BROKEN BRIDGES UNDER THE EURO

The collapse of a motorway bridge in Genoa last month resulting in 43 deaths, and Italian Interior Minister Matteo Salvini’s exploitation of that event by blaming Brussels-imposed austerity, is a reminder of what is coming.

Having driven over that particularly rickety bridge on more than one occasion, this writer is not surprised to hear about what happened. Similarly, driving through Italy in recent years always serves as a reminder just how poor Italy has become under the euro. Remember, Italy has recorded almost no growth since the formation of the euro at the beginning of 1999, nearly 20 years ago. Italian real GDP has risen by only an annualized 0.4% since 1Q99 and is up only an annualized 0.1% in real GDP per capita terms over the same period (see following chart).

ITALY REAL GDP AND REAL GDP PER CAPITA

Source: CLSA, Datastream

The Italian issue is raised again in part because it is timely with the end of the summer holiday season. The view here remains that a systemic event in financial markets is more likely to be triggered by Italy and the Eurozone than other candidates currently discussed by pundits, be it a Donald Trump-triggered trade war, a much anticipated (by talking heads) Chinese currency collapse or overvalued Wall Street FANG stocks.

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