Suddenly I see articles on Italy's economic woos almost daily even though the Italian economy has been stagnant for years. This interesting article was referred to us, today, by a friend at Saddleback College. The reasons of Italy's economic crisis are spelled out very well in this WSJ article which mentions an enormous sovereign debt (one quarter of the sovereign debt of the entire euro zone), combined with high taxes and a business environment that needs liberalization like plants need water. Tax increases to support a ballooning public sector united to very tough labor laws, such as hiring and firing restrictions and strict working hours limits, have caused Italian companies to look overseas for expansion, leaving the country with an almost nonexistent rate of growth (0.7% this year) and a large black market for both sales of services and goods and employment.
Any attempts to make necessary structural changes over the years have been interrupted by almost constant government turnovers (since 1945 Italy has had 60 and counting). This instability has been caused, to a large extent, by the failure of the political class to connect with ordinary citizens, inspiring a sense of collective effort and national purpose in order to communicate effectively the realities and challenges of globalization and the pressing need for reforms that could help the country integrate in the global economy.
Instead, with one of the world’s lowest birth rates, Italy is increasingly becoming a nation of old people, ruled by old people for the sake of old people, with little, if any, interest in changing "the old ways" for a brighter future.
Will this crisis force the Italian Government to get bold and make real structural changes that can facilitate the creation of a friendlier business environment for Italy? So far, it seems far-fetched and some of Italy’s best and brightest continue to opt for opportunities abroad to find greater meritocracy and equitable results for hard work.
The most promising feature about Italy is that it is a beautiful and beloved country which could gather support from many Italians and "italophiles" from all over the world if it decided to become, once again, a relevant economy.