Venice and Genoa were the economic pioneers. Reasons for their early development are for example the relative military safety of Venetian lagoons, the high population density and the institutional structure which inspired entrepreneurs.
While attention on the Euro crisis has been focusing primarily on Greece and Cyprus, it is no mystery that Italy, alongside with Spain, constitutes the real challenge for the future of the common currency, in any direction events will be unfolding.
It is no overstatement that the Italian economy is currently collapsing. How is this sustainable? Well, it is not. In its essence, the mechanism is the following: It is arguable that many investors are actually systematically reducing their exposure in South Europe, possibly hoping that a future breakup of the common curency will have less harmful consequences if their involvement in the financial and economy destiny of those countries is curtailed to the minimum.
However, this is not happening and there is no sign it is going to happen in the years to come. The situation of the Italian economy is simply dramatic. Recently, a study has appeared which reveals how the current crisis is in many ways much worse than the contraction.
In the present crisis, investments have collapsed by GDP has declined by 6. No data is currently showing any sign of recovery. From the beginning of this year, the country has lost over 31, companies. Every day retail units are lostsignalling an authentic disintegration of the retail sector.
The automotive sector, a crucially important one for the Italian economy, has been constantly contracting: Construction, the other pillar of the national economy, is in rout: Of course, the consequences of this economic disaster in terms of loss of employment are dire: Half a million workers have been put in stand-by and receive a state funded social benefit cassa integrazione: Needless to say, it is far more likely for all these workers to lose their job, rather than being re-integrated in the production cycle.
The Italian state has so far managed to defend its financial position by means of increased taxation, limited spending cuts and more borrowing.
As illustrated above, the borrowing scheme has been engineered with the help of the ECB and the banking sector. Taxation has now reached unprecedented levels, and it is asphyxiating the economy together with the credit crunch. Spending cuts have been implemented to a certain extent, but like taxes they have a depressing effect on the economy, not to mention their unviability in a largely clientelistic, if not openly kleptocratic system.
Under pressure from the European Union, Italy has committed to a rigorous budget and it has even introduced a balanced-budget amendment in its constitution. Now, it is not difficult to imagine that, in a few months, despite the new taxes, the sheer collapse of entire sectors of the economy will cause a rapid contraction of tax revenues.
The Italian state cannot possibly accumulate even more debt at a faster pace at least for Italy, the austerity debate makes little sense. Italy will simply run out of options, and it will require additional measures from the EU. Essentially, some sort of bailout.
In the absence of any political consensus around a radically different monetary policy of the ECB, i. The collapse of the Italian state finances is rapidly approaching. It will have an enormous impact on the Eurozone and the European Union.
This article gives the views of the author, and not the position of the Euro Crisis in the Press blog, nor of the London School of Economics.The economy of Italy is the 3rd-largest national economy in the eurozone, the 8th-largest by nominal GDP in the world, and the 12th-largest by GDP (PPP).
The country, that has a major advanced economy,  is a founding member of the European Union, the Eurozone, the OECD, the G7 and the G This page has economic forecasts for Italy including a long-term outlook for the next decades, plus medium-term expectations for the next four quarters and short-term market predictions for the next release affecting the Italy economy.
This statistic illustrates the annual share of persons satisfied with their economic situation from to in Italy. According to data, the highest percentage of people happy with their.
The Economic Situation in Italy Essay The economic situation in Italy Krisztián Pásztor 5/12/ The Economic profile of Itlay Since the II World War Italy has transformed form an agrecurtural society into a world industrial power.
The Quiet Collapse of the Italian Economy. Please also read the updated analysis of the Italian situation in The Demise of Italy and the Rise of Chaos and in Why Italy Will not Make It by the same author.
Basta ‘La Casta’: No End in Sight to Italy’s Economic Decline. The government still faces pressure from investors and European partners to sustain its efforts to address Italy's longstanding structural economic problems, including labor market inefficiencies, a sluggish judicial system, and a weak banking sector.