'Italy is the real sick man of Europe'

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An article in The Spectator speaks about Italy being a "very European tragedy".Italy photo: Shutterstock
13:06 CEST+02:00
Italy comes under scrutiny in this week's edition of the British political magazine, The Spectator, with a front front cover saying "Arrivederci, Italy" and an article that speaks about a "very European tragedy".

Andy Street, the managing director of the British retail group, John Lewis, provoked an outcry last month when he said "France was finished", and now Italy, which supports its EU counterpart for bending deficit rules, has come under the spotlight.

Italy's problems, although nothing new, have been somewhat overshadowed by the more surprising collapse of the French economy.

But "everything that’s wrong with France is worse here," Nicholas Farrell writes in The Spectator  this week.

Things are so bad in Italy, he says, that "Italian women are refusing to make babies."

Italy's financial markets took a bigger hit than Greece last week, when investors were spooked by dismal economic data from the US, a fall in oil prices and slow recovery in Europe.

But nobody seems to worry about Italy anymore, as its "irreversible demise is a foregone conclusion", with the country being "too much of a basket case even to think about," Farrell writes.

Italy joining the European monetary union "with scarcely any serious debate" is partly responsible for its problems, but Farrell points the blame more squarely at the country's structural issues.

He cites the unprecedented move by Rome's indebted Opera House, which recently sacked 200 members of the orchestra and chorus after its honorary director Riccardo Muti resigned amid funding issues and strikes.

In a country where no one with a long-term contract can be fired, Farrell says it was "a revolutionary — dare one say Thatcherite? — act".

Even though Italy's Prime Minister Matteo Renzi is trying to "look to the future", Farrell says it's "the same old story" regarding the country's governance.

Renzi last week unveiled plans to increase borrowing to slash taxes by €18 billion in Italy's budget for 2014 . Although he promised to abide by EU deficit rules, the plan risks drawing fire from the European Commission.

Christian Shultz, a senior economist at Berenberg Economics in London, told The Local earlier this week that the tax incentives could also be a “costly flash in the pan” for Italy.

"It does create public debt, which will need to be repaid,” he said.

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The premier, also branded a Thatcherite by his critics, came out fighting in September after stamping down opposition in parliament to his so-called Jobs Act, which will make it easier for companies to hire and fire.

But Italy's businesses are also struggling under the weight of heavy taxes - among the highest in the world - and bureaucracy, with Farrell describing the process of starting a business like entering "a Kafkaesque bureaucratic nightmare".

For Renzi, the tax cuts are supposed to go some way towards easing this, although real results are unlikely to be seen for at least another couple of years.

So for now, "Italy, more even than France, is the sick man of Europe — and it is also the dying man of Europe," Farrell concludes.

He also cites Italy's low birth rate as a sign of the country's malaise, while its population is being propped up only by immigration.

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