tag:blogger.com,1999:blog-36227136.post6835926633489104328..comments2024-01-16T08:40:53.682+00:00Comments on <a href="http://www.openeurope.org.uk">Open Europe</a>: Is Beppe Grillo forcing Italy to new elections? OEhttp://www.blogger.com/profile/00556463374230498875noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-36227136.post-46438548028080270762013-03-06T17:14:44.443+00:002013-03-06T17:14:44.443+00:00"The reforms Italy needs." That is the ..."The reforms Italy needs." That is the key point, isn't it?<br /><br />How does one induce growth in an economy that desperately needs it, but with a public debt level that is quite unsustainable once interest rates start to rise from their current historic low levels? On the other side, as a political matter, how do you tell an entire generation to wait a decade until debt levels hopefully return to a more manageable level?<br /><br />In my mind, Italy's real problem is that the light industry on which it so depended has been destroyed by Asian imports. At a street market in Lido di Camaiore last week, I saw a nice pair of leather faced gloves--the kind of thing once made in Italy for all of Europe--for €2.90! No amount of economic restructuring will allow us to make that kind of product in Italy at that price level. This is not caused by some fault on the part of Italian politicians or industrialists. In my view, to return to growth, some limitation of the free trade principles embodied in World Trade Organization (WTO) treaties is going to be required in order to permit many developed countries to regain some industrial activity. No economy can run on services and ultra high value added products alone. To the best of my knowledge, this subject is not even under discussion yet. It will be.F.Lukoffnoreply@blogger.comtag:blogger.com,1999:blog-36227136.post-62238257918864351462013-03-05T20:53:19.459+00:002013-03-05T20:53:19.459+00:00"Whether such a government will be able to co..."Whether such a government will be able to continue with the reforms Italy needs to re-gain competitiveness within the eurozone is a completely different story."<br /><br />Bingo. That is indeed the key point, and there are two clear meanings to the word "reforms".<br /><br />There are long-term reforms to an economy, such as the ones Maggie implemented in the UK from 1979 onwards.<br /><br />These are the really important ones, as we can see from the events around the ERM. The UK and Italy left the ERM at the same time and devalued by the same amount, but then the UK began to grow much faster than Italy, so that today the UK economy is around 15% larger than Italy's.<br /><br />The difference, then, is long term economic reform, but Italy simply does not have the time for that.<br /><br />The other kind of "reform" consists of short-term measures such as cutting Government spending and social benefits, but as we have seen in Spain, Portugal, Ireland and Greece, all those "reforms" achieve is accelerating unemployment which requires increased social spending and/or a high degree of social injustice.jon liveseynoreply@blogger.com