GDP Comparison: Italy vs. The United States
The global economic crisis has been affecting almost all of the nations of the developed world. However, despite the fact that the source of the downturn is largely thought to have begun in the United States credit market, all of the countries of the European Union have become mired in the recession more quickly and more deeply than the nation from which the crisis originated (Pfanner 2009).”The economy of the 16 countries sharing the euro currency declined by 1.5% in the fourth quarter, according to the European Union’s statistics office. That is even worse than the 1% decline in the United States economy during that period, compared with the previous quarter” (Pfanner 2009). On an annualized basis, “the 1.5% decline in output would amount to a drop of roughly 6% — a significantly bigger fall than the 3.8% annual rate of contraction in the United States during the fourth quarter” computed in a similar fashion (Pfanner 2009).
While the economic powerhouse that was the EU has been reeling as a whole, one of the worst-affected countries is Italy (Pfanner 2009). Italy’s fourth quarter output contracted by 1.8% (Pfanner 2009). Even more disturbingly, the forecast for Italy’s gross domestic product (GDP) in 2009 is projected to contract by 2.5% rather than the previously anticipated 0.8%. “The international crisis has hit… An economy that was already weaker than the others,” in the EU particularly hard (Italy 2009 GDP to shrink 2.5 pct, 2009, Reuters). Nations that experienced the most rapid growth from a lower point of economic development such as Italy, Spain, and Greece, have suffered the most in recent months. Tens of thousands of workers have been marching through the streets of the Italian capital “snarling traffic and demanding action to ameliorate the crisis” (Pfanner 2009).
According to the U.S. Bureau of Economic Affairs, the fact that the United States is in ‘less bad shape’ than the European Community nations such as Italy should not be a source of consolation. The “real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 3.8% in the fourth quarter of 2008…. [a]sharp slowdown in finance and insurance, a further contraction in construction, and a deceleration in durable-goods manufacturing were the leading contributors to the economic slowdown” (Overview of the U.S. Economy: Perspective from the BEA Accounts, 2009, BEA). Still, Europe is experiencing its worst economic downturn since the Second World War. Its more precipitous decline contradicts initial economic expectations that the European Union might be buffered from the crisis.
European home prices remained more durable than in the United States and European consumers have cut back less on their spending. The problem is that the European export industry has been suffering. While the more developed nations of Europe have taken more aggressive measures to inject capital into their economies and pursued more than the United States, poorer economies cannot afford to do so and still adhere to the policies of the the euro.
Germany, France and the Scandinavian countries are mounting billion-dollar stimulus plans and erecting fences to protect their banks” but the “peripheral economies” such as Italy “find themselves caught in an awful policy bind: credit is available, but only at punitive rates; and further borrowing not only breaks with European Commission dictates but raises broader questions about their solvency. Bond and currency speculators have demonstrated that they intend to punish countries with , just as they have punished banks,” and few EU countries have more dubious economic prospects at present than Italy (Thomas 2009).
Italy 2009 GDP to shrink 2.5 pct (2009, February 3). Reuters. FX Street.
Retrieved February 19, 2009 http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=08b67ab1-2c05-4ff4-bfc7-e0e6915b76b2
Pfanner, Eric. (2009, February 3). Europe slump deeper than expected. The New York Times.
Retrieved February 19, 2009 http://www.nytimes..html
Overview of the U.S. Economy: Perspective from the BEA accounts. (2009). Bureau of Economic Affairs. (BEA). Retrieved February 19, 2009 at http://www.bea..htm
Thomas, Landon. (2009 January 19) Once a boon, Euro now burdens some nations.
New York Times. Retrieved February 19, 2009 at http://www.nytimes.com/2009/01/24/business/worldbusiness/24euro.html?_r=1&fta=y