Some of my students asked me which fact could show, in the most synthetic way, the decline of Italian economy in the last 10-15 years. The best “picture” of this decline is, in my opinion, the “italian GDP per capita / purchasing power standard-PPS”, calculated assuming as 100 the same fact averaged for the 27 states of EU. In this way we obtain a line which goes down very fast, continuously time by time, and without any sign of change in trend: it’s possible to see it in the chart below.
In the mid-nineties the “italian GDP per capita in PPS” was 21% above the average of todays 27 EU states, and even 6% above the average of the 15 original EU states. In 2003 the Italian figure went below the EU-15 average figure, and at the end of the decade it set to zero the difference over the EU-27 average.
Beside the “picture” of Italian decline, it’s useful to observe the different evolutions of GDP in Italy and in the EU. The following chart shows the two “real GDP” indexes since 1995.
Since 1995, Italy ever grew less than the rest of EU (apart for 1999-2000): from 1995 to 2007, last pre-crisis year for Italy, we put together a total growth of 20% (against the 38% of the rest of EU), but about half of this growth has been lost in the 2008-2009, and the little improvement of 2010-2011 has been completely burnt off by tax-driven recession of 2012.
Final result? While in 2012 the rest of Eu (which includes the other countries facing “problems” except us), completely re-gained the 2007 GDP level, Italy did not recover and our GDP is back to the same level of 2001, three political terms ago.
But there is something even worse. During this period Italian population grew, so the GDP per capita figures decreased in an even worse way.
Italian GDP per capita decreased back to the 1998 level, the year when Italy was admitted to the Euro currency. I know I’m giving a point to “grillini” (fans of comedian politician Beppe Grillo, who asks for the exit of Italy from Euro currency, to recover the “freedom” of unlimited balance deficit), but the chart says us that, during the whole period before the adoption of the Euro currency, there has not been any improvement in the GDP per capita, and, since the Italian population became older, and there are more needs to satisfy to ensure a given welfare level, we can reasonably believe that, even with the same real GDP per capita, the average Italian welfare is now below the level of 1998.
Obviously a coincidence is not a cause, and the euro currency is not really connected with italian decline. When Italy was admitted to the Euro currency, the state deficit was under the 3% of the GDP, and thanks to the euro currency introduction, and the conversion of Italian debt bonds, there has been a decrease in the expense for interests on the debt, of around 7% of the GDP.
With such drop in interest expense, could have been possible to take the state deficit to 0, stopping the increase of the debt stock, and accelerating the decrease of the Debt/GDP level. It could have been even possible to decrease the Tax/GDP level for 4%. If we had made this few things, now we would have not had any decline and no problem of state finance as well. We choose not to do these policies, and have been us, ours governments. It has not been the Euro currency, or whoever was in charge before Angela Merkel.
Translation by Francesco Tedeschi
Original article by Ugo Arrigo from Chicago-blog.it