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 Europeâ€™s biggest debt. â€œWe will emerge from the economic crisis with more debt and higher unemployment,â€ governor of the Bank of Italy Mario Draghi said in testimony to a parliamentary committee on organized crime. â€œIn order to reduce them, we should be able to grow at a faster pace than over the last 10 years.â€
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.