It is hard to imagine a time when Europe disagreed so much about the economic facts. Whilst Britain almost revels in the headlines of falling house prices, empty shops and unemployment, the Germans rather think it is something happening to other people and the Italians, well the Italians aren’t sure. One reason is that the present downturn began in the financial markets, where Britain is especially strong and Italy is weak. Finance Minister Giulio Tremonti announced with delight that the Italian banks had not got round to investing in these new-fangled credit instruments and were therefore strong. Italians do not have a debt culture and the average family saves a bit. Whilst Italy’s governmental debt is high, if you add personal debt the figure is about the same as Britain. At the start, it all looked like a problema anglo-sassone.
Italy is not of course immune to the second wave of the crisis – the business downturn. But again things are slightly different here. There was already an economic malaise in the country; people feared that Italy was slipping behind her neighbours month by month, year by year, due to the peculiarities of its economy: rigid labour markets, stultifying bureaucracy, massive black economy. Italy knows it is not immune from the happenings in the rest of the world; it is dependent on exports and if Ferrari and Gucci are to survive people worldwide have to be buying their products, but there is almost a comfort in knowing that others are in the same boat. It might even be their fault.
Monday 8th December, the feast of the Immaculate Conception, is traditionally the first day of Christmas shopping. Italy is not likely to have a disastrous Christmas because family values are entrenched and the presents are a part of that, also because many Italians are paid with a thirteenth month and so have cash in their pockets around this time.
The underlying Italian economy is a network of small family firms, heavily geared to export. It is the totems of the economy which Italy doesn’t do well. Alitalia’s takeover has still not gone smoothly, despite a determination to proceed even without the approval of the pilots and the cabin crew. What is increasingly certain is that it cannot survive on its own. The planes are old and the working practices so outdated that essentially Alitalia is a collection of landing slots and not much else. Air France is favoured as the lucky partner. There are stories of short time working at FIAT, and whilst the CEO Sergio Marchionne is generally regarded as a miracle worker, he has warned that the car industry can no longer survive in its present form: global consolidation is the only way forward. Previously a black hole swallowing cash at an alarming rate, FIAT is now regarded as an attractive partner. ENEL, the national electricity giant, reports industrial usage down 30%. The bright side of this is that it was struggling to supply its market due to a failure to upgrade to modern gas-fired power stations and now might limp through the winter without power cuts. The Venice Mose project, consisting of a flood barrier which can be raised on hydraulic rams, is now likely to go ahead following exceptionally high waters in recent weeks.
Politically Silvio Berlusconi is in a stronger position than ever, in part due to the fragmentation of the left, and in part due to some rather modest successes on the Naples rubbish crisis and Alitalia. A raft of measures on security, corruption, education and the economy have progressed almost unopposed, whilst he has secured immunity from prosecution in time for the prosecution’s winding up in the Mills trial expected before Christmas. He was criticised for increasing VAT on his media rivals, Sky, but with a magician’s sleight of hand produced a letter from the EU asking him to do so. As Greece, Spain and Portugal suffer from the downturn, Berlusconi’s Italy looks stronger internationally, with a greater acceptance in Europe, for example with its plan to relax environmental laws on cost grounds, which many agree with. It seems likely that in the next 12 months Italy’s economy will overtake Britain’s as fifth in the world, which would be nearly as important as winning the World Cup.
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