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Draghi government: Seven ‘surprising’ facts about Italy

Troppi i falsi miti sull’Italia “spendacciona” e che vive al di sopra delle sue possibilità. I fatti li smentiscono, chiamando in causa la necessità di una profonda riforma della governance economica dell’Unione Europea. Dal sito del “The Vienna Institute for International Economic Studies (wiiw)”.

It is high time to take a fact-based look at the country and dispel some of the myths that continue to be spread.

  • Italy has been running trade surpluses, and the country remains the EU’s second-largest industrial location behind Germany.
  • Private debt in Italy is relatively low compared to other OECD countries. Public debt is high due to the legacy of the 1970s and 1980s.
  • The Italian state has implemented by far the largest fiscal consolidation packages of all industrialised countries since the early 1990s.
  • Italy has significant structural problems (e.g. oversized banking sector, North-South divide), but tackling these problems partly requires a rethinking of economic policy.
  • Italy’s recovery must be considered a central task of European economic policy. Mario Draghi’s start as prime minister should be seen as an opportunity for a “New Southern Policy”.

Over recent weeks, countless articles have been written about Italy playing on long-held stereotypes about the country in other parts of the EU: that it is heavily in debt and unwilling to reform. In fact, we have rarely been able to read anything positive about Italy in the media over the last year. First, the negative health effects of coronavirus hit the country particularly hard during the first phase of the pandemic. Then came the severe economic crisis with discussions about European response packages, during which journalists as well as leading politicians of the self-proclaimed “frugal four” repeatedly questioned whether Italy should really receive grants to a considerable extent to mitigate the consequences of the COVID19 crisis. And then Guiseppe Conte’s government had to step down after former Prime Minister Renzi removed his party’s two ministers from the government, leading to intense discussions about a political crisis in Italy.

Now there is a new Italian government under prime minister Mario Draghi, the former ECB president. This government will not only have to deal with the pandemic, but also with planning the use of around €200 billion from the EU recovery fund for the coming years. In view of these important political projects, it is high time to take a fact-based look at Italy and, in doing so, also dispel some myths that unfortunately continue to be spread regularly by journalists and media.

So here are seven stereotype-defying pieces of data about Italy.

1. Italy has been living below its means

‘Italy is living beyond its means!’ This statement is often justified by pointing out that Italy’s public debt has risen to around 160% of economic output, not least due to the effects of the Covid pandemic. Yet this means only that the public sector is highly indebted—it says nothing about the Italian economy as a whole. For a country can only really live beyond its means if it imports significantly more goods and services than it exports over a longer period of time, which goes hand in hand with rising foreign debt. If, on the other hand, roughly the same amount is exported as is imported, it makes little sense to speak of “living beyond one’s means”, because production and consumption match. And in Italy it is even the case that since 2012 the country has recorded higher exports of goods and services than imports. The country consumes less than it produces and is a net exporter of capital. So if anything, Italians are not living above their means, but below their means.

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