Will ITALY leave the EUROPEAN UNION? – KJ Vids

Will ITALY leave the EUROPEAN UNION? – KJ Vids

(bubbles popping) (dramatic music) – Following the decrease of 9.1% in the third quarter of 2018, Italy’s economy contracted of 9.2% in the final quarter of the same year. As such, Italy is now officially
in technical recession, just when it seemed to be recovering from the effects to the debt crisis. This has sparked an
intense political debate and has cast doubts over
its economic prospects. But what does this actually
mean for Italy and the EU? I’m your host, Kasim,
welcome to another KJ Vid. In this video we will discuss
Italy’s economic recession, and if it will ever leave the Eurozone. But just before we begin, this video has been sponsored by audible. Audible is a website
where you can download and listen to audiobooks. With 1,000s of titles to choose from, it’s certainly worth a try. Check it out by clicking on our referral
link in the description, which will give you a free
audiobook with a 30 day trial. Using our link will also help to generate a small commission for KJ Vids, which we need, to make more videos. The news that Italy has entered
into technical recession have immediately triggered
a mutual blaming quarrel between political forces. The Covening Colation formed
by The Five Star Movement and the League attributed the
fault to the former ruler, the Democratic Party,
who on it’s part accuses the economic policies of
the current executive. In reality, the situation
is way more complex. And the responsibility cannot be ascribed to a single reason. As in all economic issues, there are multiple factors in place whose interplay determines
the growth on a given period. Therefore, it is difficult
to clearly find out who or what is responsible. Economic performance is a longterm issue. Amazon CEO, Jeff Bezos, once said, “That if we have a good quarter, “it’s because of the work we did “three, four, and five years ago. “It’s not because we did a
good job in this quarter.” His sentence also applies to States, so part of the
responsibility can be imputed to the previous governments. Who in spite of having managed
to reassure the markets and bring Italy back on the
path to unlimited growth, failed to reduce the country’s huge debt. But it is equally true
that the current executive in power since June 2018, has raised the concerns of investors with the economic policies it
has implemented or proposed. First, it attempted to adopt
an expansionary fiscal policy to boost growth by increasing
public expenditures. However, this alarmed the EU commission. Even though Italy’s budgetary plan did not break the Union’s rules, it was still considered too risky. As it would’ve caused a fiscal deficit and increase the already
enormous public debt. This resulted in a standoff that was ultimately solved, when the Italian government
partially backed down and reduced the plan spending. Yet, this episode cause stress
on the financial markets and harmed trust amongst investors. Another controversial topic in the economic policy of
the incumbent government, is the introduction of a basic income for unemployed people. It will increase public spending, but its future benefits are dubious. A part from the policies
of this government, or the previous ones, there
are many other external factors that the executive cannot control and that probably have
had more important impact on Italy’s economic performance. The countries GDP contractions comes amid a global slowdown. The growth of the EU as a whole has been limited to 9.3% in the final quarter of 2018. There are some issues on trade as well. China, the world’s second largest economy and a non-negligible export
destination for Italy, is also growing at a
slower pace than before. Problems exist with also another and more important trading
partner, the United States. President Trump’s protectionist policies have surely had a negative
impact on the EU and on Italy. At the end of May 2018, the U.S. enforced 25% tariffs on steel and 10% ones on aluminium. In 2016, Italian mechanic’s
parts to the U.S. were worth almost two billion dollars. This is not an impressive figure, but more important
industries could soon be hit. And this eventually,
could have had an impact. Trump is threatening
to put tariffs on cars that always in 2016 represented 9.5% of total Italian exports to America for a total value of more
than four billion dollars. Again, this is not an
extraordinary amount. But the spillover effects
on related industries, should also be considered. The EU is trying to reach a deal on trade with the Trump Administration. Also by managing to
enforce counter-tariffs worth 23 billion dollars on U.S. products, but in case it fails, Italy will surely be negatively affected. The looming possibility of
no deal proximities in months might also have an erupt. The U.K. is a more important destination for Italian exports
than China and the U.S., and the prospect of a no deal scenario may have had an impact, even though it is still
too early to evaluate this. But the most important point, probably concerns energy supplies. Italy is dependent on petroleum imports, and the price of oil surged in 2018 to reach the climax at
the beginning of October. Thus covering much of the period in which the Italian
economy has contracted. Since then, the prices have gone down and the effects will probably
be felt in the coming months. These are only some of
the numerous factors that may have determined Italy’s recession in the second half of 2018. What is important to understand, is that the issue is very complex and easy explanations are
not effective indicators of the reasons behind the GDP Contraction. But what about the future
prospects for Italy? Will it leave the Eurozone? Since the debt crisis of 2011, and the subsequent austerity policies, Euro scepticism has become common in Italy’s political discourse. EU Institutions were criticised
and perceived as technocrats and the service of financial interests. And some even advocated
for Italy to abandon the EU or at least the Euro. The most recent recession
albeit marginally by now might reopen the debate. Especially if were to continue. After all, the two ruling parties were among the most vocal
anti-Euro political forces, even though they took more
moderate positions later on. This is a political choice
that Italy will have to make. But it will have, of course,
major economic implications. According to the optimum
currency area theory, it is economically beneficial
to have a single currency in case the region is strongly integrated by intense trade exchanges and a great mobility
of production factors. So a country evaluating whether to enter or leave
a common currency area, should assess its degree
of economic integration with other participants. As a matter of fact, the
higher the level of integration the greater are the benefit,
and the lowests are the costs of renouncing to monetary sovereignty to have a single currency. For what concerns the benefits, the main advantage of a common currency is to eliminate transaction costs due to exchange, and interest
rates, and their variations. If the economies are closely intertwined with an elevated trade volume, and a strong mobility of
workers, and productive factors, having different currencies
brings very high costs that partly eliminate the gains of trade. And adopting a single
currency removes these costs. But having a common currency
also brings its owns costs, because it makes it impossible for states to use monetary policy to counter asymmetric economic shocks. Namely recessions that
hit only that country, but not others. If it has its own currency
whose value can freely float, its automatic depreciation
will boost export and counter the economic slowdown. But if it has renounced
its monetary sovereignty by adopting a common
currency like the euro, this mechanism is impossible. However, higher degree of
economic integration minimises this inconvenience as it allows to reduce the recession’s effects. If the country’s economy
is closely intertwined with that of its fellow partners, the diminution of the
price of its products will encourage others to buy them, thus increasing its exports. Similarly, if their is
high mobility of workers, then jobless people
will be able to emigrate to other countries. Thus, re-equilibrating the
domestic labour market. In short, if the economies
are strongly integrated the benefits of having a
single currency are high and the costs are low, so it is wise to adopt
the common currency. Now is this the case for Italy? For what concerns trade, in 2016, Italy’s exports to Eurozone alone was worth 192 billion dollars. Over a total amount into 450 billion. In the same year, it’s imports
from other Eurozone countries amounted to 207 billion,
on a total of 397. This shows the importance of its exchanges with other countries using the euro. Moreover, its economy is also
integrated with a Eurozone by mutual investments,
experts, joint ventures, services, and others. If it abandoned the euro, then it will lose all the advantages of having the same currency
as its main economic partners. In addition, if it came back to the lira, it will have to face the short-term shock. The currency would rapidly depreciate. And while it is true that
this would boost exports, it will also bring back
consistent transaction costs. Moreover, inflation would erode the people’s purchasing power, and there would be deep
consequences on its debt with sovereign spread
and strong difficulties to obtain new loans. This situation would
surely stabilise with time, but all in all, this does not seem to be an economically convenient move for Italy. The fact that Italy has
entered a technical recession is surely no good news for it and the EU. Blaming each of the political level, will not solve the issue. Also because there are
many factors at play, and responsibility cannot be
fully attributed to anyone. Much will depend on future
economic developments. For now the Contraction is limited, and in spite of the
Euro’s sceptic positions of the current government,
there is nothing that indicates that Italy will leave the
Eurozone anytime soon. That’s all for today guys. Thanks for watching another KJ Vid. What are your views on Italy’s recession? Will Italy recover or implode? Should Italy leave the EU? We would love to hear your
views in the comments below, especially if you are from Italy. Please also consider
supporting us on Patreon, so we can produce more of
these geopolitical reports, and help to keep us independent form political influence. Thanks for watching again, and see you next time.

54 comments on “Will ITALY leave the EUROPEAN UNION? – KJ Vids

  1. Good choice. Italy seems to have been left in a dark hole by media, yet we ALL love Italy. Yes! Give us aesthetically beautiful Geopolitics!

  2. let me highlight one thing:
    "the UK is a bigger market to Italian products than are the US & China"

    so, yeah, Brexit might hurt the economy of some EU economies harder than it does the UK.

  3. Italy will Sooner or later will leave the EU the self centered parasite in Brussels are heading to self destruction and can't even see it coming once it happens France Spain and other's will follow.

  4. The new division on the river Elba is forming in Europe.
    EU is beneficial only to Northern Europe. The south will be dried up of capital, skilled labour (trained for southern money), brainpower.
    South will be transformed to Holliday destination and agricultural production.

  5. Italy (like Greece, Portugal, etc.) will NEVER voluntarily leave the EU. The Italians know their liras will be worthless in about 5 years time – just as the Greeks talked big but when threatened to be kicked out begged to stay in the EU because NO GREEK wanted the return of the worthless Drachmas!

  6. No no my friend! Euro destroy us! In long term we need Lira back! I dont care if im poor! I want my country sovereignty back! Dont care about Union Europea, is finished!

  7. Wait…we're in recession and you want us to LEAVE? That's nuts. Ignore the political drama, guys. We ain't leaving. The government will fall and we'll have another technical government.

  8. Italy will not leave the EU, our economy is too dependent on exports to renounce the access to such a market. Italy's manifacturing industry is strongly connected to Germany's car and mechanical industry and now that German economy is slowing down, Italy is suffering a lot because of the decrease in orders. Italy is projected to be the country with the lower growth in the Eurozone in 2019 (estimated at +0.2%), but Germany is expected to be second worst at no more than 1% and possibly (official data will be available next week) in recession this quarter, just like Italy.
    However Italy's economy has many more structural problems, first of all the lack of investments in research and innovation that is making our companies less competitive every year, so when Germany does great we barely grow, but when Germany stops growing we collapse.

    We also have a huge demographic problem: fertility rate is one of the lowest in the world and life expectancy is one of the highest (which is good, but costs a lot of public money in pensions). Add to that the massive emigration of young people to other more dynamic countries and you understand how the already massive debt could become unbearable at some point unless we severely cut pensions and social welfere.

  9. I am not so sure if Euro is so beneficial for countries economy. In the EU there are countries using Euro, and others using local currencies. If you compare GDP growth in countries using Euro, like Greece, Italy, Spain , Portugal against countries using their own currencies like Sweden, Denmark, Poland or Hungary you can see big gap in the GDP growth, and it isn't very impressive in the Euro countries.

  10. Waiting for Italy to leave EU is like waiting for the other shoe to drop, or the other boot. Better yet, keep northern Italy and cut the bottim half loose.

  11. I congratulate you on a very balanced, non-partisan and dispassionate view. I've lived and worked in Italy since 1970 and am settled here. For the first 10 years I wondered whether this "seemingly" chaotic country could survive until I began to understand the Italian concept of the "arte di arrangiarsi". After all, Italy is not only the happy go lucky land of people who enjoy life, which of course they do, but it is also, if you scratch below the surface, a very hard headed and pragmatic society that understands its own defects and accepts them but takes lessons from nobody- It is, after all ,the country of Machiavelli, the birthplace of banking and a powerhouse of technical innovation and invention. It is a country with virtually no natural resources, certainly not energy related ones, apart from agricultural so, it has to live and nurture a population of 65 million by ingenuity, invention and fantasia that can be exported in the form of products, civil engineering enterprises, technical expertise and imported with the encouragement of tourism. Both Conte and Salvini, although they have contentions with the EU have publicly stated that they have no intention of leaving the Eurozone, much less the EU. Italy is in technical recession due to the fact that it is a nation very much dependent on exports and if a big customer like China slows down economically it is impacted. Brexit should not impact Italy all that much because the UK is only 5% of its exports while Germany is 12%, France 10%, Spain 5% and the USA 10%. With the recent JEFTA agreement I forsee great opportunities for Italian exports to Japan. I hope that any objectors will make allowances for the fact that I obviously suffer from the Stendahl Syndrome that is particularly acute if you happen to be an adoptive citizen of Milan.

  12. Screw Europe. We saved it from Germany in WWI & WWII , only to see them give themselves up to Germany. Let it burn.

  13. The opposite: EU will leave us!
    Actually Italy is more a problem than a resource for its partners and in a not so long time its market will be more and more less important because there are newer and fast growing in Eastern Europe.
    The Eastern European countries are economically more in tune with Germany, the real engine of EU.
    The best opportunities for Italy in the EU could be with France and UK because this two countries are more interested than Eastern Europe in a more balanced economic trade with Germany.
    Unfortunately the present Italian government is doing all the best he can do to dismantle friendship and collaboration with France.
    On another side the UK, according to Mr Farage and Mr Johnson, is trying to became a poor country at any cost leaving the EU.
    Well, considering this scenario, Italy will be isolated very soon by the rest of the EU as the new Greece.
    The worst is that for the size of its economy compared to Greece, any kind of rescue will be impossible for Italy, so the only choice will be leave Italy to its own “brilliant” destiny…

  14. Your more recent videos show an obvious intensification of your research efforts. Good to see, and keep it up! Success follows from hard work.

  15. italy was famous for it cheap and high quality product (it was something like china today) but when the asian nation like Thailand and china joined the world trade italy lose it place because of the asian cheaper labour cost and on the other hand germany and japan in these period they have invested in technology because they were thinging of a long term profit.

    another reason, italy was famous for it inflation manipulation and that is one of the reason why italy have a lot of debt and when italy change it currency it didn't stabilized the debt and bank before changing to Euro.

    the italian know that if we were to use lira again it will kill us because we already have 132% of debt to gdp and with the inflation of the lira it will be about 200% of debt so that will kill italy and the purchasing power of the italian peaple and the italian government will be reduced (italian still import many resourcees and food from other countrys and with lira everything will be more expensive not to mention the values of lira will be even weaker when the government decide to print more money to pay the debt ).

  16. Italy will Remain in the European Union Rome is the Spiritual Capital of Europe Catholic Religion will Unite and Hold the EU. Pope Francis 1 will Lead the Unification and Strength there will be Reduction of European Countries Italy is CORE Europe will Remain. Germany will be the Political and Military Power of Europe Great Deception is being Orchestrated to Fool the World.

  17. Europe needs common political/financial institutions to transfer income, much as the U.S. transfers income from rich to poor states. Otherwise the German powerhouse will suck the rest of the EU dry. That's a lot of the problem with the southern tier countries. And loved all the scenes of Venice.

  18. This channel is fantastic. Keep it up, guys, you’ll take off soon. The more level-headed, analytical, accessible geopolitical content on YouTube the better. Sharing this channel with everyone I know

  19. The Universal Basic Income has already been rolled out. As of April 2019 5.5M italians will get "free" money! Woohoo. Why didnt I think of that? Probably because I would've reduced the state and cut taxes for small businesses

    Not all economic outcomes are considered when going back to Lira. Like Brexit, some short term loses are weathered by the ability to be "freer", not totally of course, since Central banking will still exist. Bottom line, the more sovereignty you give up, the less free you are. So for example: Debt-base currencies *may* not be all the bad, IF you are well aware of the consequences.

    Buying a house with debt is not bad *IF* you know what that means. Again, the "freer" you are from all mechanisms that compromise your liberties, the better. The Eurozone is one of those chains, in the many. We will free ourselves of the chains one by one.

  20. Hi from Firenze, Italy. we won't leave EU but we want to be respected and not be considered a big refugee camp like were were few months ago with leftist government. Most problems for Italy comes form migrants policy.

  21. As an Italian, we won't leave the European Union. If we don't want to collapse, then we would have to start to make some improvements to our economy (cutting fiscal evasion, reducing the extreme bureaucracy, fighting corruption and many other things). I am young and I'm tired of these politicians that we're having right now, they are stealing our future…

  22. As much as some wish for the EU to fall apart, it isn't going to happen. Those who keep salivating at the possibility are going to be sadly disappointed when they don't. Predicting the collapse of the EU is a past-time for many who have been predicting its demise since its founding. And yet it is still here and will continue to be so.

  23. The Euro should be replaced by smaller currencies, currencies should only shared by similar economies. A possibility is a Northern and Southern Euro, while greece gets its own currency.

  24. Though Italy is eurosceptic at its core it will not leave the eurozone as Italy is wise enough to take advantage of the Euro's shortcomings.
    One being the technical possibility through the Euro currency of dumping its low credit rating on other eurozone members.

  25. Very superficial, the speaker clearly doesn't understand why membership of the Euro has proved so disastrous for Italy (although it might indeed have difficulty extricating itself).

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  27. Everybody should leave EU. It's globalists wet dream to make it another soviet union and then proceed to one global country, aka. new world order.

    Atm. Eu is using their scare tactics with the countries which like to leave, like how much it would costs to UK if they proceed with the brexit. IMO it's just a bluff… globalists themselves are in panic while they are losing their wargames and people around the world are waking up to their crimes against humanity.

    Eventually we will see the brexit, italexit, polexit, swexit, fixit and so on.. EU is about to collapse. Sooner the better.

    And that's the way it is.

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