The two faces of Italy... How the credit crisis was felt in the north and the south of this country

Last Friday, I was triggered by one of Twitter’s powerhouses: Fabrizio Goria, financial reporter at Linkiesta.

Fabrizio shared some charts from the latest economic survey by the Banca d’Italia. 

Among these charts, one chart caught my attention: a chart that showed the current gap in employment between the north/centre of Italy and the south/islands of this country.

Although the results were not particularly surprising, they still came as a shock. Where the north and centre parts of Italy kept their employment fairly stable, the employment in the south of Italy had plummeted since the start of the Euro-crisis.

Today, I decided to check out Istat, the Italian statistics bureau, and to collect some long-term data on regional employment and unemployment in Italy. I turned this data, originating from between 1990 and 2013, into two charts.

These charts show that Italy is still very much a country with two faces, when it comes to employment and unemployment issues. 

Regional employment in Italy between
1990 and 2013 (moving average)
Chart by: Ernst's Economy for You
Data courtesy of : Istat.it

As you can see in this chart, the northern and centre parts of Italy have proven to be fairly crisis-proof since 2008, with an employment loss of roundabout 2.25% or less. This is fairly little in an economic crisis with the size and impact of the one that is haunting the European Union since 2008.

However, the south of Italy got hammered with a loss of employment of 8.5%: nearly four times as much. You can see this enormous loss of employment back in the unemployment data: 

Regional unemployment in Italy between
1990 and 2013 (moving average)
Chart by: Ernst's Economy for You
Data courtesy of : Istat.it

If there is one region in Europe, which understands the sense of the Euro-zone and the chances that it offers, it must be south Italy: between the start of the electronic Euro in 1999 and the start of the credit crisis in 2008, the unemployment dropped by a staggering 47%. This was nothing less than a miracle.

Inquiring minds might argue that the extra jobs in the south of Italy have probably been spurred by billions and billions in excessively cheap euro-loans from the northern euro-countries. In other words: these jobs have been paid for with borrowed money.

I will then rebut that this has always been the strenght of the Euro-zone and the EU in general: that it offered chances to challenged regions to turn into successful regions, thanks to help from the other European countries. 

Here, I will of course not advocate that regions should become successful and prosperous by using mindboggling amounts of borrowed money; that would be ridiculous. I do advocate, however, that the concept of the European Union and the Euro-zone is a concept that can bring prosperity to a lot of people, that would live in relative poverty without it. That is something that the populists in northern Europe fail to see with their easy rants against the European Union.

Unfortunately however, since the credit-crisis started the unemployment in south Italy has soared with no less than 75% (based on the 2008 unemployment trough), turning the credit crisis in nothing less than a disaster for south Italy. Through the unemployment chart, it becomes perfectly clear how hard south Italy has been hit by the crisis and how vulnerable it still was, in spite of the positive change in the nine years before the crisis started.

But... to my surprise, there is actually a region in Italy with a worse unemployment situation than in the south, at one of the least expected places: the north of Italy.

This is the region where the large industrial cities like Milano, Torino and Bologna reside. In this region, the unemployment skyrocketed with a mindboggling 145% (!), since the crisis started in 2008. 

As I suppose that the data of Istat is correct, this was a flabbergasting outcome for me: the employment in the North of Italy only dropped by 2.25%, but the unemployment soared by 145%.

The only reason that I can think of, is that many jobs in the manufacturing and services industry have been taken over by people from the European low wage countries: Poland and particularly Romania and Bulgaria. And perhaps also by workers from the south of Italy, who probably have lower income demands and maybe are more willing to do the dirty work than their northern counterparts. 

Nevertheless, I hope that my readers could inform me about this peculiar phenomena.

Of course, there is a lot wrong in Italy, when it comes to organized crime, corruption, the ubiquitous nepotism and clientelism and especially the top-heavy civil service system in the country, with its thousands and thousands of useless civil servants and overpaid officials.

Positive change and reforms in these areas for attention still happen way too slow for the country, in order to truly become the Italy that it could be: an industrial and service-oriented powerhouse with products and services that are second to none; aka the Germany of the South.

Nevertheless, particularly the employment chart shows that the country reacted strongly towards the credit and euro crisis, with only a minimum loss of employment almost all over the country. 

Unfortunately, these charts showed also that Italy has indeed two faces: the grim and desperate face of the country still lies in the southern areas with steeply dropping employment and soaring unemployment.