Submitted by Michael Snyder via The Economic Collapse blog [12],
When you get into too much debt, really bad things start to happen. Sadly, that is exactly what is happening to Italy right now. Harsh austerity measures are causing the Italian economy to slow down even more than it was previously. And yet even with all of the austerity measures, the Italian government just continues to rack up even more debt. This is the exact same path that we watched Greece go down.
Austerity causes government revenues to drop which causes deficit reduction targets to be missed which causes even more austerity measures to become necessary. But if Italy collapses economically, it is going to be a far bigger deal than what happened in Greece. Italy is the ninth largest economy on the entire planet. Actually, Italy used to be number eight, but now Russia has passed it.
If Italy continues to stumble, India and Canada will soon pass it as well. It really is a tragedy to watch what is happening in Italy, because it really is a wonderful place. When I was a child, my father was in the navy, and I got the opportunity to live there for a while. It is a land of great weather, great food and great soccer. The people are friendly and the culture is absolutely fascinating. But now the nation is falling apart.
The following are 11 signs that Italy is descending into a full-blown economic depression...
#1 The unemployment rate in Italy has risen to 12.2 percent [13]. That is the highest that it has been in more than 35 years.
#2 The youth unemployment rate in Italy is sitting at 38.5 percent [14], and in southern Italy it recently hit the 50 percent mark [15].
#3 An average of 134 retail outlets [16] are shutting down in Italy every single day. Overall, approximately 224,000 retail establishments have closed since 2008.
#4 Italy's economy has now been contracting for seven quarters in a row [17].
#5 It is being projected that Italy's GDP will shrink by 1.8 percent [18] this year.
#6 Industrial production in Italy has declined for 15 months in a row [19]. It has now fallen to its lowest level in about 25 years.
#7 Overall, factory output in Italy has fallen by about one-fourth [15] since 2008.
#8 In May, automobile sales in Italy were down 8 percent [20] compared to one year earlier.
#9 The number of people that are considered to be "seriously deprived" in Italy has doubled [21] over the past two years.
#10 Italy now has a debt to GDP ratio of 130 percent [22].
#11 It is being projected that Italy will need a major EU bailout within six months [23].
At this point, Italy is flat broke.
And unlike the U.S. or Japan, Italy cannot run over to a central bank and have them print up oodles of new money with which to buy up government bonds. Italy is married to the euro, and so that greatly limits their options. Unfortunately, the money is rapidly running out. The following is from a recent article by Wolf Richter [22]...
In most countries, it would be an act of mind-bending chutzpah, or perhaps a display of political insanity, but in Italy it barely made ripples: for a government official, a minister no less, to declare that the country cannot pay its long overdue bills, and not for a month or two, but for the rest of this year! Due to "technical" problems.
The Italian government is out of money. Not that the US government is in any better shape in that respect, or the Japanese government for that matter, but they have central banks that print the missing moolah with lavish abandon. Italy doesn't. It has the ECB which is run by an Italian who promised last year to print with lavish abandon to keep countries like Italy afloat. But that promise is not the same thing as having your own central bank.
On July 4, Italy's budget fiasco came to light [24] once again. Wracked by the pretense of austerity, expenditures rose 1.3% in the first quarter, while revenues remained flat. So the deficit rose to 7.3% of GDP, up from 6.6% last year, bringing the national debt to 130% of GDP. Ballooning debt and deficits in a shriveling economy – Italy has been in recession since the fourth quarter of 2011 – is a toxic combination in the Eurozone.
While those numbers may sound really bad, the reality is that the people that are suffering the most are the average folks on the street. Many Italians have been completely blindsided by this economic depression, and suicides are skyrocketing [15]...
In Italy, the tragic stories of suicides apparently linked to the deep recession are becoming all too frequent. Last month, a former factory worker hanged himself near Turin because he could not find work, his relatives said. In May, a young man committed suicide outside of Rome shortly after he lost his job. The next day, Italian President Giorgio Napolitano begged the government to deliver “the utmost attention for situations of greatest malaise and need” to help stop the wave of suicides.
That is absolutely tragic.
But you know what?
The United States is headed down the same path that Italy has gone.
In the coming years unemployment and suicide will both skyrocket here too.
Those that are sticking their heads in the sand right now [25] will be absolutely blindsided by what is coming. But those that understand what is on the horizon and are preparing for it [26] will have the best chance of making it through.
Italy is kind of like the Leaning Tower of Pisa. Everyone knows that it is going to fall eventually, and when it does fall it is going to be a major disaster.
When the financial system of Italy totally implodes, that will be a sign that things are really starting to accelerate. Expect dominoes to start tumbling much more rapidly in the aftermath.