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Italian Deficit Narrows

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Italian Deficit Narrows

Italy has just published its Q4 Public Deficit/GDP data, this is currently running at 1.1% reassuringly down on the previous quarters rate of 3%.

This figure gives a good indication of the fiscal responsibility being exercised by the Italian government at present, and the current rate bodes well. While still a deficit it should be considered at an acceptable level given the nature of the recent global recession. Italy’s problem however is it’s overall government debt levels, it is currently ranked eight in the world in terms of debt burden and this leaves little scope available for the continued running of a deficit, however small.

Italy is the ninth biggest economy in the world and the third largest in the Eurozone. This position gives Italy the dubious honor of being one of the most concerning economies within the EU at present. Compared to other struggling Eurozone nations particularly the likes of Spain, Italy has a different set of economic challenges. The debt burden is substantial but at least there are signs of healthy life within the economy all be they tentative. Core Inflation is running at just shy of 0.9% which does suggest a reasonable level of economic activity is taking place, inflation is essential in order to manage a large deficit situation.

Italian Unemployment is in line with the EU average, perhaps a couple of points higher at 13%. The difference is that whereas European unemployment is falling, the Italian rate is rising. GDP growth on the other hand is recovering steadily, it is still negative but has been moving in the right direction over the past few quarters, with the right policies the employment situation should therefore begin to improve.

The Italian debt/GDP ratio is now at a level of 132.6 and has been steadily rising since 2009. Unlike Japan however, Italy has the cover of the Eurozone and the European Central Bank. This ensures liquidity within the economy and takes the edge off the overall price of government debt.

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