Italy’s prime minister Matteo Renzi came under attack when Italy’s GDP unexpectedly slid to 0% vs. an expected gain of 0.2%.
The five star movement immediately blasted the performance of Renzi, whose constitutional reform package is under pressure.
If the reforms do not pass, Renzi threatened to resign.
Please consider Critics Lambast Renzi’s Economic Plans as Italian Growth Stalls.
Italy’s unexpectedly weak performance, with data on Friday showing that GDP was flat compared to expectations of a 0.2 per cent gain, has dashed hopes that the eurozone’s third-largest economy was on a steady upswing under the prime minister’s watch. The country’s recent growth streak, which began in early 2015 following a triple-dip-recession, has stopped after five quarters.
Opposition critics immediately seized on the flat GDP, both to lambast the prime minister for his economic policies and also to urge Italians to vote against Mr Renzi in the referendum, in order to push him out of office.
“It will be a dark autumn for the government,” Renato Brunetta, the leader of Forza Italia, the centre-right party founded by former prime minister Silvio Berlusconi, said in a statement. “Italians will rightly vote ‘No’ in the referendum with their pocket books, they will have no pity [for] Renzi the charlatan.”
Alessandro di Battista, a senior member of the populist Five Star Movement that is neck-and-neck with Mr Renzi’s Democratic Party in the latest opinion polls, was equally scathing. “Public debt has skyrocketed, GDP is stuck and there are no new jobs. This is Renzi-ism,” Mr Di Battista tweeted, adding the hashtag #iodicono, meaning “I will vote no”.
[Here’s that elusive second half pickup idea again]
Loredana Federico, an economist at UniCredit, the Italian bank, expects economic growth to pick up again in the second half of the year, with overall growth coming in at 0.9 per cent for the year.
But others were less confident. “Rather than a further acceleration in the quarters ahead, the cyclical peak is probably already behind us, and growth looks set to slow for some time,” wrote Daniele Antonucci, an economist at Morgan Stanley.
Mr Renzi has recently floated plans for new fiscal stimulus in the 2017 budget, due in October, but his spending and tax relief options are likely to be limited if he cannot meet the EU commitments.
Renzi’s Enormous Gamble
The biggest beneficiary of the constitutional reform will be the party that wins the next election.
Given Renzi is running neck-and-neck with Five Star Movement (M5S), he is taking an enormous gamble.
The reforms will diminish the power of the Senate and give a majority of Parliament to the party that wins the election. As it stands now, M5S has at least as good a chance as Renzi’s Democratic Party (PD).
Should M5S win the next election they will likely seek referendums on the EU and Euro itself. Won’t that be fun?
Meanwhile, the economic situation in Italy is hardly likely to get any better.
The Italian banking system is still on the verge of collapse, and Renzi will not will not win significant stimulus concessions from Brussels given Italy’s lackluster economic performance.
Renzi better be careful of what he wishes. He many not want those reforms if he gets them.
Mike “Mish” Shedlock
Just wait until EU bureaucrats arrive in IT & try to enforce tax collection & regulations… the Italians will just love that.
Like the Greeks, the Italian $$$ & productivity will “go underground” and disappear from the radar. The EU is attempting to squeeze blood from a stone… southern europeans are far better at evading tax/regulation than northern euros are are at enforcing taxes/regulation.
Checkmate. The EU is finished.
Michael Morris said:
Just a small correction. Five Star have talked about a referendum on the EUR, but as far as I know they are not looking for a referendum on EU membership. That could change of course depending on future conditions and events.
chris m said:
since Italy joined the Euro the Italian economy has stagnated.
leaving the Euro itself would be a momentous decision.
The EU itself is now largely just a bureaucratic organisation,
whose only point seems to be to justify its own existence,
(by destroying its own constituent states political independence, as with the
old Soviet Union)—leaving the EU should be option to be considered
after the Italians have left the Euro (which has “only” crippled their economy)
I have to laugh when I here that “if the reforms fail to pass, Renzi has threatened to resign “.
It is reminiscent of the scene in blazing saddles with the Sheriff hold the gun to his own head!
A few more million illigal muslim immigrants will fix this…
Those aren’t immigrants but the bleeding edge of an Islamic Horde.
A recession is the least of that entire Continent’s worry right now.
I’m sure Great Britain stands at the ready of course…
When all else fails, haul out the latest marketing slime.
Italy is bankrupt whether Renzi stays or goes.
Somebody (Renzi, Five star weirdos, illegal immigrants, Sicilian mafia, Goldman Sachs mafia, or whatever combination) will tell the EU to get lost — they will bring back the Italian Lira and resume devaluing it.
Foreign creditors (EU or elsewhere) need to decide if they want 30% on the Euro, paid instead with worthless Lira — or do they want to walk away and admit the loans were never money good.
Italians have over a thousand years of experience avoiding taxes, and at least as many years hearing lying politicians “promise” that things will get better if the people just start paying onerous taxes to support the president’s latest “boom boom room”. And they know that no amount of taxes and orgies will make their lives any better.
History will repeat no matter who is in Rome, and drunk Juncker will go have yet another brandy while the EU slowly circles the drain.
Stuki Moi said:
“History will repeat no matter who is in Rome, and drunk Juncker will go have yet another brandy while the EU slowly circles the drain.”
That’s an awesome punchline!
gli italiani sono uberracati dopo cento cinquante anni di bugi and cooking the books since the 13th century
chris m said:
the best Italy can do right now would be to re-elect Berlusconi,
and leave whatever needs to be leaving (euro or EU or both)
(after all he was the last democratically-elected politician they had)
Bankers are demanding yet another bailout. Oh boy.