December 27, 2011

Gloomy Christmas in the Eurozone

Retail sales down in Italy; Greece slashes health care program

Austerity measures have hit hard in the eurozone nations struggling under the burden of huge debts. In Italy, merchants have seen their worst Christmas season in 10 years, but in Greece the situation is far worse: health care once provided to the poor and unemployed has been cut so substantially that, in the words of many experts, the results have hit like a tsunami.

Bloomberg reported that Italians cut holiday spending substantially even before new austerity measures instituted by Prime Minister Mario Monti took effect. The Rome-based consumer group Codacons said on its website that Italians spent 48 euros ($62.75) less per person this holiday season than they have averaged over the past five years.

Hardest hit was the clothing and shoe sector, losing some 30% of sales; Codacons added that those retailers would not regain any lost ground during their customary January seasonal promotions.

Carlo Rienzi, head of Codacons, said in a statement that the January discount period “will be a flop,” and sales could fall as much as 40% compared with 2010 levels. Fears are that Monti’s new austerity measures, which include a luxury goods tax, higher prices on gasoline and levies on primary residences, will compel households to cut spending even further as they seek to make their money go farther.

Italian consumer confidence dropped in December to its lowest level in 16 years, and the economy shrank in Q3 with the government predicting additional contraction in Q4. Italy is in its fourth recession since 2001.

Still, that is not as bad as what Greeks are enduring under tight austerity measures that have seen major cuts in health care spending that have left many of the poor and unemployed struggling to find necessary care. The New York Times reported that in two years the Greek government has cut some $2.5 billion from its health care spending, reducing it 13% from $19.5 billion to $17 billion. New agreements to cut debt will force it to search for additional cuts of $915 million in 2012.

While the health care system was considered bloated and corrupt, and some 20 doctors have been arrested for corruption, the flip side of the coin is that public health clinics in Greece have seen a 25-30% increase in the number of patients coming to them—people who can no longer afford to get private medical care.

Other cuts have taken a toll, as doctors complain about faulty supplies and generic drugs that are ineffective. But the worst may be a budding public health crisis, as people are unable to afford vaccinations for their children and many who need lifesaving cancer surgery and other treatments are turned away for lack of payment or resources. 

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