Italy: 16 facts and 7 anecdotes (1/3)
A few numbers to start
Few months ago I was asked by a foreign fellow why the economy of my country, Italy, has been doing poorly for long time. Shortly after I discovered that the family business of a friend was suffering an annual -30% in sales.
Fortunately they have no debt, following the founders (the Grandma) they only and always used equity. They are surviving, strong risk aversion paid-off in this case, and interestingly enough now they are finally thinking to get serious about online: “So what was that Etsy thing about?”.
Those two things made me to think a bit harder on the topic of Italy sluggish economy, putting a bit of order on thoughts and daily observations.
So here it is my collection of facts and anecdotes, linked together the way I see them.
This is made of 3 posts:
- Part1: Six facts for a short overview on the economy (this one)
- Part2: Why Italy is not growing
- Part3: Very subjective and deeply biased root-causing exercise
So down to the 6 overview facts:
If you don’t genuinely enjoy reading numbers skip Part1 and go to Part2, I don’t want to lose you too early — it’s my first blog post ever.
1.Growth: From 2001 to 2011 Italy’s GDP has increased less than 3%, France by 12%.
2.Debt: Public debt now stands at a record 130% of GDP. If you consider though not the wealth produced in 1 year, which is the GDP, but the stock accumulated, you get a different result. Including in the equation the net financial wealth we are not in a significantly worse shape than France or Germany: for €1 of net financial wealth Italy had around €0.67 of public debt, France €0.67 as well and Germany €0.62. This is because private debt is comparatively lower and saving rates have historically been higher than in the rest of EU. (data of 2011)
3.Real Estate: Italy was one of the few PIIGS not having a real estate bubble. Yes prices went down in Rome and Milan but as a result of the prolonged stagnation, prices were not in a bubble.
4.Primary surplus and current account deficit: On primary account, i.e. government revenues minus expenses excluding interest payments on public debt, Italy has been in surplus. The primary surplus accumulated from 1995 to 2010 is €530bn. This is higher than in other countries: Germany have accumulated surplus of €270bn, France and Spain both cumulated deficit. In other words taking out interest payments, Italy has been saving money and did that more than the rest of Europe. We get to a public deficit when we include interest payments in the calculation.
5.Public spending: Overall the composition does not differ significantly from comparable EU countries, I think there are only 2 main differences: interest payments, 5% of GDP in 2012 vs. 2.8% Euro Area and pensions, 15% of GDP vs. 12% EU average. So it is not an issue that Italy spends more than the rest of the EU (the effectiveness of this expenses is lower but it is another topic).
Notice that on education Italy is among the lowest spending member of OCSE.
6.Private sector: In 2012 in Italy the number of companies is 3.8M, much higher than EU countries: France is at 2.5M, Germany 2.1M, Spain 2Mn. The difference is mainly driven by the SMEs — in fact our economy is mainly based on them.
So SMEs in Italy represents 99.9% of companies, they hire 80% of the workforce (vs. 66% in EU – the difference mainly driven by Micro companies), they generate 68% of the added value, vs. 58% in EU.
Enough facts to start. So why are we not growing?
