Who Or What Will Push Italy Over The Cliff This Year?
Traditionally, the Eurozone’s GDP numbers of the second quarter of a calendar year are being released in the first few days of August, and this year isn’t any different. And as expected, the updated report contains some not-so-very-optimistic results.
Germany continues to be the main engine of the economy of the Eurozone, as the largest country of the bloc saw its GDP increase by 0.4%which is better than expected as the market was expecting a weaker growth result. Unfortunately Italy is once again stagnating and instead of a small economic growth of 0.2%, the economy’s growth rate fell flat and remained at exactly at the same level, indicating the program of monetary expansion of the ECB isn’t working just yet.
Source: Bloomberg
The lower growth rate (after realizing a GDP increase of 0.3% in the previous quarter) also caused both the International Monetary Fund and the Bank of Italy to revise their growth expectations as both institutions now expect the country’s economy to grow by less than 1% in the current year. That’s a very disappointing result as the quantitative easing program of the European Central Bank was predominantly aimed at reducing the impact of economic contractions in the poorer performing countries. But the situation might actually be even worse than you’d expect.
After all, Italy could be considered to be a semi-failed state, and the current prime minister, Matteo Renzi, was planning to push some reforms through after the summer recess of the country’s parliament. Reforms will definitely be necessary to try to the Italian economy going again, as it’s one of the very few countries remaining short of the pre-crisis levels of the GDP considering Italy’s GDP is still approximately 8% lower compared to the pre-crisis GDP numbers whilst the unemployment numbers are increasing again.
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