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Italy's Debt Crisis

Based on recent data there has been a drop in Italy’s GDP. At the same time, it has been confirmed that Italy is currently facing a recession. This is something that many people already suspected.

Italy’s current financial situation is similar to the financial environment in 2008, 2011, and 2012.

Due to a number of factors, an impending crisis has been kept at bay. Most importantly, as a member of the EU and more importantly the Euro, Italy has been allowed to continue issuing debts and spending money in a way that is not sustainable. Subscribing to the Euro was a great option for Italy as it allowed the country access to far more credit than it would have otherwise been qualified for. Now, however, the country is in a position of having to pay back considerable debts. This is an uncomfortable position for Italy. However, due to internal devaluation and austerity measures, its possible that Italy may see an improvement in its public finances in the upcoming years.

Spain, on the other hand, has achieved an impressive turnaround in its financial situation. In many ways, Spain’s achievement aided Greece and Italy, both of which are currently running up to as similar situation to the 2012 Eurozone crisis.

One major problem facing Italy is its political system. The Italian government is not in a position to challenge Brussels. This is surprising considering that Italy was not only one of the founding members of the Euro and European Union, but it was also incredibly supportive of European integration plans. The European Union’s resentment towards Italy is therefore unexpected.

In recent years, the world economy has recovered. From 2015 to 2017, a mild recovery was seen in Italy, in which unemployment was reduced. Now, however, it looks like the situation has changed.

Unlike other nations such as the United States, Italy is highly dependent on the health of the global economy. This is because more than 30% of Italy’s GDP comes from its exports whereas only 12% of US GDP is export dependant. With the current world economic situation, the Italian economy is contracting again. At the same time unemployment is increasing.

Economic weakness is expected to continue for the rest of 2019. Regardless of austerity measures in place, the Italian government faces a debt to GDP ratio of 132%.

As far as the competitiveness between other members of the European Union is concerned, the improvement is negligible. There is no doubt that Spain’s economic situation has improved. However, Italy is a different story.

According to the Italian government, the economic slowdown in the country is a result of the weakness in the global economy. In particular, the slowdown in China is responsible.