Dropped, you have underperformance relative to other eu members, why is italy not doing that well, which is pointing to a recession overall, not just in manufacturing, and then were gonna uh give you some um news about the eu economy as a whole uh as to why its not doing that well, you have a money supply decrease, you have lending and deposits of declined and you have record bankrupcies. Italys economy is in crisis, according to the latest data, the countrys gdp shrank by 0. 4 in the Second Quarter of 2023, when compared with the First Quarter, the downward revision has cast doubts over prospects for the rest of the year, as Prime Minister molonis rightwing government prepares to draw up his 2024 budget. As recently as last week, the leader of the countrys rightwing Coalition Government was predicting her nation would outperform germany and france this year. Italys Manufacturing Sector also contracted in august for fifth consecutive month. The august manufacturing pmi index came in at 45. 4, up from 44. 5 in july, but still well below the 50 mark that separates growth from contraction, raising the risk. Of weak Economic Activity extending into the third quarter. Rome is officially forecasting fullyear 2023 growth of 1 , slowing sharply from the variant 3. 7 rate in 2022. The government is also preparing a 2024 budget that is expected. To stick to italys commitments to keeping its deficit a downward trend, that will leave little leeway for stimulus. Time to look at some of the online posts on this, we took a look at some websites, the first one, Economic Forecast for italy, the latest microEconomic Forecast for that country, where it said italys Economic Growth started slowing down last year, halting the postpandemic rebound, which had lifted growth to 7 . For the year 2021 and 3. 7 for 2022. One out to say, after a pickup in the First Quarter of 2023, gdp decreased by 0. 4 in the Second Quarter, driven by falling domestic demand, particularly investments in construction. Next, italys economic resurgence, a prime opportunity for g7 presidency in 2024, more optimistic look, it seems with this entry, where it said the 2024 g7 presidency will provide a. A unique opportunity for italy to present the structural progress made by its economy in recent years, particularly after the pandemic, quite a contrast to the previous post. Next, the date here is important, this was posted on september the 1st, 2023, italys economy shrinks in the last, or the latest, i should say, quarter, casting a shadow over the outlook, italys gdp shrank by 0. 4 in the Second Quarter from the first, and its manufacturing. Sector contracted in august for fifth consecutive month. Obviously that points to how manufacturing is a problem in that country. And our last entry, again, the date important here, this was july 31st, 2023. Protests erupt in italy over cuts to poverty relief scheme, where uh, cuts to this scheme by Prime Minister, georgia malonis rightest governments will affect hundreds of thousands. Of people, all right, so we figured some of those entries gives you a clue as to how the economy there in italy is struggling, but more importantly, lets find out what a guess think, uh, let me welcome. Our guest for this first segment of the q a, we have alex krainer joining us, hes an author and geopolitical analyst. Alex quener, welcome to economic divide. Um, were looking at italys economy to not performing that well, uh, and this particular question, i like to zoom in on manufacturing, um, in particular how factories have start have laid off many, the Manufacturing Sector has contracted um since um last year, in the middle of last year, up. Till now where people um and analysts have said theres a manufacturing recession, why has italys manufacturing done so poorly . I think that the causes of this crisis stretch back into the early 1990s, you know, and and i think that they are they have the root in the western financial markets, so so it stems from. Financial markets, just year ago, italian 10year Government Bond was yielding 0. 6 . Today its trading at over 4. 4 , and it looks like its trading higher, and you know, if the interest trades break higher, its it spells a whole lot of trouble for the italian economy, in 2016, i think 17 of all assets on the books of italian banks were marked as bad loans and by last year the that miraculously fell to 4 . All that happened is that the Bank Regulators regulators declared these loans as good loans, they um they approved them as a collateral for the repo markets and they got lost in europes target to rebalancing system. Okay, thats a very important point. That our guests there uh talked about, something which many perhaps are not uh informed as to how these loans have just been ridden off and im sure the figures are pretty high. Our next guest, claudio koza joins us, hes an associate professor in Economic Policy at the university of naples in italy. Claudio cosa, welcome to economic divide, so the economy in italy is reported to shrink unexpectedly. Were looking at the second half of 2023 which were in right now. Um and its even said that theres going to be a sharper production drop compared to the other euro zone economies uh which brings about the natural question, why is italy underperforming when it comes to its pears . Well, in my opinion, we have always ups and downs, so in general we have a European Crisis that is now, mean since at least over the last 15 years, so last year it seemed that italy was better performing as compared to other industrial economies in in europe, this year and this quarter it seems the the opposite, so for instance we have other Large Industrial countries that have been facing problems or stagnation, think about germany that is zero, but also poland had a decrease this year, while for instance, france and spain were better performing, but maybe last year there was a problem with france so um we should not look too much at momentary problems of the single economy uh while look at the trend and the trend is negative for all european country eurozone. 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We are going to get into the reasons why that is happening, although there are many, but hopefully youll get an idea through this indepth section of the program. All right, lets look at the first graph that we figured is important and thats ital least gdp growth so you can get a taste as to whats happening with this country. As you can see in the year 2018, very modest growth just above 0 , 2019, you could see a little bit below that actually, the year 2020 is when covid hit, you can see the dip there in the negative territory, then the year 2021 um, it shot up, thats called the covid bounceback, and then the year 20. 222, which uh, it did relatively well considering uh the fact that it carries so much debt, but uh, why is it that its not progressing, its not improving in this gdp output. In order to find that out, we want to go to the next graph, lets take a look at the way that uh this has worked out for italy, so as were about to see in this next graph thats coming up, lets see the yearonyear annual average, thats what we picked. Uh for uh germany, relative, im sorry for italy relative to the rest of the countries uh in the euro area. Here you can see uh germany for example, 1. 9 in terms of it gdp growth for the year 2022, and then were looking at uh, lets zoom in on italy here where for the year 2022, it did relatively well, 3. 9 . Okay, but then you could see the dip there, 0. 3 for the year 2023. Okay. And then for the year 2024 modest growth uh that has happened there based on uh what we see over here for its growth for 2023 were looking at roughly around 1 . Okay this gives you an idea about how its doing with some of its uh uh piers in the euro area uh the countries we spick we picked spain france and germany so uh looking at the most recent uh year which would be the year that were in overall we can see that uh not only are other countries not doing that well in the euro area such as the power house for example germany or france italy again um very very low growth as evidence in this uh particular uh graph that you see in the bar that you see there which as i mentioned comes in comes in at around 1 . All right lets move to the next graph this is important uh because this is about uh the inflation rate okay. The categories that we picked all items in general um then ones that are only a food and energy we deducted and then uh we broke it down to food and energy being the top categories where inflation has been registered so uh take a look at the uk for example 7. 9 roughly is uh what were looking at for the inflation weight there when it comes to all its items now in terms of italy again we did a comparison here the countries we picked the uk, germany and france, uh, italy came in at 7. 6 for all the items, but then when it came to um, all items less food and energy, we can see this is where it ranked in terms of its inflation, inflation which is a little bit above 5 , or actually just a little bit below 5 , but then here is where uh it shot back up, food and energy seem to have uh have the same value, and that value is a little bit over. 10 were looking at roughly around 11 or 12 . Okay, this shows uh again a comparison in the eu area, the euro zone as it is called, france, germany and the uk being the other countries, of course uk is not part of the euro zone, but it is in europe, so that gives you an idea about the inflation and how its impacting the country. Next up, this is very important because the euro zone is known for this, and this is about the loans okay. Now we uh picked out the outstanding loans and put it into perspective with the countries that carry um those high loans such as uh france uh spain and germany uh that is the french spanish and the german economies so we put them all in one bar so you can see how that is transpiring and as youre about to see over here you can see that italy uh does have a substantial amount of loans that uh it has uh gotten uh the loans that it carries out of um in turn has an effect on the uh European Central bank because of the fact that these uh loans get dispersed from those banks uh so you can see relatively speaking the loans by uh italy which is in the black that you see over here relative to the other countries that it is ranking relatively high uh and uh the q quarter of 2021, along with the Fourth Quarter of that year, the loans ranked pretty high, let me put another piece of information in uh perspective here for you uh in terms of the the type of loan that italy is grappling with. Lets move to the next graph in order to find that out. This is a pretty incredible one and it has to deal with italys covid loan. Take a look at how much it had to borrow. 123 billion euros 123. 2 billion euros that much money. Italy actually borrowed, now obviously thats a high figure, but there are other countries also, not only in europe, but the euro zone, who have had extensive and high amounts of money that they dispersed because of their covid related economic problems that they were experiencing, so uh this also puts into perspective the amount of loan that italy had to uh endure, including this this big one, which is 100. 23. 2 billion euros. Now what about italys debt . Okay, lets take a look at that. Um, and lets put that into perspective by putting it next to other countries uh in um the euro zone. As you can see over here, were looking at around uh, a little over 2. 5 trillion euros that uh the debt of italy is, and then when you put it next to other countries like spain, portugal, greece, france, and ireland, you can see how its towering them uh where they are coming in at roughly 2. 3 trillion euros roughly or 2. 25 trillion euros, so thats italys debt next to other countries. Also to put things into perspective for you a little bit, we uh went and uh looked at uh the growing debt that has occurred um for italy through the years, we started with the year 2020, and look how its just keeps. Increasing um all the way through to january 2023, of which if you take a look at the um, i believe thats the highest debt that italy is carrying, and that is over 2. 5 trillion euros, roughly two point, perhaps uh 525 um trillion euros, thats a lot of uh debt that italy has accumulated, and thats the problem that not only is italy experienced. In the euro zone, but also a lot of other countries such as france um and uh spain, theyre carrying lot of debt, which has dragged down the euro zone economy. All right, i think thats enough for you in terms of facts and figures to try to understand how italy is doing, especially in the context of the euro zone, and we brought in some other countries for you, but lets have our guest dissect this for you. Alex craigner, author and geopolitical analyst rejoins us. Uh, alex craigner, welcome back economic divide. Uh, in terms of the question id like to ask you, is the um money supply uh has decreased in the euro zone. This is the first time this has happened in 13 years. Uh, at the same time, private sector lending, that has stagnated. You have deposits that have also declined. Um, the Second Quarter 2023, bankrupties have gone up, its a record uh, thats a sixth quarter in a row, the highest since 2015. My question. Is, are we looking at another eu financial crisis . Yes, i think we are looking at another eu financial crisis. These crisis are mathematical certainty given the given the Monetary System that we operate under, namely, this system is only stable for as long as it grows. At present, you know, with the Federal Reserve in the United States, tightening the Monetary Policy, increasing. Interest rates and reducing their balance sheet, the eu, the ecb, in order to stam the flight of capital to the United States from europe, they had to follow the same policy, in spite of the fact that its a known thing that if you do this, you know, you begin to to shrink the the money supply, that theres going to be a significant segment of your of your economy, you know, firms and as well as individuals who are be going to be grow going bankrupt and so we see that happening now in real life this was this should have been this was predictable this was predicted and this will not stop until the Monetary Policy is loosened again all right wow well thats not good news for the euro zone as a whole uh claudio cosa rejoins us associate professor and Economic Policy from the university or at the university of naples. Welcome back economic divide. I was going to ask you another question, but our guess there talks about how there might be a risk of another. Financial crisis happening uh for eurozone as a whole. Um, i mean, some of the indicators are pretty stark, money supply decreasing for the first time in 13 years, you have deposits that have declined, youre looking at things like bankrupcy declarations have also increased, and this is again the high since 2015, as i mentioned in my previous question, uh, so uh, is is it really possible now that the eu might be experiencing . Another financial crisis . Yes, i think we can, we are a way in the same financial crisis that has some rebounds and ups and downs over time, but yes, that could be another financial crisis. The problem with the small firms, as i said before, 99 of italian firms are the small medium enterprises, this means that they are not able to self fund, especially in times of crisis, so they have very low or even negative cash flows, so they are not able to self fund themselves, and they need the Banking System to support them, but when the Banking System goes under pressure, and of course as happen now for the 10 10th times, the european European CentralBank Increased the Interest Rates, the Banking System is not helping small and medium enterprises. Italy is not alone in the current climate of crisis. Business insolvencies in the eu have hit record highs. According to the blocks official statistics agency, eurostat, the number of businesses declaring bankrupcy in the Second Quarter of 2023 increased by 8. 4 compared to the First Quarter fueled by trouble in the food and house. Sector, figures mean bankrupcies have increased with a six consecutive of quarter, unseen since eurostat started collecting data in 2015. Crisis comes in Rising Interest Rates in the euro zone monetary region. The European Central bank piled a 10th straight Interest Rate increase, pressing forward in this fight against stubbornly high inflation that has been plaguing consumers, even as worries grow that higher borrowing costs could help pus