Arrivederci Italia?
The latest news from Italy was heartening. The European country first struck low by Covid-19 was at last emerging into the sunlight, literally so, as finally Italians were allowed to leave their homes and walk abroad. The virus is receding at last. Normal life looks attainable once more.
A happy ending?
Well, not quite, more the end of the beginning, and what happens next is anyone’s guess in terms of public health. However, what is clear is that the economic indictors and resultant predictions for the European Union’s 3rd biggest economy are dire.
We watched in disbelief as Italy shutdown before our eyes in March 2020, we now watch with bated breath as she opens up. Now the question is: after so much damage wrought by Coivid-19 is there anything left of the Italian economy?
It was reported that the Italian economy shrank 5.3% in the first quarter of 2020, the worst figures for Italy since the current records began in the 1990s. Worse is expected. A deeper economic shock is due with a resultant contraction expected for this present quarter. Some analysts think that the Italian economy will slump by over 10% by the time that 2020 is over. It will be a finish like no other for Italy, and may be the finish of Italy, and even the EU project.
Because it’s a major depression not just a recession that’s coming down the track. The present frantic borrowing by the Italian government seems as desperate as it is pointless, solving little but adding more to the mounting national debt burden. This week Italy received over 100 billion euros ($112 billion) worth of bids for its syndicated offering of 10-year debt. With the country’s debt as a share of economic output set to top 150% this year, Italy will need to sell bonds like never before in order to fund a growing fiscal deficit.
This week Prime Minister Giuseppe Conte announced how Italy is to rebuild a battered economy after almost three months of lockdown. Politically, Italy has more problems than most in Europe, acerbating any economic woes. Conte heads an unruly coalition that was barely functioning when the economy was roaring. Today, the challenge Italian politicians face is the greatest since the end of the Second World War.
Echoing that time Conte posted a message on Facebook, evoking the hard won efforts to make the then war devastated Italy into the prosperous European democracy we have known since. It read: “Let’s combine and concentrate all our energy in the shared effort to pick ourselves up and begin again with maximum determination,”
Perhaps it was not unexpected that Conte called for the national unity of purpose to restart the economy with calls for squabbling political parties to set aside their differences and work for the common good. His message was met not with a show of solidarity though but with opposition rallies in hundreds of cities.
Nevertheless, as new virus cases continue to decline, Italians can again travel within the country without restrictions starting this week. Yet, that too has provoked controversy. Officials from the more virus-free South are threatening to turn away citizens from northern Lombardy, Italy’s most Covid-19 hardest hit region and where new cases continue to be reported.
On one day this week Italy’s Health Ministry reported a daily rate of just 55 fatalities, the fewest in more than a week. But this week’s new cases saw almost 60% of new infections in Lombardy alone. Remember that this may be the region hardest hit on account of the pandemic, but it is also the engine house of the Italian economy with at its heart the financial center of Milan. And yet, Lombardy accounts for almost half of the more than 33,500 fatalities nationwide and still has the highest ratio of new cases per 100,000 people.
The decision to allow free movement internally is as much about foreign tourism as it is about Italian domestic travel. Tourism accounts for about 13% of gross domestic product in Italy. Perhaps with more hope than expectation, struggling Alitalia is increasing by 36% this month’s flights in and out of Italy. Unless the talk of “air bridges” becomes a reality, however, then tourism in Italy will die. Looking at Gatwick Airport this week should give all tourist dependent economies food for thought. On one day, from the UK’s second busiest airport, only 22 passengers boarded flights. In normal times, there were around 60,000 passengers per day.
Now Italy has been in the past one of the top destinations for British holidaymakers. In 2018 nearly 4 million UK tourists descended on Italy. But with UK government plans – albeit not fully detailed – to quarantine arrivals into Britain this looks like just about killing off travel for Brits for the foreseeable future. In the same year, 2018, just over 12 million Germans holidayed in Italy. The Italians are already frantically negotiating with EU partner countries to try and ensure that travel within the EU – they have given up on Britain – is as restriction free as possible.
The strife torn Italian government needs to get its act together quickly. Italy is not only one of the EU’s largest economies but one of the world’s, with the 8th largest GDP. And 13% of that economy is built on tourism. It is June as I write. The summer is upon us. Time is, therefore, running out.
So tourism alone, however belatedly it picks up, will, I fear, come too late to right this sinking ship. And as for Italian politics, it may well be too late for anything to done by Premier Conte, or anyone else for that matter.
