A1: Italy’s Economy During COVID-19
Class: IS206 Created Time: April 10, 2020 2:48 PM Database: Assignment Database Last Edited Time: June 11, 2021 11:20 AM Provided Materials: IS206_1st_Assignment.pdf Status: Done Tags:#Coronavirus,#Italy,#Public-Policy
Grading & Comments
As a policymaker, what would we do to deal with the current pandemic to increase productivity, and long term growthh
- need to know the country situation and what they’re doing so far
- make policies on how to deal with the situation
Italy’s Current Situation
Cases
Total Cases: 187,327
Active Cases: 107,699
Deaths: 25,085
Recovered: 54,543
Lessons from Italy’s Response to Coronavirus
The Italian government dealt with the Covid-19 pandemic by issuing a series of decrees that gradually increased restrictions within lockdown areas (“red zones”), which were then expanded until they ultimately applied to the entire country.
Italy followed the spread of the virus rather than prevented it
The regional lockdown led to people fleeing the “red zones” into healthy areas, effectively helping the virus spread
Unemployment in the south was already at 18 percent and more than 3.5 million workers in Italy operate off the books — 12 percent of the country’s G.D.P.
More than 178,000 companies had to lay off more than three million workers due to the economic shutdown
Italy, with most deaths in Europe, tiptoes into economic restart
Italy ranked among the highest indebted country in western Europe
IMF predicts Italy’s production output to drop by 9%
The government is planning to slowly reopen the economy in three stages across the north(Most affected), the center, and the South.
Firms, Factories, Industry vote for reopening the economy and workplaces early, while work unions vote for social distancing, prioritizing workers safety over the economy.
The curve of active cases has only decreased slightly
Silvio Brusaferro, president of Italy’s National Health Institute, said last week that the “contagion curve is dipping,” the government is debating whether to extend the lockdown past May 3 over concerns of a viral rebound.
|19 March 2020: up to €200 billion of State-Aid to allow for loans for small and large businesses
Topics
1. Investment and Saving
Governments give tax breaks to industries in which it wants to encourage investment. Governments can also make certain types of savings tax-exempt if it wishes to encourage savings.
2. Investment From Abroad
States looking in don’t have the incentive to invest in a declining economy.
3. Education
Investing in education would mean a long term goal for growth many years in the future. If the purpose is to foster growth during the pandemic idk if its the right option.
4. Health and Nutrition
Might be a good option, to invest in healthcare, hospitals, equipment, to satisfy all the coronavirus cases, make sure all cases are accounted for, so as to recover quickly and reopen the economy after the pandemic has surely stopped.
- Reopening the economy too early could cause a resurgence of new cases, as the curve of the active case has only reached its peak a few days ago
- Getting rid of the coronavirus early would also bring back Tourism responsible for 12% of Italy’s GDP and total jobs
5. Property Rights & Political Stability
Italy’s political stability has been on a decline, 2018 is 0.31 points. For comparison, the world average in 2018 is -0.05 points.
This is more relevant for Italy in general (not just in coronavirus situation). Italy has seen 68 different governments in 73 years.
This policy focus would be more for long term growth for Italy’s economy: to attract investors with better political stability after the coronavirus has subsided
Companies are deferring expansions and limiting investment rather than risking cash in a time of uncertainty. The public debt remains monumental, running at more than 2 trillion euros ($2.24 trillion), or more than 130 percent of annual economic output.
Economic Stagnation
https://data.worldbank.org/share/widget?indicators=NY.GDP.MKTP.KD.ZG&locations=IT&view=chart
Weak Constitution
The authors of Italy’s 1946 constitution were wary of a system that could put too much power into the hands of a single figure, like Benito Mussolini, who ruled Italy from 1922 to 1943, and who led Italy’s into World War II.
- Head of Government must pass reforms through ‘confidence vote’, if it fails the government must step down
- Too many political parties, government relies on smaller political groups
News Analysis: Why do Italian governments collapse so often?
Who has the authority to make all these political reforms?
Its sort of a general direction in which Italy would want to head towards. From 2017, the Rosatellum was passed by the parliament themselves of a new electoral system
37% went to First Past the Post System (majority winner takes that percent)
64% is spreaded proportionally among the other parties
at least 3% votes is needed to get a seat in parliament (less fragmentation of the government)
The reason was to encourage parties to form likeminded coalition instead of many small competing political parties.
It shows that the parliament are willing to make changes to better the governmental system and maybe even create new functions that could lessen the inefficiency of the constitution
Parts
Introduction:
Coronavirus Cases:
- Active, Deaths
- Recovered
- Curve
Unemployment
Economic Impacts (estimated)
Public Policies
1. Focus on health
Even though the coronavirus cases seemed to hit its peak not long ago, it doesn’t mean Italy should open it’s economy.
- Reopening the economy too early could cause a resurgence of new cases, causing Italy to need to lock down even longer.
- Getting rid of the coronavirus early would also bring back Tourism responsible for 12% of Italy’s GDP and total jobs
2. Political Stability
After the coronavirus situation is settled, a bigger long term problem would need to be addressed
Italy’s political stability has been on a decline, 2018 is 0.31 points. For comparison, the world average in 2018 is -0.05 points.
The country has seen 68 different governments in 73 years ⇒ political instability cause investors to back out
The problem has been weighing down the economy for years, not the outcome of the coronavirus
Conclusion
Italy has been facing economic and political problems since before the coronavirus. To be able to grow economically, Italy need to manage the coronavirus crisis cautiously to reduce the likelyness of it’s resurgence then deal with it’s political instability
Most countries are cosmopolitans because there are people coming in together as one population
Report
As economic situations also reacts to political stability and instability of the country, we need to take a look at that aspect as well. All types of foreign investments requires that the host country promise potential, promise to remain stable, and will predictably return profit back to the investor. However, reports have shown Italy’s political stability rating has dropped to an all time low since 2004 (its lowest year). This corresponds to the drop in economic growth that seemed to have stagnated dropped to below 0.5 percent each year and even contraction in GDP in some years. It can also be seen that economic growth of Italy in the period of around 50 years have a downward trend of GDP growth each year. This stagnation and economic contraction have been said to be caused by the ever unstable political instability of Italy. Over the last 73 years, Italy has had 68 different governments. This is two time as many governments than the United Kingdom in the same time frame. The reason for the constant instability within Italy stems from it’s constitution. From 1922 to 1943, Benito Mussolini had power Italy and led it into World War II. After World War II, in 1946, Italy’s constitution was written to not let too much power fall into one person’s hand, making a weak government system. In result, the prime minister’s office was weak and must pass reforms through confidential votes, if the leader loses the vote, he and the entire government must step down from power. That was the reason why Italy had so many different governments in such a short period of time. The problems needs a reform or fine-tuning of the governmental system as a whole to deal with the problems of:
- Prime Minister’s office is weak in making any decisions, can be confidential voted out of office
- Coequal houses of parliament that doesn’t negotiate and must agree on identical bills to make into law
- People are divided into many different political parties and coalition governments can fall apart if they don’t come to terms with one party
Scripts
As you guys already know, all types of foreign investment from abroad requires that the host country has promise to remain stable and will predictably return profit for the investor. However, as we can see from the graph, Italy has seen it’s lowest political stability rating since over a decade ago.
And this also correspond to it’s effect in Italy’s economy from these two graphs right here
https://data.worldbank.org/share/widget?indicators=NY.GDP.MKTP.KD.ZG&locations=IT&view=chart
It’s economy appears to have fallen into stagnation and we can see a clear downward trend over the last 50 years in Italy’s GDP Growth.
Over the last 73 years, Italy has had 68 different governments. This is 2 time as many governments than the United Kingdom in the same time frame. The reason for the constant instability within Italy stems from it’s constitution. From 1922 to 1943, Benito Mussolini had power Italy and led it into World War II. After World War II, in 1946, Italy’s constitution was written to not let too much power fall into one person’s hand, making a weak government system. In result, the prime minister’s office was weak and must pass reforms through confidential votes, if the leader loses the vote, he and the entire government must step down from power (Yamei, 2019). That was the reason why Italy had so many different governments in such a short period of time.
The problems needs a reform or fine-tuning of the governmental system as a whole because.
- Prime Minister’s office is weak in making any decisions, can be confidential voted out of office
- Coequal houses of parliament that doesn’t negotiate and must agree on identical bills to make into law
- People are divided into many different political parties and coalition governments can fall apart if they don’t come to terms with one party
Although this class is about economics and not about politics, it’s still important the linking between the two. I just wanted to show the problem that has been hindering Italy from growing it’s economy further and will continue to in the future. It’s not related to the coronavirus but is a big concern for Italy in the long term.