Small Businesses Struggle in Italy: Eurozone Threatened

May 13, 2016Italyby EW News Desk Team

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Due to anemic growth and an unstable world economy, Italy’s small business sector woes grow worse, according to The Wall Street Journal. Small businesses are vital to Italy’s economy, and the European Union (EU) relies on Italy and other EU nations to strengthen Eurozone GDP. The Italian prime minister has yet to instill policies that would bolster the economy.

Italy’s economy is far behind in certain respects. For instance, the restaurant sector lags far behind restaurants in the U.S. or U.K., and the economy has suffered a 15-year downward trend in productivity. Italy has made a modest recovery in recent times, but has failed to maintain traction.

Italian officials must also please Brussels, as the Eurozone needs long-term expansion to secure a substantial recovery. Even though the Italians have been major contributors to the Eurozone recovery, including the French, Italy is one of the weaker-performing in Europe, and a sluggish domestic economy is the main problem.

The small business sector relies on strong domestic growth, but layoffs and waning investment stalls further output, with many business owners unable to secure the loans they need.

The Corruption Factor

Italy’s lack of progress stems from corrupt governance, and it is one of the most corrupt nations in the EU despite reform attempts. Many Italians hold a cynical view of the government, and some business owners do not believe the state is looking out for them.

According to a recent report, many Italians believe parliament is one of the most corrupt institutions in Italy, notes The Local. Italy’s growth would have grown three times its size from 1980 to 2004 if the country retained a lower corruption rate.

Entrenched corruption has resulted in a system that benefits the top elite while others, most notably small business owners, do not receive the same attention and treatment from the government. Moreover, corruption also impacts the EU, as Italy is one of the Eurozone's largest economies.

Public Anger

Recent data shows that the public is increasingly frustrated with incumbent leaders. The anti-establishment 5-Star Movement surpassed Prime Minister Matteo Renzi’s Democratic Party in terms of popularity, enjoying high favorability numbers going into next month’s local elections.

With the domestic economy in disarray, incumbents will have a tough time making their case to business leaders at a time when their concerns have largely been ignored. The general election does not take place until 2018, but experts believe Renzi will hold onto power due to an alliance between left and right parties.

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