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Italian report Italian report
by Euro Reporter
2015-05-17 13:07:16
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Italy says it rescued 3,600 migrants from the sea in 48 hours

Some 200,000 are expected to arrive in Italy this year. Italy has rescued 3,600 migrants from rickety boats sailing from Africa to Europe in the past two days, officials said. Hundreds were taken to the Sicilian port of Catania. The Interior Ministry expects human cargo to the southern European nation to increase by 30,000 to 200,000 this year.

Many migrants embark from Libya, where a prevailing lawlessness creates conditions favourable to those seeking to profit from the demand for illegal passages to Europe.

This week, the European Union declared it would absorb an additional 20,000 refugees and more evenly disperse asylum seekers across member states. The death toll from migrant boat journeys is expected to move beyond 2,000 in 2015. In early May, approximately 6,800 people were brought ashore to safety by European rescue missions.

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Can Italy’s nascent recovery be sustained

As he visited Barack Obama in Washington last month, Matteo Renzi, Italy’s prime minister, offered a fairy-tale analogy about the Eurozone’s third-largest economy. “For too long our country has been like Sleeping Beauty,” he said. “But we are here to wake her up,” he added. This week, Italians could finally point to some solid evidence that their country is finally emerging from its slumber. Gross domestic product grew by 0.3 per cent in the first quarter, which may seem modest, but marked the best quarterly performance in four years and an exit from a bruising triple-dip recession. The question is whether this nascent recovery can be sustained, or fizzle out. Here are four things to watch:

italy_400_01The 0.3 per cent increase in output in the first quarter was notable for breaking a lengthy negative streak. Italian GDP had not risen at all since mid-2013, and had not performed as well since early 2011. But this week was also a major turning point because it indicated that the recent strength in “soft”, or survey based economic indicators, such as consumer and business confidence indices, were not off the mark, as they have been in the past. Instead, it is showing up in real — or “hard” — economic data, like GDP figures. In the next few weeks and months, it will be key to assess whether that convergence continues, or ends.

In large part, the Italian economy — like the rest of the Eurozone — has been juiced up by external factors. Low oil prices have given households more disposable income and a drop in the value of the euro has bolstered exporters which form an important chunk of Italian business. The European Central Bank’s quantitative easing programme has also helped keep interest rates low, which may have spurred extra borrowing. But there are still doubts on the Italian economy’s ability to stand on its own two feet — especially if those factors begin to reverse, as they have partially in recent weeks. Both consumption and investment in Italy have shown some tentative signs that they are picking up, and may even accelerate. But it will take more months of data to be confident that they can truly drive a sustained recovery.

The Italian labour market has been a discordant note to the better economic mood-music in recent months. Unemployment actually rose back up to 13 per cent in March, marking the second consecutive monthly increase after what looked like the beginning of a steady decline. Youth unemployment, which is well over 40 per cent, also rose. The data has puzzled economists because it is not being driven by an expansion of the labour force, as discouraged workers finally believe they have a chance of finding jobs again, which would be consistent with the early stages of a recovery. Instead, it has been caused by a decrease in the number of employed workers, and an increase in the number of unemployed workers. Unemployment is often a lagging indicator, which may explain this, but eventually joblessness should begin to drop consistently, and for the right reasons. The budding rebound may partially be attributable to political stability. Domestically, Mr Renzi does not appear to be facing major threats to his leadership — either within the ruling centre-left party, or from a fractured and weakened opposition. Combined with his generally business-friendly agenda of economic reforms, this has arguably created an improved climate for companies to put money into new projects. Internationally the situation has improved. Last year’s economic setbacks for Italy are often blamed on the Ukraine crisis given the deep business ties with Russia. But even if it is far from resolved, the Ukrainian conflict has at least stabilised. A new flare-up could be very destabilising economically for Italy, as could — for different reasons — a Greek exit from the euro or a default.

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Italy to pay 'portion' of billions owed to retirees

Italy’s Prime Minister Matteo Renzi said on Friday that “a portion” of what the government owes to retirees would be paid after the country’s top court ruled that the money should not have been withheld. Earlier this month, the constitutional court overturned a key plank of the debt-laden country's pension reforms in a ruling that could require the government to repay at least €5 billion. "We will restore a portion of this money," Renzi was quoted by Ansa as saying during a Rai radio call-in show.

He added that the government is "studying how to respect the judgement" while respecting the need to maintain the budget. Economy Minister Pier Carlo Padoan is expected to outline measures on Monday. In December 2011, when the country was under severe market pressure over its public debt, the technocrat government in power at the time pushed through draconian austerity measures.

Among the reforms was a hike in the number of years of pension contributions, a change in the calculation of pensions to take into account salaries received through an entire working life rather than the most recent wages, as well as a halt in inflation-adjusted increases for pensions that are above €1,400 a month. The then social affairs minister Elsa Fornero had burst into tears when announcing the changes at a press conference. But in its ruling, the constitutional court overturned the government's decision to scrap inflation-adjusted pension increases, finding that it is a "constitutionally-founded" right which had been "sacrificed in an unreasonable manner". The government's representative in court estimated that the savings made from this measure alone amounted to €5 billion for 2012 and 2013, before the subsequent government of Enrico Letta reintroduced a partial reinstatement of inflation adjustments in 2014.

 


         
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