Another Month, Another Blow for Italy!
- Who is the next candidate for the Eurozone debt default? It appears to be Portugal. But the rest of the PIIGS are not far behind.
Italy is trapped in a monetary Völkerkerker!
By Ambrose Evans-Pritchard, http://www.telegraph.co.uk/
Another month, another blow for Italy. Industrial orders fell 7.4pc in January, according to ISTAT. Domestic orders fell 7.6pc. Output fell 4.9pc, as you can see from this chart (top of post).
This follows the release of construction data on Friday showing a 10.9pc fall in output. This debacle was entirely predicted by monetary data six to nine months ago, as you can see (bottom of post).
The M3 money data is at last improving very slightly (ie, it is collapsing less fast) but M1 is falling ever faster. We’ll see how that plays out. I wish premier Mario Monti all the best. He is one Europe’s great gentlemen. Yet I fail to see how his labour reforms can – under current macro-policies – pull the country out of its downward slide before the debt trajectory blows out of control.
By all means repeal Article 18 of the labour code, which restricts redundancies for economic reasons, always bearing in mind that two labour reformers have been assassinated by neo Red Brigades since the late 1990s for venturing into these waters. But don’t expect such supply side reforms to bear fruit for many years.
“Are we really sure that a recession is the right moment to carry out such social reforms?” asks Tito Boeri, a professor of labour economics at Milan’s Bocconi University. “To carry out reforms a times of stress, you need a multi-billion support package.”
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