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Debt and the recession: Italy, the ticking time bomb

Italy's populists control the Mediterranean country ever deeper into recession. Experts beat the Alarm: in Debt, unstable, unpredictable – Italy is a danger to

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Debt and the recession: Italy, the ticking time bomb

Italy's populists control the Mediterranean country ever deeper into recession. Experts beat the Alarm: in Debt, unstable, unpredictable – Italy is a danger to Europe.

two months Ago raved about Italy Prime Minister Giuseppe Conte of the "bellissimo" will the new year. Of due! 2019 is likely to be for Italy not "beautiful" – at least economically.

these men of Italy into the abyss: the Prime Minister, Giuseppe Conte (l.) and the Minister of economy Giovanni Tria

a few days Ago - in the middle of the Brexit-Chaos - Italy lowered its growth forecast - and the right drastically. Instead of a percent, the third largest economy in the Eurozone will grow by only 0.2 percent. Shortly before, Minister of economy, Giovanni Tria had already warned that Italy hinsteuere this year to zero growth. In 2018, the country's economy still grew by 0.9 percent.

Italy provoked the EU

Italian budget deficit-to-GDP ratio

Due to the gloomier prospects of Rome, raised at the same time, the forecast for the expected debt - to 2.04 percent to 2.4 percent of gross domestic product (GDP). Hence Italy returned exactly back to the level where the dispute with the EU-inflamed Commission. Week-long Rome and Brussels had delivered in the past year, a slugfest over the budget deficit, until the populist accompanies the score tables Italian government is small and there is a Zero in the forecast in between pushing.

"The target value for the deficit was probably intended from the beginning by the Italian government as a provocation," he says Martin Lück, investment strategist of Blackrock.

outputs high-state wants to bring the government of right-wing Lega and the populist Five-star movement in Italy, one of the brands of economy. She has decided to be a costly pension reform, and new social benefits. This should be financed by a higher budget deficit.

the country in 2019 is Slipping further into recession?

Probably not, it could be even greater if the economic situation in Italy improved. In both the third and in the fourth quarter of 2019, the Italian economy has shrunk. After a major recession, Italy is in a recession.

International organisations fear that Italy remains, in 2019 in the recession. The OECD expects that the economy will shrink performance this year to 0.2 percent.

According to the OECD, Italy's will rise in the debt ratio to 134 per cent of GDP by 2020. Even now, Italy is in debt to the tune of 130 percent of GDP. Only Greece has a higher rate. In absolute Figures, Italy with liabilities of around of 2.38 trillion euros, the highest indebted country in the Eurozone.

politicians and Economists are concerned

politicians, Central bankers and Economists are alarmed. EU Commission President Jean - Claude Juncker, demanded that the Italian government's additional efforts to the flagging economic growth. "Italy could be the first country that the device is not in the next recession, in serious difficulty, unless the government moves away from its economic policy plans," say the authors of a study of the Berenberg Bank and the Hamburg world economy Institute.

Several economists and investment strategists see Italy as the ticking time bomb in the Euro-Zone. The dispute between Rome and Brussels flares up again, could rise, the yields on Italian government bonds rapidly to over three percent. Particularly dangerous it could be if the distance between the yields of securities between the Italian State and German Federal bonds would climb to four percentage points.

"The biggest risk to the currency Union"

Then many banks would have to be Italy recapitalized. Keep Italy bonds of almost EUR 400 billion. Since the course would have an impact on losses of the bonds, the balance sheets, would have to Italy to write off banks a lot of money. This could lead to a new banking crisis. Higher risk premiums in the bond market could force Italy to do this, either from the Euro to withdraw or the trust of the capital markets reforms and a more solid budgetary policy regain, believes asset managers Bert Flossbach.

Sunk the Euro?

Italy have become accustomed over the decades, "a lack of competitiveness by a devaluation of its Lira balance," says Thomas Mayer, the founding Director of the Flossbach von Storch Research Institute. Since the introduction of the Euro, not more. For Mayer, it is clear: Italy is the "biggest risk to the currency Union".

the risk of the Gradation to junk level.

Especially would be dangerous for Italy, a recession in Europe. In this case, could worsen the credit rating of the country. According to Ricardo Garcia, chief economist at the Bank UBS for the Euro-zone, would then threaten a downgrade by Moody's to Non-Investment Grade. Under pressure from the markets, Italy would need to hang up a large savings program. This would worsen the economic situation.

the Italy-crisis would also hit German savers hard. You would have to reckon with negative interest rates. UBS chief economist Garcia expects in the case of a Europe-wide recession with a negative record of minus one percent for ten-year Federal government securities. That would bring insurance companies and pension funds, which rely heavily on fixed-income investments, in enormous difficulties.

ECB offers new loans to

ECB chief Mario Draghi knows what Italy needs

The European Central Bank (ECB) is well aware of the Dilemmas in Italy aware of. ECB chief Mario Draghi, himself an Italian, in March, the banks new cheap long-term loans in the money houses are more willing to loan to the company. Of all institutions in the recession is likely to benefit-ridden Italy. For the time being Super Mario" Draghi is likely to "his countrymen from the Worst keep. For the time being.

source: Atlas |Italy |Rome A new high for the year of start for Lufthansa, Zalando is in the air forecast errors is likely to exceed as a ...

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