Country Outlines (ITALY)
The gradual but clear trend toward economic recovery that has been ongoing for a year and a half (+1.9% in the first trimester of 2011), initially sustained by massive fiscal and economic plans and the reconstitution of supplies, now seems fueled by a restart in demand, especially for consumer products. According to analysts, the threat of a double dip recession has now been averted, but the question remains of what effects monetary and fiscal stimuli have on the real economy and which are the result of autonomous growth dynamics.
The degree of utilization of production capacities is at 76%, which is still about 6 points lower than the peak in 2007. It proves the existence of a continuing output gap pointed out by also by Federal Reserve Chairman Bernanke. According to Bernanke, the push for a rise in the prices of raw materials should not be enough at this moment to create a serious obstacle to U.S. economic growth.
The Fed’s bond purchasing policy ended in June 2011. It was the target of criticism from Republicans who considered it an overly accommodating stance to the medium-long term public debt problem. There are differing political viewpoints on the public sector’s role in the economy; it was a central theme of the mid-term election campaigns and it remains at the center of current political debate.
The 2011 federal budget (that ends on 30 September), approved this past April 15, cut expenses by over $38 billion, and the 2012 budget proposal is now before Congress. It envisions $3.7 trillion in spending and a package of spending cuts and revenue increases which, based on the administration’s projections, would reduce the deficit/GDP rate from the current 10.6% to 3.2% by 2015. The proposal does not meet with approval from Republicans who decry the absence of measures to contain spending on entitlements in the medium-long term, e.g., pensions.
Embroiling the political debate even further is the August 2 date announced by the Department of the Treasury of when the $14.294 federal debt ceiling would be reached. The political battle is very tight. Moreover, the projected spending cuts in the 2012 budget raise concerns of potential damping effects on economic recovery.
One of the factors negatively affecting the recovery is the continuing weak real estate market. Housing prices are again dropping and analysts expect a further decrease of about 5% in 2011. Financing conditions for real estate purchases have become more stringent. The numerous foreclosure procedures due to bankruptcy filings by owners are still negatively affecting the market. Moreover, the investigations under way in all the States on the legal conformity of many of these loans lend further uncertainty to these transactions. The Administration is studying new measures to assist the many families faced with paying off mortgages that are higher than the value of the property. Beyond any short term measures, the basic issue of how to revamp the federal government’s role, especially those of Fannie Mae and Freddie Mac (taken over in September 2008), in the real estate market remains unresolved. Treasury Secretary Geithner recently submitted a White Paper to Congress. The three hypotheses, based on maintaining the securitization system that distinguishes the U.S. mortgage market, tend to reduce role of public agencies to varying degrees, freeing up the market.
Italtrade Invitalia
The degree of utilization of production capacities is at 76%, which is still about 6 points lower than the peak in 2007. It proves the existence of a continuing output gap pointed out by also by Federal Reserve Chairman Bernanke. According to Bernanke, the push for a rise in the prices of raw materials should not be enough at this moment to create a serious obstacle to U.S. economic growth.
The Fed’s bond purchasing policy ended in June 2011. It was the target of criticism from Republicans who considered it an overly accommodating stance to the medium-long term public debt problem. There are differing political viewpoints on the public sector’s role in the economy; it was a central theme of the mid-term election campaigns and it remains at the center of current political debate.
The 2011 federal budget (that ends on 30 September), approved this past April 15, cut expenses by over $38 billion, and the 2012 budget proposal is now before Congress. It envisions $3.7 trillion in spending and a package of spending cuts and revenue increases which, based on the administration’s projections, would reduce the deficit/GDP rate from the current 10.6% to 3.2% by 2015. The proposal does not meet with approval from Republicans who decry the absence of measures to contain spending on entitlements in the medium-long term, e.g., pensions.
Embroiling the political debate even further is the August 2 date announced by the Department of the Treasury of when the $14.294 federal debt ceiling would be reached. The political battle is very tight. Moreover, the projected spending cuts in the 2012 budget raise concerns of potential damping effects on economic recovery.
One of the factors negatively affecting the recovery is the continuing weak real estate market. Housing prices are again dropping and analysts expect a further decrease of about 5% in 2011. Financing conditions for real estate purchases have become more stringent. The numerous foreclosure procedures due to bankruptcy filings by owners are still negatively affecting the market. Moreover, the investigations under way in all the States on the legal conformity of many of these loans lend further uncertainty to these transactions. The Administration is studying new measures to assist the many families faced with paying off mortgages that are higher than the value of the property. Beyond any short term measures, the basic issue of how to revamp the federal government’s role, especially those of Fannie Mae and Freddie Mac (taken over in September 2008), in the real estate market remains unresolved. Treasury Secretary Geithner recently submitted a White Paper to Congress. The three hypotheses, based on maintaining the securitization system that distinguishes the U.S. mortgage market, tend to reduce role of public agencies to varying degrees, freeing up the market.
Italtrade Invitalia
