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Economic Condition of Italy

When one wants to talk about the Euro-zone crisis of 2012, it doesn’t take a long time before the discussion inevitably shifts into the economic condition of Italy. While it’s perhaps not fair to consider Italy’s condition as a case in vendita especially when compared to the more serious states of Greece and Spain, it bears mentioning that Italy is one of the centers of attention if the Euro-zone crisis is to be resolved. The good news, however, is that of all the three problem nations inEurope,Italy has responded well to the call for austerity measures providing a model for whichGreece andSpain can work to also remedy their current economic malaise.

As of early 2012, Italy’s economic condition remains far from being in the optimum. Due to the global economic crisis beginning in 2008, Italy’s economy shrank by 6.76% dragged over a seven quarter stretch of negative growth. Public debt was also calculated to be at an all-time high of 100% versus the 2010 GDPseverely affecting all forms of businesses from serviced apartments to small pizzeria stores. This number alone putItaly as the country that was second only toGreece in terms of having the worst debt ratio in the Euro-zone. A big chunk of this debt was primarily due to the high rate of borrowing going back to the Silvio Berlusconi administration making the national government fully indebted to the obligation of debt servicing. Unemployment also stood at 8.4% which is higher than in pervious years but far better thanGreece andSpain.

Italyadopted the austerity measures proposed by the Euro-zone beginning in December 2010. These policies were designed to limit public spending to the absolute minimum which created further worries on job creation and maintaining the services offered by the public sector. The task of keeping the job numbers afloat boiled down to small businesses like the surf shop or the pizzeria at the street corner as the government went into full contraction mode in the hopes of achieving its intended goal of reducing the public budget deficit to 3.9% in 2011 and 2.7% in 2012, easily one of the most aggressive goals in the Euro-zone. Up to now, the government is in full “keep exploring” mode as the initial results prove to be discouraging in snappingItaly out of its economic funk.

Beginning in 2011, credit rating agencies Standard & Poor’s and Moody’s loweredItaly’s sovereign credit rating as the economy continued to falter. As of early 2012,Italy’s rating remains a solid A- and well above investment grade although this has already fallen from what once was one of the most reliable investment environments in the global stage.

Since then, the government has chosen to move from the “watch now” mentality, preferring instead to adopt a new set of austerity measures to further spur growth even to the smallest businesses like its floral delivery Victoria BC counterpart. The new policies went into effect in July 2011, aiming to reign in about 124 billion euros worth of savings. Still, the economic indicators have been slow to respond to this new set of government policies as the bond yield is still at a 6.74% level.

There is wide consensus that Italy is heading in the right direction as far as righting the economy is concerned but it remains to be seen whether the new policies will actually lead to growth and finally stave off the multi-quarter recession that Italy is in. Only time will tell if this is indeed the case. For now, Italy is just happy that it isn’t in the same boat as Spain and Greece, which are both undergoing some of the worst country-level recessions seen in a long time. With the right policies in place, a new and stronger Italy is hopefully on the rebound so as to significantly boost the global economic indicators and keep the Euro-zone together as a proven economic alliance.

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