Why Italy is in Trouble.
Wolf here: occasionally I highlight comments that add a different angle or flavor or an illustration or more depth to an article published on Wolf Street. This comment by “Daniele,” an entrepreneur in Italy, is in response to my article, What NCR just Said about the American Retail Quagmire. Or rather, it’s in response to RDE’s comment.
To illustrate the difficult situation the American middle class finds itself in, RDE gave some data on worldwide rankings in median household wealth:
#27 – USA: $38,786 – hardly enough to pay for a minor operation in a US hospital.
#1- Australia: $193,653
#4 – Italy: $123,710 – a country that Americans look down upon as an economic basket case populated by wine drinkers more concerned with spending afternoons with their mistress than getting ahead.
Which then elicited this moving response from our entrepreneur in Italy:
Well, here in the country of wine drinkers, the middle class isn’t that well off either. The figure of $123,000 of wealth per household is mostly due to the fact that people in the past have been very careful with debt.
Unfortunately, we can’t say the same about our foolish government.
Families took the risk of credit only to buy the house where they lived, but apart from that they generally were very savvy, and unemployment in the past was not a huge problem like today. Most families in Italy own their house today and this, I suppose, is where the $123k figure comes from.
In the early 2000s, a new spending trend set foot in Italy: “Buy everything now and pay when you want.” In 2014, the middle class here is much more impoverished than it was 15 years ago. And if that wasn’t enough, since our government isn’t really capable of cutting down expenses and lowering taxes, we had many industries that moved to Asia, and we lost jobs.
With a lower base we have seen a gradual lift in taxes, and at the time when Italy was having trouble refinancing its debt, our government introduced taxes on properties and bank accounts. So, we, the savvy Italians, are paying heavy for our government failures: we have actually a 22% VAT, a 37% minimum revenue tax, 75% taxes on oil products… I have calculated that in my case I pay more or less 67% in taxes.
No we are not in a rosy situation here, but as an entrepreneur I know many businessmen; people here are eager to start something new, but can’t because we are crushed by our country’s debt. If finally we could have somebody with a brain in our government, this country would bloom again. Yes we drink a glass of wine at dinner, but still we are surviving in those hard times, and we are ready to start anew. By Daniele. Here is the article with the original discussion… What NCR just Said about the American Retail Quagmire