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While there has been much focus on the major economies in relation to the coronavirus pandemic, the economic fallout is an opportunity to look at two economies that are important in different ways. Italy, heavily indebted and with two decades of sluggish growth, has often been regarded as the biggest threat to the euro. South Africa, once regarded as one of a batch of up-and-coming economies – the so-called ‘BRICS’ with Brazil, Russia, India and China – seems stuck. In both cases, a depression could be disastrous.
In this session, Dominic Standish (Italy) and Russell Grinker (South Africa) will describe events in the countries where they live and offer their thoughts on what the future holds.
Italy’s already-serious debt problem has been exacerbated by the pandemic and lockdown, which could lead it to default, face restructuring or leave the EU. Then, at the end of May, the European Commission proposed a €750 billion coronavirus recovery fund. While Italy would receive the most money through this fund, this would be more in the form of loans rather than grants, adding to its public debt – in contrast to France, Germany and the ‘frugal four’ states of Austria, Sweden, the Netherlands and Denmark. Even if this fund is agreed by EU member states, it is likely to come in 2021, too late to help many Italian companies (over half) that foresee a lack of liquidity for expenditure until the end of 2020. This will also be too late to deal with Italy’s public debt, which rose €36 billion in April to €2,467 billion. Meanwhile, the ECB is breaking its own rules to buy Italian debt. Are there any real answers here or is the crisis merely being postponed?
The Covid-19 pandemic has exposed the disastrous state of the South African economy. Over-dependent on mineral exports, SA is particularly hard hit by lack of international demand. The government’s half-hearted interventionist measures are too little, too late. A particularly harsh and oppressive five-stage lockdown has not given the public-health system enough of a breathing space to prepare for the pandemic, but merely done more economic damage with key sectors forced to shut down. Promised special programmes have been stingy and poorly conceived and implemented. This has negatively affected business, but particularly the large informal sector and the existing and newly unemployed. Ultimately, we’re likely to see continued economic stagnation and decline, further reinforcement of the existing enclave economy, ongoing social unravelling, and more repression.
former architect; worked in the housing and economic development sectors in the UK and South Africa for more than 40 years; has helped develop policy and supported programmes to maintain and grow industry, agriculture and employment in the Eastern Cape province
lecturer; media commentator on Italian affairs; author, Venice in Environmental Peril? Myth and reality