EU Erosion

Italy is wasting away month by month

– its debt ratio ratcheting up towards 140pc of GDP – and all because the country’s ruling elite cannot shake off its slavish assumption that a return to monetary self-rule is impossible

By Economics Last updated: January 31st, 2014

Today’s headline from Italy is that unemployment has at last begun to fall, dropping from 12.8pc to 12.7pc in December.

Drill deeper and the recovery story turns to dust. The number employed in Italy has fallen by 424,000 over the last year. Piangi Italia mia.

As you can see from the chart below (only available on ISTAT’s Italian site), the slide has been relentless. There is no sign of stabilisation. A further 25,000 dropped out of the work force in December alone.

The overall employment rate has fallen to 55.3, a staggeringly low level. The rate for men has fallen by 1.6 percentage points over the last year.

Youth unemployment was 41.6pc despite a tide of emigration to Britain, Germany, and beyond. It is at Greek and Spanish levels above 50pc in Naples and across much of the Mezzogiorno.

The brutal reality is that Italy’s human capital is still being destroyed by contractionary EMU policies. Italian industry is still being hollowed out. The hysteresis effects of skills erosion – and the failure to draw a large chunk of the next generation into the economic system at a crucial stage in their lives when they are most open to new technologies – will lower Italy’s future growth rate and do lasting damage to Italy’s economic dynamism.

The claim that economic reform is slowly rendering Southern Europe lean and fit is ideological cant. As my colleague Jeremy Warner wrote this morning, there is precious little reform (Greece excluded).

The policy is little more than a crude internal devaluation achieved by breaking the back of labour resistance to pay cuts through mass unemployment. The morality of that receives remarkably little attention, though EU commissioner László Andor is putting up a brave and lonely fight. Far from solving anything, it is pushing Europe into deeper decline.

Sorry to dissent, but Italy is not recovering at all. It is wasting away month by month – its debt ratio ratcheting up towards 140pc of GDP – and all because the country’s ruling elite cannot shake off its slavish assumption that a return to monetary self-rule is impossible.

For those who share my taste for Leopardi’s Italia:

O patria mia, vedo le mura e gli archi E le colonne e i simulacri e l’erme Torri degli avi nostri, Ma la gloria non vedo, Non vedo il lauro e il ferro ond’eran carchi I nostri padri antichi. Or fatta inerme, Nuda la fronte e nudo il petto mostri. Oimè quante ferite, Che lividor, che sangue! oh qual ti veggio, Formosissima donna! Io chiedo al cielo E al mondo: dite dite; Chi la ridusse a tale? E questo è peggio, Che di catene ha carche ambe le braccia; Sì che sparte le chiome e senza velo Siede in terra negletta e sconsolata, Nascondendo la faccia Tra le ginocchia, e piange. Piangi, che ben hai donde, Italia mia, Le genti a vincer nata E nella fausta sorte e nella ria.

Chi la ridusse a tale? Chi precisamente?

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