June 2, 2012

The Small Earthquake that can bring Italy down


Two relatively small earthquakes have hit Italy in May, the first one hit on the 20th of May with a magnitude of 5.9 and caused 7 dead and thousands of citizens abandoning their homes, then on the 29th of May another earthquake struck in the same area with a magnitude of 5.8 adding another 17 dead to the toll and a further 8000 fleeing their home, this time most of the victims were workers caught by the earthquake while at work in factories and warehouses that were destroyed or badly damaged by the cumulative effect of the second strike.

It is estimated that more than 3000 enterprises and factories have been damaged by those two earthquakes, after the first earthquake on the 20th of May all factories were checked for damages and were granted green light to resume production, unfortunately workers died under the rubble of crumbling warehouses when the second earthquake hit at 9 am on the 29th.

This time of course production in the factories has been stopped undefinetely until all structures are thoroughly checked for damages which could take months.

If we check a seismic map of Italy this area was considered as a safe one not requiring special precautions when building since no earthquake had been registered in the last 400 years.

Historically there was an extremely long series of earthquakes that struck the region in the 16th century and that went on for many years with hundreds of medium-low intensity earthquakes but not further activity since then.

It is true that most probably even if the area was highlighted as prone to earthquakes little would have changed in building practices, even critical areas prone to major earthquakes in Italy are still building with no seismic fail safe; corruption, carelessness and lack of rules are all ingredients to buildings being raised cheap and fast; ready to fall and boost the reconstruction business when disaster strike.

After all Italians still remember the laughs of joy of corrupt builders when informed of the earthquake of Aquila in 2009, transcripts of their phone calls were intercepted by Police in relation to bribery charges to former Berlusconi government officials.

Reconstruction is a major business for Italian builders; it boosts revenue and margins and incentivates them to build as bad as possible in order to increase the base of possible candidates, furthermore since even in case of proved negligence not even a builder has ever gone to prison, there is not even fear of retribution. This morally repulsive and economically destructive (for the society not for the builders) attitude has been dominant for many decades and it can explain why the most recent buildings are the first to collapse during an earthquake even before centuries-old historical buildings.

News of the first strike briefly appaered on major international news while the second one was mostly unreported although it has the potential of accelerating the Italian economic crisis to new heights and consequently affect the entire eurozone economy.

Let us be clear if terrorists would decide to cripple the economy of Italy they would have chosen the same area; destroy or paralyze the industrial production of The Emilia Region is equivalent to destroying 1-2 % of the Italian GDP with a consequent spiralling of the crisis.

This area alone is the backbone of Italy's industrial system, firms producing almost everything from biomedical to mechanics to food processing, current damages are 2 billion euros but aside from this a prolonged production shutdown will cause immense stress to the Italian tax revenue with a consistent shortfall and an almost sure missing of the budget parameters requested by the European fiscal compact.

If earthquakes will go on for months or even years as geologists are predicting, those factories that were already deeply affected by the global economic crisis will be out of business causing a major blow to an already crumbling Italian economy.

Pity that a similar earthquake in places such as Japan or California would have been just a small inconvenience with little or no damages.

 

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