Bill Emmott - International Author & Adviser


Without truth there will be no reform
La Stampa - April 2011

It was pleasing to see Antonio Vigni’s elegant reply (“Tre verita’ sull’Italia”) to my provocative article about “bugie”. His truths do, however, need some clarification.

The first pseudo-pseudo bugie/verita’ was about whether Italy’s industrial system showed its strength during the crisis. The missing background to his figure on growth in industrial production in 2010 is that, following the Lehman shock, the fall in such output in Italy between the second quarter of 2008 and the second quarter of 2009 (the trough of the crisis) was, at more than 20% (Eurostat 2010 Yearbook, figure 13), the fourth most severe in the whole European Union, worse than in Germany and far worse than France (about 15%). So the drop showed weakness, and in order for the recovery to show strength it would have had to have been a lot faster than France’s. It hasn’t been.


A similar point applies to the second pseudo-pseudo bugie/verita’, exports: Italy had the second largest fall in exports in the European Union in that same post-Lehman period, so its rebound needed to be stronger to make up lost ground. In both cases, a further point should be added: manufacturing’s rebound has been disappointing, but the service sector has done even worse, which is more important given that (including both public and private services) it makes up 70% of GDP against manufacturing’s 25%.


The third pseudo-pseudo bugie/verita’ concerns whether families’ savings and wealth are a positive factor for the economy. As he says, in 2010 household consumption contributed modestly to the rise in domestic demand, thanks to families choosing to save less out of their declining real disposable income. But this is not a sustainable “positive factor”: for consumption to support economic growth, household incomes need to rise, for otherwise Italy’s wonderful high family savings rate will disappear, quite quickly.


The underlying point is well illustrated by Vigni’s boast that Italy’s public debt-to-GDP ratio was 119% in 2010 compared with 121.5% in 1995. This means that governments during that 15-year period failed either to cut public spending by enough or to generate sufficient economic growth to reduce the ratio. Which in turn explains why, during a global crisis which hit countries like Britain, Ireland and America, where banks were reckless and the private sector borrowed too much, Italy, where such sins did not occur, has still experienced one of the weakest economic recoveries in the Western world. To change that, reforms are needed. And to achieve reforms, truths need to be recognised.


Bill Emmott



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