Questions are being raised over whether the Italian economy can survive the current downturn. It has had a negative effect on the country's production sector, with falling gross domestic product (GDP) and rising unemployment levels. The GDP is a country's monetary value of a finished product within a given time period. It is used to indicate a country's economic health and the standard of living. In Italy there has been a downturn in the number of sales of products made domestically. The production system in Italy has also been affected by the redundancy hours authorised by the Cassa Integrazione Guadagni (Wages Guarantee Fund).
This has had a marked effect on unemployment levels which have been increasing gradually over the years. There have been huge job losses both in the public and the private sectors; especially with people who were working on employment contracts. Self-employed people have also lost jobs, particularly in the industrialised regions such as Lombardy and Friuli-Venezia Giulia. Most companies in that area have filed for bankruptcy having recorded turnovers less than 2million Euros. This means that there is an increased number of Italians between the ages of 15 and 64 who are inactive. Larger companies seem to be resilient during these harsh economic times, but smaller enterprises are feeling the full impact.
This is mainly due to their limited access to credit, fewer resources to start reorganisation and the difficulties faced by large corporations where small companies are their suppliers. The state of the Italian economy is primarily due to its large debt, which is the highest in the entire Euro Zone, coupled with its stagnant growth. A bailout from Europe is not on the cards, since interest rates on the debt at 119% GDP is too costly to service. The only advantage it has is that the debt is not owed to external investors, but rather to the people of Italy. Trade Unions want the Italian government to do more than just depend on its social shock absorbers to recover from the current crisis.
New tax systems that are lenient on workers have been advocated, as well as job security for younger workers, which would also encourage investments and help to boost employment levels. The sale of bonds by the Italian government has helped raise the money needed to lower its borrowing costs by half. However, investors are not too keen yet since they are likely to drive up the borrowing costs if Italy does not straighten its finances.