AFP
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NOS News•yesterday, 09:22
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Leanne Kraniotis
economics editor
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Leanne Kraniotis
economics editor
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In recent days, concerns have arisen in the financial markets about Italy after Prime Minister Draghi resigned. This is reminiscent of about ten years ago, when there were also many concerns about the high debts of Italy and other countries.
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But how have these countries fared since then? We look at Italy, which is now the most talked about. And to Greece and Ireland, who then both had to turn to the European Union for emergency aid.
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View here the figures on unemployment and government debt in these three countries since 2005:
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NOS
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NOS
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Italy: ‘mud on’
Italy never received an emergency aid package from the EU and the IMF during the crisis years. As a result, they could not make reform demands in exchange for billions, which has happened with Greece and Ireland.
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“It has turned out to be mainly a case of muddling along in Italy,” says ING eurozone economist Bert Colijn. “You have to conclude that many reform plans have died in beauty.”
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Since the crisis, Italy has had a new prime minister about every two years. The country entered the crisis with Silvio Berlusconi, who had to resign in 2011 when financial markets trusted him less and government bond yields soared. Then came Mario Monti, Enrico Letta, Matteo Renzi, Paolo Gentiloni, Giuseppe Conte and thus Mario Draghi.
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Reforms reversed
“There have been reforms of, for example, pensions and the labor market, but these have also been partially reversed by successive governments,” says Colijn. “There was no structural movement towards a stronger economy.”
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Mario Draghi, former president of the European Central Bank, did enjoy the confidence of the markets that he would structurally reform the Italian economy. But his premiership came to an end this week. “For example, he was working on modernizing the legal system and ensuring more competition between companies. The question now is whether the next government will continue with this,” says Colijn.
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Partly as a result of this muddling on, the Italian government debt and unemployment are still high compared to other euro countries.
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Greece: ‘not fully recovered’
The Greek economy was hit hard during the euro crisis. In a few years, unemployment rose from less than 10 to more than 25 percent. But since then, it has steadily declined to around 13 percent.
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“Greece has still not fully recovered from the crisis, although the economy is now doing surprisingly well in the aftermath of corona,” says Bert Colijn of ING.
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According to the EU, Greece has also duly implemented required reforms in return for support. These include adjustments to real estate taxes, the rule of law and public finance management, according to the EU. That is why the increased EU surveillance, which the country was subject to, end next month.
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Greece still has an immense public debt of around 200 percent of GDP, while the EU actually wants it to be a maximum of 60 percent of GDP in all member states. “It will be very difficult to get it to a normal level in the foreseeable future,” says Colijn. “Having creditors written off on their loans is a taboo within the EU, but you cannot avoid it if you want to structurally tackle this high debt.”
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Ireland: ‘all together’
Ireland had to turn to the EU and the IMF in 2010 for tens of billions in aid because of a specific problem: a housing crisis threatened to collapse banks, which were then bailed out by the Irish government, leaving the government deeply indebted and lost confidence in the financial markets.
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But apart from that banking crisis, the Irish economy was and is in a structurally better shape than Italy and Greece. “It has more dynamics, for example there are more multinationals active,” says Bert Colijn of ING. “Ireland had a deep trough, but has since come out strongly. That is also because the country is very attractive in terms of taxes.”
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The Irish economy has long since grown back to before the banking crisis, unemployment is relatively low at around 5 percent and the government debt is 56 percent, so below the EU border, and only slightly more than the 52 percent of the Netherlands. .
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