Joachim Fritz-Vannahme
28. June 2019

Italy’s splendour and misery

Italy beats China, Italy wins against Sweden – a victory at the Women’s Football World Cup, a triumph in the competition for the 2026 Winter Olympics. Let them go ahead, all the more so as it distracts a little from the other battle Rome is fighting against Brussels. Italy is not Greece, Interior Minister Matteo Salvini rated in Washington, of all places. Italy would not be fobbed off with crumbs.

Indebted with 134 percent of GDP

This was aimed at the growing national debt, which should have brought the country a “blue letter” of warning from Brussels long ago. On 2 July, the EU Commission ought to initiate initiated a deficit procedure against Italy, which the EU finance ministers will discuss a week later. The country is indebted with 134 percent of its GDP; contracts allow for 60 percent.

I bet that, for the time being, everything will remain as it is and the government in Rome will be granted a postponement. The Italian government, above all its strong man Matteo Salvini (of whom the FAZ aptly says that, as minister of the interior, he held “all kinds of other cabinet posts” according to taste), will find that too little. It wants a free ticket for further and higher debt.

“Accoustomed like the cow to the fly”

“The Italians have become accustomed to Juncker’s indignation like the cow to the fly,” complains Gabor Steingart in his morning briefing on 27 June. Supported by statistics and with German severity, the columnist then reads the “debt state” the riot act. All right, but very true to the old joke: the Germans love the Italians, but they don’t respect them; and the Italians respect the Germans, but they don’t love them.

Therefore, it is worth looking at the more neutral Financial Times if one wants to avoid such ethno-psychological reflexes. Here Tony Barber traces the roots of the Italian misery, “Dysfunction in Italy has deep roots”. Barber takes another route than Steingart. He also starts with the image of the indebted and poor Italy, in which around five million people, or 8.4 percent of the population, live in “absolute poverty”. However, the FT editor then turns his attention to the bright sides of the glorious country, “Last year, the trade surplus grew to 4.6 percent of the annual economic output, whereas it was still 1.4 percent in 2010.” Barber warns against being misled by Salvini’s loud tones. “Italy’s problems have deep roots, both cultural and institutional.”

Thatcherism or Colbertism – or none of the two?

Barber then quotes a brilliant analysis by central banker Tommaso Padoa-Schioppa, who died prematurely in 2010A: in its misery, Italy should actually practice either Thatcherism of the free market or state-controlled Colbertism. For Thatcherism, however, Italian politicians lack courage, and for Colbertism the Italian state was simply too inefficient.

Yet how can the Italians stand it? Here the latest OECD country report points the way to the answer: Italians had a high level of well-being in work-life balance, social relations and health, “but not in areas such as environmental quality, education and skills.”

Italy has many strengths, says OECD

Economically, Italy has many strengths: exports, strong consumption, a dynamic manufacturing sector, and a slowly growing employment rate (which, at 58 percent of the working population, is at a very low level). The OECD report even praises the reforms announced for public administration and the judiciary, which could have the greatest impact on the GDP.

So, for now, let’s measure Italy not by the volume of a Matteo Salvini, but by the actions of his government, in which he seems to be capable of doing everything on his own.



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