The Future of Young People In Italy

Following up on my earlier post about the problem of graduate out-migration from Italy, Roberto has drawn this Time magazine article to my attention. I really like the photo since somehow it draws attention to that combination of the old and the new which, if people only could find the way to work with it, could serve as a basis for moving things forward in Italy. A nice crisp winter's morning, just like we have in Barcelona today.


Growing up, Italian teenagers learn the tale of Giotto and the fly. As a young apprentice in 13th century Florence, the aspiring painter sketched a fly on the nose of a portrait his master-teacher Cimabue was finishing. So lifelike was the insect that when the elder painter returned to the studio, he repeatedly tried to swat it off the canvas. Realizing he'd been fooled by the bravura talent of his pupil, Cimabue told him: "You have surpassed your teacher." Thus encouraged by his master, Giotto went on to revolutionize Western painting, and posterity regards him as the man who launched the Italian Renaissance.

Fast-forward to Italy 2006, and the image of the precocious apprentice has been replaced by a humbler figure: the underemployed 30-something despondent about the present, let alone the future. Today's Italy is defined by stories like that of Vincenza Lasala. At 32, four years after graduating with honors in mechanical engineering, she is living with her parents in the same house where she grew up. She has sent more than 200 résumés to large corporations and small companies around the country, but all she has managed to secure are a handful of part-time stints, unpaid internships and training programs. From her home in the sleepy southern town of Avellino, near Naples, a frustrated Lasala speaks for much of Italy's younger generation: "Without a job, my parents are basically still in charge of my life. After all my studying, I don't see the fruits of my effort. Right now, I can't even envision my future."

Business Confidence Drops

Italian business confidence declined in November, hardly dramatically - to 96.8 from 97.1 in October - but the outlook for the Italian economy over the next three months fell to minus 9, the lowest in at least nine months. My feeling is that people have been much too focused on this years good results and have not given sufficient attention to the situation moving forward which will be all important in determining how successful the Prodi government is in addressing the government deficit problem.

Italian business confidence fell in November on concern that a global economic slowdown would hurt exports and crimp growth in Europe's fourth-largest economy.

The Isae Institute's confidence index fell to 96.8 from 97.1 in October, the state-funded research center said today in Rome. The reading matched the median forecast of 24 economists surveyed by Bloomberg News.

``The slowdown in the U.S. is a concern, given that there's no balance in the Italian economy,'' said Robert Perry, an economist at 4Cast Ltd. in London. ``As foreign demand fades, the question is, are there sufficient domestic drivers to keep it going?''

The U.S. economy, the world's largest, expanded at the slowest annual pace in more than three years in the third quarter, weighing on European exports. France's economy stalled in the third quarter and Germany grew less than economists' forecasts, threatening to crimp growth in Italy, which has lagged behind the euro-zone for a decade.

``Expectations fell this month for production levels, but also for the prospects for the Italian economic situation,'' Isae said in today's report. An index measuring the outlook for the Italian economy over the next three months fell to minus 9, the lowest in at least nine months.

Consumer Confidence Index Rises in November

Italian consumer confidence rose in November. As can be seen from previous posts (and this one) the index is bobbing up and down, but it is still below the September high.

The Rome-based Isae Institute's index, based on a poll of 2,000 households, rose to 109.2 after falling to 108.6 in October. The reading beat the 108.8 median forecast of 18 economists surveyed by Bloomberg News.

``Growth has had quite a bounce-back this year and there will be some effect felt by consumers,'' said Robert Perry, an economist at 4Cast Ltd. in London. ``The headline unemployment numbers will also be comforting.''

Italy's economy is set to expand 1.7 percent this year, the fastest growth in five years, after stagnating in 2005, according to the European Commission. Italy's jobless rate fell to the lowest in more than 14 years in the second quarter, according to the latest available data.

Consumers are ``less concerned about the outlook for the labor market,'' Isae said in today's report. The employment gains helped increase optimism about consumers's personal economic situation and that measure rose to 115 from 113, Isae said.

Now it is very important to bear in mind at this point that part of the improvement in the labour market situation is due to a tightening in the labour market due to Italy's labour supply constraint as the population ages (as argued in this post), and in part this is one of the worries at the ECB, and one of the reasons that they are set on raising rates, which, from Italy's point of view is a far from perfect outcome. Remember Italy needs to keep the economy growing to maintain any sort of sustainability in public finances.

The Italian Brain Drain

Here is the abstract of a paper on the out-migration of graduates phenomenon I mentioned in my last post.

How Large is the “Brain Drain” from Italy?
Sascha O. Becker, Andrea Ichino, Giovanni Peri

Using a comprehensive and newly organized dataset the present article shows that the human capital content of emigrants from Italy significantly increased during the 1990’s . This is even more dramatically the case if we consider emigrating college graduates, whose share relative to total emigrants quadrupled between 1990 and 1998. As a result, since the mid-1990’s the share of college graduates among emigrants from Italy has become larger than that share among residents of Italy. In the late nineties, between 3% and 5% of the new college graduates from Italy was dispersed abroad each year. Some preliminary international comparisons show that the nineties have only worsened a problem of ”brain drain”, that is unique to Italy, while other large economies in the European Union seem to experience a ”brain exchange”. While we do not search for an explanation of this phenomenon, we characterize such an increase in emigration of college graduates as pervasive across age groups and areas of emigration (the North and the South of the country). We also find a tendency during the 1990’s towards increasing emigration of young people (below 45) and of people from Northern regions.

La Febbre

Last week I had the pleasure of seeing Alessandro D'Alatri's recent film La Febbre. As the reviewer says, this is a 'normal' (everyday) film, not a great one, even if there are one or two memorable moments, like the scenes by the river, which were (and I imagine this is not entirely unintentional) rather reminiscent of some to be found in the unforgettable L'Albero Degli Zoccoli from that giant of Italian cinema Ermanno Olmi.


La febbre è il classico film italiano, che vuol raccontare una storia normale, di tutti i giorni, e che per farlo non trascende dai canoni della buona creanza del plot, e da quel pizzico di amara critica sociale che lo rende molto politically correct. D'Alatri infatti sceglie una storia senza picchi emozionali o visivi, con risvolti e situazioni tipiche per un certo tipo di cinema, affrontando il tutto con una messa in scena scanzonata e senza pretese.

On the aesthetic level the film is perhaps far from satisfactory, since D'Alatri seems at times unable to make up his mind whether he is Rosselini or Almodóvar but this is not my principle concern here. The film narrates the 'little story' of Mario Bettini:

La storia dell'impiegato Mario Bettini, geometra comunale come si definisce nel film, passa così tra luci e ombre attraverso gli amici, il sogno di aprire un locale, il posto fisso, la mamma e il fantasma del padre e il grande amore di una vita.

Well, almost an everyday story in an Italian context I would say, but what interests me here is the situation of Mario as a young person who wants to succeed, and all the trials and problems which are thrown in his path by a system which doesn't understand him, and which seems happier to see him fail than to see him succeed. THIS is one of the big problems facing Italy today. And it is reflected in the large numbers of young qualified people who leave Italy every year.

There is one very memorable moment in the film, the one where Mario gets to meet the Italian president. The scene takes place in Mario's bar, which he finally manages to get the permit to open thanks to the fact that the local mayor needs his help in the context of the president's visit. Mario offers the president a drink, una birra is the reply, una birra Italiana, è bella la birra Italiana. So Mario serves the drink, and then tells the president there is something else he would like to give him, and out of his pocket he whips his Italian passport: "here, this is for you, I don't need it or want it" (or words to that effect).

Now here, although to the point in terms of sentiments, D'Alatri hasn't quite got it right. There are currently an estimated 3.5 million Italians living and working outside Italy (to go by the AIRE database), but one thing they do seem to keep is their Italian pasport, since it is this document which enables them to move.

The point I would like to draw attention to here is the substantial loss of future human capital which Italy is undergoing at the present time. Back in 2002 the website Lavoce published an article on this topic. As they say throughout the 1990s there were a growing number of Italian graduates leaving Italy:

La fuga dei laureati italiani all'estero è un fenomeno di cui spesso si discute senza l'appoggio di dati significativi. Analizzando i flussi di laureati italiani che vanno all'estero il fenomeno appare drammatico e in crescita. Mentre all'inizio degli anni '90 meno dell'1% dei nuovi laureati emigrava all'estero, alla fine degli anni '90 circa il 4% dei nuovi laureati lascia l'italia.

During recent years this situation has surely only accelerated. They also publish comparative data for migration of graduates into and out of a number of other EU countries. Unfortunately this data is now somewhat old and it would be really interesting to see something from, say, 2005. My feeling is that the position has only deteriorated. Paola in an e-mail suggests the following:

It is difficult to differentiate between people who are first, second and third generation Italian. However, in terms of first generation Italians leaving the country: I found that since 1990 every year 4% of people who hold a bachelor's degree move out of the country to find job elsewhere; to this number you need to add some people who went to work elsewhere after high school, and MANY young people who did not register to AIRE (Association of Italians residing elsewhere) -therefore the government has no idea they are working somewhere else ... Could we estimate an average of 6% of the average yearly birth for people between the ave of 20 and 45 years old are leaving the country?

Now this situation is important, and especially in the context that Italy's population has not been replacing itself since the early 1990s (ISTAT, latest data, PDF link). There is only continuing population increase in Italy these days due to inward migration. But, as the Lavoce article stresses the balance in human capital terms is hugely negative here. That is to say, this inward migration is extremely important in labour force terms but can only serve to make the path of the Italian economy sustainable if the young educated Italians stay and enter the labour force in more productive, higher value activities. It is here that the big problem exists (and this is not only a problem for Italy, since as I explain in this post here, the phenomenon is similar for Germany. And of course, Italy and Germany are the two European societies with the highest median ages, something whose economic importance I try to explain here).

So the position is a very worrying one. Anyone with anything to add on this, either anecdotally or in terms of more data and links, please feel free to go ahead in comments.

Budget Agreed in the Chamber of Deputies

I should have posted on this earlier. Now the haggling it seems moves over to the Senate.

Italian Premier Romano Prodi won a key confidence vote in the Chamber of Deputies Saturday night on the center-left government's planned 2007 budget, which included heavily protested tax increases and spending cuts.

Prodi's government decided earlier in the week to put the measures to a confidence vote in a bid to overcome harsh opposition that has slowed its passage in Parliament.

The coalition has a comfortable majority in the Chamber and won the vote 331-231. If the government loses a confidence vote, it has to resign.

The budget, which must be approved by the end of the year, had been bogged down by hundreds of proposed amendments and a filibustering opposition during nearly two months in the lower Chamber of Deputies.....

A tougher challenge could come if the government is forced to call for a confidence vote when the budget is later examined by the Senate, where the center-left has a slim one-seat majority.

Eni and Gazprom

I'm a little late with this I fear, but an article in last Friday's FT caught my attention:

Eni, the Italian energy company, and Russia’s Gazprom on Tuesday finally signed a wide-ranging strategy pact to replace a gas distribution deal that collapsed last year.

The deal, which confirms Eni as Gazprom’s single largest customer, comes amid intensified concern about Gazprom’s ability to produce enough gas for domestic and export markets.

A leaked report by ­Russia’s Ministry of Trade and Economic Development predicts the country will not have enough gas from next year to satisfy domestic demand and to cover all its export contracts to Europe. European Union officials say this explains why some European countries have been trying to negotiate bilateral deals directly with Gazprom.

Under the terms of the deal signed on Tuesday, Gazprom will gain direct access to the Italian gas market. It will be able to sell up to 3bn cu m of gas in Italy a year from 2010, equivalent to about 3 per cent of the market and worth about €600m-€750m ($770m-$963m) a year.

The deal helps Eni respond to pressure from its home regulators to reduce its market share in Italy.

In return, Eni will gain access to a number of upstream oil and gas projects with Gazprom. The two companies said they would work together on a series of projects that would be finalised by the end of next year.

Gazprom has long been targeting access to the European retail markets. It already owns 50 per cent of Wingas, a German distribution company, and has tried to strike similar deals with other European countries.

However, EU officials have warned that bilateral deals with Gazprom undermine Brussels’ efforts to work out a common policy towards Russia and its gas supplies. The EU has been pushing Russia to ratify an energy charter treaty that would provide access to Russia’s reserves and remove Gazprom’s monopoly of the export pipeline to Europe.

Now there are so many things on which I am not an expert that it hardly needs saying that I am not an energy sector one. But this type of agreement worries me. Especially when I read things like this:

“The agreement signed today is a major step towards the security of energy supply to our country,” said Paolo Scaroni, Eni chief executive.

I would be very careful about making any assertion that agreements with Russia about long term energy needs constitute a move towards greater security if I were you M. Scaroni. One of the reasons I would be worried is that Russia is far from being a democracy, and is facing an impending demographic melt-down. If you are not aware of the looming issue in the Russian Federation in this regard, then I suggest you dig into some of the posts you will find on this page.

Now at this point no-one really knows how societies as socio-political entities will respond to population meltdown, since we have never been here before, but I think we should all be aware that this is unlikely to be a factor generating more stability. For this reason alone I think it is very important we all try to formulate and abide by a common EU policy. Frankly I fully anticipate 'agro' with Russia over the Baltic states, especially since out-migration by ethnic Latvian, Lithuanian and Estonian populations is leading to a steady increase in the Russian speaking population there, and this is all grist to the mill for aggressive Russian nationalism. An indication of what this might mean can be seen in what is currently happening in Georgia. So I wouldn't want to see Italian pensioners being frozen and held to ransom in midwinter in an attempt to get concessions from the EU over Russian interests in the Baltics.

Does all this seem very far fetched to you, well then try looking at this piece about Serbia, and start thinking about what exactly might happen in those East European societies who seem likely to remain outside the warm hearth of the EU for many years to come:


Serbia - Outbursts of nationalism are nothing new in Serbia, but the blustering graffiti in a Belgrade park belongs to a bygone era. "On your knees before Serbs!" it demands.

In June, Serbia lost access to the sparkling Adriatic coastline when its sister republic, Montenegro, gained statehood. This winter, it could lose the southern province of
Kosovo if U.N.-brokered talks lead to independence as expected.

As their nation relentlessly shrinks, Serbs — a fiercely proud people accustomed to ruling the roost in the Balkans — are slipping into despair.

"How do you like our cemetery?" businessman Zoran Djuric asks cynically, standing on a hill and sweeping his hand over the twinkling lights of the capital below.

A string of staggering setbacks began last spring, when the
European Union suspended pre-membership talks with the former Yugoslav republic for failing to arrest Gen. Ratko Mladic, the world's No. 1 war crimes fugitive long believed to be hiding here.

Of course the key point here is almost missed in the rush, the principal cause of Serbia's population shrinkage is the very low birth rate (data on Serbia itself is hard to come by, but the birth rate fell rapidly in the 1990s and seems to be currently somewhere in 1.5tfr region according to Serbian demographer Mirjana Rasevic - and the out-migration of young Serbians of childbearing age to within the walled garden of the EU were wages are higher and employment prospects greater.