thisweekinitaly.com

Connecting Two “Unrelated” Stories

I wrote a while back about the polite notice I got in my mailbox concerning
the repaving of the street in front of my apartment building. Last week I
noted that the Giro d’ Italia bike race passed in front of my building.
These two stories were not unrelated, as some friends pointed out to me. My
street was not in great need of resurfacing, but it got special treatment
because the race was to pass over it. Meanwhile a friend of mine who lives
on a street with many potholes plans to ask the mayor to have the Giro d’
Italia in 2006 go down her street.

Learning English a New Way

I’ve mentioned that late at night many Italian TV stations feature long
advertisements for “talk dirty to me” telephone services. Recently on one
of these stations there was instead an English lesson given by a woman in
scanty garments. It concerned phrases one might use in a restaurant. My
favorite (certainly an essential one for anyone wanting to speak English in
a restaurant) was “Sorry I licked your hand; I thought it was the ice
cream.” The babe giving the lesson could lick my hand anytime without
offering an apology or an excuse!

Romantic Italian Men

I wrote once that I thought Italian men were quite romantic before marriage
and very unromantic after tying the knot. I mentioned this to a married
woman friend of mine. She disagreed saying “My husband wasn’t romantic
before marriage either.”

A Meal at a Friend’s House

One of my students of English invited me and some others to her house for
dinner. Here was the menu:

Fruit punch
Appetizers of marinated mushrooms, two types of prosciutto, salami, crostini
with liver patè or meat patè, sausage of wild boar.
First Course of two pastas—one carbonara and the other with a red cream
sauce with mushrooms
Second course of beef and/or rabbit
Side Dishes of Peas with bacon, green salad, and tomatoes cured in olive oil
Dessert of Torte, Cantucci (type of cookie) with Vin Santo (special wine for
dipping the cookies) , and Strawberries
Wine with meal and dessert wine
Coffee

Joke about When Life Begins

I told the old joke about the priest, protestant minister, and rabbi arguing
about when life begins. The priest says it begins at conception. The
minister counters that it begins at birth, the rabbi says “life begins when
the children leave home.” For the Italians life begins very late.
Furthermore, they are not joyous when the children (or more usually the
single child) finally leave home. In addition the children remain
“dependent” upon their parents even after leaving home; contact between them
is much more frequent and if there is any problem, the parents are called
immediately.

Squabbling Leftist Parties

I mentioned recently that the leftist parties had a quite unified coalition
in the recent regional elections in which they were very successful. They
were dedicated to the idea that they had to unify to oust the center-right
coalition of Berlusconi. After their success in the regional elections, it
appears to some leftist politicians that they can win the next national
election (2006) even without complete unity. So now they are squabbling
again.

Reflections on Religion

Recently there was a show on Italian TV comparing religion in Italy with
religion in the USA. One of the key points was that in Italy churches
(primarily the Catholic Church) get funds (not all their money) through the
state whereas in the USA churches are dependent upon the contributions of
members. Americans interviewed said that they gave generously to their
church, some even tithing. Italians threw a few coins into the collection
plate. One American said that giving 10% to her church was not a great
sacrifice considering all the good things God had done for her. It would be
almost impossible to find an Italian who would say the same thing.

I went to an evangelistic tent meeting in Pistoia. This type of religion is
rare but exists in Italy. The group sponsoring the two-week tent meeting
(“Christ is the Answer”) was founded in the USA. In such a setting the
preacher may emphasize hellfire and damnation (“change your ways now”) or
the love of God and Jesus as an answer to your personal problems. Clearly
at this meeting the latter was the theme. The group did not sing hymns, but
a trio in front sang religious songs. They did not pass a collection plate.
There was an “altar call” but people did not come forward to declare or
reaffirm their faith but to receive a special prayer from the minister (who
may have been a lay minister—I could not tell)

Although there are some charismatic groups in the Catholic Church, in
general this type of evangelistic religion is far different from Italian
Catholicism. Considering that the Italians can certainly be emotional, this
type of religion may have some appeal, but it still seems to be a fringe
phenomenon in Italy. In the USA when a person leaves one church, he or she
may quit religion altogether, but often such a person changes churches.
Protestants become Catholics and vice versa. Baptists become Presbyterians,
Lutherans become Episcopalians, etc. In Italy it seems when people stop
practicing the Catholic religion, they almost always end their religious
life.

Smoking Beggar

I saw a beggar with a sign about having five children and no home. The
sign was almost certainly a lie (This is a standard formula for such signs.)
, but let’s assume it is true for a moment. He was lighting up a cigarette.
My reaction, as an American, was “If you have to beg to feed your family,
why are you smoking $5 a pack cigarettes?” An Italian would be more likely
to think “Even if he is poor, he nevertheless deserves to have the pleasure
of smoking just like those more wealthy than he.”

Progress in Italy

A friend found in a Supermarket (that featured imported items) some
microwave popcorn that was manufactured in Spain. This is the first time I
have heard of this item in Italy. When I make microwave popcorn (purchased
at my son’s military base in Germany) for Italian friends, they are amazed
at this novelty.

A Few More Observations about Spain

Spanish Train Security

Getting on a train in Spain is like getting on an airplane in another
country.
Spain, of course, had the terrible bombing at the Madrid station. The
luggage is
X rayed. You have to show your ticket before boarding. I’ve not noted much
(if
any) train security in any other country.

The Prado

This is the world famous art museum in Madrid. I only had 45 minutes to
visit
it. Still I was amazed at the number of well known masterpieces that I saw.
It
is clearly in a league with the Louvre, the Hermitage, the Metropolitan
Museum
of Art, etc.

A Spanish Cathedral

The only cathedral I visited in Spain was the one in Granada. Much of it
was
under restoration. What I noted was the number of religious artifacts done
in
gold. There was much more gold than one sees in an Italian cathedral. Of
course, the Spaniards extracted a lot of gold from the New World when they
were
the major colonial power.

Breakfast in Spain

The Italians and the French have a roll and coffee for breakfast if they eat
anything. The Spaniards on the other hand like large breakfast sandwiches.
They are a bit more like the Germans and northern Europeans in having a
larger
breakfast.

Returning to Italy

I flew back from Madrid to Florence. At the Florence airport (a small one
with
few flights), I nevertheless had to wait almost an hour for my luggage. I
have
since learned that this is not an uncommon occurrence at this airport. Lest
one
think that this is another example of government inefficiency, I should note
that the airport is run by a private company. Some passengers were upset
and
began to yell “vergona” which means “shame.” This incident reinforced my
admittedly superficial perception that in fact Spain as a nation runs much
better than Italy does.

The Gettysburg Connection

At a hotel in Florence with some American friends, we got into a discussion
with
the bartender about where we were from in the USA. It turns out that: (1)
his
cousin lives in the USA and was an extra in the film “Gettysburg,” (2) the
bartender had seen the film, and (3) the bartender had visited both the town
of
Gettysburg and Gettysburg College where I worked for 30 years. Sometimes I
meet
people in Italy who remember from their school studies that Gettysburg was
the
site of a famous battle in the American Civil War, but I’ve never met before
an
Italian so “connected” to Gettysburg.

Giro d’Italia

This major three-week bike race is in full swing. Last year I saw two
stages, one coming through Pistoia and another in a nearby mountain area.
This year, however, on the day I was returning from Spain the race passed
directly in front of my apartment building. I did see the stage the next
day in Florence. Lance Armstrong had talked about riding the Giro this
year, but I assume his new sponsor (who is paying him millions) told him
that he was riding instead in the Tour di France. I don’t know if Lance
will try the Giro d’ Italia or the Tour of Spain next year, after he says he
will no longer ride in the Tour di France. His reputation as one of the
greatest cyclists of all time is harmed by the fact that he has not won any
of these other major races.

Celebrity Wedding

On May 28 in nearby Monticatini, Mauro Maccioni, son of Sirio Maccioni, will
be married. Sirio is the owner of Le Circe restaurant in New York and some
similarly named restaurants elsewhere. Many American and European
celebrities will be at the wedding including: Woody Allen, Robert DeNiro,
Donald Trump, Zubin Mehta, and Rudolph Giuliani. A little-known fact is
that when pictured from a certain angle, Rudy Giuliani looks like my twin.
In fact, one time I picked up the Gettysburg Times and said to myself “What
is my photo doing there on the front page?” It was Rudy’s picture; the
resemblance was that strong. So maybe I can crash the wedding by claiming
to be Mr. Giuliani.

For Those of You With a Stronger Interest in Italy

First, a nice web site about events in Italy is done by a travel agency in
the
Chicago area. It is www.selectitaly.com All the back issues are available
on
the web site.

Second, I recently included in this newsletter an article from The
Florentine
(new English language newspaper in Florence) about the Italian economy. The
same
author recently published in this newspaper an article on the state of the
Mafia
in Italy today. Here it is for those of you who are interested.

Organized Crime Still a Force in the South by Anthony Smith

“ Some big arrests have been made but it remains to be seen how effectual
they will
be as long as the generali are still giving the orders, some of them from
behind bars. ”

A wave of tit-for-tat executions has recently engulfed Naples, southern
Italy’s
main metropolis. The Camorra, the mafialike criminal organization that
controls
large swathes of the city and other towns in Campania has been wracked by
internal confl ict since a splinter group of “Scissionisti” began an attempt
to
wrestle control of the Camorra’s lucrative drugs trafficking business from
the manacles of the leading di Lauro clan. Forty-one people lost their lives
between October 2004 and February 2005 with 18 people brutally killed in
January
alone. As most of the actual \u2018hoods’ have gone to ground since this
particularly
gruesome round of blood-letting got under way, or are already in jail, many
of
the victims have been their distant, seemingly insignifi cant relatives.
Some
big arrests have been made but it remains to be seen how effectual they will
be
as long as the generali are still giving the orders, some of them from
behind
bars. Few expect the killing to stop completely, least of all the hapless
Italian police left trailing in its wake.
/*
CYCLE OF POVERTY AND INTIMIDATION Like Italy’s other major criminal
organizations, Sicily’s infamous Cosa Nostra, the less well known Calabrian
\u2018ndrangeta and Sacra Corona Unita from Bari, violence and intimidation run
deep
in the Camorra. In fact, the Neapolitans are arguably the nastiest. Each new
“Camorristà” is required to murder someone as a precondition to membership.
“Certi bambini”, an Italian film released just last year by the Frazzi
brothers
and known as “A Children’s Story” outside Italy, was chillingly successful
at
portraying the vicious and dismal cycle of poverty and peer pressure in
Campania’s slums that spurs on adolescent teenagers to carry out their fi
rst
\u2018hit’. Although much crime in Naples and neighboring cities like Caserta and
Salerno is probably never reported, 140 shootings were reported in Campania
last
year and all of them were believed to be related to organized crime. For
visitors to Italy who have seen little but Venetian canals and the Tuscan
countryside, the first glimpse of any of the poor and rundown inner-city
neighborhoods in the big cities of the Italian south, the “mezzogiorno”,
will
come as a huge shock. Whole districts of Palermo, Bari, Catania, Reggio di
Calabria and, the south’s biggest metropolis, Naples, often look more like
Beirut back alleys than Milanese housing complexes. Years of political
neglect
and corruption, from the highest levels of government down to the local post
office, have taken their toll. The economic infrastructure present in most
modern conurbations is nonexistent in slum quarters like Scampia and
Secondigliano where most of the killings have taken place. Unemployment,
especially among young people, is rife and since whole families often work
in
one form or another for the mafi a, crime is often the only way up for some
of
them. Recent attempts to revive the tourist trade in Campania, successfully
so
in 2004, could easily suffer a serious setback as a result of the violence.

MAFIA BUSINESS IS BOOMING In recent years, the perception of Italy’s mafi a
gangs has been one of antiquated and increasingly under-attack relics from
the
past, on a steady decline thanks to the where it thrives the most. In a
report
released in January 2005, the Institute of Political, Economic and Social
Studies (Eurispes), an important Italian research center, reported that the
mafi
a-controlled economy is growing rapidly and now amounts to an estimated 1.05
trillion € per year, a quite staggering 9.5% of Italian gross domestic
product. Estimated annual profits run at something like 100 billion Euro.
Even
if the precise fi gures are impossible to know for sure, they hint at the
severity of the mafi a drain on the Italian economy, or as Italian President
Carlo Ciampi calls it “the cancer that is eating away at our lives”.

CUTTING OUT THE CANCER That 1 trillion € annual turnover is drawn from a
predictable portfolio of organized criminal activities: drugs traffi cking,
prostitution, extortion, usury, and pilfered public funds. Drugs remain the
biggest money spinner accounting for about 60% of all mafia profits. The
\u2018ndrangheta reaps in the lion’s share of drugs money at 22 billion € with
the
two other big mafi a organizations, Cosa nostra and camorra ringing up
distinctly unhealthy profits (for everyone else) of 18 billion and 16
billion
Euro a head. The Calabrians also make the most from prostitution while Cosa
Nostra siphon off the most public funds and illegally acquired
shareholdings.
The Camorra is active in extortion and usury that brought them 4.7 billion
Euro
last year. The biggest mafi a in strictly financial terms, the \u2018ndrangheta,
makes a 30 billion € annual profi t. By way of comparison, the gross
domestic
product of Calabria, the \u2018ndrangheta’s home \u2018patch’, though unlikely to be
its
sole area of interest, was a measly 28 billion € in 2003.

FIGHTING FOR CONTROL OF NAPLES’ DRUGS MARKET The Neapolitan Camorra
exercises
similar financial clout in Campania a more populous and potentially
wealthier
region of Italy than Calabria. Add to its 16 billion € and growing drugs
profi ts, the 587 million € from prostitution, 5.9 billion € of
embezzled
public money, and the 4.7 billion from extortion and usury and you get a
sizeable 27 billion € income, thank you very much. That tallies up to
just
under a third of Campania’s 84.6 billion € gross domestic product in
2003.
The current internecine crisis among the Camorra is widely believed to be a
to-the-death struggle for control of the city’s increasingly profi table
role at
the center of the European drugs market. Cocaine imported from Spain,
Britain
and the Low Countries frequently finds its way onto the Neapolitan streets
and
into the hands of the city’s multitudes of dealers and \u2018buttigliella’
addicts, a
hyper-addictive form of crack-cocaine. Since 2003 “Fats” di Lauro, running
the
show in the absence of the senior di Lauro, Paolo, who is in hiding, has
been
attempting to centralize control of the drugs trade in his own hands by
installing young di Lauro loyalists in key positions throughout the
camorra’s fi
nancial apparatus. The Scissionisti’s attempt to resist and break out on
their
own is believed to have triggered the spate of gruesome murders and
reprisals.
Even if the arrest in late Febraury of Raffaele “the Spaniard” Amato, leader
of
the ò Lello clan chiefly behind the scissionisti, may stem the killing, the
underlining problems will remain \u2013 rampant poverty, spiraling profi ts and
utter
lawlessness.

SCARY STUFF IS SCARING MORE PEOPLE MORE It is no wonder that Italians are
more
afraid of the mafia than at any time since the early 1990s. According to the
aforementioned Eurispes survey, 13% of the population now fears becoming the
victim of organized crime, a 5% increase on the previous year. The figure is
undoubtedly much higher in the poorer southern regions of Italy where mafi a
power is at its greatest and people’s willingness to talk at its lowest. In
truth, there is no more appropriate measure of the mafi a’s currently
thriving
state than that of fear. After all, fear is the core asset of any mafi
a-like
criminal organization, the resource on which all its fi nancial gain is
based.
Only Italy’s political masters can put a stop to the problems in Naples and
other mafia-controlled cities by getting serious about fi ghting corruption
and
improving living conditions for the locals. Creating the kind of climate
where
lawful employment can compete with the profi ts to be had from a life of
crime
is a prerequisite. Otherwise, the hoped for prosperity placed in the
swelling
numbers of visitors coming to Naples, will prove mislaid and futile as the
fear
out on the mean streets of Naples translates into cancelled bookings at the
tourist office.

*/

Report from Spain

General Impressions

This is second time I have been to Spain since moving to Italy. The first
was to Barcelona. Now I am at Nerja on the southern Spanish coast. Coming
from Madrid to Nerja on train I was struck at how arid and unpopulated the
land was. I know that northern Spain is more lush. Spain is a very large
country with a population smaller than many European countries with less
area.

Once again I noted that Spain is less expensive than Italy. Now in Italy
things are cheaper in the south than in Tuscany, but here I am in a major
tourist area (usually not the location of low prices) and it clearly is less
expensive. A friend sent me an article from USA Today this week about
Americans living in Italy who are moving back to USA because of the high
cost of living in Italy which is based upon both the strength of the Euro
vs. the dollar and also the high price levels in Italy. The € vs. dollar
situation is bad in all of Europe, but in Spain the price levels are lower.
I retired to Italy in part because of my Italian-American heritage; absent
such a heritage, Spain is a more attractive retirement location.

This part of Spain is noticeably cleaner than my area of Italy. Northern
Italy (with the Germanic influence) is cleaner than central (including
Tuscany) and southern Italy.

Nerja

It is a resort community—very pretty location with nice beaches (where
topless is a popular option for the ladies) and mountains immediately to
north of the town. It has a very large British contingent of residents.
You could live here in a “little Britain.” I, however, would not like to
live in a country where I did not speak the language even if I could
function in English in the expatriate community.

Speaking about the English Language

I mentioned in an earlier newsletter that Italy and Spain are the two
European nations where knowledge of English is the least common. I noted in
the train to Spain (which was a Spanish train—nicer but more expensive than
an Italian one) that the signs in the bathroom were in German, French,
Spanish, and Italian but not English. This is very unusual today. In Nerja,
of course, many clerks speak English. If I were in a Spanish area with
fewer English speakers, I am sure my Italian would prove more useful than my
English.

I mentioned once that the standard English language instructions on all cash
machines in Italy end by saying that the machine will be ready for another
transaction “in a few moment.” In Spain the instructions on one machine (I
don’t know if these are standard on all Spanish cash machines) told me that
my request was “beeing processed.” Maybe signs in Spanish in the USA often
contain similar errors. Still I cannot understand why any company using
English (or any foreign language) instructions does not have these reviewed
by a native speaker first.

Understanding Spoken English

Whenever one hears people speaking in a foreign language, they seem to be
speaking very quickly. When I show films with an English sound track to
Italian friends who are learning English, they comment upon how fast the
actors are talking. Recently I showed the film “Lonestar” A main character
in it (the young sheriff) speaks very slowly and deliberately. Because the
film takes place in southern Texas, the general rate of speech os slower.
Still my Italian friends commented that the actors spoke rapidly.

Fighting Credit Card Theft

When you use a credit card in Spain you must produce a valid photo ID. The
clerk looks at the names on card and ID and at the photo and the person
presenting the card. This makes it hard to use such a stolen card in
person. Paying by a credit card over the phone is generally far less common
in Europe. I think paying by mail using a credit card here is more common
than over the phone, but not nearly as typical as in the USA.

Fight Obesity

There is a poster in Spain asking people to join in the war against obesity.
You see an occasional obese person here (as elsewhere in Europe), but the
percentage is miniscule compared to the United States. They are starting
the war here at a lot earlier stage.

The Shooting of the Italian Agent at Baghdad Airport

The United States has issued a report saying that the soldiers did nothing
wrong
(no surprise).  Italy rejects this report and issues its own with a point by
point refutation of the USA report (no surprise).  Back to square one.  I
note
that in Italy the man who was driving the car does not seem to be talking
much
on the news instead the woman journalist who was in the back seat  is the
one
who speaks about what happened.  I am told that the driver did give a
statement
that repeated the Italian version of what happened, but is seems to me that
he,
not the journalist, is the best witness of how fast he was driving, did he
receive warnings, etc.

Who knows what happened?  A version that might partially reconcile the two
contradictory
accounts is as follows. The Italians were supposed to warn the Americans in
advance that this specific car was coming through.  Either this warning was
not
made or was not communicated to the soldiers on the ground at the airport.  
So
the driver thought that he had a prearranged  “free pass” to go through the
check point. He was not paying a lot of attention and missed the warnings;
by
the time he realized what was happening the firing had begun.  It was too
late
to react.

Big News in Germany

My son Chris’ wedding was the first one to be held in a newly renovated
castle
and tower.  This is one reason why the local mayor (not a lower official)
conducted the civil ceremony, and gave the couple a gift of a city shield.
The
local paper did a little story on this event.  It was in German but Chris’
promises a translation soon.

Justice, Italian Style

In 1969 a bomb went off in a bank in Milan killing 13 people and injuring
over 100.  Originally it was thought that left-wing terrorists had done this
deed, but then it was discovered that neo-fascists planted this bomb and
others to an “anti-leftist” reaction in Italy.  The trial of a number of
accused began in 1974, but all the accused were acquitted in 1985 following
numerous trials and appeals.  The case was reopened in 1999 on the basis of
new evidence.  Three neo-fascists were condemned to life in prison, but the
decision was overturned on appeal.  In Italy the families of the victims can
join in the criminal trial and have their own lawyer participate as well as
the public prosecutor.  Some of the families exercised this option.  Now
they are being billed (according to Italian law) by the State for part of
the costs of the trial.  Don’t worry, if the public sympathizes with these
families, they will probably never pay any costs regardless of what the law
says.

A Trip to Naples

I went with my sister  Carol for two days in Naples.  Naples is very
different from Florence.  First it is dirty.  On the news in Italy there is from time
to time a story about a garbage collectors’ strike in Naples.  There was no
strike when we were there, but there were still piles of garbage in the street.  
Second it is loud.  People drive with their horns.  Third it is chaotic.  You take
your life in your hands when you step off the curb.  Fourth, although we felt no
sense of danger, the subways now stop at 11 pm rather than midnight because,
we were told, of the “danger.”  On a lesser level my sister fell after stepping
into a big hole on a sidewalk.

Why would anyone go there?  Well the Bay of Naples is beautiful.  The food
is excellent. We saw two world class museums -the national archeological
museum and an art museum.  It is economical.  The 99 cent store in Florence is matched by a 52 cent store in
Naples.  The people are lively and vibrant.  Our cab driver one night sang
famous Neapolitan songs for us all the way home.

We arrived, unknowingly, on an important date-the festival of the
liquification of the blood of San Gennaro.  The Cathedral has both some bones and some
coagulated blood of the saint. Once a year the blood is taken out from its
cabinet and miraculously liquefies.  We did not see the actual point when it
liquefied, but we saw the procession that took the blood (as well as many
statues from the church) around the city as it returned to the Cathedral.  I
did not get a real close look at the blood-I’m sure it was liquid.  I did not
get to kiss the Cardinal’s ring as many were doing.  He is a short, fat, smiley
guy, perfect for Naples. Still it was an impressive sight.

A Trip to Pompeii

While at Naples we went to Pompeii.  We took a tour with a guide. I was
surprised that he did not take us to the number 1 attraction at Pompeii —
the house of prostitution with the erotic wall paintings. I thought that maybe
he considered our group, mostly older folks, too staid for such a visit. Later
I discovered that the street with this attraction on it was closed for
repairs. When we visited the church of Santa Croce in Florence, at the box office
where you buy tickets to enter the church, there was a sign noting which famous
works in the church were under restoration and not available for viewing.  I
assume this was to avoid complaints from ticket buyers.  Pompeii should do the same
(or offer a reduced price) if the house of prostitution is not open.

Hollywood Movies in Italy

I read in a book about Hollywood in the 1940s that some foreign editions of
films were made in Hollywood at the same time the English version was
filmed.  I had always assumed that Hollywood only made English versions that then were
dubbed or given subtitles abroad.  I saw recently  in Italian the 1942
Hitchock film The Suspect.  At times in this film a character reads a letter, note, or
telegram. These were in Italian. (Ordinarily in this case they would be in English and
the text would be in Italian subtitles or with a voice over in Italian.)  
Obviously Hollywood had sent to Italy a version for the Italian market.  (A friend
suggested that in Italy they may have inserted into the film the notes
written in Italian, but this seems to me to be a ridiculous expense.) I
don’t know if the Italian dubbing was done in Hollywood or in Italy.

The Italian Economy

There is a new weekly newspaper in Florence, The Florentine, in English.  
For those of you whose interest in Italy goes beyond the usual short
observations in my newsletter, here is an excellent article “The Face of the Italian
Economy” by Anthony Smith from The Florentine.  I note that the the article does not mention
that with a vibrant underground economy, Italy may be a little more
prosperous than the official statistics suggest.

“Italians Love to Lamentarsi, Si Lamenta, (one complains)”

Italy’s Economy – as bad as most italians think?

Bring up one subject with your
average Italian and you can expect a real ear-bashing – the economy.
Italians love to lamentarsi, “si lamenta” (one complains), about many things, but
especially about the grim outlook for the country’s economy, like those in
other developed countries that feel increasingly threatened by the mighty Chinese
tiger. But just how badly is Italy doing in the economic stakes? Is it a
misfiring basket case or just another European country in need of a little
more of the Thatcherite medicine it’s been taking in steady doses since the mid
Nineties?

Italy—a tale of two quite different economies

First off for the
uninitiated it does well to remember that Europe’s fourth largest economic
power (after Germany, France, and the UK) in economic terms, and not only economic
terms, is not really a single country at all but two quite distinct economic
entities: a pumped-up, super-charged and extremely dynamic North, and a
depressed, under-performing subsidy-dependent South. The two are linked,
both geographically and economically, by the slightly above-average performing
Centre containing Tuscany, Umbria, Marche and Latium.

Northern engine room

Northern Italy includes nine regions most of which are economic powerhouses in
European terms, some even in global terms. The Alpine region of Bolzano-Bozen is one
of the top ten in Europe in terms of Gross Domestic Product “GDP” per capita at
almost 160% of the EU average. The engine-room of the Italian economy,
Lombardy containing the business capital Milan, recorded high GDP per capita growth
between 2000 and 2002, up from 142% to 144% of the EU average. The North is
a patchwork of industrial districts, highly specialized in a wide range of
segments such as leather goods, tiles, glass and ceramics, and eyeglasses,
making many of them global leaders in their fields.

Mezzogiorno—southern backwater

Unfortunately for Italy, the South is as far
removed from the country’s North as could be. Here regional per capita
wealth was around 74% of the EU average and, unlike many northern regions, those in
the south experienced little improvement in respect of the average between 2000
and 2002. The poorest region, Calabria, at just under 68% only managed to grow
by 0.2% over the period, paltry in comparison to European regions in the new EU
member states. Years of massive state subsidies (reaching up to €100 billion
a year) have done little to reverse the huge disparity in GDP per capita
between the two halves of the country, which if anything has only widened. Indeed,
many economists now blame north-south transfers for accentuating the problem by
raising labour costs to uncompetitive levels and encouraging the pervasive
culture of corruption and sponging that plagues much of the South. The
social consequences are there for all to see with unemployment of 19% in the South
compared with only 4% in the North, and the enduring and insidious problem
of organised criminality.

Reforming Italy—tackling over-regulation

In common with other continental
European economies, Italy’s is beset with the kind of “structural problems”
(i.e. red-tape, trade unionism, state interference) that International
Monetary Fund “IMF” and Organisation for Economic Co-operation “OECD” reports
periodically slam for stifling business and entrepreneurship. Or is it?
These days Italy tends to score highly among western nations for reform of such
areas as labour and financial markets. Due to the introduction and rapid expansion
of short-term contracts almost nobody in Italy expects to get a “job for life”
with an indefinite contract any more. Those that have them, many of them
employed in large companies or the public sector, jealously guard what has now become a
privilege rather than a right. The trade unions remain very powerful and
frequently bring chaos to the country’s transport system for instance over
wage bargaining and working conditions. But their power will eventually wane as
the increasing millions of unprivileged Italians without indefi nite contracts
spurn union membership and push for lower taxes. Trade on the Milan borsa has
benefited from newer clearer company laws which have strengthened shareholder
rights and improved accounting standards, making it one of continental Europe’s
better performing stock markets.

The Bright Lights?

While there is still considerable room for improvement, especially in
simplifying Italy’s arcane and labyrinthine tax laws, the
knock-on effect of reforms now sees Italy as the seventh most “business-friendly”
country in the 24-member OECD. Foreign investment may not exactly be pouring in but
there is at least a trickle. In such areas as call centres and temp agencies
looser laws on hiring and firing have created new markets for foreign
companies where they simply did not exist under the previous conditions when jobs were
created by the state. There have also been rich pickings in Italy over the
past ten years as the state has sold off or part-privatised whole branches of
industry such as oil and gas, electricity and telecoms, once the sole
preserve of state-run monopolies. The public sector now accounts for just one-tenth
of bank assets in Italy compared with over two-thirds in the early 1990s. So if
things are looking so (relatively) rosy, why all the gloomy faces?

Storm Clouds Forming

Despite the progress, there remain a number of
deep-seated problems that recent governments have failed to address and over which
crisis point may be looming very soon. These largely concern Italy’s declining
competitiveness and productivity in certain sectors, especially textiles,
and the looming catastrophe in public finances. The threat posed by China, India
and other developing countries to the Italian textile industry is acute and
a fine, if extreme, example of the dangers facing a variety of key sectors. Up until
this year, the EU has been the world’s leading exporter of textiles thanks
to the top design houses in France and Italy and, no less importantly, to the
substantial barriers in Europe to imports from developing countries. Half of
the EU’s textile firms are in northern Italy, some 50,000 small and medium-sized
family-run businesses that face an onslaught of cheap Chinese imports
following the final phasing out of restrictions in line with WTO rules in January
2005. One option is to shift production overseas, as many French producers have
been doing since the mid-Nineties. Or alternatively they may simply go bust or be
bought up by foreign companies, something even Chinese investors keen to
acquire Italian expertise are silently hoping for.

House of Disorder

At the macro-level things are even worse. Public debt in
Italy now stands at 106% of GDP according to data for 2004. With growth so feeble
it is more or less cancelled out by inflation, the chances of repaying any of
that debt are remote. The IMF was even forced to criticise Italy over its debt
problem recently citing the impending crisis in its pensions system. Many
developed economies may be failing to deal with the ‘problem’ of ageing
populations and Italy is no exception. But hang on, it is an exception
because in Italy the problem is about as serious as it gets. Italians simply produce
too few children and live too long to finance their later lives. The birth rate
in Italy has sunk to just over 1 child per adult female, making it one of the
least fertile countries in the world. Add to that Italians’ exceptional longevity
(with modern medicine and the Mediterranean diet largely responsible), given
there are more aged per capita in Italy than anywhere else in Europe. Top it
off with extremely generous state pensions provisions and what do you get? A
ticking time-bomb for public finances. A major reform of pensions in 1995 altered
the method for payment from an infl ation-indexed to a contributions-based
system. This was a necessary corrective measure, which unfortunately came about 20
years too late for the new crop of retirees never mind those who will retire a
generation from now. The legions of pensioners who retired in the years up
to 1995 often receive a salary-indexed payment worth 80% of their former wages.
As a result pensions consume just under 14% of Italian GDP and, before the
reforms have even the slightest chance of biting that percentage is predicted to
rise to 15% by 2015. As the ratio of workers to pensioners rapidly falls, the public
purse is heading for bankruptcy. The only way to avoid such a collapse may
be to radically slash state pensions once and for all. As yet, no politician has
dared raise the notion, which would be tantamount to electoral suicide, or even
worse—Italian economists have been assassinated for less.

Taxing Times Ahead

If things were not bad enough the Italian government
received something of a potential killer blow earlier this year as a case against the
state for unlawful tax collecting went before the European Court of Justice.
The so-called Irap, introduced in 1998, is a regional tax on Italian businesses
that is levied on turnover in a manner similar to VAT. The preliminary report by
the Court’s advocate general agreed with the plaintiff, disgruntled Italian
companies, that the tax did indeed contravene EU rules on indirect taxes and
should, therefore, be repaid. If the Court agrees, a massive tax return bill
of some €120 billion will have to be found to reimburse taxpayers, a sum
equalling about 10% of Italian GDP. Although there is little chance that any companies
will see much of their money any time soon, the Italian state may be forced
to include its obligations for progressive repayment over the course of future
budgets. Not what the doctor ordered the ailing patient. So having started
with a mixed picture of an Italy both dynamic and depressed, losing ground in
some areas, gaining in others, the overall picture gets progressively bleak once
the potentially disastrous state of public finances enters the picture. Italy’s
economic future and with it that of its working age population are
intimately intertwined with two things: the success or otherwise of its core businesses
to adapt to the new globalised reality and the ability of its politicians and
central bankers to resolve the pensions crisis. But neither will be easy,
hence si lamenta.