February 26, 2011

Italy tops the Risk Index for 2011

Risk analysis firm Maplecroft just released its new fiscal risk index ranking of 163 countries. Europe trumps all other regions with 11 out of twelve courtiers rated as "extreme risk." However, quite surprisingly, only one PIIGS country--Italy which takes the top spot--is in the top 12.
The others include many big economies in Europe - Belgium (2), France (3), Sweden (4), Germany (5), Hungary (6), Denmark (7), Austria (8), United Kingdom (10), Finland (11) and Greece (12). Japan at No. 9 is the only other country not in Europe within the highest risk category (See map below).
Without significant adjustments, such as raising taxes or reducing spending, countries risk going bankrupt. One such adjustment has already been seen in the UK and Germany where recent government initiatives have increased the state pension age to encourage people to work for longer as a way to alleviate pressure on public finances.
Certainly Governor of the Bank of Italy, Mario Draghi had this on his mind when today he addressed during a speech in Verona the current situation of Italy. He clearly stated that Italy has not been growing in the last 15 years, salaries are stuck to 80's levels, the unemployment among the Italian youth has reached 30%, the only support young enemployed italians receive is from their families since no dole or benefits exists for them, the savings base which has always been the backbone of italian families' wealth is being drained by the inevitable costs of supporting the unemployed youth well over their 30th birthday. Furthermore widespread corruption and cronyism are practically rotting the society and make impossible any much-needed reform of the inefficient and corrupted economy. No wonder given the current scenario that Italy is at the top of the international investors' worries.






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