Italy: Why is the economic recovery so slow?

Economic recovery is very slow, much slower than it used to be in the past after a period of recession. Growth rates are expected to go back to normal levels after 2015.

In addition, not all economies are reacting in the same way. Germany and Japan seem to be the ones less affected by the crisis, as both countries could recover by 2018. In the same year, Italy and Spain will still be registering a 20% drop in production. France, USA and UK are in the middle.


Evolution of per capita Gdp in advanced economies. Source: Euromonitor and international statistics.

The crisis has made the economies of the various countries even more vulnerable to new shocks. In Italy and Spain - and southern Europe in general - the crisis of the private sector has increased fears regarding the sustainability of public finance. The result was a loss comparable to that of the "Great Depression" of 1930. 

Another issue slowing down the recovery is the contraction in credit provision. The drop in interest rates is only partially compensating for the stricter guarantee requirements of banks. According to a Federal Reserve poll, credit standards have yet to go back to pre-crisis levels.

If we also consider the reduction of R&D investments and the drop in the number of start-ups, we have an explanation for the negative trend that characterised work productivity and the slowness with which economies are reacting to the crisis.

One of the indicators that could lead to a quicker recovery is the employment rate, which was particularly low in Spain and Italy, but in this case too a lot depends on relaunching work productivity.