Financial Crises

Financial crises that engulfed the Italian economy were caused by different factors including the country’s unfavorable foreign trade policies. Since seven years ago, different governments in the country have concentrated on how to mitigate the negative effects of their financial crises. This has been the focal point of the country’s economic recovery policies.
For the past seven years, at least two different austerity packages were introduced in the country. These policies were started since 2007. However, the current government is trying to depart from that policy. The major aim of the austerity policy introduced in the past was to achieve two major things and they include a drastic reduction in the government budget deficit, as well as cutting down on the soaring public sector debt.
Both the country and European Commission clearly understand that structural reforms hold the key to the country’s recovery and that is why important changes were made within those years. The government enunciated a policy that was aimed at reforming the public education and the public administration in the country. The aim of this policy was to promote the competitiveness of human capital in the country. This could not achieve the expected result because the investment environment was very poor, and this is attributed to the strong labor laws as well as inefficient public service, high cost of labor in the country, as well as the country’s judiciary system.
It was in recognition of the need to do something urgent that the Prime Minister Matteo Renzi who assumed that position in 2014 decided that he would introduce one reform policy for every month within his first one hundred days in office as the prime minister. He initiated policies by cutting down on the income tax and this cost the government more than ten billion euros. His major reason for doing that was to boost growth.
The prime minister did not stop there; he introduced new policies about labor reform. The reform was to be very broad. The target of this new policy was to effect a change in the country’s unemployment welfare policy.
The major political reform carried out by the prime minister was to put an end to the two-chamber legislature in the country by making the senate chamber non-elective. The same reform policy was to be affected in the electoral law as well as the country’s public administration and the judiciary system.
Italy carried out a comprehensive fiscal policy review within the past few years. The country needed to do this because of the slump within the crisis years. The economy has to go through fiscal adjustment to enhance the people’s confidence. The country has to exit the EU Excessive Deficit Procedure in the year 2012, as its deficit came down to three percent of its GDP. The country has to maintain its deficit below the three percent threshold. This was the EU convergence criteria. In the year 2012, Italy has reached a surplus of 2.5 percent of its GDP. This was good enough that it was considered one of the highest within that Euro area. The government knew that the high positive balance was what was needed in order to improve public confidence in the economy.

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The New Policy

The new policy enunciated by the government also extended for one more year a reduction in the high social security levies. This factor was singled out as the major cause of labor force in the country, and the highest when compared to the other countries in Europe. This would stimulate employment, because it could encourage employers of labor to look for an open ended contracts. This would facilitate employment.
The country is already benefitting from this system, because the policy has already created more than 319,000 jobs for the past 8 months since the program started. For the first time in recent years, the unemployment rate in the country went down by at least 12 percent in August of 2015. This is the lowest for the past two years and half. This shows that the program has already started working.
The prime minister has tried to cut down on heavy government spending. However, this could not be achieved because the government was only delivering about five billion euros in this regard as opposed to the 10 billion euros, which the government was targeting. However, the government intends to save more money through its reduction in the health care funding, as well as in their overall budgeting and the new purchase rule, which, was introduced for the public sector in the country.
As said the European union is not happy with the new economic regime of the government. The European Union rejects the fact that the country is not doing enough to tighten the belt. There is a worry that the country is not doing enough on its watched plan on debt and deficit reduction. Moreover, the commission is not satisfied with the fiscal approach adopted by Italy. It said that the tax burden supposed to have been moved to capital and property and not to labor as it is obtained currently.
Already Italy is the second most indebted country in the eurozone after Greece. Its debt stood at 132. 8 percent of GDP this year. There is expectation that it would be less next year. The commission is currently studying the budget proposal and could send it back to the government for review if they were not satisfied with it. Italy argues that the policy they have initiated is in order because anything like aggressive deficit cutting would be counterproductive because it would likely depress private consumption and at the same time choke the expected economic recovery. The prime minister maintained that the EU should support the country by offering fiscal leeway as a compensation for the reform agenda, which they have started. The reform is not affecting the rule of labor engagement; it also tends to hasten to the slow justice system in the country.

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Government Policy

The Italian government policy was also felt in the transatlantic relationship. The country reaffirmed their support for this in the year 2014. For years, Italy was among the countries regarded as strong supporters of the Transatlantic Trade and Investment Partnership. The country has promoted them domestically and internationally. They saw it as opening unique opportunities for citizens and countries of the continent.
This notwithstanding, the country has maintained a strong commitment to the European Union’s official policy and intelligence practice. The Snowden case for instance does not have a strong impact on the various governmental levels, but it affected public opinion on what shall be exact relationship between privacy and security. In recognition of this, the parliament drafted a bill known as the Internet Bill of Rights. The essence of this is to initiate a debate about fundamental freedom and online civil liberties. So far it is existing as a mere draft, but it has already initiated a debate about that, and it shows the country’s support for the European policy on data protection and privacy.
In 2016, the Italian government presented a policy aimed at loosening the burden on the Italians and at the same time encouraging private consumption. This was captured in the 2016 budget. The government wants to ease the heavy tax burden on the Italian citizens. The measure is shown in a 27 billion Euro budgets on tax relief. People occupying their private residences are expected to benefit enormously from this tax cut. Such costs are now to be funded through additional borrowing.
This is a new policy thrust of the new Prime Minister Matteo Renzi. This is a measure adopted by the movement in order to move away from austerity measure. This is to be accompanied by different economic reforms and the aim of this is to spur Eurozone to retain the status of the third largest economy in the world.
As laudable as this may sound for the Italian people, other countries in the eurozone may react negatively to this. Already a lot of countries are becoming worried because Italy is one of the most indebted countries in the eurozone. Other countries are worried that slowing its pace of fiscal tightening instead of fastening it to speed recovery.
The country is determined in its policy as testified by the prime minister who said that the major aim of the new policy, which would be rolled out in 2016 is to provide support to the fragile recovering economy. Through the policy, the government intends to fight stagnant investment, as well as the high unemployment rate in the country. It is expected that the policy would help the country to pull away from the longest recession, which confronted the country since the end of the Second World War. It appears that the major challenge the country could face is finding money to fund the budget.
The new spending plan envisaged by this policy includes over trillion and half euro cut on primary houses in the country as well reduction on those levies paid on farm buildings and municipal services. In the same way, companies that want to buy new machineries are expected to pay tax on that. It is expected that this measure is going to revive investment.

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However, the coalition form of government still prevailed and the number of parties participating in their elections continued to increase. The election in the country became a clear contest between center left and center right coalitions. These two parties have held office different times since the reform was completed in 1994.
Since the year 2001 to 2014, there was a political turmoil in the country leading to a change of government for three times. The current prime minister was sworn in 2014. The policies have not been consistent in some government departments as an important ministry like that of the Foreign Affairs was replaced for three times within the past one year. This has affected the leadership role, which the country was expected to take.
It appears that since the current government of Renzi came to power early last year that their major preoccupation was the internal affairs of the country. At May’s European elections, the Prime Minister party won 41 seats and this increased the government presence in the continent. This is why he can push vigorously the country’s interest among other European countries. The government policy is now shifting towards re-launching the European economy. The government wanted the other European countries to look for an alternative to austerity measure and change towards growth policies, which they argued would favor the people of the continent more. It should be remembered that Italy was at the headship of the Council of the European Union in the year 2014.
Though the country focused on internal affairs last year, there is considerable shift in interests in favor of foreign policies. In terms of their foreign policies, it appears that the major focus of the government is the southern neighborhood. In 2014, the country was actively engaged in Libya and it was not surprising that the country was ranked the leader as far as Libya is concerned. Italy’s involvement in Libya was linked to the economic, political, migration, and security issues knowing that what happens in the country could affect them in one way or the other. Italy wants to ensure that there is a permanent political union or prevent territorial division in the country. That was why they refused to close their embassy when other European countries closed their embassies in the country.
Italy has a history of friendly relationship with Libya. This could be traced back to centuries. The government of the country does not want to go back on that despite the political upheaval in that country. Over the years, the country has economic and cultural interests in Libya, and that was why their approach to the crisis is balanced and better than the approach adopted by other European countries.
Another government involvement that revealed its strong commitment to the southern neighborhood was their involvement in the crisis in Afghanistan. The country got involved in Afghanistan since 2001 and it has no hope of giving up their interests in that country. Italy wants to be actively involved in the development and future security of the country. Italy in conjunction with other countries would remain engaged in the country even after 2014.

Italy Democracy

Italy started practicing democracy after the end of World War 11. The democratic system in the country is not as strong as other countries in the Western Europe. Despite political instability over the years, the country has consistent policies running from one government to another. The abdication of King Victor Emmanuel 111 in 1946 led to the country becoming a republic. Constitutional democracy was created in the year 1948. Electoral College elects the country’s president, which means that the election is not by direct balloting, but the Electoral College represents the popular vote. The president has the constitutional responsibility to select the prime minister from the parliament and it is selected from the party with the highest number of seats or it could be selected from a ruling coalition.
The country has two chambers of legislatures that are a bicameral legislature. The upper chamber is the senate, which has 315 members and the Chamber of Deputies which represent the lower house. This has a total of 630 members legislature. Members of parliament are elected by direct election that is through popular vote.
There is no way you can discuss the Italian government without having a look at the dominant political parties that dominated politics in the country since 1946 until a few years back. The dominant parties in the country include the Christian Democrats, the Communist Party and the Socialist Party. For almost five decades, the Christian Democrats were the dominant party in the country. The party has been leading the coalition since 1946 until they were defeated in the 1990s.
The major preoccupation of all the parties in the country was to ensure that the communists were excluded from forming a government in the country. This is because they were afraid that coming into power, the communists could force swings in policies. Throughout the time there was a coalition in the country, they ensured that there was policy consistencies. That was why there was a long period of economic growth, and that was to the satisfaction of the voters who were against any radical change in policies that could affect their well being. Harsh economic realities of the 70s and the early 80s forced the people to seek a change outside of the DC-PSI axis. By the year 1992, the political system in the country fell apart and this can be attributed to a lot of reasons including the collapse of the communist Soviet Union.
Apart from the collapse of the Soviet Union, corruption undermined the political system. An investigation revealed huge corruption among big government officials and some industry collaborators. The high-level corruption scandal shook both the economic and political establishments of Italy. One good thing is that high-level corruption and the collapse of the Soviet Union put to an end the issue of ideological division in the country, and this also altered the political equation in the country.
This contributed to the forced exit of the old political establishment and politicians in the country. New political parties emerged and electoral laws were reformed in the country. This also led to the abolition of proportional representation and this was replaced by what is known as the first past the post system. This led to the split of the country into constituencies and candidates were elected to take the seats of those constituencies. These reforms took place between 1991 and 1994. The constituency election took the same pattern that was observed in the United States of America. Politics in the country now shifted from ideological foundation to real concrete issues confronting the country.