Nov 9, 2011

Berlusconi's legacy

With markets in turmoil now that Berlusconi has announced his resignation, people are wondering what's gonna happen to the eurozone. All of a sudden, markets think Italy's debt is a huge problem. Has the shit that's been piling up finally hit the fan? Italy hasn't grown in the last 10 years. Obviously, debt has been piling up, reaching 120% of GDP. But why has Italy not been able to grow? Daniel Gros argues on Vox that Italy’s growth fundamentals are all in pretty good shape. In terms of human and physical capital formation, structural reforms, investment in research and development, Italy has done OK, even better than most eurozone countries. There is only one thing where Italy has fared worse than everybody else: Governance, i.e. corruption and all that crap. All in all, this is what crises are made of.

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