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Italian material deprivation rates still the worst among large euro area economies

Latest poverty figures provide government with an argument for fiscal stumulus.

Severe material deprivation rates gauge the proportion of people whose living conditions are severely affected by a lack of resources. According to Eurostat, “it represents the proportion of people living in households that cannot afford at least four of the following nine items: mortgage or rent payments, utility bills, hire purchase instalments or other loan payments; one week’s holiday away from home; a meal with chicken, fish or vegetarian equivalent every second day; a telephone (including mobile telephone); unexpected financial expenses; a colour TV; a washing machine; a car; and heating to keep the home adequately warm”. The rate varies significantly from country to country. Italy has the highest severe material deprivation rate among the four largest economies in the euro area. Preliminary data show that the rate in Italy declined to 9.2% in 2017 from 12.1% in 2016 but it still remained higher than in the other three largest euro area countries.

The level of material deprivation would seem to strengthen the case for fiscal stimulus in Italy. The government is currently doing the maths before presenting its 2019 budget plan at the end of this month. But, predictably, negotiations in Rome are tense. Both government parties, the League and the Five Star Movement (5SM), were elected on a platform that foresees significant fiscal expansion, but their plans are coming up against EU spending rules. Deputy prime minister and leader of 5SM Luigi Di Maio’s promise of a universal basic income would be especially expensive. The 5SM soared to over 30% of the vote in March’s election in part because of this pledge.

Italian material deprivation rates still the worst among large euro area economies

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Nadia Gharbi
Nadia Gharbi is economist at Pictet Wealth Management. She graduates in Université de Genève, Les Acacias, Canton of Geneva, Switzerland Do not hesitate to contact Pictet for an investment proposal. Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.
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