Corona and What to do With Italy?


Lega Nord frontman Matteo Salvini once was so fed-up with Italian corruption that he wanted to abolish Italy by seceding Northern Italy (“Padania” = Po valley) from the Italian South. We Northern Europeans feel your pain, Matteo! In contrast to Salvini, we don’t want to split up either Europe or Italy as we love them both too much.

[istat.it] – Italian wealth

Wealth Italian households: 9.7 trillion
Debt Italian state: 2.1 trillion
Italian politicians: we have no money!

If you want to examine the economic strength of a nation, you need to discern three sectors:

1. Private households
2. Corporation
3. Government

Regarding private households there is income and wealth.

According to Wikipedia, an average Italian is 3 times as rich as a German or Dutchman, think about that!

[wikipedia.org] – List of countries by wealth per adult

Country Median wealth in 1000 euro
France 102
Italy 92
USA 66
Germany 35
Netherlands 31

Reason: Italians mostly live in almost paid-off real estate. Average Italian mortgage: 19,555 euro, ridiculously low in international comparison.

How come? Because the Italians are the world’s greatest tax dodgers. Even the POPE hinted at that this week:

[reuters.com] – Pope says Italy tax dodgers bear partial blame for virus health care crisis

According to Italian Treasury figures last September, tax dodgers cost the country 109 billion euros on average each year between 2013 and 2015. Italy has the highest level of Value Added Tax evasion in the EU, the European Commission says.

The reason why the Italian state has a public debt of 131% GDP is because Italians refuse to support their own state.

In the good old days of the lira, the Italian government simply printed the money it needed, saddling its tax-evading citizens with ca. 10% inflation per year.

That is no longer possible with the euro, a currency based on disciplined northern Europeans, not a country that is world-famous for its mafia. Even Salvini once had enough of Italian corruption and wanted to create “Padania”.lol

The Italian drama in a singe picture: the collapsed bridge, that’s the 131% Italian public debt. The nearly paid-off houses in the background are the reason for that debt. Italian tax-dodgers need to be made clear that the 131% is THEIR debt, not that of other countries. Like Greece, Italy needs a troika.

And here the income, measured in GDP per capital (in terms of purchasing power)

[wikipedia.org] – List of countries by GDP (PPP) per capita

Country GDP per Capita (PPP) in 1000 $
USA 67
Netherlands 60
Germany 55
France 49
Italy 42

Where Italy and France have more household wealth than Germans or Dutch (most paid-off real estate), the latter have higher incomes and prefer to spend that extra income on travelling, luxury and expensive cars.

Here the Italian public debt in comparison with other nations:

[wikipedia.org] – List of countries by public debt

Country Public debt in % GDP
Italy 131
France 98 92
USA 82
Germany 64
Netherlands 49

[wikipedia.org] – List of countries by household debt

Household debt includes mortgage loans and consumer debt like car loans, student loans and credit card debt.

Country Household debt in % GDP
Netherlands 103
USA 76
France 60
Germany 54
Italy 41

Italy has indeed a very high public debt, making it difficult for the Italian government to adequately respond to crisis like corona. The frustration of Italian politicians is understandable, but directed at the wrong target. Because the Italian households have extremely low debt.

Northern Europe is not to blame for this, the Italian population is. But Italian politicians are more afraid of Italians than of their Northern European colleagues, so they give in to the temptation to try to black-mail Northern Europe, in the expectation that the latter will come to the rescue and save the EU-project. The stunt in the video below couldn’t better illustrate this mind-set. Rampelli threatens to leave the EU, but doesn’t forget to add that “maybe we’ll see each other again”:

A theatrical vice-President of the Chamber of Deputies Fabio Rampelli scoring cheap points with EU and Italian flags.

Is Italy a weak country, economically? Not at all! Italy is very well able to compete on international markets:

[wikipedia.org] – List of countries by current account balance

Country Surplus in Billion $
1. Germany 295
2. Japan 195
3. China 165
4. Netherlands 81
——
8. Italy 56
——
192. Canada -49
193. India -57
194. UK -107
195. USA -466

How to solve this crisis?

No Eurobonds! Italian debt is Italian debt. Northern Europe cannot be made responsible for that.
The good thing is that there is no need for Euro bonds, the Italians can easily pay the debt themselves.

Solution.

[ecbc.eu]

Gross residential loans amounted to more than EUR 71.4 bn at the end of the year, while outstanding residential loans continued to show a progressive growth, started in 2015, reaching circa EUR 375.4 bn in 2017 (EUR 368.1 bn in 2016).

Number of Italian households: 26 million
Number of privately owned homes: 72.4% or 18.8 million.

Dividing the outstanding loan of 368.1 billion over 18.8 home owners results in 19,555 euro mortgage per household with privately owned home.

Italian GDP (PPP): 2.26 trillion euro.
Italian public debt: 131% GDP
Desired public debt: 80% GDP
Difference: 1.15 trillion euro
Number of Italian households: 26 million
Debt per household: 44,000 euro

In a zero interest environment this debt can be serviced over a period of 30 years with a monthly amount of 122,- euro.
This is absolutely doable. The ECB can play a role in providing the loan.

In the Netherlands, 50% of the households service a mortgage and the average height is 210,000 euro.

Either every Italian household will be obliged to take a mortgage of ca. 44,000 euro to the benefit of the Italian government OR Italy steps out of the euro and goes back to the lira and 10% inflation per year.

You cannot expect Germans or Dutch to underwrite Italian debt and create the next Greece.

Italians can perfectly service their own debt and finally “arrive in Northern Europe”.

P.S. Note that the West-Germans have paid ca. 6% extra “solidarity tax” for their fellow East-Germans for a period of 30 years, with no end in sight. If Germans can be asked to show solidarity with their new countrymen, the Italians likewise can expected to show solidarity with their own state.

[spiegel.de] – Deutschlands fatales Zerrbild von Italien
Contrarian view der Spiegel.

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