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The Italian Bond Spread - Essay Example

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Summary
The bond spread or yield spread is the difference between two debt measuring instruments such as a high-risk bond versus a risk-free or stable bond and the difference is used to help investors decide which bond to invest on…
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The Italian Bond Spread
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The Italian Bond Spread

Download file to see previous pages... From 2008, Italian banks survived and prevented abrupt losses using the traditional business model and limited support from the government (International Monetary Fund, IMF, 2011). But the Greek and Irish crises increased the bond spread for most EU countries, causing a decline in government securities’ value and higher risks of investments on the affected countries. Aside from the European and worldwide economic crisis, Italy suffered from other internal problems such as economic and political systems, like economic fragmentation and the people’s lack of trust in national politics (Bastasin, 2012). In addition, reports of both the Left and Right government coalitions’ inability to create long-term solutions while creating counter-productive reforms and programs did not stop the economic crises’ effects, serving only a few sectors of the government and not all Italian people (Cline & Wolff, 2012). Other issues in Italy affected the people’s economic perception like over-reliance on non-permanent government work contracts, devaluation of some public services like health services and educational institutions, people’s deterrence from spending, and the increasing unemployment rates from the lack of support for small and medium-sized firms (Di Quirico, 2010). Also, the previous administration’s problems decreased the standing of the country such as the former prime minister’s non-incarceration from numerous filed cases, creation of self-serving policies and laws, and questionable ownership of majority of national television networks resulting to near-total control over mass media (Guiliano, 2012; Viroli, 2011). Internal...
The Italian Bond Spread: Its Transformation from Berlusconi’s Third Regime to Monti’s Administration and Beyond

Like other EU nations, Italy was also affected by the global economic crisis starting from 2008, but this was not the sole factor that caused its large fiscal deficit and high bond spread. The political instability from the former Prime Minister’s issues such as misusing public funds and inefficient policies along with the nation’s multi-party system’s lack of unity lack of policies compounded on the recession’s effects. While Prime Minister Monti initially helped increase the country’s credit standing through some reforms, these were not enough to completely change Italy’s economic standing. In addition, the 2013 elections created more problems due to a political deadlock, and the three major forces that were expected to reform the Italian politics had no hopes for cooperation at present. The existing policies should be revised to solve fiscal problems as soon as possible, otherwise the recession would continue to affect the country and eventually block Italy’s further economic development.

Since most problems rooted from the leaders’ inability to create effective policies, one possible solution for Italy and other European nations is unification similar to the United States, where the government, leaders, politics along with the currencies are centralised. However, this solution would take a long time due to restructuring, developing and proper implementation. ...Download file to see next pagesRead More
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