---
title: "Italy: Reflections from an Informed Observer"
description: Will Italy be the first country to leave the eurozone, and what's really on the minds of the Italian people? After spending three weeks in Italy, Commonwealth's Giovanna Zaffina shares her view from the ground.
image: https://blog.commonwealth.com/hubfs/Brad_Images_IMO_Blog/2017/Europe_3.jpg
---

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# [Italy: Reflections from an Informed Observer](https://blog.commonwealth.com/independent-market-observer/italy-reflections-from-an-informed-observer)

Posted by [Giovanna Zaffina](https://blog.commonwealth.com/independent-market-observer/author/giovanna-zaffina) 

This entry was posted on  Jun 21, 2018, 3:19:53 PM

 and tagged [Commentary](https://blog.commonwealth.com/independent-market-observer/topic/commentary) 

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*![Italy](https://blog.commonwealth.com/hs-fs/hubfs/Brad_Images_IMO_Blog/2017/Europe_3.jpg?width=300&name=Europe_3.jpg)Brad here. One of the problems we have in the U.S. is that we are largely forced to rely on the media to cover events abroad. While useful, this reporting can miss important details about what is really going on, as anyone who has been at an event and then later read coverage can attest.*

*Giovanna Zaffina, one of our crackerjack wealth management team members, recently spent three weeks with family all over Italy. With the current concerns around Italy and Europe in general, she put together the following post on what people in Italy are saying. You may agree with the points expressed—or not—but this is what is actually happening, as reported by an informed observer. I found it both interesting and useful, and I think you will as well. Thanks, Gio!*

As you may have read in the news, Italy has recently gone through an election that was capped by turmoil. I was in Italy when this unfolded, as the populist parties—the Five Star Movement and the League—proposed to join forces to form a government. This proposal was then rejected by President Sergio Mattarella. I watched family members glued to the TV, while others didn’t even want to hear what the politicians had to say. I observed each of them as we sat down for dinner, sensing their frustration. But to my surprise, no one spoke about it. This reaction piqued my curiosity. What were they thinking? What were others thinking? For the next couple of weeks, my mission was to ask and learn.

##### A common theme emerges

I spoke with many of the locals, including business owners, young adults, and retirees. The common theme was that they felt powerless and wanted change. The general feeling was that people are tired of career politicians and upset with the recent election results. Most of all, they were discouraged by the prospect of going back to the polls in the fall if a government coalition could not be formed. “Nothing will change if we go back to the polls. Everyone will vote for the same party they just voted for,” said one man.

High unemployment and a broken tax system are among the most pressing issues. Many agree that something must be done to jump-start the crippling national economy. A gentleman put his hand on my shoulder, looked me straight in the eyes, and said, “Someone steals a chicken because they are hungry, and they need to feed their families. These people are imprisoned. Others embezzle money and are rewarded. They are given a position in politics and are protected.” A convenience store owner in Rome said she voted for the League because the current government isn’t working. “Let’s see what this party will do.”

Overall, there is a sense of injustice, and people feel that the politicians are only out for themselves and power.

##### Strawberry fields (and taxes) forever

One morning, I went strawberry picking. At 6:00 A.M., we pulled up to a farm that was tucked away from civilization. All you could see were acres of strawberry fields—when you stepped out of the car, you were hit with an intoxicating scent. The farm has been family owned and operated for more than 50 years, and it distributes its produce to Northern Italy.

One of the owners, a man in his 70s, came over to me, put his arm around my shoulders, and motioned for me to look at all the farmland. “Do you see everything? Do you see the tents? All that you see here has been done by us without help. We pay 50 percent in taxes and then our workers.” When he said this, I was stunned. You would have thought this was a successful business with wealth to pass down through generations. Instead, their earnings went toward operations and taxes.

##### Immigration: A divisive issue

Immigration and migrant care were of concern, too. While there seems to be consensus that something must be done quickly about taxes and the economy, immigration is a much more divisive issue.

During this trip, I saw more immigrants than the last time I visited family two years ago. I met two young men who recently landed on the coast of Southern Italy, one from Cuba and the other from Africa. When I asked the man from Cuba where he wanted to live, he said, “Anywhere but here.” Southern Italy is absolutely beautiful with its scenic landscape, delicious foods (farm to table), and deeply entrenched culture. But it is also very poor. If people can find work, it’s back breaking for very little compensation. Immigrants may or may not come to stay; however, their presence puts a strain on the Italian economy. As a result, there is now a country divide, with some who have become unsympathetic to the plight of immigrants.

I spoke with an 18-year-old Italian woman preparing to attend college in the fall. She was enraged with Italy’s lax approach to immigration. “We have Italian citizens who are starving and can’t find jobs, but we keep letting refugees in. Americans are shutting them out, and we are accepting them!” Her point, I believe, was that Italy can barely care for its own citizens, let alone refugees, and that’s where the tax money is going.

##### Will Italy leave the eurozone?

Brad’s recent post, [“Is 'Italeave' Greece 2.0?"](https://blog.commonwealth.com/independent-market-observer/is-italeave-greece-2.0) touched on another issue on the minds of the Italian people: fears that "Italy, the third-largest economy in the eurozone, could become the first member to leave." In fact, this speaks to President Mattarella’s reasoning for denying the proposed coalition. It was not due to the two parties but for their choice in finance minister Paolo Savona, who is anti-euro. If the anti-euro sentiment prevails, resulting in Italy pulling out of the eurozone, that would affect not only the global economy but Italian families and their savings. Still, one man in his 50s said, “Italy won’t pull out of the euro. We should have never switched to the euro; now it’s too late.” He feels this was just an excuse from the Democratic Party to try to force new elections, which fortunately did not work.

Since my visit, a coalition of these two populist and anti-establishment parties has been formed, and a new government is taking over. What does this mean for Italy? Will this new government make the changes that it craves and ignite some confidence in its leadership that has been missing? While it has only been a few weeks, the new party has laid out its [vision](https://www.nytimes.com/2018/06/05/world/europe/italy-government-giuseppe-conte.html), and some changes are already happening. Indeed, one aspect of this vision is to limit migration into Italy, and Interior Minister Matteo Salvini has blocked migrant ships from docking in Italy.

##### A glimmer of hope?

Going forward, what does this coalition mean for Italy and the European Union? In the eyes of the people, perhaps they will feel heard. Their sense of disappointment and helplessness may be soothed by a glimmer of hope—as many euroskeptic and anti-immigration champions believe that, with a hard-line government, Italy’s voice will finally be heard throughout Europe. That, more than anything, seems to be what is needed to keep the European Union together.

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Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

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The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities.

The Russell 2000 is a market-capitalization weighted index, with dividends reinvested, that consists of the 2,000 smallest companies within the Russell 3000 Index. It is often used to track the performance of U.S. small market capitalization stocks.

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The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

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