Italy’s Economy Slow and Steady Wins the Race

0

By Matthew Lipina – Student at Gonzaga University in Florence

With the current dollar-euro exchange rate being $1.09 to 1euro and the current concern over Greece potentially leaving the EU, the Grexit as it has been named, governments and economists are paying close attention to struggling European economies. Greece, Spain, Portugal, Ireland, and Italy, or PIIGS countries as have became known, are those with the five worst economics in Europe, all of which have debts significantly higher than the Eurozone average, and growth rates that are minimal.

During 2012-2014 Italy had a negative growth rate of -1 to -2%, which led to mass unemployment in the country. On March 22nd ChemChina, a China based rubber and chemical manufacturing company, agreed to become the majority owner of the Italian tire company Pirelli. This $8 billion dollar deal gives the world’s fifth largest tire company, and one of the most successful companies in Italy, over to Chinese control. In addition there has been recent speculation that Ferrari, the very icon of Italian luxury automobiles, may consider leaving Italy and setting up headquarters in a more tax friendly area such as London or the Netherlands. With some of the Italy’s most prominent companies considering setting up shop elsewhere it may seem to be the end of the Italian economy but there is hope for glorious Italy. In response to the European Central Banks decision last January to begin a Quantitative Easing program, Italy’s economy boasted a hopeful +. 03% growth rate. Minimal indeed, but this could be a sign of good fortune and an indicator of how the program will affect Italy during the 19-month plan. With the first purchases of government bonds from PIIGS countries beginning at the end of last March, it marked the ECB’s patience in rejuvenating Europe’s stagnant economy. Quantitative Easing was successful when America recovered from the 2008 financial crisis, and it is safe to say it will be in Europe as well. As the ECB begins their efforts to insert $1.2 trillion dollars into the Europe’s economy over the next 19 months, government debts from PIIGS countries will be slowly alleviated, and foreign investment will increase due dropping interest rates. The message to Italians right now is to be patient, have faith in Quantitative Easing, and know that Italy, and the Euro as a whole, will soon return to it’s crucial role in the global economy.

 

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.