Economy of Italy

Economy of Italy

Currency	Euro (EUR) (except in Campione d'Italia) (CHF)
Fiscal year	Calendar year
Trade organisations	EU, WTO (via EU membership) and OECD
Statistics
GDP	$1,787 trillion (2007)
GDP growth	0% (2008 est.)
GDP per capita	$30,400 (2007)
GDP by sector	agriculture (2%), industry (26.7%), services (71.3%) (2008 est.)
Inflation (CPI)	2% (2007)
Population below poverty line	12% (2002)
Gini coefficient	32 (2006)
Labour force	25.09m (2008 est.)
Labour force by occupation	services (65.1%), industry (30.7%), agriculture (4.2%) (2008 est.)
Unemployment	6.2% (2007)
Main industries	tourism, commerce, communications, machinery, iron and steel, chemicals, food processing, textiles, automobiles, home appliances, clothing, footwear, ceramics
External
Exports	$566.1bn (2008)
Export goods	engineering products, textiles and clothing, production machinery, motor vehicles, electric goods, transport equipment, chemicals; food, beverages and tobacco; minerals, nonferrous metals
Main export partners	Germany 12.9%, France 11.4%, Spain 7.4%, U.S. 6.8%, UK 5.8% (2006)
Imports	$566.8bn (2008)
Import goods	engineering products, chemicals, transport equipment, energy products, minerals and nonferrous metals, textiles and clothing; automobiles, electronics, food, beverages, tobacco
Main import partners	Germany 16.9%, France 9%, China 5.9%, Netherlands 5.5%, Belgium 4.3%, Spain 4.2% (2006)
Public finances
Government debt	103.9% of GDP (2007)
Revenues	$1,139 bn (2008 est.)
Expenses	$1,203 bn (2008 est.)
Economic aid	donor: $2.48 billion, 0.15% of GDP (2004)
All values, unless otherwise stated, are in US dollars.

The economy of Italy has changed dramatically since the end of World War II. From an agriculturally based economy, it has developed into an industrial country ranked by both the World Bank and the International Monetary Fund as the world's seventh largest economy in USD exchange-rate terms and tenth largest in terms of purchasing power parity (PPP) by World Bank, IMF and the CIA World Factbook. More recently, Italy has faced sluggish economic growth and reduced international competitiveness. The country belongs to the Group of eight (G8) industrialized nations; it is a member of the European Union and the OECD.

Italy's economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized family-owned firms. The country has been less successful in terms of developing world class multinational corporations. In addition, the small and medium-sized firms typically manufacture products that are technologically moderately advanced and therefore increasingly face crushing international competition.

Italy's economic growth ranged from 1% in 1996 to a 3.7% peak in 2000, which was above the EU projected growth rate of 3.10%, but nevertheless remained one of the lowest among industrialised countries. Since 2002, growth has been gradually slowing, reaching recession twice, in 2003 and in 2008. A 2005 report of The Economist, entitled Addio, dolce vita ("Farewell, sweet life") parallels current status of Italian economy to that of the Republic of Venice in 1797, a country with "many attractions" but living "a slow, long decline". Italy was called "the real sick man of Europe".

Labor

Following the 2003 "Biagi law", a controversial labour reform, unemployment has been steadily decreasing, reaching 6.2% in 2007, the lowest rate since the 1970s. In the south the average unemployment rate is far higher than the national average, but, in recent years, progress was made nonetheless, with the unemployment rate falling from 23.7% in 1999 to 11.2% in 2007 for Campania, and from 24.5% to 13% for Sicily. There is a significant underground economy, especially in the south where it partially offsets the high official unemployment rate, absorbing substantial numbers of people, working for low wages and without standard social benefits and protections.

Unions claim to represent 40% of the work force. Most Italian unions are grouped in three major confederations: the CGIL, the CISL, and the UIL, which together claim 35% of the work force. These confederations formerly were associated with important political parties (respectively the Italian Communist Party, the Christian Democracy and the Italian Socialist Party), but they have formally terminated such ties. Nowadays, the three often coordinate their positions before confronting management or lobbying the government. The three major confederations have an important consultative role on national social and economic issues. Among their major agreements are a 4-year wage moderation agreement signed in 1993, a reform of the pension system in 1995, and an employment pact, introducing steps for labor market flexibility in economically depressed areas, in 1996. The CGIL, CISL, and UIL are affiliates of the International Trade Union Confederation. Of the three unions, CGIL is the strongest in numbers. CGIL once single-handedly organized a three-million people rally in Rome. Italy's employers are represented by Confindustria, the Italian Employers' Federation.

Primary sector

The northern part of Italy produces primarily grains, rice, maize corn, sugar beets, soybeans, meat, fruits and dairy products, while the south specializes in producing fruits, vegetables, oil and durum wheat. Italy, depending on the year, is the first or the second largest producer of wine in the world and one of the leading in olive oil, fruits (apples, oranges, lemons, pears, apricots, peaches, cherries, strawberries, kiwi), flowers and vegetables.

According to the Agriculture Census, there were 2.6 million farms in 2000 (down from 3 million in 1990,) covering 19.6 million hectares. The vast majority (94.7%) are family-operated and small, averaging only 5 hectares in size. Of the total surface area in agricultural use (forestry excluded,) grain fields take up 31%, olive tree orchards 8.2%, vineyards 5.4%, citrus orchards 1%, other orchards 3.8%, sugarbeets 1.7%, and horticulture 2.4%. The remainder is primarily dedicated to pastures (25.9%) and feed grains (11.6%.) Livestock includes 6 million head of cattle, 8.6 million head of swine, 6.8 million head of sheep, and 0.9 million head of goats.

The most famous Italian wines are probably the Tuscan Chianti and Piedmontese Pinot Grigio. Other famous wines are Barbaresco, Barolo and Barbera (Piedmont), Brunello di Montalcino (Tuscany), Montepulciano d'Abruzzo (Abruzzo) and Nero d'Avola (Sicily). Quality goods in which Italy specialises are often DOC or 'of controlled origin'. This DOC certificate, which is attributed by the European Union, ensures that the origins and work that goes into a product are recognised. This certification is considered important by producers and consumers alike, in order to avoid confusion with low-quality mass-produced ersatz products, such as Cambozola, a German copy of Gorgonzola.

Mineral resources and energy

Italy has few natural resources. With much of the land unsuited for farming, it is a net food importer. There are no substantial deposits of iron, coal, or oil. Proven natural gas reserves, mainly in the Po Valley and offshore Adriatic, have grown in recent years and constitute the country's most important mineral resource. Most raw materials needed for manufacturing and more than 80% of the country's energy sources are imported.

Industry

In Italy there are many important car industries, like Fiat, Alfa Romeo and Ferrari (here is pictured the new Fiat 500 in Turin)

Industrial sectors have long been concentrated in northern areas of Piemonte, Lombardia, and Veneto. The region supplies easy access to the rest of Europe, hydroelectricity from the Alps, and workable, flat land. The FIAT factory, for example, is located in Turin. Most Italian industries, often of small size, are located in the "industrial triangle" (Milan, Turin, Genoa) and in some centres of Northeast and Emilia Romagna.

Italy is known also for its fashion houses, such Versace, Valentino, Fendi, Gucci, Prada, Roberto Cavalli, Sergio Rossi, Dolce & Gabbana, Benetton, and Armani.

FIAT is an automaker specializing in utilitarian and luxury vehicles, with the brands FIAT, Lancia, Alfa Romeo, Ferrari and Maserati. The Piemontese group has struggled in recent times due to high input costs and declining market share, although a recent revival has seen a return to profit . Manufacturers like Piaggio and Ducati produce motorcycles.

Italy has a substantial home appliance construction industry, especially in Lombardy (Candy), Marche (Merloni, Indesit) and Northeastern regions.

A quarterly report prepared by the Economist Intelligence Unit on behalf of Barclays Wealth in 2007 estimated that there were 2,800,000 dollar millionaires in Italy.

North-South divide

See also: Southern Italy

Naples

There exists a regional economic disparity between the Mezzogiorno and the rest of Italy, especially compared to northern Italy. This disparity was apparent at the time of unification, although some scholars claim it became more pronounced after unification, where it resulted in a long-standing political issue known as "the Southern Question". Some cite the northern House of Savoy's support for the modernization and expansion of its own region's industrial base at the expense of the southern regions. Other scholars attributed the Mezzogiorno's economic misery primarily to its population's amoral familism: like other southern European regions, the inability to conceive the modern concept of communitary common good beyond direct tribal-like family interests.

Although throughout modern history southern Italy has been less affluent than northern Italy, at times southern Italy had prosperous and advanced areas, culturally and economically wealthier than northern or central Italy, mainly prior to the Renaissance. Southern Italy was a leader in European cultural and political affairs. The Norman Kingdom of Sicily was prosperous and politically powerful, becoming one of the wealthiest states in all of Europe.

In the 11th and 12th centuries, Sicily and the Kingdom of Naples played a major role in European affairs and exhibited many signs of prosperity. By the middle of the 13th century, due to fiscal policies that prevented the growth of a strong merchant class, the region became economically backward compared to the other Italian states.. Unlike the rest of Italy, which experienced the rise of many small, independent and prosperous city states, all enterprise in the comparatively large kingdom centred on the capital city of Naples. The outlying areas, cursed with generally poor agricultural conditions, fell further behind. Sicily's trade fell primarily under Catalan control and by the 14th century finances of the kingdom fell primarily into Tuscan hands. With the Spanish conquestthe kingdom continued to be repressed and exploited by foreign rule until the late 18th century and even when Bourbon rule meant a native court and a time of enlightenment for some sectors of the society.

According to some historians, during the time of the Bourbons the area around Naples became relatively productive. It was the first place in Italy to build a railway, even though it was mainly for royal (not commercial) use, and the local manufacturing base was growing. Following unification with the rest of the Italian peninsula in 1861, factory technology (which the Kingdom of the Two Sicilies had gained from the British) was taken away to Piedmont, Lombardy and Liguria.

After unification southern Italy experienced a huge demographic expansion which provoked mass emigration, especially between 1892 and 1921. Apart from Veneto, no other region contributed so much to the Italian diaspora.

In addition, corruption was such a large problem that the prime-minister Giovanni Giolitti once conceded that places existed "where the law does not operate at all".

One study released in 1910 examined tax rates in north, central and southern Italy indicated that northern Italy with 48% of the nation's wealth paid 40% of the nation's taxes, while the south with 27% of the nation's wealth paid 32% of the nation's taxes. Several natural disasters (earthquakes and landslides) also occurred during this period, often killing hundreds of people at a time. Giolitti's administration poor response to a major earthquake in Messina in 1908 was blamed for the high number of casualties. The management of the aftermath of the Messina earthquake infuriated Southern Italians who claimed that Giolitti favoured the rich North over them.

Gross Domestic Product in Italy (2006)

Macroregion	GDP /cap € (PPS)	GDP total €
North-Western Italy	29,800	476,665 million
North-Eastern Italy	29,200	334,294 million
Central Italy	27,300	320,051 million
Southern Italy	16,300	235,530 million
Insular Italy	16,600	113,441 million

After the rise of Fascism, Benito Mussolini set himself the task of defeating the already powerful criminal organizations flowering in Sicily and the South. Economically, Fascist policy aimed at the creation of an Italian empire and Southern Italian ports were strategic for all commerce towards the colonies. Naples enjoyed a demographic and economic rebirth, mainly thanks to the interest of the King Victor Emmanuel III who was born there.

During the 1950s, the regional policy the Cassa per il Mezzogiorno was set up to help raise the living standards in the South to those of the North. The Cassa aimed to do this in two ways: by land reforms creating 120,000 new small farms, and through the "Growth Pole Strategy" whereby 60% of all government investment would go to the South, thus boosting the Southern economy by attracting new capital, stimulating local firms, and providing employment. As a result the South became increasingly subsidized and dependent, incapable of generating growth itself.

Even today, regional disparities persist. Southern Italy continues to be the least prosperous area of Italy. Problems still include corruption, organized crime and high unemployment. Southern Italy includes 37% of Italy's population, occupies 40% of its land area, but only produces 24% of its gross domestic product. This does not, however, include the large underground black economy reported to be as high as 30% of GDP.

Italian exports

Italian exports in 2005

Italy's major exports are precision machinery, motor vehicles (utilitaries, luxury vehicles, motorcycles, scooters), chemicals and electric goods, but the country's more famous exports are in the fields of food and clothing.

Italy's closest trade ties are with the other countries of the European Union, with whom it conducts about 59% of its total trade. Italy's largest EU trade partners, in order of market share, are Germany (19%), France (13%), and the Netherlands (6%).

See also

• Economy of Europe
• Economy of Italy under Fascism, 1922-1943

External links

• Banca D'Italia (Italy's Central Bank)
• National Institute of Statistic (ISTAT) (in Italian)
• International Cooperation Center for Statistics (ICSTAT)
• OECD's Italy country Web site and OECD Economic Survey of Italy
• The Italian portal about patents and intellectual property