The Italian Case

Italy’s debt crisis is on a different level than the previous European crises, given that Italy is four times the size of Greece, Portugal and Ireland combined with a gross GDP of $2.1 trillion, making it the 8th largest economy in the world and the 3rd largest in the Euro-zone after Germany and France. This standing amongst the world’s largest economies is not going to change anytime soon, and the next European and global competitors are still fairly distant.

Yet it has been considered to be the most vulnerable of the national economies threatened by the European debt crisis because of its huge public debt, which reached 119% of GDP in 2011. Although the country is considered as "too big to fail" because it could hardly be saved by the European rescue funding programme due to its sheer size, there continue to be fears that a further loss of trust by the international money markets could trigger an unprecedented crisis.
Italy’s economy remains based on small and medium enterprises. Unlike the U.S., the U.K., France and Germany, its banking and finance sector is largely centered not in spec ulative finance but in the real economy, which in the current global transition process is decisively positive in terms of struc-tural solidity and helped the country master the recent international financial crisis of 2007-10 better than most other global players. This remains true for crucial aspects of the European debt crisis as well. Italy’s banks, unlike those of France and Germany, are by comparison only minimally involved in lending to Greece, Portugal and Ireland and thus less threatened by their failure. Italian industry continues to be among the strongest exporting business sectors in the world. The unemployment rate in Italy is currently at 8.1% while it is 10.0% in the Euro-zone, 8.3% in the U.K., 9.5% in France, and 9.0% in the U.S. This is another indicator of the irrationality of the current assessment of Italy’s situation. The outlook is worse, however, if youth employment, another decisive future factor, is considered in a comparative way. Italy performs poorly in the employment of youth, with about 30% youth unemployment; but which could also be said of most other Western countries since the financial and economic crisis of 2007-2010, with Spain’s figure at more than 40% and other leading Western nations at well over 20%.
Eventually it has to be added that according to 2010 European Union statistics, the industrial triangle between Turin, Milan and Genova in Northern Italy is the most productive region in Europe as regards to real economic production (goods and services), more productive than the greater London area. Due to its natural beauty and cultural and architectural heritage, tourism is a stable source of national income, accounting for more than 25% of the total annual revenue which was at about 900 billion Euro (regional taxation included) in 2011, making it the sixth highest government budget in the world and more than a third of the federal budget of the U.S.
Is Italy at the brink? Probably not, if it succeeds to conserve its structural strength by fixing its systemic weakness.