Widespread Economic Slowdown Across Europe with Italy Heading to ‘Zero Growth’

vittorio emanuele monument rome © pexels.com

Eurozone’s third-largest economy, Italy, can’t afford fiscal expansion at a time when its economic growth is heading to zero, Economy Minister Giovanni Tria said. He ruled out any possible changes to the government’s budget.

Italy’s central bank and the International Monetary Fund both estimated the country’s economy would expand by 0.6 percent this year. The European Commission’s forecast was more pessimistic, at just 0.2 percent. It said Italy was facing excessive economic imbalances and the policies of its government were making matters worse, posing a threat to Eurozone partners.

“We face a widespread slowdown in growth across Europe, and in Italy we are headed for zero” growth, Tria said at a conference in Florence. “Certainly we don’t have the room for expansionary measures,” he added.

Rome targets a fiscal deficit of 2.04 percent of gross domestic product this year, while analysts say the figure may be higher. In the fourth quarter of 2018, Italy plunged into technical recession as the economy contracted. At the moment, public debt sits at €2.3 trillion (US$2.6 trillion), or 131 percent of Italy’s GDP, which is way above the 60 percent EU ceiling.

According to Tria, Italian manufacturing exports suffered as a consequence of the slowing German economy. Europe’s leading economy, Germany, is struggling due to significantly weaker demand for its exports.

Italy’s Eurosceptic coalition government of the 5-Star Movement and the League parties lowered the deficit target after a protracted tussle with the European Commission. Rome has been clashing with Brussels over its big-spending budget in the past few months.

Last Thursday, Claudio Borghi, a leading member of the League party, said the Italian government could steeply raise the deficit next year to avoid hiking value-added tax.

European Commission President Jean-Claude Junker on Monday mocked the country’s government coalition. Junker said Brussels had “foreseen” that Italy’s economic growth would not be as outstanding as announced, and that he “isn’t sure” the country will crawl out of the financial crisis it plunged into more than 10 years ago.

One wonders how much American sanctions are affecting Germany's exports? Perhaps it is time for the rest of the world to stop supporting the myriad sanctions with which America is bullying the rest of the world, most of which are for American economic gain, not political reasons.

Canada is suffering from the loss of billions of dollars in the canola market to China because we arrested Huawei's CFO for violating an American sanction. IMHO that was a huge mistake that should never have happened. 

The rest of the world needs to tell President Trump that American sanctions are America's problem, not a global problem.