While the various PIIGS nations some common characteristics with regard to their crises, they all have unique issues.
Greece’s debt-to-GDP got ot be ridiculous.
Spain had a huge housing bubble.
Ireland had a banking bubble.
Italy? Basically, it’s a horror show of over-regulation and economic inefficiency.
Barclays’ Fabio Fois takes a good luck at the moribund Italian economy, and what the government is doing to get things improving.
The story can really be told in these two charts. The first one shows service sector productivity across various Eurozone nations. Basically, while others have improved, Italy has become a basket case over the last 10 years.
Unfortunately, it’s hard to separate what’s the result of the euro, and what’s the result of the Berlusconi error, but the bottom line is that they’ve been a mess.
And unfortunately, the services sector is far and away Italy’s biggest economic category.
Construction and industry have been long been on the decline as a share fo the economy. So if the one area that’s growing in importance is doing so badly, then you’ve got a problem.
So the Monti government is pushing forward a liberalization scheme, the likes of which you’d expect to read about in a true emerging market.
They’re reducing monopoly powers for the large state-owned energy company (Eni), privatizing more public transport, granting more taxi and pharmacy licenses, and so on.
Economic growth is hard to achieve in the context of austerity, but there appear to be some areas where the country is really shooting itself in the foot via regulation.