Photographer: Awakening/Getty Images

Italy's Tremble-Prone Geology Shakes the Economy

A major tectonic fault line, ancient architecture, and a flagging economy make for a dangerous situation.
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Last month's earthquake that wiped an entire medieval hilltop village is the third major tremor of its kind to shake Italy in about seven years. The combination of fragile architecture and a stagnant economy makes it that much harder to pick up the pieces.

earthquake map 2.0

The death toll stands at 292, ten times the fatalities of the quake that struck the richer Emilia-Romagna region in 2012 and just shy of the 309 killed in L'Aquila in 2009. A still mourning nation must now turn to reconstruction and how to house the thousands of displaced residents. 

The latest area affected was rural and less-populated, meaning the economic cost may eventually be around half the damage inflicted by the two previous disasters, according to a 5-billion euro ($5.6 billion) estimate by Lorenzo Codogno, founder and chief economist of LC Macro Advisors. Other estimates put the range of losses anywhere from $1 billion to $11 billion.

"Clearly it's not a negligible amount, but given the size of the economy and the numbers we are talking about here, it probably can be absorbed," Codogno, a former chief economist of Italy's Treasury Department, said in an interview. He said the government's likely response will be to refinance an existing tax break for related renovations. "Other than that I wouldn't expect any additional initiative, as it would be too expensive to make earthquake-safe all these areas."

earthquake table

That's because 70 percent of buildings are not earthquake-proof, say members of Italy's National Institute for Geophysics and Volcanology. A recent UN assessment suggests Italy should brace for more acute seismic pain ahead: to the tune of $9.8 billion a year. But it might just be impossible, in practical terms, to protect the country's myriad treasures.

Italy holds a record 51 UNESCO World Heritage sites. Almost half are within a 100-mile radius of the epicenters of the past three major quakes. That includes all of Rome and the Vatican, as well as Pisa with its leaning tower and Verona, the setting of Romeo and Juliet, with its famous balconies.

The only other countries in Europe with anything close to Italy's catalog of earthquakes are Greece, where most tremors happened out to sea, and sparsely-populated Iceland. 

earthquake chart

As Italy emerges from the rubble of yet another catastrophe, the odds are it won't be long before the earth trembles again.

 

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