By Paolo von Schirach
June 9, 2011
WASHINGTON – The bad news from Europe is still about Greece. But Italy is a runner up. Not so much for its immediate fiscal problems, (rather well contained, at this stage); but because of its slow motion, but steady economic implosion, punctuated by the decline of its once buoyant manufacturing sector.
The Centro Studi di Confindustria, a research outfit of the leading national confederation of Italian industrial groups, indicated in a recent report that Italy’s industrial production is almost at a stand still. “Italian industrial production is hovering around the levels of the Summer of 2010” –the report indicates. There is pitiful monthly growth of about 0.1%. Production is way below pre-crisis levels (-26.1%). Italy is a country “smashed by a violent recession and a slow recovery“.
Behind India and South Korea
Even worse, Italy lost two notches in world rankings of leading industrial powers. From number 5 it is now number 7, behind India and South Korea. With only 3.4% of global industrial production, Italy is now just a bit ahead of Brasil, a country growing at a much faster pace. Italy remains an industrial country. But the sector declined almost 17% in the last 3 years, a record fall among developed countries.
According to the research center Director, Luca Paolazzi, quoted in the Rome daily La Repubblica, Italian entreprenurs have to be three times as clever as their foreign counterparts ”in order to survive in such a non competitive environment”.
Long term, impossible to deal with Italy’s massive debt
While Giulio Tremonti, Italy’s Finance Minister, has been good at containing public expenditures during the financial crisis, thus preventing a fiscal collapse a-la-Greece, Italy’s public debt, now close to 125% of GDP, is one of the biggest in the world. Difficult to deal with it in ordinary circumstances. But no chance to keep financing it –let alone paying it back– with a diminished revenue base due to a collapsed industrial economy and manufacturing in free fall. It is not Greece, but it is not looking good.
And, down the line, this systemic industrial weakness spells more troubles for the Euro-zone.