Italy, the prime minister with advice. Berlusconi leads

Italy, positioned in southeastern
Europe, is a beautiful country that is faced with high unemployment, corruption
and massive debt. Although it appears to be one of the most developed countries
in Europe, Italy is somewhat of a laggard in globalization. Ranking
twenty-third in world population, Italy stands at 56,126,212 people as of July
2009. The north and south seem to be split in economic terms with the north
being well developed industrially and the south facing high unemployment and
poverty. Italy is a democratic republic that replaced a monarchy back in 1946.
Although it ranks seventh in world GDP and public debt and attracts millions of
tourists every year, its current debt to GDP ratio continues to skyrocket.
World economists are beginning to wonder if Italy will be able to survive the
aftermath of the U.S. housing and credit crisis without defaulting on its debt.
Even though Italy is known for its diversity in civilization and political
principles, slow economic growth and an unstable political arena cause the
country to fall behind in terms of global trade. Its economic forecasts and
equity markets have taken a hit in the last quarter of 2009. Many say the cause
of these horrific economic numbers are the global competition that Italy faces
in its low-end industrial product segment.

Politically,
Italy has the structure of a parliament system, in which its executive powers
are delegated through the Council of Ministers. This Council is led by the
“primo ministro” or “prime minister.” Italy’s current prime minister, Silvio
Berlusconi was recently attacked by a emotionally unstable extremist. He was
hit in the face repeatedly suffering a facial contusion by a northern
extremist. The international character of Italy, its politics, environment and
civil rights have significantly declined since Berlusconi has taken office. It
seems like the only sector of Italy that has thrived is its underground black
market. These lucrative and subversive activities account for over 25 percent
of the country’s GDP. This puts a burden on the Italian government since all this
lost revenue is not subject to taxation. Italy’s chief of state, or president
is Giorgio Napolitano, who has served since May 15, 2006. Napolitano’s main
responsibilities are to approve the Council of Ministers and to provide the
prime minister with advice. Berlusconi leads the Forza Italia, a
Christian-democratic, liberal majority political party in Italy. Forza Italia
was founded in December 1993 and was merged into The People of Freedom March
2009.

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The
Italian government has practiced many policies intended to strengthen and
functionally link the different multilateral organizations of which the country
is a member, primarily the UN, the EU, and NATO.

Italy’s
globalization policy can be best described by constructivism. Constructivism is
essentially the human way of learning from our experiences. In Italy’s case,
worldwide actuality is collectively constructed by cognitive structures that
give sense to the material world.

The
public debt of Italy is growing exponentially, hitting 5.8 percent in 2009. Its
unemployment was over 9 percent last year and is expected to top 10.5 percent
this year. Italy continues to struggle with budget deficits and a high public
debt, which is at 2.6 percent and 105.9 percent of GDP for 2008. Italy joined
the European Monetary Union (EMU) in 1998 by signing the Stability and Growth
Pact. As a condition of this Euro region association, Italy must keep its
budget deficit beneath 3 percent. It’s been hard for the Italian Government to
keep the budget deficit below this threshold, which would permit a swift
reduction of the debt. Even worse, economists are predicting this statistic to
surpass this three percent limit in 2010.

Italy
can seem like somewhat of a skeptic since its main motive is its own national
interest, however, Italy’s foreign relations with the U.S. have been quite well
lately. Italy gladly has sent over 2,500 troops to Afghanistan in Operation
Enduring Freedom to assist in the war on terror. It is an ally to the United
States and has somewhat of a special relationship with our country. Rome ranks
number thirty in the 2008 Global Cities Index and Milian, Italy’s largest city
ranks number thirty-nine. The Global Cities Index is based on sixty cities,
ranked by political experience, business activity, human capital, information
exchange and cultural experience. It ranks one hundred and fifty on the 2009
Failed States Index. The Failed States Index is an article about the world’s
weakest states. What these two statistics tell us is that Italy is somewhat
integrated in the world economy. This is because Italy has very few natural
resources. Much of its land is unsuited for farming making Italy a big food
importer. Natural Gas has grown lately and become the country’s greatest
mineral supply. While there are no significant deposits of iron, coal, or oil,
most raw materials needed for manufacturing and more than 80% of the country’s
energy sources are imported. Italy’s biggest exports are precision machinery,
motor vehicles (utilitaries, luxury vehicles, motorcycles, and scooters),
tobacco, alcohol, chemicals, firearms, and electric goods.

The
country has a strong comparative advantage with the more famous exports in the
fields of food and luxury clothing. Its main export partner is Germany,
accounting for 13.2% of its exports. The country’s main imports are engineering
products, chemicals, transport equipment, energy products, minerals and
nonferrous metals, textiles and clothing; food, beverages, and tobacco. Its
main import partner is also Germany, accounting for 16.7% of its imports.

 

The
Italian equity market has a volatile history and continues move sideways due to
over leveraged balance sheets and the exponential growth in derivatives. The
Dow Jones Italy Titans Index has only returned 0.98 in the past decade and 6.25
percent since inception. (djindexes.com) The Italy Titans index is composed of
the thirty largest Italian companies. Stocks for the index are selected
according to their respective market capitalization and average trading volume.
Italian companies are called Società Per Azioni,or SpA for short. Societa Per
Azioni’s are limited liability companies that are usually chosen not only by
large companies, but also medium sized companies. SpA’s are comparable to the
American corporation, in a sense that the owners have limited liability, the
company has the ability to issue stock, and elect or fire directors. Italian
accounting principles are very similar to Americas, as they have adopted the
International Accounting Standards, an independent, nonprofit organization that
oversees international financial reporting. Information on holdings, accounting
statements and ____. Italy is also a member of The Group of Twenty (G-20), an
assembly of Finance Ministers and Central Bankers who discuss international
crises’ and other vital issues in the global economy.

Italy
has a democratic republic that has existed since 1946 but has gone through
several dramatic changes, however, consists of an executive, legislative, and
judicial branch. Italy’s main economic strength is its processing and
manufacturing of goods in a large base of small to medium size companies. Their
main weakness is competitiveness and long-term growth. It has moved slowly to
implement certain structural reforms favored by economists, such as lightening
the high tax burden and overhauling Italy’s rigid labor market and expensive
pension system, because of the economic slowdown and opposition from labor
unions.

The
Italian labor force consists of 24.86 million people. Unemployment has been
steadily increasing from 6.7% in 2007, its lowest level since 1992, to 9.1% in
2009. It is forecasted to grow to 10.5% this year. (Global Finance – 2010)
Southern Italy actually has a much higher unemployment rate, where the average
can exceed 20% in some places. Women and children have significantly higher
rates of unemployment than men. In past years, some claimed the rigid labor
market was a disincentive to job creation. Citizens claim that employment has
improved somewhat but that companies force employees to work more hours than
legal, provide less secure jobs, pay low wages, and give little or no benefits.
Italy’s unemployment rate has steadily decreased for the past ten years from
11.5% in 1999, to 7% in 2007.

Economists
predict real GDP growth will be below expectations again in 2010 and that a
further halt in 2008 will result reflecting the impact of higher inflation,
international financial insecurity and the appreciation of the euro. Its public
debt is at nightmare proportions and continues to rise, and to this day remains
well above 115% of GDP. (Economist.com – Italy)

I
believe that Italy will continue to have sluggish economic growth within the
foreseeable future. The widespread corruption, organized crime and massive debt
will cause Italy’s slow expansion. When the government works to lower the high
tax burden on citizens and bring the country out of its budget deficit, we will
see Italy’s political and economic prospects flourish once again.