"La Dolce Vita", which translates as "The Sweet Life", is the title of the most famous film by Italian director Federico Fellini from 1960. And it describes an attitude to life that we – cliché or no cliché – associate with Italy: Pizza, Pasta, Vino. Prada. Ferrari, Mafia, Berlusconi. Monte dei Pasci. And everything is held together by La Mamma. But Italian life is expensive. Someone has to foot the bill.
Italy is a founding member of the European Union and was actively involved in European integration. However, the country is historically deeply divided. Today's Italy was created by the forced unification of several independent small Italian states. Very different influences from northern and southern Europe are played out within Italian society. The northern provinces are economically much stronger and better organised, while the institutions of the Italian State in southern Italy and Sicily have never been able to function well. Corruption is still widespread. Another problem is the complicated Italian constitution, which results in a political system of constantly changing government coalitions and new elections. Italy has had over 60 governments since the Second World War.
In the years since the financial crisis, Italy has generated dubious media coverage, although it still does not need an official rescue programme. A rescue of Italy along the lines of Greece would, however, be virtually impossible due to its sheer size. Italy's official national debt is around 2.3 trillion euros, not to mention the further liabilities via the Target 2 balance of over 482 billion Euro. Italy's financial collapse would be dynamite and could mean the end of the euro currency.
The economy has been stagnating since 1990. Italy is the only southern European EU member that has not been able to generate substantial economic growth. It is true that the country had a debt-driven upswing from the 1990s onwards. But the successes vanished with the Euro crisis. Many major industrial companies had to close down. Today, the country suffers from high unemployment, and its national debt stands at around 130% of its gross domestic product. Although ECB boss Mario Draghi is doing everything in his power to cover the Italians and buy time to allow the country to carry out fundamental reforms in the economy and banking sector, the Italians are not making good use of the time. After tough negotiations with the EU, Italy has agreed on a budget deficit of 2.04 percent of GDP for 2019. However, the main problem, the over-indebtedness of the State and the banking sector, still remains unsolved. For 2019, the International Monetary Fund (IMF) expects Italy to grow by only 0.2 percent.
Italy's competitiveness is deteriorating increasingly by international standards and, under the current conditions, any recession could mean the end of membership of the euro. Moreover, it would also be the end for the euro and the entire monetary union in its current form.
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