prideandprejudice - MEF

prideandprejudice#Something that no one is saying about Italy

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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.


-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

1.51.6

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.


prideandprejudice#DEFICIT/GDP For 2015, Italy's deficit-to-GDP ratio further decreased with respect to prior years.


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

95

100

105

110

115

120

125

130

135

140

15 16 17 18 19

FORECASTs

104.7102.5

112.5

123.1

132.3

126.7

132.6130.1

132.8

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#

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Printed by: Centro Stampa XX Settembre - RGS - I.G.I.C.S. - Ufficio VIII

Ministry of Economy and Finance

4.5 - October 2016

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prideandprejudice - MEF