WASHINGTON – When drastically reduced expectations become the “New Normal” lousy economic numbers in Western countries become acceptable, and miserable growth is actually cause for celebration. Here is an example. I watched via the internet a recorded staff meeting at La Repubblica, one of Italy’s most prestigious newspapers.
When it came to discussing economic issues, the journalist in charge was happy to report good news to his colleagues. Indeed, in the second quarter of 2015 the Italian economy grew a bit more than expected. Therefore it is likely that the projected 0.7% GDP growth for 2015 will be achieved. (Never mind that part of this pitiful growth is due to public investments, while private sector investments actually declined).
The broader context
Got that? On track for 0.7% growth –may be. And this is the stellar Italian economic achievement coming after 3 straight years of recession. More broadly, please note that Italy’s GDP is stuck at the pre-2008 recession levels. And do not forget the staggering 12.5% unemployment rate, (with peaks of 40% when it comes to jobless young people in the South). Add to this the perennial cancer of organized crime (Mafia, Camorra, and N’drangheta are just the best known “brands”) that has successfully expanded from its native south to the rest of the country.
But –hey– we are on track for 0.7% GDP growth. That’s great news!
Focus Economics take
Well, if you want a real analysis, here is how Focus Economics describes Italy’s economy:
“Italy suffers from political instability, economic stagnation and lack of structural reforms. Prior to the 2008 financial crisis, the country was already idling in low gear. In fact, Italy grew an average of 1.2% between 2001 and 2007. The global crisis had a deteriorating effect on the already fragile Italian economy. In 2009, the economy suffered a hefty 5.5% contraction—the strongest GDP drop in decades. Since then, Italy has shown no clear trend of recovery. In fact, in 2012 and 2013 the economy recorded contractions of 2.4% and 1.8% respectively”.
“Going forward, the Italian economy faces a number of important challenges, one of which is unemployment. The unemployment rate has increased constantly in the last seven years. In 2013, it reached 12.5%, which is the highest level on record. The stubbornly high unemployment rate highlights the weaknesses of the Italian labor market and growing global competition. Another challenge is presented by the difficult status of the country’s public finances. In 2013, Italy was the second biggest debtor in the Eurozone and the fifth largest worldwide”.
The real picture
So, here is the real picture: highest unemployment on record, high debt, years of recession, lack of global competitiveness and now feeble growth. This is the “real story” regarding the Italian economy.
But for those who cover day-to-day events for a respectable newspaper a projected 0.7% GDP growth, after 3 years of recession, is good news.
Once again, welcome to the “New Normal” of low standards and zero expectations.