Italy’s Structural Challenges
So far, the Italian economy has only recovered roughly 20% of the output lost during the economic downturn, so a return to pre-crisis GDP levels will take another three years if the pace of recovery fails to accelerate. In stark contrast, the German economy has already recovered more than 70% of the output lost during the recession.
Italy’s severe structural weaknesses are weighing on its ability to recover swiftly. Productivity growth has remained virtually flat for several years. Significant rigidities in labor and product markets, inadequate investment in R&D, massive amounts of red tape, a large underground economy and unsatisfactory educational outcomes are merely some of the factors that have reinforced the negative effect on economic growth. As a result, Italy’s external competitiveness has suffered dramatically, as indicated by the real effective exchange rate.
Real Effective Exchange Rate (based on unit labor costs; index: 2000 = 100)
Source: AMECO
Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE Clients:How Vulnerable Is Italy?
No Responses to “Italy’s Structural Challenges”
kanino • January 3rd, 2011 at 11:47 am
The key to Italy and several other countries in Europe is the Euro.From the book “AN AUTISTIC WORLD (2)The introduction of the Euro wasn’t followed by a comprehensive justice system that could have engulfed the daily affairs of a kaleidoscope of national interests; but was guided by a blind attraction to the mountains of money poured on peripheral communities. The result is a conflict of interests between countries, marked by the egoistic and individualistic actions of shop-keepers and mediocre politicians which use the smallest excuse to avoid the confrontation with their respective populations in order to avoid the truth and the reality of their situation.
