Inflation has been surging worldwide, especially hitting hard Italy. Already facing economic stagnation and record unemployment, the supply chain halt and economic crisis that the Russia-Ukraine crisis has particularly impacted Italy. In fact, inflation in Italy has risen so dramatically that the main industry lobby is warning of an “economic earthquake.”
Rising Inflation and the Economic Crisis
Like most of the EU, energy costs have been surging in Italy. Prices have been rising at an annual rate of 38.3%. This is largely due to the Russia-Ukraine crisis, as Ukraine had previously supplied most of Europe’s natural gas supply. Inflation in Italy is also at an all-time high in Italy; in fact, Italy has the third-highest inflation rate in the EU. In August 2022, the inflation rate jumped to 9%, likely due to the increase in energy and electricity prices.
Increasing inflation will have ramifications for Italy. Unlike the rest of the EU, Italian wages have been stagnant for the past decade. In fact, data that the OECD collected found that Italy was the only country in the EU where wages actually declined.
Moreover, unemployment is also at an all-time high in Italy. Currently, the unemployment rate is 7.8%, but things are far worse for Italy’s youth, who have an unemployment rate of almost 21.2%. It is the highest youth unemployment rate in the EU. and one can attribute it to poor education and a largely stagnant economy. In fact, the past decade has had the worst economic gain in Italy since 1861.
Inflation & Poverty
The poor in Italy have felt the brunt of the economic impact caused by rising inflation. The decline of the Italian economy noticeably correlates with a rising poverty rate. Poverty has increased sharply in recent years, largely due to the pandemic. The recent increase in the cost of living has also pushed many people into poverty, with almost a 10th of the Italian population living below the poverty line.
Although things may look bleak for Italy’s economy, its government has been working to prevent a catastrophe. Recently, the Italian government approved an aid package worth $17.4 billion. This package aims to curbe energy prices to protect families from rising prices. The nation has budgeted around 35 billion euros to reduce the impact of rising energy and electricity prices.
In addition, the government has also extended bonuses to low and middle-income citizens, including migrants, because they are more susceptible to falling into poverty during this economic crisis.
Like many other countries in Europe and around the world, Italy has faced considerable detriment as a country from recent crises like the global pandemic and the Russia-Ukraine crisis. Despite this, things like the unemployment rate and poverty have still been decreasing according to the most recent estimates. Furthermore, considerable government action has seen to it that Italian citizens are protected from rising prices, shielding them from further economic crises.
– Padma Balaji