Greece and Italy are often lumped together when discussing the European debt crisis, but they are not the same.
Greece is facing a €14.5 billion repayment on March 20 (the annual government receipts are €32 bn). The 10-year Greek debt is trading at 31.2% (!) over German 10-year Bunds (at 1.91%). Unemployment is over 20%. Unions announced a 48-hour strike, and the prime minister Papademos has to threaten to resign to get the Parliament to listen.
Greeks make olives. And goat cheese.
S&P downgraded 34 Italian banks today, but no one listens to S&P anymore. The prime minister Mario Monti is a smart economist and a good politician. He is pushing through spending and labor market reforms. The 10-year Italian debt is trading at 5.62%, only 3.71% over German Bunds, the 2-year debt at 3.22%.
Italians make cars, consumer white goods, precision machine tools, high fashion and optical accessories, wines and branded food products. Italy earns $46 billion annually from tourism. Lombardy (Milan) is as rich a place as any in Northern Europe.
Italy has won four soccer World Cups (second only to Brazil). Greece has won none.
No contest, ciao.
Great post Professor! The Italians won't go without a fight. After all, they did have Machiavelli.
ReplyDelete