Italy’s Downward Spiral

MUNICH – Italy is now in a triple-dip recession. But it didn’t get there by itself. Yes, the economy’s long slide reflects Italian leaders’ failure to confront the country’s loss of competitiveness; but it is a failure that is widely shared in Europe.

When the financial crisis erupted in the fourth quarter of 2007, Italy’s GDP plummeted by 7%, then picked up by 3%, dropped again by 5%, rebounded by a measly 0.1%, and lately, during the first half of this year, shrank again, this time by 0.3%. Altogether, Italian GDP has contracted by 9% during the past seven years.

Industrial production, moreover, has plunged by a staggering 24%. Only thanks to stubbornly persistent inflation has Italy’s nominal GDP managed to remain constant. Overall unemployment has climbed to 12%, while the rate for youth not attending school has soared to 44%.

Italy has tried to counteract the economic contraction by increasing its public debt. With the European Central Bank and intergovernmental rescue operations keeping interest rates low, Italy’s public debt has been able to rise by one-third from the end of 2007 to the spring of 2014.