Italy- The silent time bomb threatening the collapse of Eurozone.
Categoría: Eventos

(By Varsha Thakur Democracy Express)

In the aftermath of BREXIT, the woes of Euro zone don’t seem to abate and it seems that the region is heading towards a chaos before its imminent disintegration in the due course of time. According to a recent report by the Deutsche Bank, it was noted that Italy posed the greatest threat to stability of the Euro zone in spite of the impending presidential elections in France

The low GDP growth rates of the countries in Euro zone have resulted in slower growth in tax revenues. This combined with higher social security and welfare spending has lead towards an increase in various deficits and debt levels. The vicious cycle makes for a poisonous cocktail which seems to have induced an economic stupor in the region.

Fareed Zakaria is the one who has perhaps best described the crisis in the Euro zone: “Europe’s core problem is a lack of growth. Italy‘s economy has not grown for an entire decade. No debt restructuring will work if it stays stagnant for another decade. The fact is that Western economies – with high wages, generous middle-class subsidies and complex regulations and taxes – have become sclerotic. Now they face pressures from three fronts: demography (an aging population), technology (which has allowed companies to do much more with fewer people) and globalization (which has allowed manufacturing and services to locate across the world).”
Marco Stringa, senior economist at the Deutsche Bank, said – “Italy represents, in our view, the main risk to Euro-area stability,”

It is to be noted that Italy’s former Prime Minister Matteo Renzi resigned as leader from the ruling Democratic Party (PD) on Sunday which appears to have sounded the alarm that a formal party split could be in the offing.

Europe would witness elections in France and Italy this year. The elections in France would commence in April-May whereas Italy shall have elections in September. Marine Le Pen, the leader of the anti-establishment National Front party in France has promised a referendum on France’s own relationship with the EU within six months of taking office.

“Brexit has not been a disaster. The economic signals are good,” said Marine Le Pen in January. Her party’s manifesto calls for immediate talks with the rest of the EU with the aim of taking back what she calls “the four sovereignties”- control of borders, economic policy, money and legislation.

However, the report by the Deutsche Bank noted “We think that the probability of a negative development in Italy in the short- or medium-term is greater than a victory of the leader of the National Front, Le Pen, in the forthcoming French presidential election.”

Investors from across the world appear to be increasingly nervous about the prospect of several scheduled elections in Europe this year having failed to predict the outcomes correctly in the U.K’s Brexit vote and the U.S. President Donald Trump’s victory in 2016.

*** The article was earlier published in Democracy Express in India

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