THE ITALIAN FINANCIAL CRISIS. A PROBLEM NOT ONLY NATIONAL. BUT A NIGHTMARE, OF A GLOBAL DOMINO EFFECT
ITALIAN FINANCIAL CRISIS
THE ITALIAN FINANCIAL CRISIS. A PROBLEM NOT ONLY NATIONAL. BUT A NIGHTMARE OF A GLOBAL DOMINO EFFECT
I have been hearing and reading a great deal in the Italian papers as of late about the seriousness of the financial crisis that Italy is now facing. It begs the questions such as who is at fault for this crisis. Is it the politicians, banks or some other entity? Is it possible to define the cause of this crisis?
It appears that in an attempt to keep pace with the other members of the European Union (EU) the country has been borrowing more and more money, much of which goes to the importing and exporting of items, with leaders in government raising taxes so high that much of the Italian population no longer can afford even the basics of everyday life. Even to afford to take care of their own families is now at risk and it has been reported that, due in large part to the mounting economic crisis in the country; many citizens have resorted to taking their own lives, or even becoming homeless, and living under bridges and other similar locations with just a few meager possessions that are able to take with them. Hence begging for money in any way/manner they can. This is not just happening to those on a pension, but also to those who have lost their jobs or seen their funds shrink due to more being taken from their checks, hence giving them less take home pay. Then not even being able to afford some of the basics that we take for granted, like food, housing and so on. Unfortunately prices keep increasing with no signs of the trend reversing any time soon. The only group of people that don’t seem to be affected by this crisis are those that are financially secure (such as the super wealthy, those in positions of power (political/monetary) ) who by all appearances are getting wealthier. I’m not saying it’s all the politicians, but it seems that this applies to the vast majority of them.
The European financial crisis continues to worsen as fears grow that Italy may become the latest nation needing a massive bailout. While Greece, Ireland and Portugal have already received international bailouts, the debt situation in Italy is considered far more dangerous. It is the eighth largest economy in the world — larger than Greece, Ireland and Portugal combined. Yet there are sources that report that Italy owes more than Greece, Ireland and Portugal all put together. This is a scary scenario when you stop to think of it. Would a massive bailout be the correct way to go, where efforts to repay the bailout may make things worse for the nation? And only be a temporary fix, like putting a bandage on a wound. The country needs to have a viable financial plan in place to assure that funds could be paid back while focusing on strengthening the economy and much more that would be agreeable to everyone, even though there is a fear that all in Italy would beholding to the French, as the French banks are among some of the biggest holders of Italian debt.
It appears that within the banking industry that the European Central Bank (ECB) emergency lending has made things worse by encouraging banks to buy their own debt. Many who use or have used the ECB to buy state bonds necessary to roll over their own debt and as a result of this seemingly unnecessary purchasing are nursing severe losses with no hope of recovery. Not a confidence booster.
One possible way to save Italy and stop the contagion, many believe, is for the E.C.B. to buy Italian bonds on a much more aggressive scale than it has so far been prepared to do. But while the E.C.B. will not let the euro fail, analysts claim it would avoid bailing out Italy as long as possible, to keep the pressure on the Italian leaders to make reforms by cutting spending and removing impediments to growth I see one major issue with the leaders cutting spending to a greater or lesser degree. If spending cuts were to be implemented in an effort to aid in a resurgence of financial solvency, it would be what services would be lost to those directly impacted by the cuts. Such as seniors and those getting some form of government assistance, medical coverage, some necessary school programs like sports and the arts amongst others. By cutting costs prices would rise to cover the losses and there are many that are already in such a precarious financial position, their situations would be that much more dire and the possibility exists that they would leave the country and go elsewhere else where they might be somewhat better off. Removing impediments to growth could be seen as a positive thing, yet it may take time before any results are seen.
It is my understanding that Rome is making a bid to the International Olympic Committee to host the 2020 games. But the current financial situation of the country may be an impediment to them being awarded the games. On the positive side, if Rome was to get the games, there would be an economic impact from tourists that would be visiting leading up to and through the games; many jobs would be created for the games, but more of an interest in visiting not just Rome but the country as well. But that is as they say “putting the cart before the horse.”
The country is a major player in utilities, telecoms, fashion and banking. But the recession has put a strain on its economy and a succession of pop-up governments has failed to tackle fundamental problems, including the massive pension debts owed its ageing population. And the fact that many people have a lack of trust in their government to do the right thing and put their (the citizens) needs ahead of those in elected office. Trust in the leaders and having things rectified would certainly go a long way to close the gap that is already present. And getting the county back as a viable player in the financial market without having such severe issues again.
Also, twenty-six (26) Italian lenders have been downgraded by Moody’s. They say it had cut Italy’s rating because of a “sustained and non-cyclical erosion of confidence in the wholesale finance environment for euro sovereigns,” and said it had the country on watch for more cuts to come. This action has been called irresponsible and unjustifiable by those that think that the ratings should be upgraded. Those groups or people stating this, feel that it is an attack on Italy as a whole, its companies, families and citizens and they want the European Union to clamp down on these types of reporting agencies.