#Italy#China#Coronavirus Italy Slumps into Perma-Recession -- Economic Collapse in The Eurozone
Germany slumping into recession; The Brexit aftermath; And the Coronavirus in China; The effects of this are going to be felt very sharply in Italy in particular. Add to this, failing Banks; The Euro; A huge public debt; and an unstable political situation, and you have the recipe for a major financial crisis.
Italy, the EU’s fourth-largest economy, was already in a technical recession since the second half of 2018 and has faced continued economic woes from weak productivity, high unemployment, huge debt, and political turmoil.
The impact of the coronavirus risks are significantly negative on the global economy, but particularly for Italy. China is Italy’s third-largest supplier, and 3.5 million Chinese tourists visit Italy every year. The longer the Chinese economy remains crippled, the bigger the risk to Italy.
The outbreak has come at a difficult time for Italy’s economy. Output unexpectedly shrank 0.3 percentage points in the final quarter of 2019, ramping up pressure on the fragile coalition government of Prime Minister Giuseppe Conte. Bank of Italy Governor warned of significant downside risks to the country’s outlook.
In fact, the country could be heading for its fourth recession in a little more than a decade.
Italy has been fighting a slow or no growth trap throughout this century.
Italy has more than 20% of the probability of going bankrupt in the middle term. Until the structural reforms are not done, Italy will keep loosing industries, Know How , and talented and well-educated people, etc. In the short term, it doesn't matter which coalition will rule the country. At the moment, both the USA Federal Reserve and the European ECB are keeping flooding the markets with cash, so Italy will continue being able to sell its bonds with low interests, but in the future, we don't know.
Growth has stalled, leaving the country’s economic output still 5 percent below its pre-crisis peak of 2008.
At the same time, Italy's debt-to-GDP load has reached heights not seen since World War II.
Italy's debt load is rising. It currently stands at about €2 trillion ($2.25 trillion). Debt to GDP has reached 130%, a level not seen since World War II.
Italy has the EU's second-highest debt to GDP ratio. Rome currently spends 3.7% of its GDP on debt interest.
The public debt ratio [to GDP] will probably continue rising and eventually prove unsustainable.
And as if it was not enough. Now that Germany entered a recession. In fact, in January, industrial production in Germany collapsed. A heavy, unexpected drop of 3.5%.And When Things are going bad in Germany. They are going badly for Italy too. Germany is the first commercial partner for Italy. The value of the Italian exported goods to Germany, represents 12.5% of the total of Italian exports, a quarter of what Italy exports to the whole EU.
The Italian and German production systems are strongly integrated with each other in the global value chains since Italy is an important supplier of intermediate products and capital goods to German companies. The fall in German manufacturing production, therefore, slows down Italian exports. And by a lot.
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