Italy, Europe Seek to Recover

The Eurozone has been in trouble as of late. A lot of the problems have come from Italy. Italy is one of the countries who most needs the help recently placed out by the European Central Bank. This past weekend, according to the article, “German Chancellor Angela Merkel and Italian Prime Minister Matteo Renzi said Friday that Italy and other European countries need to push ahead with structural changes following the much anticipated move by the European Central Bank to help boost the eurozone’s struggling economy.”  The much anticipated move these two men are referring to is the massive bonds buying program that will seek to boost the economy and improve struggling countries such as Italy. Italy, while not being the biggest economy, is certainly important for its stability. The Italian prime minister has run into problems due to labor unions and even legislators from his own party. The fact that he is seeking resistance from his own party indicates that the bills he is attempting to pass are indeed controversial. However, this may not be a bad thing as Italy certainly needs a little change. Opposition of any kind, unless it is stubborn partisan lockups, can spur creativity and idea creation. Overall, this is a positive sign coupled with the bond buying program. Some of the resistance Prime Minister Renzi is facing include aggressive labor guidelines, economic and institutional changes. The minister is seeking investing and a shift away from fiscal lockup. Angels Merkel recently said, “I already see the first signs of the effects of these reforms in Italy. But they need to be completed.” This is a positive sign as the aggressive stimulus begins to take effect. More than $1 trillion in newly created money has been pumped into the economy. The European Central Bank President Mario Draghi recently suggested that, “In light of Europe’s underlying problems of stagnant growth, high debt and rigid labor markets, the central bank’s largess alone won’t be enough to right its economy.” . This can create growth for the economy and help lower rates, but it can not solve all these problems. However, after seeing what the US went through, each country in the eurozone can seek to set its own fiscal policy to supplement what the European Central Bank has already done. It is a tougher situation in Europe than in the US due to the fact that the United States only has one set of fiscal regulations to couple with the Fed’s stimulus. It will be incredibly interesting to see what happens in Europe. I think the recovery could be long and hard. If I were an investor, I would seek to invest in the US due to the fact that we seem to be the only safe move right now given troubles in China and in emerging markets. Between all these things and with falling gas prices, it has certainly been an interesting start to 2015!

One thought on “Italy, Europe Seek to Recover

  1. Yichuan Wang

    Do you know what kinds of structural reforms they’re considering? The issue with “structural reforms” is that they can have a lot of redistributive effects within an economy, and they can be particularly unpopular if an economy does poorly.

Leave a Reply