Comparison Italy vs Spain in Crisis
Comparison Spain vs. Italy
Similarities
* Left-centred coalition government * Member of the EU * Low birth rate * High immigration * Declining competitiveness * Latin, Mediterranean (used to take siestas), highly emotional citizens * High costs, low productivity firms (likely to be overtaken by Chinese competition) * Low spending on R&D * Poor educational system
Differences
* Italy has a high black economy, Spain does not (tax deficits for Italy) * Spain: monarchy and democratic * Italy: republic * Corruption percentage index (Italy: 6.5 and Spain 4.8) * Unemployment rate (Italy: 10.7% Spain: 25.1%)
How did Italy and Spain become struggling economies?
Spain
* Real estate crash
Nearly every Spanish representative did heavily investments in the real estate market. So there was an illegal connection between reforms undertaken and unnecessary low interest rates concerning the housing sector in their own interest. Cajas, which are semi-public banks, are the most involved banks, which lent huge amounts of money to the real estate sector. Those real estate companies went bankrupt. This was followed by a huge price increase of housing done by the cajas, since they needed to get their money back.
* Increase in unemployment * Huge trade deficit (increasing oil prices, lack of resources) * High inflation rate (caused by real estate price increase and family indebtedness increase)
Italy
* High governmental debt (118% of GDP) * Very difficult to start businesses -> high bureaucracy and sluggish justice system * Very weak economy * Weak investment, elderly population, poor regulations (->less increase in productivity) * Very low annual growth rate (lower than the rate of interest it pays) -> causes a huge governmental debt * Due to a bad outlook and insecurities of Italy the interest rate increased tremendously for Italy * If
Similarities
* Left-centred coalition government * Member of the EU * Low birth rate * High immigration * Declining competitiveness * Latin, Mediterranean (used to take siestas), highly emotional citizens * High costs, low productivity firms (likely to be overtaken by Chinese competition) * Low spending on R&D * Poor educational system
Differences
* Italy has a high black economy, Spain does not (tax deficits for Italy) * Spain: monarchy and democratic * Italy: republic * Corruption percentage index (Italy: 6.5 and Spain 4.8) * Unemployment rate (Italy: 10.7% Spain: 25.1%)
How did Italy and Spain become struggling economies?
Spain
* Real estate crash
Nearly every Spanish representative did heavily investments in the real estate market. So there was an illegal connection between reforms undertaken and unnecessary low interest rates concerning the housing sector in their own interest. Cajas, which are semi-public banks, are the most involved banks, which lent huge amounts of money to the real estate sector. Those real estate companies went bankrupt. This was followed by a huge price increase of housing done by the cajas, since they needed to get their money back.
* Increase in unemployment * Huge trade deficit (increasing oil prices, lack of resources) * High inflation rate (caused by real estate price increase and family indebtedness increase)
Italy
* High governmental debt (118% of GDP) * Very difficult to start businesses -> high bureaucracy and sluggish justice system * Very weak economy * Weak investment, elderly population, poor regulations (->less increase in productivity) * Very low annual growth rate (lower than the rate of interest it pays) -> causes a huge governmental debt * Due to a bad outlook and insecurities of Italy the interest rate increased tremendously for Italy * If