Turbulent times deal a blow to confidence
A combination of economic and political upheaval over the past year has given consumers and investors in Italy a case of the jitters.
A stand-off between Rome and Brussels, coupled with rising unemployment and economic uncertainty, has sent consumer and business confidence plunging to among their lowest levels in years.
All aspects of the national consumer confidence index lost ground at the end of 2018, National Institute of Statistics data shows.
The overall index dropped in December for the third consecutive month; personal confidence was down, and there was a “pronounced worsening” in expectations that unemployment levels would come down. Youth unemployment is over 30 percent, and the overall rate of unemployment is 10.6 percent.
The institute reported "a broad deterioration in confidence among businesses”, amid dampened demand for manufacturing, construction and services.
The backdrop to this has been a year of high-profile political upheaval, as the populist government led by Giuseppe Conte and Matteo Salvini came to blows with the European Union over its budget plans for 2019.
The feud was finally resolved in December, when the two sides agreed a deal that would leave Italy with a budget deficit of 2.04 percent of GDP, down from the 2.4 percent in the Italian government’s original plans. This was achieved by putting off a range of plans for spending totalling €2 billion, including delaying the introduction of a basic income scheme until later in 2019.
But investor nerves are still severely frayed. Italian bond yields have been driven to their highest levels since the Eurozone debt crisis; the country must sell €226 billion of debt, the majority of which is bonds that need to be refinanced this year.
With outside investors nervous of buying, even with the high yields on offer, the government has been looking at alternative ways of raising the money, including urging Italian citizens to buy their government’s bonds.
Italians – and those who watch and invest in the country – have grown used to feeling like there’s a revolving door on the office of the prime minister; the country is famous for having had more leaders since the end of World War II than any other.
Yet the rise of the populist Five Star movement and anti-illegal-migrant League party are seen as having marked a turning point not just for Italy but for the European Union more broadly.
Both parties were, until recently, seen as being on the fringes of national politics, but their rise signals widespread voter dissatisfaction with the status quo. Both parties are sceptical of the country’s relationship with the EU, and share common ground on controversial domestic issues, such as compulsory vaccinations for children.
A hard line on assisting refugees seeking to reach southern Italy by boat has proved popular among many voters.
But this is a market where one day’s fresh face and vision of voter hope so often proves to be quickly consigned to history; with European and several regional elections coming up in May, the balance of power in Rome could well shift again before long.