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2012: Italy and the Eurozone – Latest blog

Posted: January 18th, 2012 | Author: | Filed under: The People's Pledge Blog, Uncategorized | Tags: , , | Comments Off
2012 will certainly be a demanding year for Italy and the European Union.

With a new technocratic government in place (there are no elected politicians in the cabinet), led by prime minister Mario Monti, Italy is set to carry out a number of austerity mechanisms to trim its deficit, reduce its conspicuous public debt, ranging around 120% of its GDP and attempt to boost growth.

2012, in fact, promises to be an extremely challenging year for a number of European states that are heavily affected by the financial crisis pervading the Eurozone.

From the perspective of Brussels, Italy appears now to be on the right track as Mario Monti has announced a number of far-reaching measures for the new year. Chancellor Merkel has recently recognized these sacrifices by stating ‘great respect’ for Monti’s rescue package.

Such reforms are to be speedily implemented in order to strengthen Italy’s fragile position and avoid the need for a bailout. If this were to happen this would strongly affect the already precarious economic situation of the European Union.
 
It is important to mention that successful bond auctions have been held in early January by Spain, Greece and Italy, positively impacting the EU and its financial markets. Hopes were that these events, together with the number of economic reforms proposed by EU members, would allow these countries to alleviate the pressure felt across the European markets and stabilize the common currency.


However, such hopes were short lived as nine European states have suffered a severe downgrade on 13th January. The S&P agency has criticized the EU’s poor response in the tackling of the economic crisis and not implementing sufficiently effective austerity mechanisms.

Further, the finalization of the European Stability Mechanism has yet to take place. This instrument is key to the survival of the EU as the ESM represents the Eurozone’s permanent rescue fund, and is due to enter into force in July 2012.

Monti’s trip to Brussels on 16th January ended on a positive note as the President of the European Council, Herman Von Rompuy, stressed the positive direction that Italy has been taking in the new year. Von Rompuy recognized the magnitude of the Italian effort and Monti’s austerity plans. Hopefully Italy will soon be able to contribute to creating a stronger Europe.


The next few month are, in fact, going to represent a crucial time for Italy and Europe, one where EU confidence needs to be effectively rebuilt. Decisive action needs to be taken to end the debt crisis and ultimately ensure the survival of the European Union.
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