Italy's Debt is NOT The Problem

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Timestamps:
0:00 - Introduction
2:20 - Debt Problem
4:17 - Sponsor
5:43 - Growth Problem
10:13 - Way Forward

Researched and Written by Dr. Joeri Schasfoort, Oskar Matthey
Animations by Hugo (Into Europe)
Narrated, Produced & Edited by Joeri Schasfoort

[foergitmejej]

Bucking the trend, my son, who is Italian, was born and educated abroad but returned to Italy to stay and make his future there. He works at a rapidly growing medium sized company where everyone must be able to speak English. The government provides an incentive to returning Italians by reducing income taxes in the first years from which he was able to benefit. His latest contribution to Italy is a brand new little Italian.

[julianshepherd]

The UK has such a debt problem that we can only afford tax cuts for rich people

[ArreSidu]

If you factor in ageing population the situation becomes a whole lot scary.

[Gopisubramanian]

Thank you for your videos and they have good insights. I have lived in Italy for 3 years as an immigrant. From my experience in the country, On top of the problems you have explained, Aging population is another big factor. Working population in Italy is shrinking comparing retired and (1-21 yrs) young adults still in schools and colleges. Thus Italy pays more for social security, healthcare and education than Italy making money. To counter these expenses, Italy government has brought in some measures with varied success.
1. Increase retirement age to 67 - Govt collects more taxes and social security (40% of gross salary, 30% paid by employer and 10% paid by employee) and more people work in the overall economy
2. Reduce service costs(spending on Education and healthcare) - It is really tough as an immigrant to access some of these and you have to wait for 6 months for some appointments
3. Increase Immigration - To attract more immigrants, they have tax-cuts specifically targeted to immigrants. 70% of your earnings can be tax free. Problem here is, Government implements these measures, But officials on the ground make it so hard to deter immigrants from getting it. I had to wait for 2 years and submit countless documents to justify the tax benefit. second problem is that officials on the ground literally roll immigrants over if they don't know Italian and I often needed my Italian colleague as a translator. Italy is definitely not a good place for immigrant white color workers (Sorry, I have no idea of blue color workers).
Overall, Italy have policies in place for growth. But it fails mostly in its implementation predominantly due to inefficiencies within different government functions. Every different government functions needs to work together as a single unit for effectively implementing policies.
This is a similar problem China will get in to 10 yrs (or sooner) down the line especially with its replenishment rate at 1.6 child per parents. With China's current problem, Aging will complicate the matters more. This aspect was not covered in your China video also. I think its good to consider cycle of aging population in a country's macroeconomic analysis and forecasts.

[purplecat]

One of the major problems about the 'tighten your belt' argument about government debt vs. private debt is the specific things that people want governments to cut, vs. 'belt tightening' examples. Here's a different one. You need to cut back, so you 1) cut back on health care by not going to the doctor regularly (you're in America, in this example) and not paying for medications 2) cut back on education by dropping out of that training course you were taking to get certification for a better job 3) eat less expensive food, which often means canned food or junk food. You're spending less now, but you're going to have to spend way more in the future because your health's going to take a dive, and you've lost out on the chance of making more money. IMO, an apples to apples comparison of 'drink less expensive coffee' is 'raise taxes on the people who are drinking the hyper-expensive coffee'. Health care and education are not frivolous things.

[pauladam]

Your videos' sound design is so soft, it's a pleasure to listen all the way.

[Federico]

Improving administration efficiency would also improve our mental health....

[ajfoster]

Next time you talk about debt to GDP ratios. I hope you mention the interest rates on the debt. Countries should be borrowing more during economic downturns where the interest rates are lower and be reducing spending during boom times when the interest rates are higher.

[eliasbouhout]

You should also have talked about the structure of the Italian debt, the vast majority of Italy's debt doesn't come from international lenders which of course has major economical implications

[nobodysfool]

We used to have a US national debt clock in New York City… but it ran out of space

[michaelherrlich]

I am working for an Italian company for more than 3 years. The main issue is crazy bureaucracy. Italy should focus on making all processes better and leaner. Invest in schooling and infrastructure with help of low EU yields. Use saved funds to lower debt

[Hrafnskald]

The downsides of austerity are clear with Italy, and another good example is Greece. The IMF admitted as much, that their demands for more austerity led to much lower economic growth, making the problem worse.

[fedethefico]

As always, you are the economist that we deserve in national channels. I think your work is essential to actually move past stereotypes and superficial ineffective rhetoric and really solving problems.

[ethandouro]

I swear I don't know anything about deep known Economics, but I love seeing Money & Macro explaining it.

[Markrspooner]

I can’t help feel that this video could soon apply to the UK too. In our case rather than adopting the Euro being the issue (which we refused) it was leaving the biggest tariff free trading area, the EU.

[fedego]

I love my country but it's so difficult for young people to find a nice and well paid job. I graduated at university and nothing have changed, in Italy you can only find a job as a waiter or generally in the turism sector, here no one care if you study… Now I’m planning to take a master but onestly I think that nothing will change.

[gaetanomignano]

Yes.. basically everyone with common sense in Italy will agree that debt is not the problem, the problem is how you spend the money, if you make debt to invest in building the economy then it's "good debt", however governments are not really good at doing that lol

[robbinbosch]

been following you since the courses i took at the uni in Groningen and i must say your explanations are so clear, it's no wonder i passed these courses first try!

[DonPatzone]

Here some other factors that play a big role
- Italy cut back its spending back in the 90s significantly, which resulted in reduced growth and productivity, but a primary surplus, more than any other country in the EEA.

- Germany's Agenda 2010 effectively helped to push their export economy at the expense of several other nations, Italy being one of them. Take a look on the Current Account Balance to GDP Ratio for both countries mid 90s to now. They flipped and yet Italy still managed to recover.

- Government debt is a necessity for every nation. Without it we would all be in big trouble. The problem in this specific case is that the financing on this debt is not equal across the eurozone. Germany for example pays a lower rate on their bonds than Italy. This must actually not be. The ECB has a mandate for price stability, but what do they do? Instead of ensuring continuous solvency of each EU member state that adopted the €, it rather leaves them at the mercy of bond vigilantes and so called rating agencies and then adds fuel to the fire by increasing interest rates in hopes to fight the current inflation, which actually exacerbates the issues. We saw what happened in Greece, where the ECB did nothing and what happened during the pandemic where it did something.

I just don't get the northern countries constantly belittling Italy. This does nothing but increasing resentment towards the EU in the italian population. This comes from a citizen from one of those northern countries.

[gabrielebianchi]

I'm Italian and I would say yes the problem is not the debt, it's the growth but education is not the solution.
Although the percentage of people holding a degree is low, it is far higher than the amount of job places where that education is needed that's why we have one of the highest brain-drain rate in Europe with any sign for improvement. Unfortunately, in recent years, has been common in the news find articles about top graduates "proud" of finding job for 500€/month as trash collector for cleaning companies operating in cities where renting an apartment costs 2000€/month - at least is work and it's legal.
Back to the economy, the goal of every developed country should be to develop high value added products, and leverage the difference between value produced and cost of production before the economic competition brings down the prices.
Unfortunately, Italy from a geologic point of view is very poor of raw materials required from those industry: silicon, metal, petrol and any other combustible for energy, so the only way to get some competitive edge on the prices is to get them in via cheap infrastructures which, unfortunately, were also cut with the austerity.
So what's remaining? turism and low value-producing activities like artisanal work that don't require almost any high education.
The issue with that the are sectors where you are facing the whole world competition on a tight balance between quality and cost, so the easy way is to dump salaries, but with salaries as rock bottom who will afford that quality?
Finally with salaries a low levels a lower amount of people will be able to save and and even lower amount will afford to become an entrepreneur.
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I think also the "Big companies" is a false problem and should be avoided as hell, as happens that companies become too-big-to-fail as the social consequences of a failure can be dire for entire areas where theses institutions are almost the sole employer, that makes them money-black-holes where money is poured with little or no benefit we have too much of that in Italy, an example is the infimous Alitalia (30 years without a profit), FIAT, ILVA (steel producers), ASPI (motorways).