Photographer: Alessia Pierdomenico/Bloomberg
Italian Finance Minister’s Tweet Fails to Sway VotersBy
Finance minister’s post draws rebuttal from economists
Growth still insufficient for many, sends young people abroad
When Italy’s finance minister took to Twitter this month to highlight economic achievements on his watch, the criticism flew back at him thick and fast.
Although Pier Carlo Padoan could point to bigger per capita economic growth than Germany, France and the U.K., his time period starting in 2014 was selective. It was not appreciated by the academics, investors and ordinary citizens who challenged him.
Padoan’s post -- “I am today in #London also to remind investors that since 2014 per capita #GDP has been rising in #Italy more than elsewhere” -- was accompanied by the data in the chart immediately below:
For many, the true picture is an economy that hasn’t regained the ground lost in the longest recession since World War II, and is hobbled by a record public debt load and an ailing banking system. Those issues, which have fueled citizens’ distrust of policy makers managing the economy, will feature prominently in elections expected in the spring. The discontent means more voters may be lured away by populist promises, marking another European vote where radical parties gain ground.
“Widespread pessimistic perception is so rooted among many Italians that they’re hardly influenced by a few percentage points of GDP growth,” Roberto Weber, chairman of the Trieste-based IXE research institute, said in an interview. “In electoral terms, it is likely that between now and the vote, the current trends will become even more marked.”
Padoan focused his Nov. 14 tweet -- with the hashtag #Italyisback -- on the per capita growth after he took office as finance minister in 2014. True, said Nicola Nobile, economist at Oxford Economics in Milan, but Spain’s performance in that period was even better. Riccardo Puglisi, economics professor at the University of Pavia, replied that the right comparison is from before the 2008 financial crisis.
Some critics also said per capita figures have been skewed by a brain drain that’s seen tens of thousands of young Italians leave the country in search of a job and a better future abroad. That contributed to a lower population growth and inflated each individual’s share of the national income.
The inclusion of Spain and a longer time frame produce a much different picture, one far less favorable to Italy.
Still, business confidence surveys have improved in recent years and the economy has recorded 13 straight quarters of expansion.
But while it’s heading for its best year since 2010, it’s still projected to lag behind every other euro-area nation through 2019, according to the European Commission. Unemployment was at 11.1 percent in October with youth joblessness only slightly declining to 34.7 percent, a preliminary report showed on Thursday. Poverty has risen and starting a business entails a mountain of bureaucracy. The government’s rescue of Banca Monte dei Paschi di Siena SpA, the country’s oldest bank, and of two other lenders this year were stark public reminders of the industry’s difficulties.
Investors are focusing on the positives for now, with the FTSE MIB benchmark stock index up 16 percent this year, leading gains among major European benchmarks.
Government bond yields -- at 1.8 percent for the 10-year -- are above their historic low reached in 2016 though about a quarter of where they were during the debt crisis. But there is also trepidation about what will happen when the European Central Bank winds down its stimulus in coming years.
The question is how all of this will play into the election, where selling a convincing economic message is crucial. While it’s too early to make definitive calls, the chance that the anti-establishment, euro-skeptic Five Star Movement could seize the prime minister’s post may be enough to make investors uneasy.
“The electorate is looking for someone that can prove their competence and humility in understanding and implementing a genuinely strong industrial strategy," said Raffaella Tenconi, founder of London-based consultancy ADA. They want someone who can “bring back companies and jobs.”
Bloomberg economists David Powell and Jamie Murray said in a report this month that the most likely result of the vote is “some kind of fractious coalition.” That alone would hold up economic reforms in Italy similar to what President Emmanuel Macron is pushing through in France. But they see potential for another outcome that would spell broader trouble for Europe.
“Italy has had a rougher ride than the other major euro-area economies,” they said. “A risk scenario is that voters abandon the centrist parties in droves, sweeping into office the populist Five Star Movement, which, in turn, calls a referendum on membership of the monetary union.”
— With assistance by Giovanni Salzano, and Alessandra Migliaccio