Italian Economy in the Doldrums

Despite the rhetoric from Berlusconi, the Italian economy is not in good health. I do not anticipate a rapid recovery, especially if ageing has any part of the story to tell. No young people, no immigrants, no future.........and watch out for the deflation knock.

Italian Prime Minister Silvio Berlusconi said he'd push for tax cuts next year even though Europe's fourth-biggest economy is sputtering this year and won't recover until 2004. Berlusconi, Italy's wealthiest man, said economic growth this year probably wouldn't exceed 1 percent, which is lower than the 1.1 percent growth forecast made by the government last month. That's hurting revenue and leaving little room for significant tax reductions, he said. ``We can't expect a recovery this year,'' Berlusconi said at a conference of the country's largest retailers' lobby, Confcommercio. ``We'll start to see a robust rebound from the beginning of next year.'' The premier was elected two years ago on the promise of delivering lower taxes. Most Italians and most businesses still haven't seen a reduction in the tax burden. At the same time, Standard & Poor's Corp. said it may lower the country's credit rating in the next couple years if Italy doesn't keep lowering its debt, Europe's largest. There were ``tough talks'' ongoing with Finance Minister Giulio Tremonti to reduce taxes ``even if not by much,'' Berlusconi said. Italy is trying to keep its budget deficit from widening this year even as tax revenue falls.

The April budget deficit more than doubled compared with the same month last year. The government predicts debt will decrease next year as a percentage of gross domestic product as long as a series of tax amnesties in effect this year bring in extra revenue. There haven't yet been any signs of recovery so far this year. April business confidence fell to its lowest in more than a year, and manufacturing probably declined during the first two months of the year. The retailers' lobby pushed the government to go forward with tax cuts and other changes to Italy's economic system such as more flexible labor laws and tax incentives for the tourism industry. Italy's economy was suffering from ``a type of economic SARS,'' said Sergio Bille, president of Confcommercio. Berlusconi said he was confident the economy was slowly picking up steam and vowed to carry through with his campaign promises. Commenting on the fact that consumer spending increased only 0.4 percent last year, Berlusconi quipped to the crowd of businessmen that they should send their wives on shopping sprees. ``My wife and her friends, who are terrible advisers, know exactly how to boost consumer spending,'' he said
Source: Bloomberg
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Italian Internet Use

About 27 pct of Italians use the internet at least once every three months, resulting in 12.7 million more users than there were two years ago. Weekly web navigators amounted to 17 pct, or 8.2 million. The Italian numbers are still low when compared to other European countries (Great Britain 50 pct, Germany 43 pct, France 37 pct, while Spain is lower still with 22 pct) and the United States, where 72 pct of the population uses the web. The Italian region with the most connections is Lombardy (36.6 pct), followed by Marche-Umbria (33,5 pct), Liguria and Emilia Romagna (32,9 pct), Tuscany (32,2 pct), Veneto-Friuli Venezia Giulia-Trentino Alto Adige (28,4 pct), Lazio (28,3 pct), Campania (22,5 pct), Abruzzo-Molise (21,9 pct), Piemonte-Valle d'Aosta (21,6 pct), Sicily(18,3 pct), Sardegna (18 pct), Basilicata-Calabria (17,4 pct) and Puglia (14,7 pct). Although altogether, the number in the North surpass 30 pct in the North and Central regions, the South and islands are at around 18.7 pct, according to a study carried out by Cnel (National Council for Economy and Labor) in collaboration with Eurisiko for the analysis of dimensions, segments, needs, and network logic.


Network users connect mostly from home (8,500,000 people), but also from work (3,840,000), friends homes (3,320,000), school (2,020,000), coffee shops (580,000), libraries or training courses (290,000). More men than women use the net: 32.8 pct of men use the net, while only 20.4 pct of their female counterparts do. Among the 14 to 24 age category, 57.3 pct use the net, between 25 and 34, 43.4 pct do, between 35 and 44, 28.3 pct, and 7.9 pct of those over 44 navigate. Most web users have university degrees and medium-high incomes. Internet is used 33.5 pct of workers (especially businesspeople, freelance workers, managers, and office workers) 21.1 pct by people who don't work (69.1 pct students, 40.4 pct unemployed, 5 pct housewives, and 2.1 pct pensioners). Half know some English, and 23 pct know how to use the computer somewhat (31 pct very well, 38 pct fairly well). Those who reported an elevated understanding of the net amounted to 29 pct, a medium understanding 44 pct, and a low understanding 27 pct. very well.

Approximately 80 percent of internet customers use the network for electronic mail, 57 percent to seek useful information (in particular 44 percent news regarding jobs), 37 percent for study purposes, 33 percent for downloading programs, 32 percent to read the latest news, 20 percent to research bibliographies, 19 percent to listen to music, 17 percent to meet new people, 15 percent for banking services, nine percent to make bookings and seven percent for purchases. On line purchases include books, CDs, hardware, tickets and mobile phone services. However 42 percent say they are unprepared for electronic commerce and 19 percent say there are not interested in it.

The presence of Internet is ever more important in the world of business. Over 69 percent are internet linked and 32 percent have their own site, which is used almost totally to provide information on their own products and services. Access to Internet provides above all for the use of electronic mail (93 percent), the search for general news (72 percent) or suppliers (82 percent), to download programs (36 percent), various services (21 percent) and on line purchases (16 percent). The latter applies in 45 percent of cases to ICT products, 38 percent materials or party worked items, 31 percent banking or financial services, 24 percent travel services and 19 percent machinery and other office items.
Source: Agenzia Giornalistica Italia
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Italy's Immigration Scandal

With government debt at over 100% of GDP, an unsustainable pensions system, and poor economic groth prospects all round, The Italian Government's attitute towards the much needed immigration is nothing short of scandalous:

United against the Government's immigration policies. During tense times of political clashes concerning metalworkers contracts, and insults aimed at Cisl General Secretary, Savino Pezzotta in Lucca, the Cgil, Cisl and Uil Unions have finally come to a unanimous position on an important subject.The three Unions are joining forces for a protest in front of the Welfare Ministry on Thursday at 10am to criticise the Fini-Bossi immigration law, which they define "as hostile and discriminatory towards immigrants. They also wish to underline that "nine months since its coming into force, there are no traces of a regulation of its carrying out." In a joint statement they claim "we are in May and we still know nothing about the decree concerning the entrance of foreign workers 2003. Foreign workers with all necessary papers in order are being told by the Welfare Ministry that they cannot change jobs." They continue by saying that at the end of April only a little more than the 703,000 applications for legalisation have been dealt with, meaning the majority are unable to re-enter their home countries. "There is no talk of integration policies. We have asked the Ministry about this long ago but they are not listening. This situation is frankly no longer tolerable if you that the immigrants are not even given the right to speak and defend themselves."
Source: Agenzia Giornalistica Italia
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Bloomberg reports that the Italian government has trimmed by more than half its forecast for growth in what is Europe's fourth-biggest economy this year, thus joining other EU nations in limiting expectations for an early recovery. The Italian Ministry of Finance said in its quarterly bulletin that it expects the economy to expand 1.1 percent in 2003, less than last September's prediction of 2.3 percent. Much of the slowdown is due to growth problems in a European market which is hurting Italian exports. The projection of the Italian government matches that of the International Monetary Fund, which lowered on April 9 its forecast for the euro region for the second time this year. Europe's three biggest economies, Germany, France and the U.K., had already reduced their growth forecasts for 2003.

Optimism among Italian consumers fell for the third time in four months on concern the U.S. war on Iraq may aggravate an economic slowdown in Europe's fourth-biggest economy and fuel unemployment. The state-funded Isae institute's index of household confidence, one of the first monthly gauges of European consumer optimism, dropped to 106.8 from 107.7 in February, leaving the measure near January's six-year low of 106.2. ``My fear is that even if the war comes to a brief end we're in for a decade of terrorist fear not knowing where the next threat is coming from,'' said Maurizio Piglione, chief executive of Saiag SpA, a maker of household goods such as freezer bags, ironing board covers and aluminum foil.

The start of the war may exacerbate the drop in consumer spending that contributed to Italy's $1.3 trillion economy growing at its slowest rate in almost a decade last year. Production may be disrupted in coming months as Italy's union mobilize workers for further protests against the conflict. Any rebound will also be delayed by slowing growth in Italy's biggest trading partners, France and Germany. Italy's three-biggest unions called for a national, two-hour work stoppage today to be followed by protests across the country. More than 1.5 million Italians demonstrated against the war in Rome on Feb. 15, the biggest of the protests held that day around the world.

``If things were bad before they've just got a whole lot worse,'' said Antonia Gozzi, 34, a music composer who took part in the anti-war protests in Rome last month. ``A spending spree is the last thing on my mind.'' Consumers have been cutting back across Europe. Retail sales in the U.K. unexpectedly fell in February for a second month, the government said today. Optimism among consumers in Belgium, the only other EU country to already report on confidence, fell in March to a six-year low. Optimism in the 12-nations sharing the euro fell to the lowest in more than six years in February.

The European Commission Monday cut by almost half its prediction for 2003 growth to 1 percent for the dozen nation sharing the euro. The U.S.-led war on Iraq may further curtail growth in the $7 trillion economy, the commission said. ``Everything has come to a halt, complete stagnation,'' said Massimo Turconi, chief executive officer at Ratti SpA, an Italian maker of luxury silk scarves founded in 1945, at the end of the Second World War. ``I don't see a pickup in sight until the second half of 2004.'' Germany barely averted a recession in the fourth quarter as gross domestic product stayed unchanged. French consumer confidence slumped to a five-year low. Italy and its two-largest trading partners make up about 70 percent of the gross domestic product of the nations sharing the euro. The yield on Italy's benchmark 4 3/4 percent 10-year bond maturing in 2013 fell 4 basis points to 4.36 percent. A basis point is 0.01 percentage point. Americans share the European gloom. U.S. consumer confidence tumbled this month to the lowest in more than a decade, a survey by the University of Michigan showed on Friday. Italian consumers are also concerned that the slowing growth will lead more companies to cut jobs, boosting unemployment for the first time in five years. The country's 8.9 percent jobless rate is the third highest among the Group of Seven industrialized nations.

Fiat SpA and Pirelli SpA, two of Italy's biggest manufacturers, have already announced they will axe about 10,000 jobs. This month a spate of Italian insurers, banks and retailers have reported falling sales and some are resorting to firings to curb costs. Assicurazioni Generali SpA, Europe's fourth-largest insurer, posted its first full-year loss since the 1970s and is cutting 2,800 jobs. Ducati Motor Holding SpA, the Italian maker of Testastretta motorcycles, said net income tumbled 39 percent. Gucci Group NV Chief Executive Officer Domenico De Sole said fears of war are damaging luxury goods sales. Isae's survey of 2,000 consumers showed that the percentage of Italians who think unemployment will increase rose to 42 percent from 40 percent last month. ``Consumers have been in a crisis for a long time,'' said Marco Venturi, president of Italy's second-largest retailers' group, Confesercenti, which represents 240,000 retailers, hotels and tour operators. ``The government needs to intervene urgently to stimulate consumption and growth.'' Italian confidence has also been hurt by rising consumer prices, which have remained above the ECB's 2 percent ceiling even as economic growth slowed. Consumer prices in March probably rose 0.2 percent to leave the inflation rate at 2.6 percent the same as the EU-harmonized rate for Italy the previous month, a survey of 12 of Italy's largest cities is expected to show today, economists said.
Source: Bloomberg
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