"With medium term nominal GDP growth likely to be in the doldrums at 2 per cent per annum, interest rates at 6.5 per cent would mean that Italy needs to run a primary surplus of 5.5 per cent of GDP indefinitely in order to stabilise its debt/GDP ratio at 120 per cent. (See this calculator to try different assumptions.)
three comparable historic episodes of budget reform in which such large primary surpluses have been maintained for several years, and have led to large falls in debt ratios. These are Ireland (1988-2000); Belgium (1995-2007) and Italy itself (1995-2002). There are other episodes which are not comparable, because they are based on resource discoveries or unsustainable private sector booms
Italy is being asked to repeat what it achieved from 1995 onwards, when it managed several successive years with primary budget surpluses above 3 per cent of GDP. But that was at a time when the economy was growing at a decent clip,
Italy’s labour cost competitiveness against Germany has deteriorated by around 50 per cent since the mid-1990s. How can this conceivably be reversed in a low inflation environment within EMU?The list of measures which are essential to improve market flexibility and reduce the stifling role of the state would be a depressingly long one. And many of the most essential labour market reforms will certainly add to unemployment and deepen the recession in the short run, making the budget problem even more difficult"
FT
----------------------------------
look the italian price system needs to be moved up fast
regardless of any real upward movement
and yet the nominal wage rate has to stagnate
a contradiction in part
------------------------
where is the increased effective demand for domestic production to come from??
from outside ???
trade gap reduction ??
from switching to domestic tradeable products
imports will not be curbed quickly
and exports will not boom
since zone trading partners are not likelt to expand their intrazonal import demand fast enough
as others move to hold market position
yes moves will lead to counter moves
unless germany can be made to let its imports rise and exports fall
without policy reactions
the relative german price level has to soar
perfect time for a holiday on all payroll taxes in germany btw
and an imprudent teutonic social wage binge too
october fest uber alles
every month is october fest
Italy’s labour cost competitiveness against Germany has deteriorated by around 50 per cent since the mid-1990s. How can this conceivably be reversed in a low inflation environment within EMU?The list of measures which are essential to improve market flexibility and reduce the stifling role of the state would be a depressingly long one. And many of the most essential labour market reforms will certainly add to unemployment and deepen the recession in the short run, making the budget problem even more difficult"
FT
----------------------------------
look the italian price system needs to be moved up fast
regardless of any real upward movement
and yet the nominal wage rate has to stagnate
a contradiction in part
------------------------
where is the increased effective demand for domestic production to come from??
from outside ???
trade gap reduction ??
from switching to domestic tradeable products
imports will not be curbed quickly
and exports will not boom
since zone trading partners are not likelt to expand their intrazonal import demand fast enough
as others move to hold market position
yes moves will lead to counter moves
unless germany can be made to let its imports rise and exports fall
without policy reactions
the relative german price level has to soar
perfect time for a holiday on all payroll taxes in germany btw
and an imprudent teutonic social wage binge too
october fest uber alles
every month is october fest
