Italy now the latest in the European crisis.
(Thanks to Business Insider.com)
As terror over the Greek debt crisis cools momentarily, everyone's suddenly paying attention to Italy.
Its market is diving, people are dumping Italian banks, and yields are shooting up.
Italy's economy is the fourth-largest in the European Union, and its debt burden -- wavering at about $171 billion -- shows no signs of subsiding, regardless of harsh austerity cuts.
Italy's economy has deep-seated structural problems that are not going to go away by taking away the pocket book. Indeed, they may even get worse.
FTSE MIB (the main index in Italy) is off over 4.2% today. We're now looking at a fall of about 10% in 5 days.
Speaks for itself.
Six Reasons Italy has come under attack
1) Italy Growth has stalled - Over the past six months, there's been no growth at all. And actually, GDP per capita is lower than it was in the year 2000.
2) Italy has the second-highest Debt-to-GDP ratio - At 120%, only Greece is worse - Source: SocGen
3) The country's austerity market is backend loaded - Newly announced budget cutting doesn't start the fiscal adjustment until 2013. Source: Socgen Plus, there are elections in 2013, which could throw the whole thing into disarray. A lot could change by then.
4) The political system is fragile.
5) There are no plans for structural adjustments - Unfortunately, nobody has any idea what to do. Ultimately, it's not just about budget cutting, but about fixing the economy. Check out the failure of Italian labour productivity to rebound.
6) Recent downgrades from Moody's and S&P -These downgrades have served to remind everyone what a mess the country is in.
The Sad Story Of How Italy Got To Be Such A Wreck
Read more: http://www.businessinsider.com/how-italy-got-to-be-such-a-wreck-2011-7#too-much-emphasis-on-family-means-lots-of-small-privately-owned-businesses-and-few-large-publicly-owned-companies-1#ixzz1Rtu6Ikxz
posted by Vikram R Chari @ 10:20 AM
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