Italy’s Bad Economy

Italy’s Bad Economy


The purpose of this study is to analyze the role of leadership in Italy in its current economic situation. Specifically, the paper will assess the role played by Italy’s former Prime Minister, Silvio Berlusconi in contributing to the dire economic crisis that the country is facing today and also outline possible strategies that could help revive Italy’s bad economy. Through this case, readers will understand the magnitude of the economic turmoils facing Italy today and why there is urgent need for strict scrutiny and monitoring of the situation.

The social, political and economic aspects of a country are pertinent to its growth and development. Without the progress of these determinants, no other progress can be made in other sectors. Amongst the euro zone countries, Italy is ranked third in terms of economic size. It is preceded by Germany and France. Despite this top ranking, Italy still seems to have significant debt problems that are dragging its economy down. The country’s public debt burden is currently estimated at more than two trillion euros and hence cannot be overlooked. What is more surprising is that this figure has been growing at a rapid rate in the recent years and it is mainly attributed to the greedy nature of Italy’s former leaders as well as poor management of the country’s resources. As a result, Italy has had to significantly reduce its economic activities in varied sectors in a bid to reduce its growing public debt.

Nevertheless, the new government has, under the vigilant supervision of the European Nations, implemented fruitful interventions to improve this situation. This effort has paid off and is clearly evident from recent figures of the country’s per capita contribution which seem to be recuperating. These overwhelming debts have repressed the overall GDP growth of the country and proven to be a headache for Italy’s top management. Majority of the policy makers in in the country are constantly searching for means of rectifying the situation and improving the economy. Reports show that the largest share of the economy is owned by private investors who drive the country’s largest development projects while the public domain owns the smallest percentage of the overall economy.

Recently released data on the public debt in Italy shows an advantage ratio of close to 130% on the total GDP. The data also predicts worse economic conditions for the country. Today. solutions for a sustainable Italian economy continues to dominate public and international discussions and debates. Some analysts predict that it might take many decades of either aggressive collaboration with trading partners or financial recaps to help stabilize the country’s economy and restore it to normalcy. Italy’s only saving grace is the move by the ECB between 2011 and 2012 to acquire 102.8 billion bonds which have kept its economy moving and hence enabled the country deal with all the financial hiccups of the recent past.

Despite the injection of funds into the supply chains and economy at large, employing of LTRO techniques, analysts still feel that Italy’s economy is still fragile and susceptible to a recession. The fact that ECB cannot lend liquidity funds directly to Italy or any other state that is not facing absolute economic emergency makes operations of the bank more reliable. In the past, much blame has been heaped on Greece and Cyprus for largely contributing to the decline of the Euro. However, no one ever perceived that Italy, the third largest economy in the bloc would also water down the currency as is the case today and drag the progress of the euro bloc. However, it is now evident that Italy’s economic woes are a major challenge to the future prospects of the euro which will largely depend on the progress that Italy’s economy makes in the near future (Luigi 11).

According to a 2012 international press release, Italy’s economy is at a dormant and docile stage and this has led analysts to predict that the macroeconomic efforts being channeled towards the country may yield negligible or no improvements at all for this economy in the near future. the Italian economy seems dormant if not silence and the prediction is that the macroeconomic situation may not give meaningful improvements in the near future.

There are many indicators that can point out the state of a doomed national economy which is at the brink of severe depression and may be difficult to salvage. One of these indicators and contributors to such economic atrocities stems from poor political systems and the attitudes that leaders of a country may have towards development and the general welfare of their citizenry (Zingales & Luigi 78). Economic hardships and turmoils are eminent in a country where leaders continue to commit vices and inappropriate selfish acts while in governance.

Credible sources have alleged that the Italian government went bankrupt in the summer of 2011. According to these sources, the bankruptcy was mainly as a result of high interest rates attached to the national public debt which in the long run spiraled out of the government’s control. Many such allegations have their basis on the fact that Italy lost its financial market accessibility during this period. This negatively impacted on the foreign direct investment as investors lost confidence in the country’s economy. Like these investors, Italy’s developed counterparts are also growing wary of its economic situation and this is evident in the deteriorating relations between Italy and other OECD countries.

Italy’s Bad Economy

The political environment in every part of the world is full of blame games and Italy is no different. Many have attributed Italy’s current economic failures to the actions of the country’s former Prime Minister. Silvio Berlusconi basically ordered five important cabinet ministers to resign from office, leaving a huge leadership gap in the country. This surprise move by the former premier is said to have wrecked political havoc in Italy and rendered the government nonoperational due to the vacuum left by these five ministers. The move to discharge the five ministers off their duties and leave the government without operational capacity was also conceived as a sign of disrespect to the euro zone at large considering that Italy’s financial debt rating was already at risk and the implications of the decision would obviously worsen the situation.

Majority of the political allies in Italy were caught unawares by Berlusconi’s directive (Luigi 12). This political situation was subsequently exacerbated by the resignation of Mario Monti who at the time was the coalition Premier for the country. Political advisors for his party, the People of Liberty (PDL) deemed it fit for him to resign because they were in a coalition which had not delivered the promises made to the elect during campaigns. Monti was giving prominence to the development agenda that secured him his votes and as a newly elected leader, it would have been disadvantageous for him to continue his duties in a government which was likely to degenerate into former economic woes.

The Italian Minister for Economy, Corrado Passera, stated in a television interview that Mario Monti’s decision to resign was actually a means of avoiding plunging Italy back to its former economic state and problems. This statement was considered a direct target and critique of Silvio Berlusconi’s policies that had brought about Italy’s economic degeneration (Luigi 14). Both international markets and European political leaders promptly reacted to this statement and urged for fresh elections in Italy given its nonoperational economic circumstances.

Some of the economic challenges that Italy faced under the rule of Berlusconi have been linked to corrupt dealings by the former Premier himself. This is why the former premier was convicted of tax fraud by Italian courts in October 2013 and banned from holding any public office in the country for at least five years. This was in addition to a suspended jail term and was clear evidence that the former prime minister had been corrupt hence the conviction and ban from leadership duties. Currently, there are many attempts by the former premier’s political allies to resuscitate his political career and include him in the current government (Tiersky, Ronald, Erik & Saskia 107). These efforts have been poorly received especially within the Euro zone. This is because it was during Berlrlusconi’s tenure that Italy’s economic operations reduced and this had negative ripple effects on the Euro zone.

There is widespread confidence in the new government and the implementations it has made during the past twelve months have heightened the hopes for a more economic prosperous Italy. However, the main challenge faced by this government is the pressure to incorporate Silvio Berlusconi into its administration (Lodge, Martin & Kai 130). Thcce affiliated to the incumbent and many policy makers are of the opinion that incorporating the former premier into the current government will derail the little progress that has been made in Italy and hence there is need for total detachment between the former government and the current one. T

he government must also become more proactive in defending its financial position and enhancing economic performance of Italy. This can be done through raising taxes and reducing spending. The country should also raise foreign borrowing and focus on enhancing publci investments. The government must also raise its share in public goods by increasing its bids in the public domain (Lodge, Martin & Kai 137).

Additionally, the government ought to take advantage of the financial assistance offered by ECB and other banks and borrow more from such institutions with teh objective of injecting these monies into the economy. Similarly, the Italian government also has to check tax cuts on imports and exports because these are key economic pillars and drivers of growth (Tiersky, Ronald, Erik, & Saskia 103).

The pursuit for transparency in governance can be enhanced through democratic initiations and the government should thus give room for more political parties to operate and provide effective checks and balances for government activities. So far, it is a fact that the pressure imposed by the European nations on the government of Italy have helped the country to prepare and operate within a well balanced budget. Currently, the euro zone is in the process of formalizing new policies that will monitor and control the operations of its countries.

These policies will be mainly aimed at enhancing political viability in all aspects of production within the euro zone countries and will also require alignment of the activities of each country to the general objectives of the integrated organization. These critical policies will necessitate countries to undergo through vital reformations so as to attain economic growth as per required levels.


From the Italian perspective, there seems to be a high correlation between politics and economic growth of a country. Countries depend on responsible governance and virtuous political leaders who prioritize economic growth in order to make any significant economic progress. Italy is thus a perfect example of how political leaders can derail economic growth through corrupt and selfish ambition hence causing social-political animosity (Lodge, Martin & Kai 145). Corruption has become a universal concern owing to the prominent practice of the vice by politicians from all over the world.

It is important for political leaders to aim at enhancing social cohesion during their tenures and also allow for different political ideologies to be used as key instruments for questioning intentions and viability of implementing certain economic policies (Lodge, Martin & Kai 145). This kind of perspective can help political leaders to i room for public scrutiny and question that will yield fruitful results for economic growth and development.

As a country, Italy should now prioritize economic advancement as opposed to politics in order to get out of the economic predicaments that it is facing. The country should focus on enforcing more workable policies and implementing these by the book instead of politicking. The move to bring back the former premier into public administration should not be pushed forward as this will be taking the country back to its former state.

Works Cited

Lodge, Martin, and Kai Wegrich. Executive Politics in Times of Crisis. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, 2012. Print.

Tiersky, Ronald, Erik Jones, and Saskia . Genugten. Europe Today: A Twenty-First Century Introduction. Lanham, MD: Rowman & Littlefield Publishers, 2011. Internet resource.      

Zingales, Luigi. A Capitalism for the People: Recapturing the Lost Genius of Economic Prosperity. New York: Basic Books, 2012. Print.


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