Comparison Spain vs. Italy

Similarities

* Left-centred coalition government * Member of the EU * Low birth rate * High immigration * Declining competitiveness * Latin, Mediterranean (used to take siestas), highly emotional citizens * High costs, low productivity firms (likely to be overtaken by Chinese competition) * Low spending on R&D * Poor educational system

Differences

* Italy has a high black economy, Spain does not (tax deficits for Italy) * Spain: monarchy and democratic * Italy: republic * Corruption percentage index (Italy: 6.5 and Spain 4.8) * Unemployment rate (Italy: 10.7% Spain: 25.1%)

How did Italy and Spain become struggling economies?

Spain

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* It will be a difficult procedure to intervene with more cuts and reforms. Many reforms will touch the welfare state, such as pensions, education and health. * A further intervention would probably cause a further erosion of popular support for the EU and might lead to a formation of a new-formed government lead by technocrats. * BUT: Spain needs more jobs, to decrease its high unemployment rate. * To achieve that, the government should subsidize firms, which create jobs for Spanish citizens. Also Spanish government already took over its biggest bank, this could be a start to get control over important and big institutions, in connection with job creation. * Spain should provide a mixture of private businesses, which receive subsidies if they create new jobs and state owned or partly owned firms to control the issue of unemployment better. * More employment and lower taxes would then stimulate the consumer spending, which would be followed by a highly stimulated and profitable economy. * Now it is the turn of the government to spend more and reduce taxes as long as the private sector is ready to take the economy forward (Keynesian theory) * If the Spanish economy and the market cools down FDI will continue to come in, which is also a positive fact. As far the market is not as attractive for foreign investors, the government could also create