Best Bitcoin Exchange for Italy
The euro crisis is back. And in fact it has never been gone, because the countries of the euro zone have simply failed to remedy the causes of the crisis over the past 10 years. Now Italy is the not very surprising candidate for the eurozone. In the past, some readers may have wondered why and how a small country like Greece (gross national product 184 billion euros vs. EU gross national product 15,400 billion euros) can plunge the entire EU into crisis. Well, the answer seems to lie somewhere in the Eurosystem. The crux is probably that Greece has proven that the EU is a liability union and that the euro treaties (Maastricht and Co.) are worth nothing, which in turn has massively increased the centrifugal forces within the Union, especially in the richer euro states.
The Italian Crisis and Bitcoin
Now Italy is in crisis – with an economy almost 10 times the size of Greece. The dramatic situation in Italy can be seen in the cost of borrowing for Italian government bonds. The cost of capital rose from Monday to Tuesday by 900%, from 0.276 to 2.74 percent for two-year government bonds. At the same time, the Bitcoin rose by around 4 per cent on Tuesday.
The connection is trivial. Italy threatens to rip the eurozone with its ailing banks into crisis. Moreover, a populist government has just come to power in Italy. This is a massive source of ignition. The keyword “italeave” (as a counterpart to Brexit) is now making the rounds.
Both Italians and the inhabitants of the rest of the euro zone are likely to think again about how they can protect their assets. But the situation is much more dramatic for the Italians: if Italy were to withdraw from the euro zone, a “Nuova Lira” would immediately depreciate significantly against the euro and other key currencies, and real estate prices would collapse significantly. The fall of the British pound against the euro since the Brexit vote can give a small foretaste of this.
However, the path to an italeave would be a very difficult one: the Brexit shows how difficult it is to leave the EU. In the case of Great Britain there is no currency problem at all, since the British were never part of the Eurozone. In this respect, the exchange rate of the euro would certainly suffer as well.
What is now the “safe haven” for Italians? It is difficult for the euro because it would be massively shaken by centrifugal forces in the euro zone. Real estate is also dangerous – after all, a fall in prices is not unlikely in the event of a euro withdrawal. One could exchange money for dollars – but one would need a foreign currency account.
If you take a look at Malta during the euro crisis, you can see that in such a crisis the state is also resorting to means such as expropriation. In this respect, all assets to which the state has access (real estate, securities portfolios, currency accounts, etc.) are risky. Crypto currencies are still too young for a secure way out, as can be seen from the enormous volatility of the coins, which do not (yet) guarantee a secure storage of value. Who is convinced however of the increasing adoption and spreading of the crypto currencies – and thus of rising courses -, for that perhaps now the perfect time for the entrance came. And that could be quite a few Italians, if already in Germany almost 50% of the under-35-year-olds are interested in cryptoinvestments (source: Postbank Digital Study 2018).
Italy is an industrialised country with a previously highly controlled economy: the state-owned IRI group (1933-2002) now had 1000 subsidiaries and up to 500,000 employees. During the 1990s, state-owned enterprises were gradually privatised, also to service public debt, markets were opened and deregulated.
In 2016, Italy’s gross domestic product totalled 1,672.44 billion euros. This corresponds to around 27,603 euros per capita. Italy was thus the EU’s fourth-largest economy after Germany, Great Britain and France and (in 2015) the eighth-largest economy in the world.
It should also be noted that the shadow economy in Italy is traditionally very high. The Revenue Agency estimates its share of GDP at between 16.2 and 17.5 percent (2008), while other observers estimate it at up to 30 percent. The fact is that the shadow economy is taken into account on the basis of estimates when determining GDP.
Economic growth has been below the EU average for over a decade. This applies both to the years before and after the financial crisis around 2007. Real gross domestic product fell by just under 3 percent between 2004 and 2016. In particular, following the 5.5 percent decline in GDP in 2009 due to the crisis, economic output barely recovered in the following years and fell noticeably again in 2012 and 2013. In 2015 and 2016, real GDP grew by just under 1 per cent each compared with around 2 per cent each in the EU as a whole.
Italy’s most important trading partner is Germany, with an export share of 12.7 percent and an import share of 15.9 percent, followed by France with 11.2 percent and 8.5 percent respectively. The most important export markets for Italian products also include Spain (6.5 percent), the USA (6.2 percent) and the United Kingdom (5.2 percent). Italy also imports most from China (6.2 percent), the Netherlands (5.3 percent), Libya (4.6 percent) and Russia (4.2 percent).
In the Global Competitiveness Index, which measures a country’s competitiveness, Italy ranks 43rd out of 137 countries (2017-2018). In the Index for Economic Freedom, Italy ranked 79th out of 180 countries in 2017. Italy’s cumbersome bureaucracy is seen as the main obstacle to greater competitiveness and economic freedom.
Italy has a wide variety of raw material deposits. Important natural resources of the country are fluorite, coal, mercury, sylvin and zinc. The world-famous Carrara marble is quarried in the Apuan Alps around Carrara and Massa. There are large natural gas deposits (Po Valley, Adriatic Sea) and oil deposits (Basilicata, Sicily).
Italy’s energy supply is characterised by a very high dependence on imports, around 79 percent of its energy requirements are imported.
The consumption of electrical energy in Italy in 2011 was 334.6 TWh, an increase of 1.3 percent compared to the previous year. More than 10 percent is produced by hydropower, while in 2011 the share of energy production from renewable sources increased by 7.8 percent compared to the previous year.
Today, Italy produces most of its electricity in thermal power plants, with 64.4 percent produced from natural gas and the remainder from crude oil and other fuels. The largest power plant, Alessandro Volta, is located in Montalto di Castro and has an output of 3,600 MW. In 2009, however, the power plant only ran for 2000 to 3000 hours (of a possible 8,760) because the electricity produced is too expensive.
The photovoltaic share rose by 268 percent in the course of 2011, reaching an annual production of 19.7 TWh in 2017, while the wind turbines (mainly in Puglia and the rest of the South) supplied around 10 TWh. Geothermal energy is generated particularly in central Italy, for example in Larderello, and generated 4.3 TWh. In 2011, Italy’s hydropower supplied a significant share of renewable energy among the member states of the European Union: 45.2 TWh were generated – equivalent to around 15 percent of the total hydropower generated in the EU countries.
Italy had four nuclear power plants before 1990. Triggered by the Chernobyl disaster in Ukraine (26 April 1986), Italy gradually phased out nuclear power from 1987 onwards. The last Italian nuclear power plant was shut down in 1990.
Following the nuclear catastrophe at Fukushima in Japan, the Italian cabinet decided in March 2011 to suspend a return to nuclear energy for another year; on 12 and 13 June 2011, 94.1 percent of voters in a 57 percent referendum rejected a return.
Italy is now the largest net importer of electricity in the world; in the first half of 2014, around 15 percent of demand was imported (22.3 TWh out of a total demand of 153 TWh); a large proportion of this came from French nuclear power plants. In 2012, a total of 43.104 billion kWh were imported net, of which 24.668 billion from Switzerland and 11.37 billion from France. Electricity prices in Italy are among the highest in the EU for industrial customers.
The largest energy producers are Enel, Edison, ERG, A2A and Sorgenia, while Terna is responsible for the distribution network.
Agriculture, industry and services
Although agriculture plays only a minor role in the national economy (approx. 2 percent), it produces some important products. Wine-growing is important, as the country is the world’s largest wine producer with around 49 million hectolitres ahead of France (as of 2015), as is the production of olive oil: Italy is the second largest producer here (after Spain) with 442,000 tonnes in 2013 and cheese production (Parmesan, Mozzarella, Pecorino or Ricotta). Citrus fruits such as oranges and lemons, nightshade plants such as tomatoes and eggplants, pumpkin plants such as courgettes, water melons and honeydew melons, salad plants such as rocket and radicchio, as well as pulses and nuts are also cultivated and exported.
The strength of the Italian economy lies in the manufacturing industry, especially in small and medium-sized family-run businesses. According to the central statistics institute ISTAT, 95.2 percent are among the smallest companies with less than 10 employees. The Italian company with the highest turnover is the oil and gas group ENI.
The main industries include machinery, aircraft (Leonardo), marine (Fincantieri) and automotive (Fiat Group (including: Alfa Romeo, Iveco, Lancia, Maserati), Ferrari, Piaggio and Pirelli), chemicals and electronic products (Magneti Marelli). The textile industry is very strongly represented and with its well-known brand names (Armani, Benetton, Diesel, Dolce & Gabbana, Gucci, Prada or Versace) stands for the epitome of made in Italy. Luxottica is the world’s largest eyewear manufacturer. Among the most important Italian export goods are also the products of the food industry (Barilla, Campari, Lavazza, Parmalat). The largest company in the sector is Ferrero.
In the services sector, Italy is represented internationally primarily by major banks such as Unicredit and Intesa Sanpaolo. Assicurazioni Generali is one of the largest insurance companies in the world.
The tourism sector has been one of Italy’s most important sources of income for decades. Italy is one of the classic tourist destinations in the world. Popular destinations are the Alps, the coastal areas on the Ligurian and Adriatic Seas, numerous historical towns, museums, archaeological sites and traditional customs such as the carnival in Venice, Palio di Siena or Calcio storico.
At the beginning of the 21st century, Italy recorded a sharp fall in unemployment compared with the 1990s. However, following the outbreak of the financial crisis in 2007 and the subsequent euro crisis, the country is in crisis. According to ISTAT, the unemployment rate in 2008 was still 6.7 percent. In the following years, Italy’s unemployment rate rose steadily and significantly due to the economic crisis. The unemployment rate in the fourth quarter of 2015 was 11.9 percent. The employment rate in January 2016 was 56.8 per cent. Youth unemployment was a high 39.3 per cent in January 2016. Compared to 2014, however, these figures represent an improvement. The OECD has also found that earned incomes were among the lowest among the industrialised countries. The average net income of Italians amounted to only 19,861 dollars, which means that they are also overtaken by Greeks and Spaniards. The OECD average is 24,660 dollars.
The self-employment rate in Italy is all the higher. It is around 33 per cent of the labour force (compared with 17 per cent in Spain and 10 per cent in Germany).
In 2011, 3.9% of the total labour force worked in agriculture, 28.3% in industry and 67.8% in services. The total number of employees in 2017 is estimated at 25.94 million, 42% of whom are women. The female employment rate is among the lowest in the European Union.
Italy challenges euro stability with mini bots – one more reason for Bitcoin?
Italy is in a deficit dispute with the EU. The country refuses to adjust its budget for 2020 in line with EU requirements. Instead, it is considering issuing a new bond-based currency. A suicide mission that can be seen as an attack on the euro or the Eurosystem. Why the enterprise can get the euro into serious trouble and why Bitcoin can gain momentum as a profiteer of such conflicts.
The euro currency has not always had an easy time of it in recent years. Particularly when the Greek crisis was boiling, fears of a break-up of the euro zone were spreading. The symptoms were successfully combated for the time being with appropriate state aid. Compared to other currencies, the euro is quite stable. Even the feared inflation has not yet arrived.
While Greece has a manageable economic significance within the euro zone, the situation is completely different for Italy. Italy is one of the economically most important countries in the euro zone. If Italy were to withdraw from the euro, this would have massive consequences. Exactly this danger threatens more than ever. The situation around Italy is more serious than it has been for a long time and with it the danger for the euro.
Italy’s mini bots: between promissory notes and pseudo currency
In order to master the horrendous debts – over 130 percent of GDP – Italy is flirting with an old sleight of hand. On the existing debts, which have already reached the limit, one would like to make new debts, which however run under a different “label”. The parliament has already passed a non-binding resolution which provides for the so-called mini bots to be issued. In this case, the term “bot” stands for “Buoni Ordinari des Tesoro”. The term “mini” explains the tiny, currency-like denomination of five to 500 euros. It is precisely this mini-denomination that could turn government bonds into a kind of money, for example to pay for a visit to a coffee house with the mini bots.
Above all, however, if the Mini-Bots are accepted, creditors could be paid with the promissory notes. Not only in practice, but also legally there are some ambiguities. The Handelsblatt quotes ECB boss Mario Draghi on the case: “Either they are money, then they are illegal, or they are debt, then the debt level goes up”.
If Italy were to implement the currency project in all seriousness, it would not only cause massive trouble with the European institutions, but would also increase the probability of Italy’s insolvency. Should the pseudo-currency really split off from the euro, this would lead to devaluation, which in turn would mean that the existing debt in euros would become significantly more expensive. In addition to the acute threat of Italy’s insolvency, the loss of confidence in the euro would be immense.
It is true that there is the argument that the mini bots can be used to merely reschedule debt so that there is no increase in government debt. But even then, the result would be a loss of confidence and a deterioration in Italy’s creditworthiness. After all, investors do not want to be fooled and become part of public debt experiments.
The Bitcoin flight as a result of irresponsible monetary policy
Although there is a realistic hope that this fiscal absurdity will not materialise, the newly introduced option will unsettle euro stability. Italy is thus shaking the value of the euro in general and the savings capacity of the Italian population in particular.
As already observed in the financial crisis and during the subsequent Greek crisis, the profiteers are the so-called safe havens. Be it the Swiss franc, the Norwegian krone, gold or Bitcoin. These currencies and investments are known for offering a high degree of political stability and independence in uncertain times. Even though Bitcoin as a non-governmental currency or uncorrelated asset differs significantly from the refugee fiat currencies, it still fulfils a similar promise. As an anti-cyclical investment medium, Bitcoin tends to profit from economic crises.
This same independence can also lead to an upgrading of Bitcoin in the mini bots scenario. If the mood changes and the first panic reactions from insecure savers and investors spread, a dangerous momentum of its own can develop here in a short time. As much as one hopes that this scenario will not occur, this time, more than in the previous crises, it would be a massive macroeconomic upswing for Bitcoin. Not only Italian savers would flee to Bitcoin, but also savers from the entire euro zone would be likely to go increasingly into crypto currencies due to the fundamental loss of confidence in fiat currencies.
The next crisis will fuel the Bitcoin exchange rate
Since the Crypto-Hype 2017 many people know Bitcoin and know about its advantages. There are also countless investment opportunities that make it easier and easier for people who are not crypto-affine to invest in Bitcoin & Co. Institutional investors in particular would provide massive capital inflows into Bitcoin during the next crisis.
Even in the past, when institutional investors were practically out of the picture, Bitcoin price rises could be observed corresponding to negative headlines. When Brexit became known on June 24, 2016, Bitcoin gained 7.1 percent on the same day. Of course, this does not mean anything yet and is insufficient to deduce a statistical connection. Nevertheless, the example of Brexit reinforces Bitcoin’s expectations and image of serving as an escape currency. Finally, Bitcoin – see Bitcoin White Paper – was created to establish a currency alternative independent of central banks and governments.
If Italy takes its mini-bots seriously and initiates the feared economic turmoil, then capital flight into more stable currencies and investments is likely.