Italy’s debt crisis: doomed by corruption, bloated bureaucracy and poor productivity
Decades of turning a blind eye to endemic tax evasion, corruption, and dismal economic growth has sent Italy careering into its present crisis.
By Nick Squires
10 Nov 2011
The country may be renowned for global brands such as Ferrari, Gucci and Armani but the eurozone’s third largest economy has been hobbled by the chronic failure of successive governments to enact reforms.
On the streets of Rome, Italians may express relief and grim satisfaction that Mr Berlusconi has announced his intention to resign, but many realise that the country’s problems extend far beyond the failings of the scandal-prone prime minister.
Italy’s people know they have been sleepwalking into an economic abyss for years and must now pay the reckoning.
Despite a still healthy manufacturing sector, which produces the kind of high-quality fashion, furniture and cars that are in increasing demand from emerging economies such as China, the country has for years been spending more than it earns, resulting in a staggering €1.9 trillion (£1.6 trillion) public debt – about 120 per cent of its annual economic output.
Last year, Italy’s output was smaller than in 2005, adjusted for inflation. According to the International Monetary Fund, growth this year will amount to a paltry 0.6 per cent, with an even more miserable rate of 0.3 per cent forecast for 2012.