Transcript Euro Challenge 2016 Presentation Transferx

Euro Challenge 2016
Team A23
Ava Fisher
Shuzo Katayama
Adam Lee
Sergey Petruskevich
Jose Rosario
Tiffany Zhong
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Euro Challenge 2016
Italy
Team A23
Adam Lee
Tiffany Zhong
Ava Fisher
Jose Rosario
Shuzo Katayama
(Sergey Petrushkevich)
The Euro Area
A Summary of the current situation of the Euro Area.
The Euro Area currently consists of 19
countries. It is currently in a period of
recovery from the economic crash of
2008. Since then, a large majority of
nations have continued to regain
sustainability. However, a few are still
lagging behind.
Euro Area Data
Gross Domestic Product
€12.2 Trillion
GDP
The Eurozone recorded a 0.3% growth in the fourth quarter of 2015 which was
below standards, compared to a 0.4% expansion in the previous period
Daily household consumption was the main source of growth and negative
impacts came from imports
The annual GDP growth in 2015 was recorded at 1.6%, which is consistent with a
slow recovery period
Eurozone GDP Growth
0.3%
Inflation and Balance of Payments
➢ Inflation
○ The Eurozone currently has an inflation rate of 0.7%
➢ Balance of Payments
○ Exports
■ The main exports of the Euro Area mainly include machinery, vehicles,
and other manufactured items. Overall, this makes up a total of 65% of
the Euro Area exports.
■ Euro Area exports have increased by 3% over the past year, rising to a
total of € 167 billion
○ Imports
■ Imports in the Euro Area have also increased by 3% to €143 billion from
the previous year’s €138 billion
➢ Total Balance Of Payments: +€24 billion
Euro Area Unemployment
Euro Area unemployment
❏ Euro Area unemployment rates in 2015 were about 10.3% of the area’s population
❏ Youth Unemployment rates in the Euro Area are around 22% (aged 15-24)
❏ The main reason for the high youth unemployment rates is because of the 2008
subprime mortgage crisis and the tightening of the labor market. Young workers are
more vulnerable to market fluctuations because they have less job protection, often
being hired on a temporary basis.
❏ During a recession, the natural thing for a business to do would be to stop hiring
new staff and lay off others, which leads to a limit in new job positions and
opportunities.
Unemployment Rate of the Euro Zone
10.3 %
Social Problems Affecting the Eurozone Economy
The European Refugee Crisis
●
One of the main factors that would affect the economy of the Eurozone is the
recent European Refugee Crisis. Experts have estimated that around 3 million
refugees will enter the Eurozone by the end of the year 2017
●
Experts expect the GDP of the Eurozone to rise because of this small population
increase, but only minimally by about 0.2-0.3%
●
However, different countries in the Eurozone would be affected differently, for
example, Germany’s economy would have a much larger impact as a result of the
refugee crisis
●
The introduction of more people into the Eurozone may however limit new job
opportunities even more
Italy
Illustrating Italy’s Slow Growth
Italian Economy Overview
Italy has a diversified economy, divided into a developed north and
a less-developed agricultural south. Italy has been slowly recovering
from the Great Recession’s impact, but there still remains one obstacle:
slow growth. Due to red tape, high taxes, and limited education, the
economy has been experiencing stunted economic growth. In 2014, the
GDP grew at -0.4 % and in 2015, the GDP grew at a 0.8%
Gross Domestic Product
€1.933 Trillion
GDP
The Italian Government Debt to GDP ratio is 132.5%.
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GDP Annual Growth Rate
Italy’s Unemployment Rates
Italy’s Exports
Mainly Consists of:
- Machines (Engines, Pumps, etc.) (20.4%)
(12.6%)
- Electronic Equipment (5.7%)
- Vehicles (7.3%)
Main Export Partners
Germany
France (11.1%)
United States (6.8%)
Italy’s Imports
Mainly Consists of:
- Oil Products (16.4%)
- Machines (Engines, Pumps, etc.) (9.1%)
- Vehicles (7.6%)
Main Import Partners
Germany (14.7%)
France (8.4%)
China (8.4%)
Italy’s Tax Evasion
€120 Billion, or 7% of Italy’s GDP
The benchmark we use refers to the Top Marginal Tax Rate for individuals.
Ease of Starting a Business
in Italy
#50
According to the World Bank Group, Italy ranks at #50 out of 189
economies regarding ease of starting a business
Italian Education
● Every year, Italy only spends 524 billion Euros, or 4.3% of their GDP on
education
● Only 18% of Italians have some tertiary education. By comparison, the
average for OECD nations is 40.53
● Nearly 50% of Italian college students major in humanities, social science,
and law, while only 7.7% major in math, science, or computing
● In 2010, 9.14% of Italians who had earned tertiary educations emigrated from
the country in search of better jobs abroad
● Youth unemployment is especially high in Italy, with 24.6% of Italians age 1524 neither employed nor in education or training (NEET)
Policy
Recommendations
Solutions to Italy’s Slow Growth
Effects of Having a Single Currency
● By virtue of adopting the Euro, Italy does not control its monetary policies
● Monetary policies are managed independently by the ECB
● Italy would not have monetary policies to work with for enacting economic
goals
● This is irrelevant however with respect to trade inside the Euro Area
● This leaves fiscal policies as Italy’s method of enacting economic change
● These are policies such as changing government spending and taxation
Enact Deregulation of
Businesses
● Reducing government laws and excessive red
tape will allow companies to flourish and
improve Italy’s economy
● Permits in Italy have less procedures than the
OECD average, but the time to complete each
step is significantly longer
● To create a new business in Italy, it takes an
average of three months just to satisfy licensing
requirements, and it takes around 135 days just
to obtain a building permit
● We thus recommend that Italy reduce its
licensing and permit requirements to ease the
process of starting a business and conducting
business
Encourage Foreign
● Foreign investors only own 13% of Italian stock, the smallest amount of foreignowned stock in Europe
Investment
● Foreign Direct Investment represented only 1.4% of Italy’s economic output. This
is due to Italy’s “bad reputation” in the investment community, caused by
extensive bureaucratic hurdles
● Officials at local, provincial, regional, and national levels all have a say in any one
business project, leading to a longer amount of time needed for a business permit
● We recommend that Italy streamline the process for regulations and business
authorizations by creating a single licensing procedure
Enforcement of Taxation
● Currently, a significant problem facing Italy is tax evasion
● Evaded taxes cost the Italian treasury around €120 billion
annually
● Many Italians justify their tax evasion as a reaction to Italy’s high
tax rates
● Thus we recommend that the current tax rate be lowered, but
that the tax codes be better enforced
Subsidize Italy’s
●
The Basilicata region of Italy is known for its
production of olive oil, but also has another
kind of oil - crude oil.
Domestic Oil
●
Italy holds the largest oil reserves in the
Euro Area, but these reserves are relatively
untapped
●
Most of Italy’s oil supply is imported from
middle eastern countries, but if the
government helps foster Italy’s domestic oil
industry, this would lead to a much more
faster and positive growth.
Increase Investment in Tertiary
●
Many Italians do not pursue a tertiary education
Education
because the returns to education are very low in
Italy
●
In 2010, 9.14% of Italians who had earned tertiary
educations emigrated from the country in search of
better jobs abroad
●
To improve their human capital, Italy should
increase spending in their education system,
invest
in
subsidize
technical
industries
university programs,
that
require
a
and
tertiary
education, particularly in STEM fields to create job
opportunities for graduates
Intensifying Enforcement Efforts of
Organized Crime
●
A significant issue in Italy is pervasive organized crime
●
Businesses in regions such as Campania, Sicily, and Calabria are often forced to pay
crime lords, or risk being driven out of business
●
This crime serves to deter tourism, which is a vital economic sector in southern Italy.
For example, the U.S. state department has a travel warning for Italy on crime
●
Thus Italy should enforce policies that suppress organized crime, to help the
economy of South Italy
Summation of Recommendations
❏ Enact Deregulation of Businesses
❏ Encourage Foreign Investment
❏ Enforcement of Taxation
❏ Subsidization of Italy’s Domestic Oil
❏ Increase Investment in Tertiary Education
❏ Intensifying Enforcement Efforts of Organized
Crime
The Euro Challenge
2016
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