When Italy’s Giorgia Meloni took the job of prime minister in 2022, the country wasn’t in good shape. But since then, the economy has bounced back in ways that few outsiders would have expected. Now the country looks healthier than either Germany or France, the two largest economies in the European Union.
In 2022, Italy’s deficit was 8.1% of GDP, according to Trading Economics. Unemployment in December 2022 was 7.9%, and inflation exceeded 12%.
“Italy was living through a social and economic crisis created by the rise of illegal immigration,” Daniel Lacalle, chief economist at Madrid-based investment company Tressis, told FOX Business, “Mainstream social democrat politicians largely ignored this problem because they did not suffer it, [but] the middle class in Italy is supporting Meloni because she has stopped this problem that caused significant levels of social and economic distress.”
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Things changed at breakneck speed after Meloni took office. “Confidence returned, and the economy responded,” Edmondo Cirielli, Italy’s deputy minister of foreign affairs, told FOX Business. “It has stronger fiscal discipline, record-high employment, and a government, once again, seen as reliable by international markets.”
It’s not just the government saying they’d succeeded. The data shows it too. The deficit fell to an estimated 3.1% last year, inflation dropped to 1.1% in November, and unemployment retreated to 6% in October.
In many ways, the policies were similar to those instituted by U.S. President Ronald Reagan in 1981. Reagan succeeded in transforming conservatism from an identity-based movement into a credible governing force. Meloni has done the same. She did not abandon her roots; she made them compatible with the responsibility of governing and with international dialogue, Cirielli said.
Meloni is also a close ally of President Trump.
Not everyone is convinced that Italy’s policies will work. “I am not as optimistic as some others are,” Marc Chandler, chief market strategist at Bannockburn Global Forex, told FOX Business. A significant issue is that the country’s population has been steadily falling, as have those of many other European countries. “The dearth of births influences me about long-term growth.”
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Cirielli says the government is working to solve the demographic challenge. “Italy experienced its own baby boom after World War II. That generation rebuilt the country, powered the economic miracle of the 1950s and 1960s, and sustained the welfare system for decades,” he said, adding, “Meloni starts from the same understanding: Without families and children, there is no growth and no sustainable welfare state. That is why the government focuses on birth rates, employment and support for families.”
Chandler also worries that part of Italy’s success was fueled by European Union funding and may not be sustainable. In essence, what happens if the EU stops sending money to Italy?
Cirielli isn’t concerned. “European funds helped, but they are not the reason behind the success,” he says. “The Marshall Plan worked not simply because of the money itself, but because there were governments capable of using it effectively. That is what is happening in Italy today.” He thinks that with credible leadership, those funds can be turned into better infrastructure, innovation, and jobs. “Funds must be treated as investments,” he said.
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There is also a whisper around the world that more countries will want to leave the EU, following Britain’s so-called Brexit at the beginning of the decade. However, Cirielli says no, Italy will not be better off outside the EU.
“The United States never left NATO when something wasn’t working — it chose to lead it and reform it from within. Meloni applies the same principle to the European Union. Leaving is not a serious option; reforming it is.”
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