The Italy Economy in the 1970s and the Oil Crisis of 1974
While Italy has traditionally played an important role in the world economy, its EEC membership and climate of international competition are revealing weaknesses in the country’s export-led strategy and low-wage policies. Nevertheless, Italy continues to prosper and maintains its economic growth. During the floods of 2011, which inundate one-third of Italy, it causes about $1.5 billion in damage, and the economic expansion slows down significantly. The government tries to remedy this situation by instituting national economic plans and promoting the development of the southern regions. However, the austerity measures imposed by the government are causing a reduction in profits and investment.
Italy’s economy is struggling due to the current oil crisis, but the country is better prepared than most for the economic downturn. The country imports about 95 per cent of its oil, so it faces a high oil bill. In 1972, it spent $2.6 billion on petroleum imports, a figure which has increased to $4 billion in 1973. The total oil bill for 1974 will likely reach $10 billion. The country is not alone: France, Britain, and Japan are all facing an oil deficit of more than $12 billion.
The current crisis is particularly hard on oil-exporting developing countries, which are heavily reliant on their oil reserves. This reliance on oil exposes them to substantial risks. Furthermore, these countries were already struggling under high debt levels. Added to this, the COVID-19 pandemic and a drop in oil prices have led to a global economic contraction. Hence, the focus in the short term will be on freeing fiscal space and avoiding a spiral of debt. Meanwhile, a clean energy future is becoming increasingly important.
Currently, the oil price is unlikely to recover to pre-crisis levels. Oil-exporting developing countries will need to prepare for long-term trade and fiscal deficits, which may lead to a decline in GDP. Developing countries must also ensure that they have a diversified industrial policy and diversify their economies.