Political Stagnation, Slow Economy Hold Back Italy

With the debt crisis raging in Europe, some analysts say Italy is a potential target for bond traders nervous about their investments. Italy, despite a massive national debt, has not suffered the same level of property speculation as Ireland or Spain, and its banks are in good shape.

The biggest problems facing Italy involve political stagnation and slow economic growth. The sovereign debt crisis is not a topic of daily conversation. What hurts Italians are rising costs that many blame on adoption of the single currency, the euro, a decade ago.

One taxi driver in Rome fondly recalled the days when the dollar was king.

"Americans were big spenders," Giuseppe Arena said. "Now, Italy's too expensive because of the euro. So, what do we see? Spanish tourists who skip restaurants and shop at supermarkets. What a sad sight: Tourists with plastic bags filled with food."

But this amateur economist is well aware that Italy cannot leave the Eurozone because all of its imports and debts are in euros.

The country's economy is a paradox.

Italians are big savers -- the level of household wealth is among the highest in Europe -- and homeowners are a majority, yet there was no real estate bubble here. Italian banks are solid, and don't need government support. And while it's true that public debt is one of Europe's highest, at least half of it is in Italian hands.

Economist Luigi Spaventa, a former budget minister, said, "What is really missing in Italy is growth."

"For 15 years, we have been growing less than the rest of Europe," he said. "Our relative position has deteriorated uninterruptedly; our recession has been steeper than other European countries."

Productivity has been flat for years, Italy has lost much of its traditional export market, and GNP has declined steadily. Other factors also hinder growth: inadequate infrastructure, massive red tape, Europe's largest underground economy, pervasive tax evasion and ever more powerful organized crime.

This is why Italy has hardly any foreign investments, and future prospects are grim.

One obstacle is society's indifference toward its young, according to economist Pier Paolo Benigno.

"It is not a country where young people can think to have a dynamic future like in other countries, opportunities for work satisfaction and life satisfaction," he said.

Two-and-a-half million young people -- 16 percent of those between the ages of 15 and 34 -- neither study nor work, nor are they looking for a job. They've been dubbed "the missing." And two-thirds of young people still have no choice but to live with their parents.

For the past month, Italian cities have been rocked by student protests over drastic budget cuts in education. Major monuments were briefly occupied: the Coloseum, Pisa's leaning tower, St. Mark's basilica and the Brunelleschi dome in Florence.

Nationwide, young people demanding a better future have taken to occupying hard-to-reach university rooftops. Marco Beneduce was among a group of Rome University students camping out on a Roman roof. The weather has been cold and rainy, and they take turns sleeping in two small tents.

"I don't feel we have dignity here. I am going to leave Italy in order to work, to have a better life," said Beneduce, who is in his last year of biology. "But I am staying here on this roof because I want to fight until the end to make things better. I don't want to leave beaten by this government."

Many of Beneduce's friends have already emigrated abroad -- they're part of what has been called "the irreversible great escape": In the past four years alone, about 1 million Italians, mostly young and well-educated, have pursued careers outside the country.

A major annual survey of the state of the country, released by the think tank Censis, concluded that Italy lacks the necessary energy and strength for an economic revival.

Its diagnosis is devastating: Italians have lost hope, desires, faith, ideals and a sense of legality. And a lack of confidence in the future has triggered violence and a sense of interior emptiness.