Mario Draghi States The Obvious

The Italian economy will need to expand at a faster pace than averaged over the past decade for the government to be able to reduce Europe’s biggest debt. “We will emerge from the economic crisis with more debt and higher unemployment,” governor of the Bank of Italy Mario Draghi said in testimony to a parliamentary committee on organized crime. “In order to reduce them, we should be able to grow at a faster pace than over the last 10 years.”

Well, growing more rapidly than over the last ten years should not, in theory be difficult, since according to my calculations, and using the forecast of the IMF, the average rate over the last decade will be more or less zero by the end of next year. That is to say, GDP by the end of 2010 should not be much above GDP in 2001. Wanting to grow faster and actually doing it are, however, two different things. Indeed, I reckon the Italian economy is just as likely to contract over the next decade as it is to grow if you look at the trend line in the chart below.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

2 thoughts on “Mario Draghi States The Obvious

  1. Pingback: Daily UK and Europe Highlights – 23 July 2009 |

  2. Edward, I frankly believe the Italian Economy is more likely to contract that it is to grow over the next decade. You certainly know which structural reforms our government(s) should adopt to make Italy look like a western country again (provided it ever looked like one) but given the anti-free-market mentality embedded in our culture, given the low quality of our political class and, most importantly, given the countless conflicts of interests of our politicians (ministers, MPs, local councilors etc.) who are there to protect special interests rather general ones (and the fact that their grip on the media doesn’t allow the people to understand that), I really don’t see how such reforms can be actually put in place. Italians deserve to find themselves poorer than Poles and Czechs. These peoples are much more worthy than we are and the only reason why they have been poorer during the last decades was nothing more than historical misfortune.