Italy Analysis

Inflation and Unemployment

The inflation rate in Italy has been steady in the last twenty years. It hasn’t been above five percent since 1995, and in the past ten years has averaged a 1.99 percent increase per year. The inflation rate is calculated using the CPI (consumer price index) which is the average change in price of a set basket of consumer goods and services purchased by households over time. Governments usually strive for an inflation rate ranging from two the three percent per year because it is beneficial to the economy because it encourages consumers to buy goods and services and companies to borrow money due to the low interest rates.

Increased spending usually increases jobs, but since 2007 unemployment has risen from almost six percent to thirteen percent in February 2014. Two major factors in this dramatic unemployment spike are the youth unemployment rate of ages fifteen to twenty-four and the under employment of women. Almost forty-two percent of Italy’s youth are unemployed on top of the even bigger amount of unemployed women at forty-six percent. Some economists think this is due to the growing liquidity problems that many Italian companies are having. One other theory is that the unemployment benefits system is enticing more and more people to work in the black market. While these people work on the black market they are double dipping, as in collecting unemployment benefits from the government while earning a salary off the books. Since Italy’s underground economy is such a large operation, many people especially people over thirty are taking advantage of the governments easily manipulated benefits program. The unemployment benefits program also favors older members because they make up the ma...

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...government as corrupt as this the first move would be to fire the corrupt official and crack down on organized crime. That is much easier said than done, but it is necessary to reduce the impact on Italy’s economy. A reduction in the underground economy would free up jobs as well as stop people from double dipping by collecting unemployment benefits while working off the books. This would help the younger people find jobs and receive the unemployment payment they deserve as well as help boost Italy’s GDP and hopefully start a period of economic expansion so its debts could be paid. Overall I think that Italy has a rather bleak outlook. The reason I say that is because organized crime is embedded deep within the government and law enforcement, and the country cannot thrive without eradicating those individuals from their positions, which seems next to impossible.