Mood of optimism on the boot: Italy comeback: Why a Bella Italia investment is worthwhile again | news
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by Emmeran Eder, Euro am Sonntag
Fate is back on the side of the Italians. The lucky win of the European Football Championship was felt like a godsend in deeply Catholic Italy – the Azzuri were only able to win the title through two penalties in the semifinals and in the final. The first European Championship victory since 1968 triggers a spirit of optimism in the southern European country.
After Italy was hit by the pandemic like no other country, people are hoping that things will finally look up again. So it is fitting that Mario Draghi, a prime minister who has been in office since February, exudes hope. He wants to put the state on the road to success with far-reaching reforms.
Some Italians already see him as the counterpart to Roberto Mancini, the coach of the national team. After the failure of the Squadra Azzurra in qualifying for the 2018 World Cup, when Italian football was completely down, he formed a candidate for the title from relatively mediocre players.
Such miracles are not to be expected from Draghi, but the ex-head of the ECB has at least a lot of experience as an economic expert. He wants to reform the encrusted society of the southern European state.
Populists have become calmer
Politically, he has already freed himself from contaminated sites. The populist parties Five Stars and Lega still have a parliamentary majority in Rome, but have joined the national unity coalition since February. There they have largely shed their anti-system stance.
The four ministers of the five-star party voted for an overdue judicial reform, the passing of which is a key condition for receiving the 191 billion euros from the European reconstruction fund. Of the 750 billion euros that this fund distributes, Italy receives more than any other euro member. A third of this does not have to be repaid. The money is intended to provide a boost to investment that will make the country more digital, greener and more women-friendly. “In the months ahead, we have a challenging road ahead of us to launch the planned investment projects and advance the reform agenda,” said Draghi. In addition to the judiciary, the administration and tax system are to be changed. The sedate structures have long been paralyzing the country’s economy.
More than a quarter of the EU funds are planned for the digital conversion, for example for nationwide high-speed internet. Billions are used for renewable energies and sustainability, solar and hydrogen projects are being considered. A lot of money should also flow into better training for young people and women. the Youth unemployment is 34 percent. And even before the pandemic, only every second Italian woman was employed. Now many young women in particular no longer have a job, as they often work in areas that have been hit hard by the crisis, especially in tourism with its hotels and restaurants.
Italy was the first country in Europe to be massively hit by the corona pandemic in February 2020. As a result, the economy slumped 8.9 percent last year, with GDP falling by 8.9 percent. National debt is expected to reach almost 160 percent of economic output by the end of 2021.
The economy is recovering
Draghi expects a strong economic recovery due to the announced measures and aid. Only then could Italy “get out of its high debt,” said the prime minister.
Italy’s economy is showing signs of improvement, with the National Bank anticipating growth of almost five percent in 2021. Tourism, which has picked up strongly again, also contributes to this. In addition, significantly more is consumed after the end of the lockdown. The order situation is improving accordingly. The business climate index rose for the seventh month in a row.
That gives shareholders courage. The leading index FTSE MIB 40 has climbed by 13 percent since January. Since the crash in the previous year, however, it has developed much weaker than the DAX and still has some catching up to do. This is also shown by the price / book value ratio. It is 1.27 for 2021, compared to 1.70 for the DAX.
Risk-minded investors are betting on Italy’s comeback. However, you have to be aware of the risks. In addition to the high debt, the corona crisis has not yet been defeated, the number of infected people has recently climbed again. In addition, the south of the country should receive a lot of money. That’s where the mafia sits. “We are really very concerned that the criminals are securing the many public funds, especially in important strategic sectors such as health care,” fears Enza Ronda, vice-president of the anti-mafia organization Libera.
The top 40 companies in Italy are represented in the leading index FTSE MIB 40. The largest positions are Enel (energy), Stellantis and Ferrari (car), Intesa Sanpaolo (bank) and Eni (oil). In addition to the financial sector, the sectors of consumption, utilities and energy are highly weighted. These in particular are benefiting from the easing of the pandemic and the many billions of euros from Brussels. Technology stocks only play a subordinate role. Although the defensive industries dominate, only risk-minded investors should get involved. Italy has many economic and social problems. Investors are counting on Draghi to get the country back on the road to success.
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