Italy: recovering or stagnating?

That Italy appears to be able to generate cyclical growth is good news for the eurozone.

"Greece may be the canary in the eurozone coal mine," writes Richard Barley in The Wall Street Journal, "but Italy is the elephant in the room." While Greece's boom and bust crisis is "acute", Italy has more of the "chronic" variety, as "it has barely grown since joining the euro".

Given the country's size it's the eurozone's third-largest economy that's a bigger fundamental problem than the fate of the smaller, more peripheral Greek economy.

So the good news is that Italy "appears to be emerging from a recession that has lasted for more than three years", says The Economist. This is due to a combination of "falling oil prices, the European Central Bank's quantitative easing and a weaker euro", which are "all doing their bit". Prime Minister Matteo Renzi "has pencilled in growth for this year of 0.7%", but "some of his advisers think that will prove an underestimate".

The government claims that this shows that "reforms Mr Renzi has undertaken over the past 14 months are starting to have an effect". Buoyed by this, they are considering "easing up on austerity and mulling €1.8bn in new fiscal stimulus measures", says Giulia Segreti in the FT.

While it plans to cut public spending further next year, this will still bring it "€6bn short of the original three-year plan set by Italy's former spending tsar in a March 2014 report". But this may bring Italy into conflict with the EU and the International Monetary Fund, which wants it to "rein in its high levels of public debt".

The corporate sector is also showing signs of growing confidence, say John Follain and Marco Bertacche on bloomberg.com, as demonstrated by "a boom in mergers and acquisitions in Italy". Encouragingly, this includes interest from foreign buyers who see value emerging in the economy.

"Deals targeting Italy surged more than 400% year-on-year to a total value of $19.3bn." This is "more than any other country in the euro region and compares with a 14% increase across Europe asa whole".

All this may be a sign that Italy is about to "show that it can at least generate cyclical growth", as Barley puts it. That's important not just for the country, but for the entire eurozone. "If it doesn't, expect more questions to be asked about what the single currency does for its members."

Recommended

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Interest-rate rises mean more pain for stocks
Stockmarkets

Interest-rate rises mean more pain for stocks

Interest rates are rising around the world as central banks try to get inflation under control. That’s hitting stockmarkets – and there is more pain t…
13 May 2022
Why Elon Musk's Twitter takeover could mark the end of the reign of the CEO
Stockmarkets

Why Elon Musk's Twitter takeover could mark the end of the reign of the CEO

The overlords of the corporate world have had their day, says Matthew Lynn. Long live the Technokings!
8 May 2022
Britain’s post-Brexit trade chaos
UK Economy

Britain’s post-Brexit trade chaos

The government has yet again postponed introducing post-Brexit checks on EU imports. Why has it done this, and does it matter?
7 May 2022

Most Popular

High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022
Cryptocurrencies are crashing – so how low will bitcoin go?
Bitcoin & crypto

Cryptocurrencies are crashing – so how low will bitcoin go?

The entire cryptocurrency sector is crashing, with bitcoin now well below $30,000. This is big, says Dominic Frisby. So just how low could bitcoin go?
12 May 2022
What the Ukraine crisis might mean for ESG investing
Advertisement Feature

What the Ukraine crisis might mean for ESG investing

The Ukraine crisis has brought many of the issues around ESG investing into sharper focus. Where does the sector go from here?
3 May 2022