Italy’s mounting problems

Italy already had a number of well-known structural problems: Zero productivity gains, leading to very low potential growth; Low labour force skills, leading to a very low employment rate, leading in turn to an abnormally low level of production and resulting in low tax revenues; As a result, deteriorating public finances, leading to the constant threat of a debt crisis; As another result, a skewed income distribution against companies, in the absence of productivity gains, leading to a low level of investment ( Italy has so far managed to allocate only 40% of the Next Generation EU plan to projects), which keeps productivity low . All of these difficulties make Italy economically and financially fragile. But it is now clear that Italy has another weakness in the form of its high energy dependence on fossil fuels, in particular those imported from Russia. Italy’s overall situation is therefore deeply negative and requires monitoring by the ECB.