Romano Prodi has an interview in the FT today, here are some of the points that struck me:
"Italy must raise its economic growth rate to at least the European Union average or it will be “lost”,"
This is a fairly dramtic statement, which at the end of the day doesn't mean too much. It is headline catching, that is all. It is of course true, and more true than I think Romano Prodi really appreciates.
"We have been 24th out of the 25 countries in the last five years”
Well, again this is true, but it seems to be more a politically convenient statement, since the other side were in office during those years. In fact the low growth phenomenon in Italy goes back to the early 90s, and thus both sides of the political divide could be thought to share responsibility if the garden has been 'untended'.
Perhaps one of the most debatable points is this:
“The real situation of Italian industry is not as bad as many think. We have a surplus in our balance of trade, if you take out energy imports"
I really don't see the logic behind this sentence. Italy needs, or doesn't need, energy? Is Italy planning to become energy self-sufficient in the foreseeable future? If not, energy is an import just like any other kind of raw material, and the reality would seem to be that Prodi is indirectly admitting that Italy is running a trade DEFICIT.
Now the reasoning behind Prodi's 'spin' could be that he anticipates energy prices could drop at some stage. Is this a realistic expectation? Well energy and commodity prices have fallen back somewhat in recent months, but this is a result, more than anything, of anticipated declining demand, as global growth slows, rather than increased supply. So once we get through the next recession and global growth hits newer and higher records (as the developing countries develop) energy prices could well be expected to rise once more. So Prodi is offering false hope here I think, and whats more, since the lower prices of the moment are due to slower growth this will also hit his number one Italian objective of more growth.
On a more general level Italy desperately needs a substantial trade surplus if it is to generate growth, since, as I have been systematically arguing on this blog, societies with a median age of 44 find it very hard to generate substantial growth in domestic demand, so strong exports are very much a necessity rather than a luxury.
Talking of which:
"In the footwear industry, a traditional Italian strength, “the number of shoes sold has halved in 10 years but revenues have increased. Even in this very simple industry there has been a concrete restructuring and we have placed ourselves in the luxury bracket”.
Just how sustainable is this move up the value chain in traditional product manufacture? (Design would be another thing). This strategy has been employed by textile manufacturers here in Spain, and there are now an increasing number of complaints from those manufacturers about rising Chinese competition in this area too. This is hardly surprising, since China is itself struggling to move up the value chain, and while the Chinese may have started out with low end, low quality, products, they will undoubtedly not stop at this point any more than the Europeans or the Japanese did. It could well be a good idea to start bearing that in mind now.
Italy Economy Real Time Data Charts
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Italy related comment. He also maintains a collection of constantly updated Italy economy charts together with short text updates on a Storify dedicated page Italy - Lost in Stagnation?