Economic Development in Italy - Essay Example

S&P Downgrades Italy on Weak Economy” by Blake Ellis September 20, Standard and Poor cut the credit rating for Italy based on the information available on a weakening economy and political uncertainty which has led to a conclusion of financial instability. Italy is now rated a A rather than A+ and is predicted to be a negative in fiscal security for some time. The report issued by Standard and Poor Credit Services states that “"The downgrade reflects our view of Italys weakening economic growth prospects," S&P said. "Italys fragile governing coalition and policy differences within parliament will likely continue to limit the governments ability to respond decisively to the challenging domestic and external macroeconomic environment" (Ellis). S&P revised its estimates based on the GDP in Italy which show only an average growth of .7% between 2011 and 2014 which is much lower than what was projected in previous information that the growth would be somewhere around 1.3%. With the upward pressure on the funding costs in private and public sectors and a dampened external demand, in addition to austerity measures that have been put into place by the government, it is likely that the growth will far less than was previously predicted (Ellis). Italy appears to be in trouble and this does not bode well for the next three years. The nation has a great number of resources where its history is concerned, but it appears that its present is in a conflicted state that might make visiting the nation a more difficult or less appealing prospect. With the turmoil in the government, it might be wise to assess the current state of affairs before visiting the country as well as assess the stability of the Euro as it is used in the nation. Ellis, Blake. “S&P Downgrades Italy on Weak Economy”. CNN Money. 20 September 2011. Web. 22 September 2011. “Italy Downgrade Deepens Contagion Fears over Euro Debt Crisis” by Dominic Rushe October 4, 2011 Showing that the news is ever evolving and connected, Dominic Rushe wrote an article about the economic conditions in Italy in relationship to the way it will affect the entire European economic situation. The credit rating service Moody’s has been the second service in a few weeks to downgrade the Italian rating, creating problems for the idea of lending to the nation and increasing the costs of borrowing for the state. Moody’s stated that it cut the rating because “sustained and non-cyclical erosion of confidence” (Rushe). An interesting point was made by Italy’s Prime Minister Silvio Berlusconi who “criticised Moodys rival Standard & Poors when it cut Italys credit rating last month, saying the ratings agencys action was "dictated more by newspaper stories than by reality" (Rushe). This commentary furthers the idea that much of the economy is built upon the power of the media rather than on sound economic decision making. The perceptions about the economy that are driven by the media seem to have a powerful influence on the direction of the financial world, creating fear and reactions to those perceptions as they appear to be a threat. This is a bad situation in that it is the business of the news to create sensationalism in order to sell their product. If this is the case, then Italy is suffering from bad press as much as it is suffering from a decline in GDP. In reference to the former article, the prediction is what has become lower, not the actual suggesting that the reporting of information is affecting the future as much as the events that are occurring. Rushe, Dominic. “Italy Downgrade Deepens Contagion Fears over Euro Debt Crisis”. The Guardian UK. 4 October 2011. Web. 8 October 2011. “Italy Approves Austerity, Berlusconi Resigns” Hada Messia November 13, 2011 Austerity measures were passed in Italy in order to create a greater confidence in the Italian economy. These measures were demanded by Europe in order to create a better look forward for the entire European economy as Italy is the fourth largest Economy on the continent and it is vital for the overall economic outlook. As the package of spending cuts and proposals intending to boost growth was approved, the market surged as a response. The measures were approved by a rate of 380 to 26 within the Parliament. Without proactive measures there is a potential for a meltdown in the Italian economy which would have a devastating effect on the overall European economy. The measures had provided for “pension reform, with plans to raise the retirement age from 65 to 67, the privatization of state-owned companies and sale of state-owned properties, the liberalization of certain professions, and investment in infrastructure” (Messia). Within hours of the approval of Parliament on the measures, the Prime Minister Silvio Berlusconi resigned from his position, fulfilling his promise to step down once the measures had been passed. The Prime Minister had lost the majority previously and had held on until this duty had been fulfilled. The current Italian debt, the largest in Europe, sits at roughly 1.9trilion euro. Messia states that “The country is widely considered to be too big to fail. But it may also be too big to bail”. This article suggests that measures have been taken, but none of the measures seem to be strong or clearly effective. Large transitions will have to be made and this is going to require time. The do, however, satisfy the European community thus helping in public relations. Messia, Hada. “Italy Approves Austerity, Berlusconi Resigns”. CNN Money. 13 November 2011. Web. 17 November 2011. “Italy Appoves 30 Billion Euro Emergency Plan for Economy” by Chiara Vasarri and Andrew Davis December 6, 2011 The new Italian Prime Minister Mario Monti announced “30 billion euros ($40 billion) of austerity and growth measures as he seeks to cut the euro-region’s second-biggest debt and prevent a breakup of the euro” (Vasarri and Davis). The new Prime Minister is exhibiting signs of panic over his solidity in his position as he rushed to pass the measures a day before they were planned to be addressed. His interests are in ‘taming’ the 1.9 trillion dollars in debt as well as 12 million in cuts for spending in the Parliament (Vasarri and Davis). The interesting moment that was discussed in the article is when Labor Minister Elsa Fornero broke into tears during a press conference in which she acknowledged the difficulties they were imposing on the workers. From an American perspective where the truth is always glossed and shined up, this kind of truth is refreshing and honorable. The measures are clearly going to make serious changes in the government and in the way in which life is conducted from a work perspective within the nation of Italy. It is amazing to see such measures go from the instigation to fruition through the series of articles that have been found for this project. While they did not seem to be that effective from the way in which they were presented in the article in November, it is clear that the population will be affected by those changes in meaningful ways. The emotions of the government towards her people are something that could be used in the United States where information is no longer released as a way to affect meaningful change. Change is discouraged through Americanized speech making and the status quo is meant to be perceived as unchanged through each action of government. Vasarri, Chiara and Andrew Davis. “Italy Appoves 30 Billion Euro Emergency Plan for Economy”. Bloomburg Business Week. 6 December 2011. Web. 6 December 2011. Read More