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prideandprejudice#
Italy is often described, especially in the
international community, on the basis of
several negative indicators: the public
debt, the low level of competitiveness, the
nominal budget deficit (which, in the past,
led to the opening of an excessive deficit
procedure by the European
Commission).
However, alongside these data, there are
economic aggregates useful for
presenting Italy as what it is: one of the
leading countries of the developed world,
the second-ranking European country in
terms of manufacturing output, and the
third-largest economy in the Euro Area.
A country that has managed in the past
20 years to control its public accounts,
positioning itself as one of the most
virtuous countries in Europe and in the
world.
This presentation highlights certain
economic data about Italy that are never
mentioned, or not mentioned enough,
in order i) to counter certain widespread
prejudices that are not based on facts,
and ii) to appropriately represent a country
that contributed to the founding of the
European Union.
The primary surplus in Italy's public
accounts is among the highest in the
world, and has been the most stable
among the Member States of the
European Union for the past 23 years.
In 2014, the ratio of the primary surplus to
GDP was among highest of the most
virtuous countries in the EU.
The primary surplus is the difference between revenue
and expenditure in the national public accounts, net of
expenditure for interest on the debt.
prideandprejudice#1/7 PRIMARY SURPLUS
Source: Ameco - European Commission
prideandprejudice#PRIMARY SURPLUS Italy's primary surplus for the public budget is one of the
highest in the world, and is the most stable among EU Member States for the past 23 years.
Source: Ameco - European Commission
-2.0
-4.0
-6.0
-8.0
6.0
4.0
2.0
8.0
PRIMARY SURPLUS OF THE FIVE LARGEST EUROPEAN COUNTRIES: 1995-2016
-0.5European Union
-5.5-2.5-1.0 -1.4 -3.0
(% GDP)
6.2
2.43.2
2.2
-9.3
-5.9
-1.5
15 16
1.81.6
PRIMARY SURPLUS, year 2014 (pct of gdp)
2.1Luxembourg
1.8 1.6 0.1
-1.8
greece
0.4 0.0
-0.2 -2.3
As already evident in the primary
balance, the rigorous approach to
responsibly managing the public budget
is confirmed by the trend of public
spending.
Italy's public expenditure remained almost
constant during the years of crisis,
whereas other countries logged significant
increases, including double-digit increases.
prideandprejudice#2/7 Public Expenditure Increase
Source: Ameco, ESA 2010
Source: Ameco, ESA 2010
Public Expenditure Increase 2009-2014
Public Expenditure Increase
Increase in public expenditure for selected countries for the 2009-2014 period (excluding expenditure for interest) prideandprejudice#
European Union
Belgium
Germany
France
*Italy
Luxembourg
Netherlands
Austria
Finland
sweden
uk
Norway
usa
japan
*Reclassifying the €80 bonus for full-time workers as a remission of the tax wedge, instead of as a social expenditure (According to official statistics, the figure is 2.2).
0 5 10 15 20 25 30 35
5.5
5.7
30.2
17.1
21
5.7
13.4
4.2
27.3
12
12.1
18.6
9
%
1.4
prideandprejudice#3/7 DEFICIT/GDP
Italy's deficit-to-GDP ratio was below 3% in
2013, as it was in 2012.
The European Commission accordingly
closed out the excessive deficit
procedure that had been opened in the
past.
Again 2014, Italy's public finances met this
requisite, as provided by the European
treaties applicable to the countries that are
part of Monetary Union, and those thus
that have adopted the euro as their
currency. In 2015, the deficit descended
to 2.6% of GDP.
In the Euro Area, Italy is still one of the
few countries to have respected this
rule.
It is furthermore interesting to note that
there are numerous countries outside of
the Euro area that have a deficit-to-GDP
ratio that is above the 3% level. Those
countries included the UK, Japan, and
the United States.
Source: Ameco - European Commission
prideandprejudice#DEFICIT/GDP For 2015, Italy's deficit-to-GDP ratio further decreased with respect to prior years.
Source: Ameco - European Commission
DEFICIT/GDP YEAR 2015
Gree
ce
Japa
n
Spain
Unit
edKin
gdom
Unit
ed S
tates
Port
ugal
Franc
e
Italy
Nethe
rland
s
Aus
tri
a
Swed
en
Denm
ark
Germ
any
Luxem
bour
g
%
Romani
a
Euro
are
a
Irel
and
Euro
pean
Union
Belg
ium
Slov
enia
0
-1
-2
-3
-4
-5
-6
-7
+1
prideandprejudice#
Source: Eurostat - IMF
4/7 public debt
Many countries reacted to the crisis that
took shape in 2008 by expanding their
public budgets. Between 2008 and 2014,
deficit expansion translated into the
growth of debt.
It is very clear that the trend of Italy's
debt has been much more subdued
than in other countries.
Despite Italy's modest economic growth
during the years of the crisis, the increase
in Italy's debt was well below the average
for both the EU countries, and the Euro
Area countries.
As a result of economic growth and a
plan now being implemented to divest
State properties, Italy's debt-to-GDP ratio
has stabilised and will start declining in
2016.
prideandprejudice#public debt Since the start of the economic crisis, Italy's debt has grown at a slower rate than in many other EU countries and the USA.
Public debt
Source: Eurostat - IMF
euro area
luxe
mbo
urg
euro
pean
union
% GDP
15.18
%
15.39%
22.94%21.82% 25.23%
28.44%
29.32%
35.13%37.86%
44.43%4.,33%
59.73
%
63.32%
70.48
%
81.63%
40.42%
prideandprejudice#5/7 Public Debt Trend
After 8 years of uninterrupted growth, the
public debt-to-GDP ratio was essentially
stabilised in 2015 and is slated to fall as
from 2016.
As of 2019, the ratio will decline to below
the 120 per cent threshold.
The turnaround in the trend of the debt,
which is key to the government's strategy,
must be achieved with responsible
management of the state budget, with the
maintenance of the primary surplus and
the growth of GDP.
Source: MEF/Bank of Italy
prideandprejudice#Public Debt Trend
A�er 8 years of uninterrupted growth, the public debt-to-GDP ratio is set to decline in 2016, and is projected to continue decreasing in the next few years, falling below 120 per cent as of 2019.
Source: MEF/Bank of Italy
% GDP
year
95
100
105
110
115
120
125
130
135
140
102.5
15 16 17 18 19
112.5
123.1
132.6
119.8
127.9
estimates
prideandprejudice#
Source: 2015 Stability and Convergence Programmes – European Commission
6/7 SUSTAINABILITY RISK ANALYSIS IN EMU
The European Commission's analysis of 1
the sustainability of the economies in
the Euro Area looks at the risk of Italy
falling below the Euro Area average and
the EU-27 in the short, medium and long 2
term .
According to the Commission's analysis,
Italy's public debt is among the most
sustainable in Europe over the long term.
The S2 indicator (long term) is equal to -2.1
against an EU average of 1.7 and a Euro 3
Area average of 0,8 .
1. Sustainability is defined as the difference between the
structural budget position and the sustainable budget
position.
2. The analysis referenced in the graph regards 17
countries, considering the previous entry of Latvia and
Lithuania in the EU.
3. In order to interpret the indicator correctly, it is worth
noting that as its value increases, the fiscal
adjustment needed to reduce sustainability risk also
increases. A negative S2 value, as in Italy's case,
indicates sustainability of the public finances in given
scenarios, without further adjustments. The short-
and medium-term sustainability indicators also place
Italy among the countries with the most sustainable
public finances.
prideandprejudice#SUSTAINABILITY RISKANALYSIS IN EMU
The European Commission's analysis of the stability and convergence programmes for the countries in Monetary Union shows the short-, medium- and long-term risk for Italy is below the Euro Area average and the EU average.
RISK CLASSIFICATION FOR THE 2015 ANALYSISLong-term sustainability risk under assumption of unchanged policies
negative value
LOW RISK (0.8)
LOW RISK (1.7)
The European Commission's analysis of the stability and convergence programmes for the countries in Monetary Union shows the short-, medium- and long-term risk for Italy is below the Euro Area average and the EU average.
RISK CLASSIFICATION FOR THE 2015 ANALYSISLong-term sustainability risk under assumption of unchanged policies
croatia
ireland
portugal
greece
cyprus
2.5
5
4.23.3
4.3
1.5
1.4
2.3
5.0
1.3
1.4
3.2
3.5
2.7
3.2
1.1
3.9
2.3
-0.1
6.5
2.8
4.6
-2.1-0.3
0.4
0.0
Source: 2015 Stability and Convergence Programmes – European Commission
prideandprejudice#
Source: Eurostat
7/7 State aid to banks
During the economic crisis (2007- 2014),
the national banking and financial systems
of the 17 Euro Area countries received
state aid, but with important differences.
During the years of the crisis, Italian banks
received state aid amounting to
approximately € 4 billion. This compares
with almost € 262 billion for the German
banks, and € 207 billion for the British
banks.
In one year, the total amount of aid within
the European Union went from
approximately € 681 billion to € 656
billion according to Eurostat. Of this
amount, aid granted in the Euro Area
decreased from € 511.7 billion to € 492.4
billion.
In Italy's case, the exposure went from
approximately € 4 billion to the
€ 1.1 billion today.
162,527 M
52,473 M
41,849 M
39,809 M
36,290 M
28,023 M
19,057 M
18,533 M
6,781 M
2,720 M
1,100 M
1,071 M
prideandprejudice#
Fonte: Eurostat
238,983 M
State aid to banks
During the economic crisis (2007-2014), the national governments of the Euro Area countries provided varying degrees of aid to the banking and financial systems. Italy, which provided aid of about €4 billion, is today exposed for around €1 billion, compared with the almost €239 billion for Germany, and €162 billion for the UK.
IMPACT OF PUBLIC AID TO BANKING AND FINANCIAL SYSTEMS, 2014(million euro)
prideandprejudice#
Italy has been able to excel in many areas,
from its traditional strengths (apparel,
food, and furnishings) to mechanical
production but also in civil engineering
and scientific research.
Italy has experienced periods of significant
economic development, when the wealth
produced has been amply redistributed,
with the result of improving the quality of
life for millions of residents.
But Italy has also missed many
opportunities to improve its
competitiveness and to modernise its
public administration. The most glaring
evidence of these lost opportunities is the
high public debt.
The national community has tackled this
significant burden with significant
sacrifices, as shown by numerous public
budgets closed with a primary surplus.
Italy's government is committed to
modernising and reviving the country in
order to reward this shared effort, and is
doing so through an ambitious
programme of reforms that is moving
ahead rapidly and with determination.
In dismissing with old facts and the
widespread prejudice, Italy strives to be
able to talk about itself with the pride that
is due.
prideandprejudice#
segreteria.ministro@tesoro.it
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Printed by: Centro Stampa XX Settembre - RGS - I.G.I.C.S. - Ufficio VIII
Ministry of Economy and Finance