3857 Italy and the Euro - a marriage made in hell

It seems that the [url=http://www.oecd.org/dataoecd/7/5/20209190.pdf]OECD[/url] don't share this outlook.

The OECD make it clear that Il Prof will need to make bold steps & cut public spending..............they state that:

[i]"After stalling in late 2005, the economy now appears to be back on a recovery track. Average annual growth over the next two years is expected to be around potential (1¼ per cent)......[b]Without bold structural reforms by the new government[/b] .....sub-par growth is likely to persist. Reforms that reduce public spending on a permanent basis at all levels of government would increase the credibility of fiscal policy."[/i]

I'm also not clear whether problems in the Italian economy will manifest themselves in the market for holiday homes........surely this is a factor of one's own country's economy (Brits won't buy if the British economy is up the creek, Germans won't etc..) and, one could argue, this may lead to more properties being put on the market by Italians trying to prop up their own (personal) economic position.

D

hmmm.. it Italy with a credible fiscal policy...

...somebody had better tell Fitch Ratings quick, as they've just put Italian Government debt on negative watch (meaning that they anticipate down grading it)...

.....I'd also question whether the problems facing the Italian economy are soley down to the Euro, or whether the Euro is used as a whipping-boy by less than credible politicians who'd rather blame the spectre of the Euro, than 'fess up to poor management!?!?

It reminds me of those folk who like to cash their Giro's & blame all the immigrants to taking [i]their[/i] jobs .......when they'd ruddy well faint at a hard days work themselves!

[QUOTE=tuscanhills].....I'd also question whether the problems facing the Italian economy are soley down to the Euro, or whether the Euro is used as a whipping-boy by less than credible politicians who'd rather blame the spectre of the Euro, than 'fess up to poor management!?!?

It reminds me of those folk who like to cash their Giro's & blame all the immigrants to taking [i]their[/i] jobs .......when they'd ruddy well faint at a hard days work themselves![/QUOTE]

Nice to read another point of view on this matter. I do find the anti-Euro anti EU sentiment a bit tiresome at times...

Thanks Sano (nice to hear from you again!)

...but surely the question reamins, not "Is Itay's economy in good nick", but "How will the performance of the Italian economy affect house prices & the (re)sale of properties?"

Correct. It is not an anti Euro or anti EU statement. There are deep structural problems in Italy (as elsewhere), made worse (or at least not made better) but the straight jacket of the Euro. The traditional Italian remedy for balance of payments issues was to let he currency drift down. In the 80s you would get about 2000L to the pound. But the 90s that was more like 3000L. Remember that the Lira itself was divided into 100 centesimi - in the end an infinitely small amount of money. The currency had done this since the war.

And if Italy has to leave the Euro (and yes it won't happen lightly, but there are times when there is no choice - anyone remember ERM?), then local asset prices (e.g. property) will become much more relatively cheap.

Only a fool would not factor this possibility into their equations. I have property there and it doesn't bother me, because I did not buy as a financial investment, rather as a lifestyle / emotional one. :)

Being ignorant on the subject, has Italy's fiscal and economic policies in modern times ever actually had a direct influence on the domestic property market?

Italy, much like Spain and now even Turkey strikes me as a country where the foreign investment in property does not appear to be hugely affected by local political/economic policies.

a statement from a confidustria person... an equvalent worker in geramny earns e14,000 more than his italian counterpart... if they stopped increasing the wages in germany and the italian played catch up after 28 years he would arrive at the same level.... italian industry should therefore be able to compete... but whatit leaves out is that the italian workers contribution through the taxation on employers is much higher than the germans to pay for a crippling pension system and an aging population... and with very little over half the tax revenue that should arrive into the coffers it will not get much better

the eu has also said that Prodis claims over the unbalanced books are not true, that the books as certified by the eu for italy are correct, that the problem is really no worse than everyone knew but he is trying to set himself up to tax more .... he wants to put tax up on second homes, re introduce wealth taxes and bring back in hereditary taxs...increase taxs on savings.... all cut or abolished under the right wing government... he has introduced and elected communist leaders or very left of centre people to all the major institutional areas of the state... has released news stories that all major projects involving transport will be halted whilst yesterday agreeing with the bank of italys presentation that the only way forward for italy is growth and expansion based on amongst other things a better infrastucture...and investment in it

the Prodi government will not last long, hopefully. and i believe in a way that its useful to Italy as a country to back track in this sense... the main problem with the rights program of reforms is that they could get nothing realistic done because the local councils many of the regions and the unions are all anti.... a dose of Prodi-ism and the communists for a short period should allow the right back in with a mandate for change and modernsiation and Italy will then progress and take its part in the modern world of europe...

the Euro will remain ... the lire is long gone and whilst all statistical views on the Italian economy are off by a very long way because of its massive black economy Italy will survive and prosper.... however their major push at the moment is and will be against tax eveasion...the easiest targets on this will be foreigners that are less adept at playing the rules.... ie keeping household bills for some absurd lenght of time..... so whatever you do here be sure you understand what you are doing...pay those taxs and get IVA (VAT) receipts for almost everything and throw them in a cupboard somewhere....

No, it doesn't. Its a question of what it is priced in. If you have a property that is worth E100,000 and that value is translated into L100,000 for instance, and the relative value of the Lira subsequently goes down, so that L100,000 is worth E50,000, then the foreign buyer loses money (measured in their own value).

[QUOTE=Sano]... Italy, much like Spain and now even Turkey strikes me as a country where the foreign investment in property does not appear to be hugely affected by local political/economic policies.[/QUOTE]

Agree - people will always need somewhere to live - whatever happens.

[QUOTE=tuscanhills]...but surely the question remains, not "Is Itay's economy in good nick", but "How will the performance of the Italian economy affect house prices & the (re)sale of properties?"[/QUOTE]
Generally, it wont! Italians don't move around every two years like the Brits - houses are held by the same family for many years.. and a far higher percentage of Italians rent rather than buy. Rents will remain the same in relative terms, so the Landlords wont sell - Italians don't want to move so they will pay the rent or stay put in their own house anyway. The balance remains.

Regarding effects on property purchased by the holiday/retirement/we own a house in the sun brigade - relatively speaking there are not enough to have any great impact overall.. especially by sensible Brits - who have the "see it through and stand strong" attitude for the most part.. and bought for the right reasons.

Although it may be nice to know your property has increased in value, you should remember that the price you sell it for will only enable you to purchase a similar property - so in reality - where is the real gain?

Should the price fall in relation to your property - then of course - all other property prices will also fall.. and again, in reality, where is the real loss?

Unless of course.. you bought for the wrong reasons.. but that's another argument. :D :D

[QUOTE=Anastasia]Although it may be nice to know your property has increased in value, you should remember that the price you sell it for will only enable you to purchase a similar property - so in reality - where is the real gain?

Should the price fall in relation to your property - then of course - all other property prices will also fall.. and again, in reality, where is the real loss?[/QUOTE]

Correct me if I'm wrong, but doesn't this argument only hold if you (or your heirs) then buy another place [U]in Italy[/U] ?

Exactly. You are not wrong. If you were to try and repatriate your capital, then you would lose out. If you had moved permanently to Italy, and intend only to move about within it, then it wouldn't matter.

As I said in my last sentence San..

[I][B]"Unless of course.. you bought for the wrong reasons.. but that's another argument".[/B][/I]

Property should only be bought for the right reasons, should that also be as an investment, then the argument holds solid if you are truly investing not only in the property, but also in the country as a whole hearted package.

If you choose to invest soley to gain monetary profit - that is not real investment.. and could be seen by some as theft. :)

..all property is theft :)

________________________________________
chiude rapidamente la vostra mente. la polizia di pensiero vede tutti

a quick note...its a fallacy here about property prices that dont increase... there is a thing going on here that means city prices ..even small towns have gone up...in places like milan and rome the same as you would find in london or manchester...consequence ...italians through either price difference or life style choice are choosing in ever increasing numbers to live out of the city or town...they get bigger houses...a garden and all for the same money and its almost becoming fashionable here.... this has a consequence on the whole price system.... except in those places where like in england no one local or planning to live in the country wants to buy in... for reasons that are important for people that live and work in the country ..generally work and schools being number one.... ease of communicating and fashionable....

so there are cheaper areas which will suit property buyers coming in for a holiday home... but they will be lacking in other respects ... and will virtually not be worth much as an investment if that is your aim....

the other areas ... and this can be very broad areas around places will hold value... because city prices are not going down... and they are popular... we have people in abruzzo that commute to rome now... unheard of in the past... or with weekend villas...again so unfashionable no one would have dreamt of it before... so its not foreign buyers... its italians that are driving the prices...its also the fact that in Teramo the city prices are high, italians now worry about traffic and air ...and people with families are making lifestyle choices and moving out... now for me Teramo is almost like a small village so if its causing concern there... think what its like in milan and say rome...

the other major problem in the bigger cities is the air pollution .. now monitored ..with car bans even if you live there for days when the level gets to high.... its all beginning to add to the change towards rural escape....

and as regards italian ownership of houses that level has climbed and is climbing in most areas and rentals are dropping ... a major factor in this without being rascist just realist is that the immigrants are taking over most of the rental accomodation ... and italians like most popultaions are moving up and ahead with burdening themselves with property... true they still prefer to hold onto family homes but want to buy extra places...

one thing which might effect markets here are the taxs proposed on inherited wealth and higher levels on second homes... a third which someone did laugh at is confiscation if the present government thinks you have too many... and are not making use of them....
Prodi has just handed out a lot of money of his own to his children to reduce his wealth level...which might tell you something about what his taxation plans are going to be....

Sardinia now has a tax level on second homes...its called a supertax of plus 20 % if its within a certain distance from the beach... strict new laws on planning and building ... its a targeted wealth tax... and if considering buying there it will be something to take into account

so get used to the idea that most italian estate agents are not waiting for foreign buyers, the building indsutry and most of the renovation work you see going on in the country around here is not foreign owner dependant and the only places you are likely to find bargains from central to north of italy are in areas that for good reasons of their own italians do not choose or want to live in... but these areas are being squeezed....

i bet penne within striking distance of pescara has seen quite a hike in prices in the last ten years or so... and even though a popular area with foreign buyers i bet a lot of the high value properties are italian owned....????

Great to see Adriatica back, Sano back, WT talking serious, Aliena trying to talk serious and Tuscanhills his/her usual self. I do love this forum.

I remember listening to a BBC World Service programme at the time of Euro introduction - the presenters were asking the populace of member countries what they thought of the notes. Sano a fellow from your country of residence said "sure, looks like sommit yud wrap the butter in!".

Now any good student of Italian politics knows that the north of Italy ends where they stop using butter for cooking and start using olive oil! Therefore I propose the butter munchkins keep the Euro and the olios take on the lira - perhaps they could share it with Turkey! :D :D

I'm pleased to find myself agreeing pretty well full - heartedly with adriatica on this thread, and have found nothing that WT has said to take issue with.

As for the opinion that all that matters to the Italian economy is house prices, well - that cannot be dismissed out of hand (much as I would like to) because of the emergence of the "lending culture" - driven by multinationals, and entrapping native Italians into their web.

Whether a government keeps its citizens in fear of terrorists, or bankruptcy, it all comes down to the same thing in the end. A denial of human dignity. Once the population is persuaded to be nervous about everyday life the door is open to paranoiac dicators - whether they are going to be based in Brussels, or at the World Bank, or at Standard and Poors, is pretty irrelevant. Nowhere - any more - can be Il Bel Paese.

[FONT="Book Antiqua"][SIZE="3"]John what you say is very interesting but I thought that Italians always prefered the convienience of living in town? Are we seeing the same trends arise as we have in Britain?

What you say about Sardinia heartens me as I fear so much of the coastline of Italy has been ruined by developement so anythining that halts this is to my mind a good thing and I wont be crying about rich Brits paying 20% on their luxury appartments as long as the tax is 'used ' to help improve Italy's infrastructure.I was pleased when I read of the destruction of those horrible appartment blocks in Bari.Good for Puglia!!Good for Italy!

What people are saying about Prodi was said at the time of Labour's Election win after years of tory rule.Surely much is just propoganda by the right worried about higher taxes?I really do not understand enough of Italian politics to say more.

Becky[/SIZE][/FONT]

the equivalent of tony blair in italy if you discard the leag nord is berlusconi...the equivalent of artur scargil or that chap from liverpool.... i think cannot remmember his name is prodi and his lot ...there is no centre left here its all extreme...but more than that its ofeten supported by the professional class because their jobs have always relied on the system here which in the past made it impossible to breath air in another commune let alone a region without applying to the police and then the notary... all taxed and providing these people with income....

there has been no thatcher type revolution here ...not even a whimper of trying to sort their problems by modernising freeing up business / local goverment practices.... there were 3000 strikes against the berlusconi government none of which was labour problem driven all politcal strikes... this place exists on practices that most modern western countries gave up a long time ago...just read the posts on telecom here... on police control and state driven control of the citizenry... if you add in the papal factor... and you have to realise that prodi is a vatican sponsored politician.. he came to power via the support both politically and funded via the papal coffers to take power and then engage the EU to arrange the official recognition as the catholic church being the recognised european religion..... thankfully once their power reached the limits of the italian borders their control ended... but that is his background... and his purpose... which like any cold war deep sleeper is still his one aim... how communism and catholicism reconsiles itself here ... i was going to say god...but then one doesnt recognise that presence,.... at least i dont really know... i have always felt that exterme states of anything are pretty much the same and when you read catholic, communist or fascist doctrine it all turns out to be true...
we have a pope here that wept at the polish gas chambers recently... but then i have seen crocodiles do the same .. and with less avarice in their gaze as their thoughts of the income generated from a papal saint soon to be announced shows huge profits into the papal coffers

my view of italian politics is that they might have had all the bombs and killings up until very recently but it achieved very little.. Prodi and his cohorts.. a last aincient stand of communism in the whole of europe will signify in my mind the end of the italian malaise as once and for all its population realises that the war finished many years ago... the communists should have finished back then...that they had very little to do with italies liberation from fascism... and if they only owned up to their past as the germans have done they might actually move forward ... stop the penitence and get on with modern life.... italy in the next couple of years is going to go broke... the left will be thrown out and a right wing centre party will return and at long last have the power to jerk italy into the 21 st century... at that stage it will be one party under the rule of someone other than berlusconi... i would think .. but it will be the equivalent in political terms of new labour... prodi will have killed the union movement

[QUOTE=tuscanhills]Thanks Sano (nice to hear from you again!)

...but surely the question reamins, not "Is Itay's economy in good nick", but "How will the performance of the Italian economy affect house prices & the (re)sale of properties?"[/QUOTE]

Roll on the day when we Brits stop thinking of property as a get rich vehicle and instead start to regard a house as somewhere to live in, and for more than just a few years until the price has gone up and it can be sold to move up or down market depending on whatever life stage has been reached.

Substantially in their own local markets other european states have not seen the same obsession with "investing" in and trading in property, nor concern for house price increases. The exodus of Brits (and others) buying in foreign markets with a view to "investment" is a bubble that will surely burst one day.

I'm buying in Italy because I want the lifestyle in beautiful surroundings. If the property market drops by 20-30% - who cares!

Sorry everyone but I do think the British mania for making money speculatively out of property is a problem.

I guess none of us want to lose all our life savings but really I just want to be in Italy to chill and escape the rat race that has become the souht east of England. It can't come soon enough for me.

Arty, Im inclined to agree with you,and I would of thought the majority of people on this forum are buying properties in Italy, or have bought holiday homes for the same reason as you and I not trying to make a quick buck,but for all the right reasons, however, what has been said in this thread has give me a good insight to the politics of what is going on in Italy,and what may be aheads for us all that are hoping to live there in the future, and thank you to all of you that can explain it in away that makes it easy to understand, and follow, :)

[QUOTE=adriatica]the equivalent of tony blair in italy if you discard the leag nord is berlusconi... [/QUOTE]

Says it all, really, doesn't it ? That apart, see [url]http://www.berluscastop.it/__artic/econ_eng.htm[/url]

John

We need more dots!

I kinda liked the old 50 lire coins - got me from Poggioreale to Vomero on the tram and that can only be good, as it broadened my horizions.. especially as I navigated around Piazza Nazionale and along via Casanova. :D

[quote=arty]Roll on the day when we Brits stop thinking of property as a get rich vehicle and instead start to regard a house as somewhere to live in........[/quote]

Arty, you're right of course; we bought our place as one that we could relax in, share with friends & family and that we could use to 'start a new life' (that's not meant to soud like the cliche it does!)

I understood the topic to be on the impact of economy:Euro on prices though........ but the point you make is fine; why are we bothered if the Euro plummets? If we all bought for the 'right reason' then who cares what happens?

[ATTACH]715[/ATTACH]That's what I said ages ago! :D

Greatly heartened by your replies, I realise that of course most people buying or who have bought in Italy must do so for very similar reasons eg wanting things to do with quality of life.

Like everyone though I am interested in the economic dynamics, because of course in hoping to semi-retire early I want things to be stable in economic terms. As for politics, well unless there is the likelyhood of extremists coming to power they are all just a different shade of the spectrum.

I think one of the biggest threats to any economy where production of goods is a significant part of the equation is the growth of Chinese cheap manufacturing. We are already reading of the impact this has on Italian producers - not at the top end of their market but certainly for mid range products.

Can't say how much I am looking forward to having time to spend with people, English and Italian who value what great things are to be had in life if we take one step back from the rush that is usual in SE Britain.

Robert / arty :)

John thanks for the brill 'take' on Italian Politics!!Must re-read the dark heart of Italy.Time you wrote a book!

Your'e spot on about the Pope what a hyprocrite!!!

Becky

That's another fine thread you've killed Stanley! :D

Tinks, rummage amongst the broadsheets.. see what you can find!

damn...I've hit reply...I though you said bedsheets...;)

[QUOTE=arty]Roll on the day when we Brits stop thinking of property as a get rich vehicle and instead start to regard a house as somewhere to live in, and for more than just a few years until the price has gone up and it can be sold to move up or down market depending on whatever life stage has been reached.

Substantially in their own local markets other european states have not seen the same obsession with "investing" in and trading in property, nor concern for house price increases. The exodus of Brits (and others) buying in foreign markets with a view to "investment" is a bubble that will surely burst one day.

I'm buying in Italy because I want the lifestyle in beautiful surroundings. If the property market drops by 20-30% - who cares!

Sorry everyone but I do think the British mania for making money speculatively out of property is a problem.[/QUOTE]

I wonder Arty how you are going to finance your escape to happiness.

Will it be through honest toil in Italy or are you one of the (early) retirees - freeing up a bit of room for ambitous Poles and Slovaks in the the S.E. of England.

[LEFT]There seems to be a real difficulty in obtaining reliable estimates on the property market, something that is inevitably leading to speculation and many anecdotal reports. But some analysts do believe, however, that the sustained growth that Italy has been experiencing in the property market over the past 6-7 years is starting to fizzle out in the face of poor economic growth. Moreover, their prognosis for the foreseeable future is that real house prices will remain static, not that this is going to worry those of us who have purchased properties for reasons other than just to make a quick buck. [/LEFT]

However, trawling through some of the studies that have been undertaken, I note that the reported growth (which is subject to regional variations) in the market has been influenced by a number of factors. Namely:
[LIST]
[*]Changes in the rent laws
[*]A decline in private rentals
[*]Higher levels of owner occupation
[*]A higher level of mortgage borrowing, fuelled by more competitive interest rates that are currently available under the Euro
[*]Tax breaks that favour home ownership
[*]An increase in new housing supply
[*]A decrease in the supply of social housing
[*]Demographic factors that influenced a shift towards owner occupation[/LIST]I have noticed too that a lot of the price hikes have mainly been concentrated in the more dynamic areas such as Milan and Rome where there has been growing demand, especially in the luxury property market where the average cost of real estate per sqm is €12.000 and €15.000 respectively. Industry forecasts are already pointing to an increase in demand for luxury properties and second homes. Some of this demand will come from overseas buyers, but considering Italy, when compared to other EEC Member States, still has a relatively small percentage of resident foreigners, I suspect that most of this demand will be generated by the higher echelons of Italian society and the upper sections of the middle class. Paradoxically, although the economy is slow, Italians don’t like to sacrifice their high living standards, but whether the majority of the middle classes will be able to sustain their debt-burdened life-styles in future is something that will remain to be seen.

Returning to the contemporary political scene in Italy, the euro is just part of a complex model of much wider forces and I think it would be incorrect to conclude that the currency is the root cause of Italy’s economic malaise, when in reality, inherent weaknesses already preceded the introduction of the euro. Moreover, in light of the many failures of preceding governments, I am not entirely convinced that the left will be any better than Berlusconi’s premiership. In fact, I believe Prodi is going to find it very difficult to push through (except for introducing new taxes of course) the reforms that are necessary to reposition and strengthen Italy. It will be interesting to see how long Prodi’s centre-left coalition will actually remain in power for, before divisive politics once again brings the entire country into a state of discontent.

Nice to see you back john.

The arthur scargil- prodi bit?

Not a scargil fan, but 22 years on, he was nearer to the truth, than anyone
ever gave him credit for.

So i ask, if prodi is only half as near, then there has to be a chance, that he
could be good for the country, if given the same chance as berlo had?

gio

in my opinion scargill was a dinosaur...one last battle to save the rights of the workers...prototected by the sate ...from at that time the state which wanted to save money and get rid of the dinosaur practice...of guaranteed jobs and inefficient work practice... raise taxs to keep the industries which couldnt compete going... and it was sad... at that time........ i hated both thatcher and him... because his army was one of honest workers not knowing what the future would bring and she was a tyrant.....

history has proved her way forward was right.... those that complain about the UK have never tried living and working in a place like italy...its aim to compete with countries now like poland and rumania.... their benefit a country ... the uk....with at least a prospect of maintaining even increasing its position in the world and by all comparisons no matter what people might like to think under blair a place to be proud of....

a salient fact if you look at the stock exchange in milan is that since prodi got back into power alitalia has risen in price.... for a company that has to be bailed out buy funding from the state every few weeks or so...this might seem impossible...but yes ...people are now buying into it...why... because they know the most inefficient overmanned company that flies in the air of europe is for as long as prodi lasts guaranteed state support...

so the plans are to cancel all massive infrastucture investmet...those hoping for a motorway that would link calabria into the rest of italy might be sad to hear thats due to go... the high speed rail link also... and various other bottleneck places wiil not get the extra motorway links... ANAS is bust... the railway system is bust... six regions are looking at hikes in taxes because the health sytem is bust....

they are going to solve the prison sytem crisis by having an amnesty and early release of prisoners...which those at the brunt of the crimes might not be so happy about....

does it all ring a bell... does it all sound like the sick uk of the past.... well it is ... its the last of the modern european countries that holds onto state supported enterprise... well not enterprise... but state supported inefficiency and they have the gall to worry over chinese imports...

there answer like most things is to not allow... all you that benefit from cheap airline fares to enable you to have your second home here...,alitalia has the answer... ban the cheap airilines so we can keep running as we are.... and if prodi had been in power the last five years it might have happened... as it is the only thing stopping that happening... through taxing the budget airlines is the EU.... and thats their answer to china... allow us to produce shoes that nobody that lives a normal life in italy can afford... might surprise you but i dont want to spend 100 euro for a pair of trainers that will last my son a couple of months...i prefer chineses that cost 20 euro... and most italians do...

the answer to the china prob... let them do what they do best and keep our inflation low... let europe specialise in low labor work with high value and sell it to them... eventually china will be wealthy enough from the circle of economic certainty of growth to want to buy what we have... and with all those chinese that is going to be a big market.... free trade ...competition... and private iniative....

so to me prodi and his cohorts are dinosaurs... and either the ice age will hit here or.... they will implode... and i think the latter...they are already fghting over what is laughingly called republic day here...see the circolo area if you want to see the justification of that statement.... half playing dead in the street as a peace protest ... and their military ignored by the other half that attended ... a bigger insult to the italian military service cannot be imagined ... a service which with the deaths in the recent conflicts .. i think i am right in saying has virtually only played a peace keeping roll in world conflicts since ww2 and is something italy is proud of as a nation... but not the left... its a sad time here in italy... much as when the miners in england were led to war when there was nothing to win... just the ego of their leader

Yes.. but.. I still want Park Lane and Mayfair on the Monopoly board! ;)

Here have ONE AND ONLY truth

the left is conservative
the right is progressive

for many and many years the left to increase they power = money, money, money : to lose the power .... dispiace .

No Nazionalism , non economics , no Italia, no Europe

ONLY private interest !!

Ugo