Written by Grace Hayden, GEI Associate
Making it nearly impossible for Spain to revel in the good news of its second quarter 0.6% GDP growth rate, Italy’s unfortunate return to recession status coupled with lackluster growth in France and Germany practically assures slowed growth for the Eurozone as a whole.
With the tension in Eastern Europe and the Middle East continuing to rise, investors’ fears are clearly being reflected in the market. Last week proved to be rough for the Italian stock market in particular as it saw figures plummet, pushing the economy into a recession for the third time since 2008. While this news may come as a surprise to some, economic analysts are also attributing Italy’s decreased GDP to diminished demand from the Middle East and Russia for Italy’s main export: fashion. Furthermore, Vladimir Putin’s recent decision to limit imports from the US and EU in response to economic sanctions they are imposing threatens the welfare of the agricultural sector in both the EU and US. Although the majority of Italy’s agricultural activity happens in the underground economy, this still serves as a considerable blow to the Italian economy in addition to the wellbeing of the economy of the Eurozone overall.
This recent news of recession has also had negative effects on the people’s confidence in Prime Minister Matteo Renzi. The question on everyone’s mind seems to be whether or not the Prime Minister will be able to achieve his goals of reviving the Italian Economy. With little to no evidence of improvement since his rise to power, people are still waiting for him to deliver on his promises for various reforms. Since becoming prime minister February 2014, he has only managed to put in place a tax cut for low income workers.
All of this occurring at a time when reports of Spain “turning the corner” are beginning to surface most likely means that despite the recent progress, the end of Spain’s economic troubles appears to be ending.
