Italy and the Eurozone
Aug 14th 2014, 2:18 am
#1
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Italy and the Eurozone
This appeared in the FT the other day. I'm afraid I wasn't reassured. I wonder what other members think -
http://www.ft.com/cms/s/0/8f677018-2...#axzz3A3V0Ql5D
Also this, from the WSJ -
Italy's Problem Is Europe's Problem
Also, irrespective of who wrote it and where it appeared, I wonder if anyone has any thoughts on this - Is it do-able ? Would it work ? What would the consequences be in Italy and beyond ? (Would it mean the break-up of the EZ ?) Would it be permitted ? Could they stop it ? If so how ? etc.
Italy's Renzi must bring back the lira to end depression
August 10, 2014 5:04 pm
Matteo Renzi defends pace of Italian reform
By Rachel Sanderson in Rome
Matteo Renzi, Italy’s prime minister, says the eurozone’s third-largest economy is on track to hit its EU-mandated budget targets this year despite falling back into recession in the second quarter and, in a pugnacious interview with the Financial Times, defended the speed at which his reforms are moving.
Mr Renzi, speaking in the prime minister’s office in Rome, rejected suggestions made by European Central Bank president Mario Draghi last week that the EU should intervene in countries where reforms were not being implemented fast enough to spur economic growth.
“I agree with Draghi when he says that Italy needs to make reforms but how we are going to do them I will decide, not the Troika, not the ECB, not the European Commission,” he said. “I will do the reforms myself because Italy does not need someone else to explain what to do.”
On Wednesday it was revealed that Italy unexpectedly fell back into recession in the second quarter for the third time since 2008. The economy shrank 0.2 per cent quarter-on-quarter between April and June, after contracting 0.1 per cent in the first three months of the year, having only briefly emerged from two years of recession at the end of 2013.
Economists have said the fall in gross domestic product may result in the general government budget deficit breaching the EU’s 3 per cent of GDP threshold for 2014. Fabio Fois, an economist at Barclays in Milan, expects the deficit will pass the 3 per cent limit unless the government cuts spending by between €1.2bn and €3.2bn.
Mr Renzi, who took power in a party coup in February and whose centre-left democratic party won a landslide victory in the European elections in May with an unprecedented 40 per cent of the vote, vowed to take personal control of Italy’s ongoing spending review to ensure compliance with the EU targets.
“I have absolutely no intention of breaking the 3 per cent ceiling. We hope to have better [growth] figures in the second half and as a result will be at 2.9 per cent [of GDP]. We will not break 3 per cent, it is an old rule, but it is still a matter of credibility and of reputation for Italy even if others will surpass it,” he said.
The 39-year-old former mayor of Florence appeared to backtrack on previous demands for the EU to introduce more flexibility to its budget rules, but admitted feeling worried about potential deflation in the eurozone.
“I’m not a fearful person by nature . . . but it would make me happy if the euro weren’t as strong against the dollar and if inflation were a bit higher,” he said.
Mr Renzi, who has just won parliament’s first approval for a landmark reform of Italy’s Senate, defended his decision to give priority to the Senate overhaul – which ultimately will see the end of Italy’s two-chamber system and slashes the number of senators to 100 from 320 – over labour reform and tax cuts as “absolutely the most important [reform] to achieve because it was the most difficult”.
On a day when national airline Alitalia signed a deal allowing Emirates-owned Etihad to become its largest shareholder, Mr Renzi added he was “flinging wide open the doors” of Italy to foreign investors and cited upcoming investments by Chinese, Indian and US investors in Italian assets.
“We are going to bring this country out of the crisis, Italy has a great future, Italian finances are under control, we will continue to lower taxes, we will do revolutionary things . . . Not even dictators managed to get things done as fast as this,” he said.
Matteo Renzi defends pace of Italian reform
By Rachel Sanderson in Rome
Matteo Renzi, Italy’s prime minister, says the eurozone’s third-largest economy is on track to hit its EU-mandated budget targets this year despite falling back into recession in the second quarter and, in a pugnacious interview with the Financial Times, defended the speed at which his reforms are moving.
Mr Renzi, speaking in the prime minister’s office in Rome, rejected suggestions made by European Central Bank president Mario Draghi last week that the EU should intervene in countries where reforms were not being implemented fast enough to spur economic growth.
“I agree with Draghi when he says that Italy needs to make reforms but how we are going to do them I will decide, not the Troika, not the ECB, not the European Commission,” he said. “I will do the reforms myself because Italy does not need someone else to explain what to do.”
On Wednesday it was revealed that Italy unexpectedly fell back into recession in the second quarter for the third time since 2008. The economy shrank 0.2 per cent quarter-on-quarter between April and June, after contracting 0.1 per cent in the first three months of the year, having only briefly emerged from two years of recession at the end of 2013.
Economists have said the fall in gross domestic product may result in the general government budget deficit breaching the EU’s 3 per cent of GDP threshold for 2014. Fabio Fois, an economist at Barclays in Milan, expects the deficit will pass the 3 per cent limit unless the government cuts spending by between €1.2bn and €3.2bn.
Mr Renzi, who took power in a party coup in February and whose centre-left democratic party won a landslide victory in the European elections in May with an unprecedented 40 per cent of the vote, vowed to take personal control of Italy’s ongoing spending review to ensure compliance with the EU targets.
“I have absolutely no intention of breaking the 3 per cent ceiling. We hope to have better [growth] figures in the second half and as a result will be at 2.9 per cent [of GDP]. We will not break 3 per cent, it is an old rule, but it is still a matter of credibility and of reputation for Italy even if others will surpass it,” he said.
The 39-year-old former mayor of Florence appeared to backtrack on previous demands for the EU to introduce more flexibility to its budget rules, but admitted feeling worried about potential deflation in the eurozone.
“I’m not a fearful person by nature . . . but it would make me happy if the euro weren’t as strong against the dollar and if inflation were a bit higher,” he said.
Mr Renzi, who has just won parliament’s first approval for a landmark reform of Italy’s Senate, defended his decision to give priority to the Senate overhaul – which ultimately will see the end of Italy’s two-chamber system and slashes the number of senators to 100 from 320 – over labour reform and tax cuts as “absolutely the most important [reform] to achieve because it was the most difficult”.
On a day when national airline Alitalia signed a deal allowing Emirates-owned Etihad to become its largest shareholder, Mr Renzi added he was “flinging wide open the doors” of Italy to foreign investors and cited upcoming investments by Chinese, Indian and US investors in Italian assets.
“We are going to bring this country out of the crisis, Italy has a great future, Italian finances are under control, we will continue to lower taxes, we will do revolutionary things . . . Not even dictators managed to get things done as fast as this,” he said.
Also this, from the WSJ -
Italy's Problem Is Europe's Problem
Also, irrespective of who wrote it and where it appeared, I wonder if anyone has any thoughts on this - Is it do-able ? Would it work ? What would the consequences be in Italy and beyond ? (Would it mean the break-up of the EZ ?) Would it be permitted ? Could they stop it ? If so how ? etc.
Italy's Renzi must bring back the lira to end depression
Aug 14th 2014, 5:01 am
#2
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Re: Italy and the Eurozone
personally I think the only way Italy can do it, is to resign - I mean all of the decision makers should be sacked and get in competent foreigners who could run the country. The ITalians are not genetically programmed run a country.
Aug 14th 2014, 6:31 am
#3
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Re: Italy and the Eurozone
I'll believe everything Renzi and all the rest say, if EXPO opens on time, complete in all aspects and functioning, by 01/05/2015. And no corruption scandals associated to get it done.
bye bye dicette l'inglese
bye bye dicette l'inglese
Aug 14th 2014, 7:16 am
#4
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Re: Italy and the Eurozone
Not sure it would solve the problem. Italians are not genetically programmed to follow rules.
Aug 14th 2014, 7:31 am
#5
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Re: Italy and the Eurozone
Italy's Renzi must bring back the lira to end depression - Telegraph
OK its the TELEGRAPH but ......
OK its the TELEGRAPH but ......
Aug 14th 2014, 8:07 am
#6
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Re: Italy and the Eurozone
Thanks for starting this Sancho - gloomy as it is.
Your posts have definitely taken a turn for the gloomy side modicasa (I'm not criticising you at all I stress)
>>Originally Posted by modicasa View Post
personally I think the only way Italy can do it, is to resign - I mean all of the decision makers should be sacked and get in competent foreigners who could run the country. The ITalians are not genetically programmed run a country.
I fear you are both right - I have long had the idea that it's too simplistic to just criticise the politicians, though I know that many Italians choose to place the blame at their door only.
Akin to modicasa's at first sight extreme suggestion I also remember thinking a few years ago that the only thing to do was ship out everyone over 40 to Tunisia [yes I know it would include a lot of us] and ship a load of new folk in (the country would be dentist-gassed into a slumber for a couple of days while this happenned - alternatively RAI Uno could have a monster 48 hour variety show/Palio-fest).
Personally I very sadly decided in 2011 that Italy really ceased to exist in November of that year, despite the fact that I know folks who got out the champagne when Berlusconi fell.
Maybe the end game is approaching:
Italian PM Renzi confirms meeting with ECB's Draghi | Reuters
One thing about that Telegraph article - I have given it a quick read - it says what I have always understood to be the case - that leaving the Euro is thought by many to be extremely extremely difficult verging on near impossible but doesn't even seem to suggest how it could be achieved, despite appearing to advocate it.
Haven't read the comments to the Telegraph article yet.
Your posts have definitely taken a turn for the gloomy side modicasa (I'm not criticising you at all I stress)
>>Originally Posted by modicasa View Post
personally I think the only way Italy can do it, is to resign - I mean all of the decision makers should be sacked and get in competent foreigners who could run the country. The ITalians are not genetically programmed run a country.
Akin to modicasa's at first sight extreme suggestion I also remember thinking a few years ago that the only thing to do was ship out everyone over 40 to Tunisia [yes I know it would include a lot of us] and ship a load of new folk in (the country would be dentist-gassed into a slumber for a couple of days while this happenned - alternatively RAI Uno could have a monster 48 hour variety show/Palio-fest).
Personally I very sadly decided in 2011 that Italy really ceased to exist in November of that year, despite the fact that I know folks who got out the champagne when Berlusconi fell.
Maybe the end game is approaching:
Italian PM Renzi confirms meeting with ECB's Draghi | Reuters
One thing about that Telegraph article - I have given it a quick read - it says what I have always understood to be the case - that leaving the Euro is thought by many to be extremely extremely difficult verging on near impossible but doesn't even seem to suggest how it could be achieved, despite appearing to advocate it.
Haven't read the comments to the Telegraph article yet.
Last edited by sunnysider; Aug 14th 2014 at 8:09 am. Reason: bad sentence structure and typo
Aug 14th 2014, 8:11 am
#7
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Re: Italy and the Eurozone
PS - does ItaLondon by any chance have any thoughts on this?
Isn't he a banker/involved in the financial sector?
I certainly don't claim to be any sort of economics major.
Isn't he a banker/involved in the financial sector?
I certainly don't claim to be any sort of economics major.
Aug 14th 2014, 9:37 am
#8
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Re: Italy and the Eurozone
Hello,
In my view (and I am not a pure economist), few points are clear:
- Exit the Euro is not economically feasible for a country in the long-run. The world economy has become too globalized and interlinked. The cost of exist will be definitely higher.
- The problem, with Italy is Italy. The political class, which remained unchanged for the last 30 years, has also corrupted people's life. Unfortunately to make a small difference you would need someone of the same strength of Mrs Thatcher.
- Look at Renzi's government - what significant changes did he make in the last year? I think nil.
Anyway...writing all the above make me feel it was a huge mistake moving back to Italy.
In my view (and I am not a pure economist), few points are clear:
- Exit the Euro is not economically feasible for a country in the long-run. The world economy has become too globalized and interlinked. The cost of exist will be definitely higher.
- The problem, with Italy is Italy. The political class, which remained unchanged for the last 30 years, has also corrupted people's life. Unfortunately to make a small difference you would need someone of the same strength of Mrs Thatcher.
- Look at Renzi's government - what significant changes did he make in the last year? I think nil.
Anyway...writing all the above make me feel it was a huge mistake moving back to Italy.
Aug 14th 2014, 9:50 am
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Re: Italy and the Eurozone
I agree the costs of exiting would far outweigh any advantage , yesterday the public debt reached a record high .. what would Renzi di with that ?
Aug 14th 2014, 10:03 am
#10
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Re: Italy and the Eurozone
I have read suggestions though that there might possibly be a one-off raid on Italian bank accounts if things continue to get bad.
I have no real idea if this is likely but I do understand that there is an Italian precedent for it.
Under Amato?
Thanks again for your polite responses italondon on these difficult topics.
It's refreshing.
all the best
Aug 14th 2014, 10:09 am
#11
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Re: Italy and the Eurozone
Well, I think the debate about one-off raid on Italian bank accounts has been going on for years...
The thing people did not notice is that if you have more than EUR5,000 in a bank account in Italy, the government is already taxing this amount (it is an hidden charge under the total charges you pay to keep the account open in Italy)....
I hope it will be fine...and I also hope that if I don't like living in Milan I can find a job back in the UK so I can run back here.
The thing people did not notice is that if you have more than EUR5,000 in a bank account in Italy, the government is already taxing this amount (it is an hidden charge under the total charges you pay to keep the account open in Italy)....
I hope it will be fine...and I also hope that if I don't like living in Milan I can find a job back in the UK so I can run back here.
Aug 14th 2014, 12:24 pm
#12
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Re: Italy and the Eurozone
I feel for you Modicasa, it must a hell of a life to live surrounded by subhuman plebs not genetically programmed to follow the rules set by competent foreigners.
Aug 14th 2014, 2:02 pm
#13
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Re: Italy and the Eurozone
Italy's Renzi must bring back the lira to end depression - Telegraph
OK its the TELEGRAPH but ......
OK its the TELEGRAPH but ......
Aug 14th 2014, 2:17 pm
#14
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Re: Italy and the Eurozone
At this stage only a masochistic Italian Prime minister would want to pull out of the Euro, because Italy is dependent on the ECB buy backs.
At one stage I believed that Grillo was to be taken seriously when he called for a default AND return to the Lira, but as you can see he was only feeding into Casaleggio's business plans. You can't have a return to the Lira without defaulting.
I would pretty much like to see Italy defaulting, in the interest of the Italians, but that would have a domino effect worldwide. Bring it on, I would say, but I am not sure if AEP and his chums at the City would be happy with that.
Aug 14th 2014, 2:26 pm
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Re: Italy and the Eurozone
Which part of the Italian population would benefit from a default ?
