Sunday, October 6, 2019

Italy Too Big to Fail and Too Big to Bail Essay

Italy Too Big to Fail and Too Big to Bail - Essay Example The huge economic deficit resulted in the restructuring of their debts. .The deficit could have reduced by austerity measures in former years, without considerably affecting the GDP. Lack of such foresight in fiscal matters has brought about the present crisis in countries like Greece, Ireland and Portugal. -Italy is a developed industrial country that arose rose from a sound agricultural background prevalent in the earlier years. Over the years,it had emerged into a developed industrial economy that was enviable even to superpowers like Germany and Greece. The debt crisis prevalent in in countries like Greece, Italy and Portugal the proved to be contagious to Italy also. During the second week of September 2011, Italy the third largest economy in the Euro zone plunged in to a debt crisis of slow growth in GDP and high debt. Italy has more than $1 trillion government debt which is in a high proportion compared to the total national output of $1.2 trillion. In this article, the author explores the present trend of higher rate of yielding of bonds that put the economy in such a serious condition necessitating to raise new bonds or to approach other financial institutions for a bail . The investors found it too risky to maintain their deposit in such a state of fiscal affairs. There was clear evidence of illiquidity in the financial market causing threat to investors. Italy’s economy is in a risky position now. In a regular circumstance, during the period of financial crisis in Eurozone countries, it is European Central Bank that takes the emergency measures to help the countries to overcome the crisis. crisis. However, with Italy, it is a very though task for both European central bank and for International monetary fund to bail out Italy. Very vigilant and highly expertise fiscal management is the need of the time. Prime concern is to be given to maintain faith in the investorsA budget management plan that does not affect the growth rate of the economy and restructure the debt is necessary. Italy is a huge economy and hence, any calamity can worsen the condition of its surrounding economies in the European Union. In Europe, economies of most of the other nations are also not in an enviable condition. Such a situation will also affect world economy. In this context, it will be helpful to examine the successful measures taken by governments such as Canada, Sweden, and Brazil etc where such negative signs of financial recession appeared in the earlier years. Italy can definitely overcome this situation, but once the control is destroyed a coming back will not be possible because the entire Eurozone as a whole would have been put into such a serious situation that is too difficult to manage. The author of the article tries to view the situation from the US perspective and the critical question that he raises is whether the US financial authorities have seriously taken into account the European experience in the debt crisis. However, recent developments in US economy have revealed that the US Treasury Department and White House has been paying rapt attention over economies all over the globe. The United States stands ready to help Europe with its debt crisis. Recently, in a meeting at white house, President Obama expressed his readiness to help the European Union in the present financial crisis. However, he has not put f orward any definite measures in

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