Amadeusz Juskowiak

Economic spotlight italian boom

Italys strong economic revival has led some observers to talk of miracles and created euphoria in some quarters about future growth prospects but many Italian experts warn that the current wave of optimism is excessive

I think all this foreign interest in the socalled Italian miracle is really exaggeratedForeign observers always oscillate in the case of Italy between complete pessimism and unwarranted optimism says Luigi Spaventa one of Italys leading economists and a professor at Rome University

According to Spaventa these violent swings of mood have been occurring for the last 15 years with Italy one minute seen as the bad boy of Europe and unable to raise a dollar and the next a worker of miracles and basking in admiration

I think theres a lot of exaggerationOnce it used to be the underground economy and all the correspondents of foreign newspapers flocked to Italy to study this That was another story about nothing like writing about a black cat in a dark room

Spaventa in tune with other economists and industrialists here stress Italys recent achievements particularly the dramatic and solid recovery in the fortunes of industrial enterprises but warns that the economy is still vulnerable

Profits of private sector firms such as Fiat SPA FIATM and ING C Olivetti and C SPA are booming the major state industries are back in the black after years of losses inflation has nosedived and the trade and balance of payments deficits have been slashed Expectations by some experts that Italy is poised to replace Britain as the worlds fifth largest economy have also boosted optimism

Italy itself has made it clear it is not happy with what it feels to be its secondrate status among the major industrialised countries

Only this week it angrily demanded clarification of this status after being excluded from a meeting of finance ministers from the Group of Five G5 comprising the United States Japan West Germany France and Britain

Italy said its exclusion from the meeting violated an agreement reached in Tokyo last year to let Italy and Canada attend meetings held by the five whenever discussions concerned managing the international monetary system

But Italy needs first to tackle some fundamental problems still facing its economy economists and industrialists say

We must not forget that ours is still a vulnerable economy warns Fiat managing director Cesare Romiti

He says that while Italys recent achievements are indeed cause for satisfaction and optimism the focus now should be on the problems still remaining rather than those already solved

The countrys huge state sector deficit high unemployment and a heavy dependence on imported oil are among the most worrying problems experts say

The size of the state spending deficit estimated at 109561 billion lire in 1986 and targetted at 100000 billion lire this year means there is a risk inflation could spiral again says Carlo Scognamiglio head of the private Luiss university in Rome

Inflation fell into single digits for the first time in a decade in September 1984 and by January this year was running at 45 pct but it is still not low enough to guarantee international competiveness economists and industrialists say

And unemployment was running at 116 pct nationally last October according to the latest official data

Recent official data showed that of a total 277 million people seeking work in October 1986 almost 73 pct were aged between 14 and 29 Unemployment in the south was running at 177 pct more than double that in the industrial north

The Organisation for Economic Cooperation and Development OECD recently forecast that Italian gross domestic product GDP would rise rise three pct in 1987 after expanding 25 pct in 1986 But it warned that growth was unlikely to be enough to check rising unemployment

Another problem is Italys reliance on imported raw materials The country imports around 80 pct of its fuel needs

This factor actually worked sharply in Italys favour last year when lower energy costs helped slash the countrys trade deficit to 3717 billion lire by year end from 23085 billion lire in 1985

But economists say the improvement owes little to any structural change in the Italian economy and that any reversal of the trend in costs could have serious consequences

If Italy truly wants to be counted among the worlds top industrialised nations it also needs to tighten up stockmarket operating procedures and encourage firms to supply more quality information about their activities economists say

Italy has no controls on insider trading

The country also needs to shed its rigid capital movements controls a European Community directive calls for these to be dismantled by 1992 but this too will require a less blinkered attitude and a change in traditional operating procedures economists say

Even today if I wanted to invest in the Tokyo bourse I doubt Id find the expertise in a brokerage firm or in banks which would allow me to do that says Spaventa