SWOT ANALYSIS

Weakness of itally:

Decline birth rate

Political situation
Xenophobic Northerm Italy
High debt level
Fiscal Budget Deficit
Decline birth rate
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"The effects of a declining population can be adverse for an economy which has
borrowed extensively for repayment by younger generations; however, a smaller human
population has a smaller impact on the environment and on biodiversity. Economically
declining populations are thought to lead to deflation, which has a number of effects.
However, Russia, whose economy has been rapidly growing (8.1% in 2007) even as its
population is shrinking, currently has high inflation (12% as of late 2007). For an
agricultural or mining economy the average standard of living in a declining population, at
least in terms of material possessions, will tend to rise as the amount of land and
resources per person will be higher. But for many industrial economies, the opposite can

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be true as those economies often thrive on mortgaging the future by way of social welfare
and retirement transfer payments. However, standard of living does not necessarily
correlate with quality of life, which may very well increase as the population declines.
The period immediately after the Black Death, for instance, was one of great prosperity,
as people had inheritances from many different family members. However that situation
was not comparable, as it did not have a continually declining population, but rather a
sudden shock, followed by population increase. Predictions of the economic effects from
a slow and continuous population decline (e.g. due to low fertility rates) are mainly
theoretical since such a phenomenon is a relatively new and unprecedented one.
A declining population due to demographics will also be accompanied by population
ageing which can contribute problems for a society. The decade long economic malaise
of Japan and Germany is often linked to these demographic problems. The worst case
scenario is a situation where the population falls too low a level to support a current
social welfare economic system, which is more likely to occur with a rapid decline than
with a more gradual one.
The economies of both Japan and Germany both went into recovery around the time their
populations just began to decline (20032006). In other words, both the total and per
capita GDP in both countries grew more rapidly after 2005 than before. Russia's
economy also began to grow rapidly from 1999 onward, even though its population has
been shrinking since 1992-93 (the decline is now accelerating). In addition, many Eastern
European countries have been experiencing similar effects to Russia. Such renewed
growth calls into question the conventional wisdom that economic growth requires
population growth, or that economic growth is impossible during a population decline.
However, it may be argued that this renewed growth is in spite of population decline
rather than because of it, and economic growth in these countries would potentially be
greater if they were not undergoing such demographic decline. For example, Russia has
become quite wealthy selling fossil fuels such as oil, which are now high-priced, and in
addition, its economy has expanded from a very low nadir due to the economic crisis of
the late 1990s. And although Japan and Germany have recovered somewhat from having
been in a deflationary recession and stagnation, respectively, for the past decade, their
recoveries seem to have been quite tepid. In a country with a declining population, the
growth of GDP per capita is higher than the growth of GDP. For example, Japan has a
higher growth per capita than the United States, even though the US GDP growth is
higher than Japan's. Even when GDP growth is zero or negative, the GDP growth per
capita can still be positive (by definition) if the population is shrinking faster than the GDP.
A declining population (regardless of the cause) can also create a labor shortage, which
can have a number of positive as well as negative effects. While some labor-intensive
sectors of the economy may be hurt if the shortage is severe enough, others may
adequately compensate by increased outsourcing and/or automation. Initially, the labor
participation rates (which are low in many countries) can also be increased to temporarily
reduce or delay the shortage. On the positive side, such a shortage increases the
demand for labor, which can potentially result in a reduced unemployment rate as well as
higher wages.

As the birthrate in developed countries drops well below the replacement rate of 2.1
children born to every woman, to somewhere between 1.1 and 1.4 children the

declining population will have severe consequences in the near and distant future.
Demographic decline causes anxiety because it is thought to go hand-in-hand with
economic decline. With fewer, younger workers to pay the health and pension bills of an
elderly population, states face an unprecedented fiscal burden. The dependency ratio of
those aged 65 and over to those of working age looks set to double from one-to-four to
one-to-two in 2050."

http://www.nysun.com/business/eu-negotiations-underscore-inherent-weakness/57287/
http://news.bbc.co.uk/1/hi/world/europe/4768644.stm
http://www.impactlab.com/2008/06/29/the-severe-impact-of-europes-declining-birth-rate/

Xenophobic Northern Italy:

The seats of power in Italy are full of Xenophobic citizens that tolerate and perpetuate violence against
outsiders, especially Africa and Arab immigrants. These immigrants make up a large work force that
efficiently picks crops and helps Italy to compete. The lose of these workers will increase prices for crops
and low their profitability.

High debt level

"Italy's large public debt (an estimated 105% of GDP in 2008 and rising) is deterring the government
from introducing a major fiscal stimulus package to alleviate the impact of the current global financial
and economic crisis. The minister of the economy, Giulio Tremonti, has insisted that although some
other governments might be able to increase their deficit and debt levels to boost their economies

http://internationalbusiness.wikia.com/wiki/Italy%27s_Debt
"However, Parliament has approved the selling of gold by Italy so that they can cut into their large
amount of debt. They can reduce their debt by $36.9 billion or 27 billion Euros this would reduce debt
from 105.1% (est. 2009) to 103.2% of GDP. They would have to sell about 1,300 tons of gold to make
this happen (Resource Investor). According to the Italian Economist Intelligence Unit the public
debt/GDP ratio is expected to rise from 105% to nearly 110-115% by the end of 2009 if this modest
stimulus package is all that is put in place

http://www.economist.com/daily/news/displaystory.cfm?
story_id=13096792
Fiscal Budget Deficit

A budget deficit decreases the ability of a government to increase spending to stimulate the economy.
Annual budget deficits increase the national debt, which increases the cost of borrowing. To pay off a
deficit, the government will have to decreases spending are raise taxes; both hurt the economy.

http://www.wikiwealth.com/swot-weakness:fiscal-budget-deficit