In marked contrast to the previous post, the economic news from Italy is decidedly not good. First there is the Parmalat scandal, where the financial black hole could in fact be bigger than €7bn. Berlusconi is remaining calm, saying that the government would take measures to "above all save the industrial part of the company and jobs" and "separate finance from industry". Those who may well not be so calm are the people who have an interest in the financing of Italy's growing national debt, the largest in Europe and the largest in the OECD outside Japan - as a % of GDP that is. The nervousness will only be reinforced by this news that Italy is having even more difficulty crawling out of the recessionary hole than the other large European economies. And while it is certainly far too soon to say told you so, I was suggesting this earlier in the year. Italy is the prime candidate (alongside Germany) for noting the Japan ageing factor - if indeed this is what it is, and with it arthrosis of the growth process.
Italian business confidence unexpectedly fell in December to a five-month low as the euro's rise to a record against the dollar weighed on exports and manufacturing stagnated.
An index based on a survey of 4,000 executives fell to 91.2 from a revised 94 in November, the government statistics office said in Rome. The index was expected to rise to 95, according to the median forecast of 18 economists polled by Bloomberg News. "The euro's strength is starting to get scary,'' said Renzo Belcaro, chief executive officer of car-finishings maker Silmet SpA and president of an association of 4,500 small and medium- sized companies in northeast Italy. ``If we don't export, we're dead.'' Italy, the third largest of the 12 economies using the euro, is struggling to recover from its first recession in almost a decade as the currency's appreciation makes it harder for companies such as Fiat SpA to sell to foreign customers.
The five-year-old euro's rise poses ``remarkable difficulties to the speed of recovery,'' European Commission President Romano Prodi, a former Italian prime minister, said last week. Italian exports outside the European Union fell almost 11 percent in November.
Fewer Italian manufacturers plan on boosting production in the next three months, Isae said. Inventories rose, and foreign demand fell. An index measuring orders from abroad dropped to minus 17 from minus 14 in November, a sign the increased value of the euro is squeezing exporters.
The survey coincides with growing woes at Parmalat Finanziaria SpA, Italy's biggest food company. Parmalat may file for bankruptcy protection as early as today after admitting that a 4 billion-euro ($5 billion) bank account didn't exist, people familiar with the situation said.
Parmalat failed to pay investors 150 million euros of bonds, Standard & Poor's cut its credit rating to below investment grade and founder Calisto Tanzi resigned as chairman. Parmalat's financial troubles put 36,000 jobs at risk.
``2004 isn't going to be an easy year,'' said Giovanni Burani, chief executive of Mariella Burani Fashion Group SpA, owner of the Mila Schon fashion label, in a televised interview with Bloomberg News.
Italy, which emerged from recession in the third quarter, faces other obstacles to a recovery. Labor unrest kept production unchanged in October. In Germany and France, Italy's two biggest trading partners, production jumped in the same month.
Plans by Prime Minister Silvio Berlusconi to force Italians to work longer to collect a full pension have triggered nationwide protests. Earlier this month, more than 1 million demonstrators took to the streets of Rome.
An October general strike forced Alitalia SpA to cancel flights and thousands of workers at Fiat didn't show up to work. The lower house of parliament had to vote confidence in the government three times to pass Italy's 2004 budget to the Senate for final approval.