November 18, 2011

The beginning of a massive European collapse and the Italian case!

The cracks are already visible all across Europe. It was first Greece, then Portugal and Italy, with Spain waiting in the queue. The current situation of Europe reminds me of the situation post World War II – wherein most European economies and societies were in complete anarchy! Since the last five years, European nations have been facing major economic setbacks, which have been triggered by political mismanagement and have impacted their entire social structure to a large extent. Today, fallouts of erstwhile strong economies are leading to a cascading effect and sending tremors across the continent!

Amongst all of them, Italy makes an interesting case because as a nation, it has been ranked among the top 25 most developed nations, has one of the best quality-of-life (features among the top ten in the quality-of-life index) and has a per capita GDP at par with other developed nations of the world. This fourth largest European economy is today struggling with a $2.2 trillion debt which is more than 120 per cent of its GDP. In spite of being one of the major manufacturing hubs of the region and boasting of big labels in the fashion and automobile industry, it has miserably failed to keep a balance between expenditure and income. UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) – two of Italy’s biggest banks – recently collapsed while five other large Italian banks have lost around 30 per cent of their share value since the beginning of 2011. Today, 20 per cent of their GDP is made up by the parallel economy and corruption ails the system. So much so that investors too are now shying away, which is evident from the fact that today Italy ranks lowest among OECD countries in the ‘Ease of Doing Business’ index; for that matter, Italy has seen a fall in all attributes since the last year’s ranking, with a drop of 10 points. The overpaid bureaucracy and corrupt political system have been instrumental in systematically destroying the nation, bit by bit!

The situation in Italy has been worsening with every passing day. More than 500,000 youths (aged less than 30 years) lost jobs between 2009 and 2010, in a nation that once had the lowest unemployment rate (around 8.5 per cent) in the entire Europe. Among this, the worst hit were pregnant women (around 800,000 pregnant women left the job as they were denied medical leaves) and low-cost skilled labourers. This not only led to a drop in family incomes, but also prevented hundreds of parents from sending their children to school. As a result, in the last year, the average school drop-out rate was around 20 per cent! And mind you, in Italy, the first six years of primary education are free.
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12 comments:

Subhorup Dasgupta said...

I think the indices of development are not valid parameters to use when trying to understand the current crisis anywhere, be it Europe, the Middle East, America or India. The crux of this is thoughtless developmental policies and untenable capital expansion. To have allowed ourselves to believe that a free and liberalized global economy will bring human welfare is our error as a society, and this error lay hidden so long precisely because it lends legitimacy to human greed and vanity.

I strongly believe "picture abhi baki hai," because this imbalance in both our fiscal and ethical systems has to seek restoration from within itself. It will be interesting to see how far things worsen before the painful journey towards restoration begins.

preeti said...

Russia is willing to increase its financial backing for the International Monetary Fund as part of international efforts to help Europe cope with its sovereign debt crisis, IMF Managing Director Christine Lagarde said on Tuesday, following two days of talks in Moscow, according to Reuters news agency.

pramod singh kandasi said...

On Tuesday, Monti won support from Italy’s two largest parties, but the question remains whether politicians will back his expected painful reform measures at the risk of social peace.

Mukesh said...

Many younger Italians in fields like medicine, science and technology leave for countries that have more professional opportunities and mobility.

Gaurav said...

Despite the debt crisis in a number of eurozone countries the European currency remained stable, trading even slightly higher against the Euro bloc's major trading partners than at the beginning of the crisis

mohit said...

In the early hours of 27 October 2011, Eurozone leaders and the IMF came to an agreement with banks to accept a 50% write-off of (some part of) Greek debt,the equivalent of €100 billion.The aim of the haircut is to reduce Greece's debt to 120% of GDP by 2020.

Brijesh Chaudhuri said...

On 9 May 2010, the 27 member states of the European Union agreed to create the European Financial Stability Facility, a legal instrumentaiming at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty. The facility is jointly and severally guaranteed by the Eurozone countries' governments, the EU and the IMF. The European Parliament, the European Council, and especially the European Commission, can all provide some support for the treasury while it is still being built.

subhash said...

In July 2011, it was agreed during the EU summit that the EFSF will be given more powers to intervene in the secondary markets, thus dramatically socializing risk in the eurozone, which ends the crisis. Furthermore the EU agreed that Greece should receive EU loans at lower interest rates of 3.5%

simran said...

On 5 January 2011, the European Union created the European Financial Stabilisation Mechanism (EFSM), an emergency funding programme reliant upon funds raised on the financial markets and guaranteed by the European Commission using the budget of the European Union as collateral. Like the EFSF also the EFSM will be replaced by the permanent rescue funding programme ESM, which is due to be launched in mid-2013.

anuj sharma said...

After fierce pressure from financial markets and European peers, Italy agreed to have experts from the IMF and the European Commission monitor its progress with reforms of pensions, labour markets and privatisation. On 15 November 2011 the Lisbon Council published the Euro Plus Monitor 2011. According to the report most critical eurozone member countries are in the process of rapid reforms. Greece, Ireland and Spain are among the top five reformers and Portugal is ranked seventh among 17 countries included in the report.

anky said...

"There cannot be peace and prosperity in the North or in the West of Europe, if there is no peace and prosperity in the South or in the East," Barroso said.

DIMPS said...

Europe will reap what it sown after world war 2.Humanity lost its luster over materialism.Gruesome events left images on social brain map addressing values of family as basic structure.Reduced size of family,Failing Marriages,State responsibility to bring new generation minimized role of parents in inculcating spiritual or human values reduced Europe to a land of Old and youth indulged in vices more and less hard working.Tree was half cut and rest push is given by China through offering products at minimum of 25% of cost of production at home thereby killing the industrious spirit.

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