in general and fiscal wisdom - one should take out a loan only if it is an investment in some way - either generating more money or reducing long-term expenses in some way. It may in fact go bust but it has actual potential to pay for itself. The same seems like it would apply to countries and investments can also include some humanitarian purposes - a healthy and well educated workforce can generate more and is a case of everyone wins.

sgt101 8y ago
> Less extreme inflation relative to economic growth could boost relative competitiveness of labor costs is their own slight advantage but even that would call for a decline in standard of living as a corollary. The question is do you focus on the "real" economy or the spreadsheet? If you are able to devalue and take the increase of import costs and generate competitive advantage by adding more value at a lower cost then the possibility is that your real economy will grow. More activity will create more actual wealth, which will help your fiscal position and restore standards of living over time. There are a lot of dependencies there, but there is a possible out. On the other hand you can do what happened in Greece, stand behind the currency, slash spending. The problem is that this cuts the real economy without improving competitiveness. The Greek solution (and IMF standard) is to liberalise, sell assets and introduce more market activity into controlled sectors. The problem with this is that you have to actually do it and not just talk (Greece largely hasn't) and also while sometimes it has worked it seems that the precondition for it working has to be that the sectors in question are healthy and straining at the leash... which is not the case in crisis economies in general.

mexicanandre 8y ago

Having spent the last two months the in Italy it’s really sad to see what it is like. Some parts are beautiful but other parts are filthy and feel thirdworld like. I don’t understand how the worlds 10th largest economy is so dirty in such a poor state

cedivad 8y ago
10th largest? Last I checked we were the 7th and that was just a few years back. Go back another couple of decades and for a brief moment we held 4th place just after Germany. I believe this decline explains most of what you are seeing.
- lapnitnelav 8y ago
  Yeah but how do you explain the decline? Do the systemic problems that have always existed getting worse? New ones?
  - cedivad 8y ago
    I don't know what I'm talking about but I cannot resist the urge to tell you what I think. As a bit of a background I've been living outside of Italy for many years now, I was there last week for the first time in 8 months. I can think of several reason: - Italy used to handle Europe's low end manufacturing, like textiles, thanks to our relatively inexpensive wages and nice location. This all disappeared in the last 15 years with production moving to Asia, you can say we got outcompeted at our own game. Here is one example of one such factories in ruin (https://it.wikipedia.org/wiki/File:Valdagno_Marzotto.jpg https://it.wikipedia.org/wiki/File:Valdagno_Marzotto.jpg) I saw last week. That thing is massive. - You heard this before, but taxation is huge. It's one of the reasons I left and it is especially depressing given the next to nothing we have to show for it. We do have a corrupted political class we can't seem to get rid of. I didn't really follow but it seems that in the process of replacing it we ended up with a worst evil, that is populism. I guess stealing a bit from everyone for your own profit is a thing, stealing from future generations for feel-better political manoeuvres is even worse. - The huge divide from north to south. It's a long story, but if you ask the north they will tell you the south is spending all their taxes, if you ask the south they will tell you the north conquered them and stole all of their wealth 200 years ago. The region I'm from, Veneto, used to be one of the wealthiest in Europe until very recently. The big majority of our taxation ended up being redistributed in the south, again, with nothing to show for it thanks to corrupted politicians, mafia and I will add, a general disinterest in improving one's condition due to the very nice weather and the very little you have to do in life to live comfortably in the south. Which I hope doesn't sparkle any debate, it's something I believe you can observe in the whole of Europe taking a train from Sicily to Norway. - English. We don't speak it. If we do it's just a notch above barely. With the internet and international commerce that is holding us back more than you would expect. I wish we had cartoons and movies with no dubbing on national TV. On the positive side, one Indian friend of mine jokingly told me his parents still buy textile machines from Italian companies, which is a nice example of the kind of industries that managed to survive in Italy to this day.

DrNuke 8y ago

The EU is not working for people as it worked for peace and banks. There is nothing shameful in that, the process is difficult and has so many enemies within and outside Europe. Italy often acts as a politics lab, let’s see what happens in May 2019 with the general European election in the EU.

mexicanandre 8y ago
I think Italy’s issues are more to do with its government and corruption than the EU. The EU seems to be working for a lot of the other countries just fine economically.
- danieldk 8y ago
  Despite the shortcomings of the EU, national politicians are also using the EU for shifting the blame of their own failings. In the longer term, this undermines trust in the EU and gives rise to populism. That’s not to say that people who vote populist don’t have a point. It’s hard to understand why companies are making billions in profits, while people are scrambling to make ends meet.
  - Applejinx 8y ago
    I would think that was very easy to understand. Unless you are stuck on some axiom that what's good for the companies is good for… humans. I think it's fairly self evident at this point that you've got people, you've got companies, you've got capitalism as a whole. It's a pecking order and they are somewhat to extremely antagonistic. People, as the most powerless entities in the equation, are very much on the way out.
    - Applejinx 8y ago
      You can downvote all you like, but all this is to be expected and is unsurprising. Humans are to these large collective entities or even larger self-organizing entities like political systems, as cells are to humans. There is no reason to assume a humanocentric viewpoint here, and if assuming one leads to continuous dismay and surprise, you've got to widen your perspective and acknowledge higher-order organisms when they're this obvious. It's like a sort of Singularity. Why would it be surprising if we fail to immediately recognize it for what it is?

AllegedAlec 8y ago

We should kick them, an all other questionable economies, out of the Euro, to tbe frank.

craigsmansion 8y ago
But what problem would that solve? Of course it's easy to say "It's their own fault, let them stew in their misery", but that doesn't enhance stability. The EU isn't about making everybody rich, but it is about preventing poverty to such a degree that people en masse would start to panic vote for the first strongman who promises to fix everything. If your solution is the same as the anti-EU politicians from a country ("We should revert to sovereign currency so we can print our way to wealth") it's likely not the best solution for the long term interest of the bloc.
- AllegedAlec 8y ago
  > Of course it's easy to say "It's their own fault, let them stew in their misery", but that doesn't enhance stability. Neither does having a country have their economy fail every few years.
  - alemhnan 8y ago
    I don't recall Italian economy having failed in recent times.
alecco 8y ago
There can be a middle ground. Keep the basics of a trading block and other small but essential concepts. But let them be adults and manage their debt and currency. Currently their populist government doesn't care about yields because pappa EU will guarantee that debt, like they did with Greece. They even own a good chunk of it!
- AllegedAlec 8y ago
  That's why I said 'euro', not 'EU'.

LoSboccacc 8y ago

here's a better analysis https://www.ineteconomics.org/perspectives/blog/why-hysteria-over-the-italian-budget-is-wrong-headed https://www.ineteconomics.org/perspectives/blog/why-hysteria... this is the usual monthly forecast that gets dropped in the hope that, maybe this time, it'll be true. we had the italy, france, greece, chinese, spanish, portoguese, greece again articles in the last six or so month. at some point people should realize there's a pattern of just yelling loom hoping it sticks and that most of those "articles" when their forecasts are tested are worse than a coin toss, because their core goal is bringing views, not being accurate.

nkjoep 8y ago

I just think politics has never generated employment. Organization and the real economy do. I think planning more debt is a mistake, especially when they have a clear (or smart) way to spend it. (see corruption, mafia, bureaucracy etc...)

alanfranzoni 8y ago

I think that what the last financial crisis shown us is that "too big too fail" is the way to go. If you're big enough, you'll be saved and forgiven, because your fall could create too many problems. This government, with all its shortcomings, is the first in some decades that tries to put italian people first, rather than finance, the euro, or banks. That said, the bet is risky. Salvini started his activities by showing how the EU is inept at solving the issue with immigrants from Africa and Middle East (eu countries could not agree on an eu-wide solution, leaving border states to deal with it). Now the government wants to transfer that ineptitude feeling to the economy. Is Italy actually too big to fail? We'll see. Disclaimer: I'm italian.

siscia 8y ago
> This government, with all its shortcomings, is the first in some decades that tries to put italian people first, rather than finance, the euro, or banks. Sorry, but this is just false. In which way they are trying to put the italian people first? The abolition of Fornero (pension reform) will not solve any issue but will only cause more problem down the road, similarly for the re-branding of the "unemployment benefits" into "citizenship income". I am afraid that Italy is both too big to fail but also too big to be saved.
- IloveHN84 8y ago
  And what do you suggest?
  - siscia 8y ago
    This idea that if someone critics something MUST also propose a solution is destroying any kind of sensible political discussion. Anyway I would suggest to focus on long term growth strategies, simplification of the business, incentive for companies growth. Our economic system is formed by too many small medium companies that simply cannot compete anymore in the global market.
- alanfranzoni 8y ago
  > In which way they are trying to put the italian people first? I'm not saying they are succeeding. I'm saying they're trying. > The abolition of Fornero (pension reform) will not solve any issue but will only cause more problem down the road It will solve the problem for people who are, right now, too old to stay at work. At least they're not saving pointless banks, aren't they? But, sure, it could be even worse for young people. > re-branding of the "unemployment benefits" into "citizenship income". Universal Basic Income is deemed necessary even by people like Elon Musk, do you know that? Sure, citizenship income won't work the same way. It's quite small in comparison with UBW. What I agree is that, probably, Italy, like other countries, would need totally different and more drastic measures. It's hard to change things in a country where retired people earn large sums of money that they don't deserve (because they haven't saved for that). But, I don't trust the markets, the finance sector or the economic system to change that; those "tools" are used by people who just want to extract the maximum rent, and they'll always use them to achieve that: extract the maximum rent. Unless we start aiming at a different target, which could be "a fair distribution of basic wealth and income", we won't reach a different outcome. All of that, IMHO.

0xferruccio 8y ago

I’m a 21 year old italian from Milan studying my last year of engineering and can’t see a future for myself in this country. As soon as I finish my degree I’ll move somewhere else, most of my friends (that attend the best universities in the country) want to do the same. The only reason most of us stayed here for uni are the incredibly high quality universities that are super cheap. Here are some of the problems we face in my point of view: https://ferrucc.io/italy-s-problems/ https://ferrucc.io/italy-s-problems/

Theodores 8y ago
Given how super fast your website is I think that you have a bright future in Italy helping businesses get their online presence up to speed. I checked the Chrome dev tools 'Audit' for your site and I have not seen another website that ranks so highly for performance. Not hard when you just have a simple blog, but the rest of the world is struggling with this.
- user5994461 8y ago
  A single page with no pictures, no analytics and no ads. Of course it loads fast but sadly it has no business value. No business wants a site with no picture where they can't monitor what people where looking at.
  - Theodores 8y ago
    Most real businesses sell real products and they really do not want adverts for rival products showing on their website. Not having 'ads' is a bonus. If you live in a Silicon Valley bubble where the 'customer is the product' and all you have to sell is advertising space then you might not understand this. Adding images to this website does not necessarily undermine the 'audit' metrics. Clearly this has to be done with sensibly sized images otherwise those metrics will be affected negatively. Small to medium sized real businesses do not necessarily need Google Analytics with people on the payroll to troll the rest of the company with petty 'SEO demands'. If a company has established relationships with distributors or if products are supplied on an 'OEM' basis to a handful of partners then the website need be no more than a glorified 'contact us' page. Server side analytics are fine for such an internet presence. In some ways better as there is no need to have a silly 'cookie' notice. You have a very narrow idea of business value if it is all about stalking your potential customers and ramming adverts that they did not want down their eyeballs, wasting their time and bandwidth in the process.

Bombthecat 8y ago

Yesterday one of my friends said that the EU won't be anymore around 2040, 2050. Sadly i was too drunk to ask why. I don't think it would be the usual answer. Like credit, debt, economic fail etc. He is a professor in cluster economics ( no idea how to translate that) basically he researched development of states, cities and clusters around certain thinks like how a city develops around a river or sea or what happens around a coal mine or easy cheap internet access (his last research) So I kinda wonder now, why he thinks the EU won't exist after 2040/ 50..

TomMarius 8y ago
Please do ask him!

timwaagh 8y ago

I dont think the EU will want to sanction Italy over a budget that is, all things considered, within the usual 3% deficit limit. They are already in enough trouble picking more important fights with Poland and Hungary who have downgraded their democracies.

hal9000xp 8y ago

I watched EU debt crisis since 2012. In 2015, I watched this animation about EU debt crisis on Bloomberg: https://www.youtube.com/watch?v=j4_tyEl84IQ https://www.youtube.com/watch?v=j4_tyEl84IQ Since 2016, I spoke with many greeks, spanish and it looks to me that vast majority of them believe in wrong things. Therefore they will continue to vote for left or right populists no matter what. Their left and right are anti free market, anti fiscal conservatism, pro spending, pro welfare, against businesses. In very long term, EU is unsustainable. Too many countries with different interests and huge moral hazard.

toyg 8y ago
Since 2001, I spoke with many Americans and they believe in wrong things. Therefore they will continue to vote for left or right populists no matter what. Their left and right are warmongers, anti-internationalists, anti-peace in the Middle East, anti-immigration, anti-poor people, against universal access to medicine. In very long term, US is unsustainable. Too many states with different interests and huge moral hazard. (Of course, I don't really believe this; I'm just showing you how your populistic generalizations can be equally applied to any federal state on the planet. Please try to see beyond the propaganda you are subjected to.)
- hal9000xp 8y ago
  Usually, people who trade smarter than those who vote. So stock market is constant voting machine for expected future earnings, it's fair to say that indexes provide pretty accurate overview of economy. With that in mind, if you look at SPY (US) and compare it with EWI (Italy) and EWP (Spain), you will see that Italy and Spain are not going anywhere since 2008 and US at that time made huge progress. https://www.marketwatch.com/investing/fund/spy https://www.marketwatch.com/investing/fund/spy https://www.marketwatch.com/investing/fund/ewi https://www.marketwatch.com/investing/fund/ewi https://www.marketwatch.com/investing/fund/ewp https://www.marketwatch.com/investing/fund/ewp Now, take a look at GDP of US: https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:USA&ifdim=region&hl=en&dl=en&ind=false https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&... And compare it with sad picture of Italy and Spain and Greece: https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_mktp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:GRC:ITA:ESP&ifdim=region&hl=en&dl=en&ind=false https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&... US has populists but their debt denominated in their own currency and on top of that US economy is very diverse and strong. US is much more business friendly than Italy, Spain and Greece. And their debt denominated in currency they can't print. If you are anti-business and pro-welfare, then your business won't flourish and at the same time you will accumulate huge debt.

revel 8y ago

What is not discussed in this article is the staggering amount of Italian debt the German government is exposed to as a legacy from the 2008 financial crisis. An Italian default would be like an atom bomb going off in European markets and the ECB no longer has the means to do much to stop it. Post 2008, the ECB forced a lot of unpopular economic restructuring measures, but it never forced bondholders to take the large haircuts necessary to allow the countries to properly delever. Instead the solution was more debt at favorable rates and forced adoption of contractionary fiscal policy. The result is that you have countries like Greece and Italy that were crushed under a wave of austerity and slowly ballooning debt whose economies never really recovered because of the toxic combination. Germany was largely acting out of self-interest when it provided the financing the countries were asking for so now German banks were terribly exposed to all that debt. The German bailout of European nations moved bank exposure to the German taxpayer. There's some lingering resentment amongst the German public about propping up the Greeks, in particular, but they ain't seen nothin' yet! The next financial crisis doesn't even have to start in Italy in order to trigger the Italian debt bomb and wreck the European economy. A no-deal Brexit could do it. A sharp drop in the American economy could do it. All of this is to say that we've been crossing a shaky rope bridge across two mountains for quite some time and I'm not sure that we'll get to the other side. Happy Sunday everyone!

atq2119 8y ago
> and the ECB no longer has the means to do much to stop it This is incorrect. The ECB is the emitter of Euros. They run the whole system, so they always have the option to buy government bonds, for example. Now, whether the politics will allow that to happen is not necessarily obvious. But that's a separate question, let's not get confused about that.
- krona 8y ago
  > The ECB is the emitter of Euros. They run the whole system, so they always have the option to buy government bonds, for example. There is a 33% limit imposed on the total amount of any country’s public sector debt that can be held by the ECB. Now what you're saying is not just that the limit be increased but also that the ECB only buys Italian bonds, creating a moral hazard arguably as bad as any other outcome.

fibo 8y ago

This is exagerated propaganda. Italy will do it well.

fibo 8y ago

Those articles usually claim also that Italy is full of racism, I leave in Italy and that is completely wrong. Media play with information and can happen that media spread wrong information.

apexalpha 8y ago

I love how, left or right, it always ends up being someones fault. Except Italy. Same story as every thread discussing Greece.

nkjoep 8y ago
I couldn't agree more. I am Italian and I think it is only Italian bad administration's fault. All bad choices taken in the last 20 years are showing their effect now.