09 August 2011

Financial Storms

With all of the dire financial news of the past week, it has made me think about how these events affect us as US expats in Italy. When we first started planning to move six years ago, the world’s economy was buzzing along and the dollar-euro exchange was about $1.20. Now the US has had its credit rating downgraded, several European Union (EU) countries are on the brink of default, the dollar-euro exchange hovers in the $1.45 range, and the signs for the near future aren’t too promising.

Italy has been in the news lately as it has a huge debt issue and the economy is stagnant. A few weeks ago, austerity measures were quickly passed by the government, but again dark clouds loom over the third largest economy in the EU. Italy is not in the same situation as Greece or Portugal, but none the less, it has economic problems that the current government keeps failing to adequately address.

How does all of this affect us, you may ask? One of the most obvious is the exchange rate. When there is bad financial news for the EU, the exchange rate improves. When there is bad US financial news, then the rate (for us) gets worse. Last week the currency markets were confused as the US credit rating was announced but at the same time Italy’s debt was center-stage again. Since arriving in Italy in 2006, we have seen rates rise above $1.60…I don’t expect to see $1.20 again. This means any dollars we have or earn don’t go as far as we hoped.

I had written before about some of the other issues with the economy in 2008, and many of these issues still hold true. For example a gallon of gas here, with the unit and currency exchange, costs about $8.65. Interest rates for savings are still rock bottom.

One of the most difficult impacts we have seen is with trying to earn a living (not just for expats, but for most Italians). The more Euros we can make the better - forget that lousy exchange rate. However, there are several obstacles for us on this front.

We have made ventures into the vacation and real estate fields in Le Marche but our timing was bad; soon after this the international economic crisis started and many people scaled back their travel plans to Italy, especially Americans. English-speaking Europeans became leery of property investments in the area due to their countries’ own economic struggles.

We are not citizens of Italy or of another EU country and some jobs postings specifically state that this is a requirement. Also, it is not uncommon in Italy for job descriptions to specifically list certain ages and/or physical traits as a requirement. Though our Italian continuously improves, language issues can limit the type of work available. We are both able to do some work teaching English but this is a very difficult way to support oneself, even in an inexpensive area like Basilicata.

I have had several students who are professionals, including top managers in international companies, and they have provided some additional insights on hiring practices in Italy. For example, when you submit a reference letter for a job, the content of the letter is not as important as whose signature is on the bottom. Officially, candidates are chosen based on qualifications, but it seems common that it is just as important as to who you know.

I have noticed that many positions are offered on a short term contract basis, two to four months. I had a discussion with one of my students who confirmed this practice aimed at reducing an employer’s exposure to costs. If you have to cut costs just wait for an employee’s contract to expire. Long-term contracts seem to be more difficult to find.

Just as in any other part of the world this economic crisis affects us. Our remaining dollars don’t go as far and investments can be perilous. Long term jobs are difficult for us and Italians to find. Many tourist initiatives by the government have been scaled back and people are hesitant to travel or invest abroad when their own economy is in a slump.

Despite these difficulties we have been blessed by our experiences here in Italy and especially in Trivigno.


Steve said...

Somehow we managed to time Michelle's sabbatical with the worst dollar to Euro exchange rate of all time.

Bryan said...

Nothing like timing...but it was such fun!

steve said...

True, it was worth every penny.