Posted by: Ben Vickers on October 27, 2011
What is wrong with Italy? In a few short months it has taken the place of Spain as the country that in many minds may spark the dreaded contagion from the Greek debt crisis. But it’s not as if Italy has taken on a massive amount of debt in recent years. On the face of it, not much has changed of late: the country’s debt to GDP has been above 100% for twenty years.
So where is the rot? Prime Minister Silvio Berlusconi, who looks deceptively young for his 75 years after benefiting from plastic surgery and a hair transplant, offers a curious parallel to the state of the nation. Economic growth has topped 2 percent in only three of the past 20 years - at a time when Italy needed to take German productivity as its benchmark. This week Berlusconi pushed through a pension reform that raises the retirement age to 67 from 65 - however, Italy will need to do a lot more than this. The country is aging too fast. In 1971 there were four people under the age of fifteen for every pensioner. This year there are almost 1.5 pensioners for every youth. No amount of cosmetics can disguise the fact that the country is unlikely to grow its way out of debt.