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Italy’s economic woes pose existential threat to euro zone

On a sunny Thursday morning in Rome, Alessandro Ambrocci, 26, bounded out of the U.S. consulate on the once-glam via Veneto, beaming as if he had just won the lottery. He was clutching a white envelope; inside was his work visa.

It was Arrivederci, Italia time for him.

Mr. Ambrocci trained as an engineer, couldn't find work, retrained as a bartender and landed jobs on cruise ships. His new visa will not allow him to work in the United States proper, but it will allow him to travel there to board the ships. So he was off to Miami.

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"I could work here [as a bartender] but I would pay too much tax," he said. "In Italy, we have the wrong mentality. The politicians want to keep all the money for themselves."

I asked him what he thought of Silvio Berlusconi, the former prime minister who vowed to clean up Italy's economic act only to fail miserably on all fronts.

"I hate Berlusconi," he said. "He talked, talked, talked but didn't do anything but steal money. That's the Italian problem. Talk, talk, talk and do nothing." Mr. Berlusconi has been convicted of tax fraud and faces expulsion from parliament.

Mr. Ambrocci represents Italian youth – smart, energetic, well-trained and utterly fed up with the corruption, inefficiency and moral and economic rot that has infiltrated their country like a cancer. So they abandon the country.

I have lived in Italy for six years and have never seen its citizens worry so much about their children, whether those children are kids, university students or young adults starting families. There is no work, or work so beneath their skill levels they can barely muster the enthusiasm to get out of bed in the morning.

Every young Italian I know is leaving the country, or wants to. The U.S., Canadian and British consulates in Rome are seeing a surge in work-visa applications from desperate Italians.

Statistics released on Thursday confirm that Italy suffers a hellish employment problem. The overall jobless rate ticked up in September to 12.5 per cent, the highest since the records began in 1977. The youth jobless rate also rose, to 40.4 per cent, approaching Greek levels.

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Even as the rest of the euro zone emerges from the economic crypt, Italy alone continues to dig its grave, tragically unaware of Warren Buffett's maxim: "The most important thing to do if you find yourself in a hole is to stop digging."

Besides being a textbook case for relentless wealth destruction, Italy poses an existential threat to the euro zone. Forget Greece; its economy is the size of a corner store compared with Italy. Italy is a Group of Eight country. Its economy is bigger than Canada's. It is the euro zone's third-largest player and second-biggest manufacturer, after Germany. If Italy goes down, the euro zone is finished.

This may sound like newspaper columnist hyperbole. It is not. Only a few days ago, the eminently sober-minded Joerg Asmussen, the German economist who sits on the executive committee of the European Central Bank, said this in a speech in Milan: "The future of the euro area will not be decided in Paris or Berlin, or in Frankfurt or Brussels. It will be decided in Rome."

Italy's decline has been breathtaking. In the post-war decades, it was an economic miracle, going from what we used to call "third world" status to economic powerhouse, one with flare, creativity and ambition. This is the country that gave the world Ferrari, Alfa Romeo, Vespa, Prada and the world's finest fashion and food, and niche – yet global – industrial products, from machine tools to diesel engines. Some fine films were made along the way, too.

The legacy has disappeared in a Vesuvius of sleaze, arrogance, denial, stupid nationalism (the flying corpse Alitalia should be allowed to go bankrupt), eternal political chaos and Mafia thuggery.

Perhaps the most extraordinary aspect of Italy's collapse is not that it is happening, but that a few stalwart companies, such as Tod's, the luxury leather goods group, and Luxottica, the eyeglass maker that owns Ray-Ban, have managed to soldier on as the bodies pile up around them. Imagine their success if Italy were to spend as much on infrastructure and education as it does on paying the interest on €2-trillion ($2.8-trillion) in debt and financing the lifestyles of Europe's highest-paid parliamentarians.

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A recent article on the London School of Economics website by Roberto Orsi, a professor at the University of Tokyo, was refreshingly brutal in its analysis of Italy. He called it "the perfect showcase of a country which has managed to sink from a condition of prosperous industrial country just two decades ago to a condition of unchallenged economic desertification, total demographic mismanagement, rampant 'thirdworldization,' plummeting cultural production and complete political-constitutional chaos."

Evidence that he is not exaggerating comes from the youth diaspora. Writing this week in The New York Times, Corriere della Sera newspaper columnist Beppe Severgnini noted that 400,000 university graduates have left Italy in the last decade.About 60,000 Italians flee Italy every year, most of them with university degrees. You can't blame them.

Italy needs an economic revolution, pronto. What's happening now – a slow-motion suicide – is still a suicide. For young Alessandro Ambrocci, working on a cruise ship is heaven compared with what he would endure in Italy.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More


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