Italy Economy – An insight
There was a time when Roman Empire was the dominating economic, military and political power in the world. However, after post war era of fast industrialization, today, the Italian economy is popularly known as the “Sick Man of Europe.”
In 2007, Italy had a population of 58 million people and Gross Domestic Product of $ 1.8 trillion. It is the largest economy by nominal GDP and the tenth largest economy in terms of purchasing power parity. Italy has a history of several thousand years which dates back to BC and has links with Greece, and the successive development and growth of Roman Empire and Roman Republic. For many centuries, Rome was the effectual center of the world and its economy and military dominated Asia and Europe.
The Roman Empire eventually divided into parts and was swapped by the city states, which were the most important centers of learning, commerce and trade during the Renaissance and the middle age. The Vatican City, which forms the center of the catholic religion, gave the region both temporal and spiritual powers.
In the year 1861, the city turns into modern day Italy. Until the 1920s, it flourished as a parliamentary democracy but after that came under the power of Benito Mussolini. Mussolini related himself with Hitler during the time of World War 2 and this country was invaded repetitively during its defeat.
After the completion of World War 2, Italy eradicated the monarchy and was at the center of western European institutions like the Group of 8 (G8), the European Community now called the European Union and NATO. During that time, it changed from an agricultural economy to an industrial power and now it is service led industry. Services today make for 70 per cent of the total economy, agriculture 2 per cent and industry 28 per cent of the economy.
Italy has an extremely vigorous small and medium size enterprise sector, with businesses owned by families making its backbone. This country failed to establish itself as multinational corporations. Furthermore, its popular brand names, those related with automotive industries, wine and the fashion have generally been family businesses.
Most of these companies do not have high level and advanced technology sophistication and therefore, they are facing mounts of pressure from globalized economies where manufactured goods and products can be produced at cheaper prices.
As a result of this, growth has declined to zero. In the year 2007, the GDP growth rate was 1.6 per cent, slightly more than the average this decade. For a long time now, Italy has faced the problem organized crime and corruption, debt levels, high unemployment, big split between the poor south and advanced north and illegal immigration.
In fact, the national debt reached to its staggering 2 per cent of GDP by 1995. Frequent severe measures have been taken to bring down this figure, however officially it is still 100 per cent.
Although there has been decline in unemployment rate and now it averages less than six per cent, it can reach more than 20 per cent in the south. Conventionally, inflation has been a major challenge for Italy. However, it has been brought down to controllable despite the conviction that prices doubled at the introduction of euro.
The global economic slowdown is expected to hit Italy hardly as it will be compounded by the internal problems of the country including the high taxation, the economic cost of costly pension system that will be exaggerated by a graying population and the national debt level.