osama bin laden news: ITALY AND OTHER COUNTRIES WITH TROUBLED ECONOMIES

Is Italy's economy in trouble?

The economies of Portugal, Spain and Ireland are said to be at risk.

And the UK may have to go to the IMF.

Financial historian Professor Niall Ferguson, in the Spectator magazine, argues that a new Conservative government should immediately call in the International Monetary Fund.

He said: 'There is a very real danger that (things) could now spiral, Greek-style, out of all control if foreign confidence in sterling slumps and long-term interest rates rise.' (dailymail.u)

The UK budget deficit is 'to surpass Greece's as the worst in EU'

But what about Italy, the world's seventh-largest economy and more than six times bigger than Greece? (Italy: Much to play for‎)

"No one has the means to bail out such a large country," says Natacha Valla of Goldman Sachs.

According to an article in the Financial Times (Italy: Much to play for‎ 5 May 2010):

1. Italy's public debt is forecast to rise from 115 % of gross domestic product in 2009 to about 118 % by the end of 2010, second in Europe only to that of Greece.

2. Italy has an inefficient public sector.

3. Italy has widespread corruption.

4. In Italy in 2009, it took 22,000 Fiat car workers to make 650,000 vehicles.

In Brazil, it took 9,400 Fiat car workers to make 730,000 vehicles.

5. Italy's GDP fell 5.1 per cent in 2009.

6. On the other hand, Italians have a relatively low level of household debt.

Italy's banks have been more careful than UK banks.

Italy has avoided a housing bubble on the scale of Spain and Ireland.

7. What could go wrong?

Massimiliano Marcellino, of the European University Institute in Florence, has said that if the deficit deteriorates, interest rates increase and growth remains subdued, "default could quickly become a less remote option."

Franklin Allen, of The Wharton School of the University of Pennsylvania, suggests that if interest rates rise, Italy will struggle to pay the interest on its debt.

According to Allen, "This means they may well start down the Greek route. This is why, if Greece does default, I think there is a significant possibility of contagion to Italy."

8. On the other hand, Italy's GDP figures do not reflect the money made by businesses registered abroad for tax reasons.

In Europe, Italy has a manufacturing base second only to Germany's.

And, Italy's grey economy is equal to as much as 30 per cent of GDP.

9. The Berlusconi government is considering greater federalism.

This means making the regions more accountable for their budgets.

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