4 Reasons Why Italy's Economy Is Such a Disaster

[xchrom]

http://www.theatlantic.com/business/archive/2011/11/4-reasons-why-italys-economy-is-such-a-disaster/248238/

Forget Lehman Brothers. Forget Greece. Italy, the world's eighth largest economy, is teetering. Should it fall, the ensuing economic disaster will be unlike anything we've seen this decade.

The country's debt crisis, fueled by doubts over the government's ability to enact broad economic reforms, took a drastic turn for the worse yesterday, when Italy's bond yields rocketed above 7% yesterday. That's a crucial threshold--the bright red line Ireland and Portugal passed before their borrowing became so expensive that the European Union had to bail them out. This time, though, the stakes are higher and the options are more limited. Italy's debt is larger than the whole economies of Ireland, Portugal, and Greece combined. The euro zone simply might not have the political will or financial resources necessary to backstop those enormous obligations. As one analyst pointedly told CNBC, the country is "too big to fail, too big to save."

Leave the euro, take the cannoli: Returning to the lira might be the best solution.

What's responsible for pushing Italy over the edge? Here are four forces to blame: the debt, the productivity shortfall, widespread corruption, or the slow South of Italy.

1. BLAME THE DEBT

Italy's debt ratio is the second worst in the euro zone, behind only Greece. The country's national debt weighs in at roughly 120% the size of its gross domestic product, or about $2.6 trillion. But that dizzying figure alone isn't what's causing panic in the marketplace. In fact, there was a time in recent memory when the market wouldn't have thought much of it at all. Italy has shouldered debt-to-GDP ratios well above 100% for about 20 years now, thanks largely to a government spending binge way back in the 1980s. In 1999, when Italy officially adopted the Euro, its debt-to-GDP ratio was 126%.

[MADem]

1. I can't agree with all of this least of all, Blame the South.

4. BLAME THE SOUTH


Italy's troubles are also a regional story. When Giuseppe Garibaldi united the country in the 19th century, he brought together three distinct regions: the republics of the North, the central papal states surrounding Rome, and the southern Kingdom of Sicily. Some believed that the regions were too distinct to function as a single country. And as the Economist has pointed out, the cultural divides have stayed shockingly impervious to change. GDP per capita in the North and center is more than 40% higher than the south, which holds about a third of the country's overall population. Unemployment, crime, and black market labor are also concentrated in the South. Imagine a country composed entirely of New York State, Mississippi and Alabama, and you begin to understand Italy's crisis.



The south is the ass end, that gets the least help, the least resources devoted to it, and a blind eye to crime (camorra in Napoli, mafia in Sicilia, etc). They're ignored, ridiculed and insulted. There's no effort to incentivize south of Rome at all. It's why there are so many dispossessed southerners living in Milan, in shitty crowded apartments like guest workers, because the nation won't invest in the most beautiful part of their own damn country. Crying shame.

I'd say the four top reasons for Italy's failure are Berlusconi, Berlusconi, Berlusconi....and Berlusconi. But that's me--I can't stand the corrupt, perverted, hairplugged old fascist.

I found a ton of lire in a pocket of an old coat I'd forgotten about, recently. Hmmm--maybe I'll be able to use it!

[sam11111]

2. what LW there say is main cause, cure?