Erstellt am: 4. 8. 2011 - 14:31 Uhr

Is Berlusconi bluffing?

Reality Check: Italy's financial toubles and why help is coming too late to refugees in Kenya's Dabaab camp.

Berlusconi says the economy is solid, but order books are looking empty

Imagine a large shopping centre, and in one corner there is a fascinating collection of smaller traders that sell intricate, highly specialised items. The traders belong to family companies, they know their business inside out and they’ve been successful for decades, until now.

It’s the best example I can think of for describing northern Italy, land of small machine tools and food delicacies; it’s the region that essentially powers the Italian economy. And what many of these small businesses are finding is that their foreign customers are not calling, order books are looking unusually empty.

There are three major dilemmas that Italy has to contend with. Firstly, there is the debt problem and it’s a huge one, when you compare it to other countries. Normally a country the size of Italy would be able to absorb high levels of debt because of its large economy, but that leads us to problem number 2. The economy grew (if we can call it that) just 0,1% in the first quarter of this year, and the outlook for further growth is bleak. Finally, Prime Minister Silvio Berlusconi went on television to proclaim that he has the situation in hand; but the problem here is that investors don’t seem to have much faith in him when he talks of Italy’s economy being solid.

How wobbly is the Eurozone’s third largest economy? Italians are clearly worried, business is slow, recovery seems far away and debt troubles are looming. It could be that Italy is too big to fail so other European partners won’t allow it to plunge into financial disaster. But despite Berlusconi's bold words, some of the best financial brains this side of the Atlantic are scratching their heads and wondering at what would happen if Italy were to default.

Also on Reality Check:

The desperate conditions in the Dabaab camps

As ORF launches a new Nachbar in Not campaign for East Africa, Kenneth Lavelle of Doctors Without Borders describes the crisis in the massive Dabaab refugee camps in Kenya, and says that the media attention the region is receiving now is too late. Had the world reacted sooner, the much of the tragedy could have been avoided.