Italy finally made an admission that its economy will be in recession this year. It is yet one more economy in the region which will struggle to add jobs and increase its tax base; one more that will have relatively low imports from France, Germany, and even the US, and China. Put another way, it will be another drag on the global economy. It is no inconsequential drag with a GDP of $30 billion.
Italy central bank leader Ignazio Visco said GDP would contract 1.5% in 2012. He forecast growth would resume in 2013, but did not have much of a case to support his prediction.
Spain, Portugal, and, obviously Greece will suffer recessions this year. Germany’s economy contracted by .2% in the fourth quarter compared to the third. It was said that Germany’s exports to its neighbors fell. That will not improve this year, as the economies of the region wage their own battles, armed with austerity measures, and little else. If the theory that austerity is regressive is true, the the recession will cycle from one economy to the rest.
Spain faces more than and economic slowdown, if Italy wants to look to another relatively large eurozone peer. Similar to Greece, people have taken to the streets to protest the government’s actions. Hundreds of thousands of Spaniards marched in Barcelona and Madrid. Members of parliament have reason to fear for their jobs, which could well force them to falter on austerity measures which will mean votes against them.
There is still a belief that if Greece is rescued it will stop the sovereign debt problem from spreading. The Italian government has to question that as most of the nations around it have drops in GDPs and very restless voters.
Douglas A. McIntyre