Until the end of the year, the leader of the League, Matteo Salvini, and that of the Five Stars, Luigi Di Maio, will have to cross their fingers and hope that in the last quarter of 2018 the GDP will turn positive. If this were not the case and even if the GDP were negative between October and December, the Conte government will go down in history as the one that defines itself as the one of change but which in reality dragged the Italian economy from growth to recession.
For the first time in four years, the third quarter of 2018 saw GDP fall below zero and if the result were repeated in the current quarter, we would technically be in a recession, which according to economists starts after two consecutive quarters with negative GDP. It is not the government's political opponents who say it, but the numbers.
Already the fall of industrial production in October had raised the alarm, but it was the official data on GDP for the third quarter of 2018 released on Friday morning by Istat that aroused the maximum alert in the Government, especially in the midst of a very difficult negotiation with the European Commission to avoid the infringement procedure against our country.
The data on the trend of the GDP are pitiless and worse than the estimates that had been made in recent weeks: in the third quarter of the year, the Italian GDP was negative and equal to -0,1%. We are at the forefront of the recession, especially since, in addition to GDP, weighed down by consumption and investments that do not recover and by less brilliant exports than in the past, both industrial production and employment are down. Barring improbable miracles in the last few weeks of the year, it seems very unlikely that the GDP for the whole of 2018 can reach even a modest increase of 1 percent. And unfortunately 2019 can be even worse. The so-called People's Government promised to eradicate poverty, but for now the reality says it is erasing growth.
[smiling_video id="68352″]
[/smiling_video]
In recent weeks the OECD argued that in 2019 Italy will not be able to grow by 1% and Goldman Sachs, with a shocking report, forecast for next year a growth of the Italian economy even reduced to 0,4%, in spite of the official forecasts of the Government which in the budget maneuver indicate the growth of the GDP of 2019 even to 1,5%, despite the worsening of the national and international economic situation.
But the Istat data for the third quarter of the year not only upset the budget maneuver under discussion in Parliament but cast a dark shadow on the negotiations between Italy and the European Commission to avoid the infringement procedure. The government he will be able to climb straws as much as he wants, but there won't be room for accounting tricks, cunning and postponements and the bill to pay will be very high and there are those who see the "Tsipras moment" approaching for Italy as well. It is no coincidence that in recent days the Greek prime minister gave fraternal advice to the Italian government: "If you have to give in, do it immediately because it's worse afterwards". Tsipras, before overturning the unfortunate economic policy inspired by the effervescent minister Varoufakis, tried to resist the creditors and the urgency of reforms and the result was a burden of 200 billion which will weigh on the shoulders of two generations of Greeks. Conversion to reality, as we know, is always hard but if it takes time it is even more bitter.
If it wants to avoid the infringement procedure, which would offer the rating agencies the right to lower the rating on Italy with inevitable repercussions on the cost of the debt, the Government will not be able to get away with a few cosmetic tweaks but will have to carry out a much heavier correction that can arrive – as revealed by the policy brief elaborated by Carlo Bastasin and Marcello Messori of Luiss e summarized on FIRSTonline – to the beauty of 23,5 billion. Otherwise, sanctions will be triggered which will certainly not be sweeter.
After all, the first yellow card has already arrived with the green light to the infringement procedure against Italy following the meeting of the past few days of the Committee of the General Managers of the EU Treasury ministries. If the Government hopes that the final verdict will be postponed until after the European elections, it is deluding itself. The sword of Damocles hangs over and the final judgment will come around January 20th. After that, it will be child's play for the opposition to go on an electoral campaign remembering that the new government has already achieved two disturbing records: reopen the doors to recession or, at least, to degrowth, and inflict on the country the humiliation of rejection of all of Europe. Which, in a nutshell, means a new squeeze, made up of spending cuts or new taxes.
This was not exactly the change that Italy hoped for but there is still time to open our eyes to the disasters that the yellow-green government is causing. Other than happy degrowth. Here there are jobs, wages, salaries and savings that are in danger of jumping and, when this happens, the degrowth is just unfortunate. As always.
