For the past decade, Italy has faced a series of economic challenges that have threatened the country’s stability.
Since the economic downturn of 2008, Italy has experienced a triple-dip recession. According to a report from the American Enterprise Institute (AEI), lingering effects of the recession are exacerbated by Italy’s recent transition from the lira to the Euro, as switching currencies has resulted in a failure to achieve long-term growth. Last week, the Italian cabinet revised the estimated 2016 GDP growth forecast from 1.2 percent down to 0.8 percent. Italy’s GDP remains 6 percent below its pre-recession peak and the country’s public debt has reached a staggering 133 percent of GDP; only Greece has a higher debt to GDP ratio in the Eurozone. Comparatively, the United Kingdom has a debt level of 89 percent of GDP, while Germany’s public debt is only about 70 percent of GDP. Italy’s unemployment rate of 11 percent and youth unemployment (15- to 24 year-olds) of nearly 40 percent makes it one of the most ailing economies in the West.
Italy’s demographic crisis also contributes to its relative economic instability. A recent report from Eurostat revealed that it has the highest proportion of elderly people in the European Union. 6.5 percent of Italians are over the age of 80, compared with just 3.1 percent in Ireland. The high number of Italian pensioners has undoubtedly put a strain on its national healthcare service.
Additionally, Italy has a fertility rate of just 1.37, compared to the EU average of 1.6. In 2015, only 488,000 babies were born in Italy, the lowest number of children born since the country’s unification in 1861. This low fertility rate has contributed with the lack of young workers available to contribute to its nearly bankrupt welfare system.
The frail economic conditions in Italy have had enormous political implications. As in the U.S. and UK, an anti-elitist sentiment has been growing in Italy. Many factions of the Italian public feel alienated by politicians, who they see as advocates for the wealthy. Others have blamed the EU’s austerity measures for high youth unemployment and lack of growth. Italy used to be one of the most pro-EU nations in Europe, but the lethargic economy is among the factors that have boosted the recent popularity of anti-EU groups.
In order to increase his power to implement stabilizing economic reforms, Prime Minister Matteo Renzi, a member of the center-left Democratic Party, has called for a constitutional referendum on December 4. A rejection of the referendum would be seen as a rebuke against the EU and could threaten the stability of the Euro. A “no” vote would further legitimize the Euroskeptic, anti-globalist Five Star Movement (Il Movimento Cinque Stelle). Desmond Lachman of AEI argues: “the last thing that a troubled Italian economy now needs is a renewed period of political uncertainty that a ‘no’ vote [the] referendum would about certainly usher in.” If the referendum fails to pass, Renzi has pledged to resign.