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Uk Economy Overtaken By Italy


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These are the official figures. Both coutries are rather partial to tax avoiding dodges, commonly known as the black economy, whereby tax free income tops up benefits. Since Italy is somewhat more skilled than the UK in this area the real gap between the two economies will be greater still.

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http://www.telegraph.co.uk/finance/financetopics/recession/6418344/UK-economy-overtaken-by-Italy.html

Britain's economy has been overtaken by Italy for the first time in a decade and a half, after official figures showed that the UK is now in the longest recession in recorded history.

The economy unexpectedly shrank by 0.4 per cent in the third quarter of the year. It takes the length of the recession to six quarters, or 18 months – the longest continuous contraction since comparable records began more than half a century ago.

It represents a double humiliation for Gordon Brown and Alistair Darling, who have repeatedly pledged that the UK is better-placed to withstand the recession than other major countries.

The figures from the Office for National Statistics also makes it highly likely that the UK will be the last leading industrialised nation to emerge from recession with forthcoming statistics expected to show the US, Germany, Japan, France and Italy growing between July and September.

But most embarrassing of all will be the news that as a result the UK has now fallen beneath Italy for the first time since the mid-1990s to become the world’s seventh biggest economy. In the third quarter of the year, Britain’s economy generated around £347.5 billion in cash terms. Italy’s economic output in the same period, based on conservative forecasts calculated by Citigroup, was some £350 billion.

It will be acutely humiliating for the Prime Minister, who in 2001 told Parliament: “When [the Conservatives] left power, we were behind France and Italy, the sixth largest economy in the world, and we are now ahead of them, and the fourth largest economy in the world.”

The fall in Britain’s comparative size since then has been due partly to the devaluation of the pound by almost a third and partly to the severity of the recession. The UK dropped behind France last year largely thanks to the weakness of the pound.

Another NuLabour success story.

Ponzi Brown does it again.

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Let's have more optimism here! ;);)

How about this:

The UK economy has adjusted via devaluation of its currency "by almost a third", which automatically and rapidly shrunk GDP (in euro terms) by the same amount. It's been remarkably pain-free, when you think about such a massive adjustment in such a short time, and when you compare to the alternative of shrinking by shedding activity/jobs.

The Italian economy (and PIIGS in general) need to readjust too, but they're unable to devalue. IMO they are in for serious pain on their (edit: more leisurely) journey toward a shrunken GDP/consumption.

Savers might not like the devaluation, but they're not going to like deflationary debt default either.

Edited by huw
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These are the official figures. Both coutries are rather partial to tax avoiding dodges, commonly known as the black economy, whereby tax free income tops up benefits. Since Italy is somewhat more skilled than the UK in this area the real gap between the two economies will be greater still.

Estimates put the size of the black economy in the UK as 6 to 8%. Italy's black economy is estimated to be around 30%. Having lived and done business in both countries, I can confirm that it feels pretty accurate.

This is a country where tax advisors and lawyers encourage tax evasion, go figure.

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How about this:

The UK economy has adjusted via devaluation of its currency "by almost a third", which automatically and rapidly shrunk GDP (in euro terms) by the same amount. It's been remarkably pain-free, when you think about such a massive adjustment in such a short time, and when you compare to the alternative of shrinking by shedding activity/jobs.

The Italian economy (and PIIGS in general) need to readjust too, but they're unable to devalue. IMO they are in for serious pain on their (edit: more leisurely) journey toward a shrunken GDP/consumption.

Savers might not like the devaluation, but they're not going to like deflationary debt default either.

+1

The EU is locking into deflation, 'good' for the euro, but very bad for unrestructured industrial economies like Italy, also bad for countries with high national debt, like er Italy, with debt higher than ours, even before you include non-valued commitments like an unfinanced public pension system. The PIGS are going to suffer very badly in the long term, while QE and short term devaluation is going to allow the UK to bounce back a lot quicker.

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+1

The EU is locking into deflation, 'good' for the euro, but very bad for unrestructured industrial economies like Italy, also bad for countries with high national debt, like er Italy, with debt higher than ours, even before you include non-valued commitments like an unfinanced public pension system. The PIGS are going to suffer very badly in the long term, while QE and short term devaluation is going to allow the UK to bounce back a lot quicker.

Did you miss the bit where we have gdp contracting by 5.9% while running a deficit of 14% of gdp?

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But isn't half the reason for the slide just because the pound is now worth less euro (and the other way around)? I believe the UK was so high in the first place was because the pound was previously so high against other currencies.

I believe Britain is going to come out of this worse than most big countries, but what is all this talk about the Eurozone, USA, China out of recession? Spain? Ireland? United States? If unemployment at 25% in real terms, currency trashing and enormous public and private debt from which none of them will EVER recover, let's face it, translate as "out of recession", then I would almost want to be IN recession! So everywhere is going to have positive growth now? I think not. It is like a tsunami, we are at the point when all the water has suddenly disappeared, and everyone is standing around wondering: where did all that aqua go? Don't worry boys, it's coming, it's coming...

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Did you miss the bit where we have gdp contracting by 5.9% while running a deficit of 14% of gdp?

The UK is clearly not fine, the point is that neither is Italy. Flattering GDP figures don't tell the whole (or even the most important) story.

Devaluation isn't going to solve Britain's problems, we need to make serious adjustments to production and consumption and the organisation of the economy and labour-force, too. But part of the strain is being taken up by devaluation, which erodes debt and enables real asset prices to fall in a relatively pain-free way (compared to having them fall in nominal terms, with the deflationary-unwinding that would cause).

The quote by the Italian Ambassador:

in Italy this news will be seen as confirmation of that fact that although so many doomsayers were predicting disaster for the Italian economy, we have proven our resilience. We managed our difficulties with skill and are now coming out of this crisis.”

is misguided becase the euro-rope he thinks is supporting his economy, is actually fastened about its neck.

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