It should be noted that Germany is not the only EU member state where controversy is growing about economic stagnation and what to do about it. Luca Cordero di Montezemolo, the chairman of Confindustria, Italy’s employers’ group, has made his preferences clear: ?I don’t want an Italy like Disneyworld”.
More to the point, he also said the following:
?If we look at the economic statistics of our country, unfortunately we see that we are down on our knees,? he told a conference in Trieste in north-eastern Italy. ?If we look at productivity, the balance of payments, public and private investments, the way industry is going, the tax burden on our companies and even the speed of our civil justice system, we see that we are in bottom place in Europe.?
The cryptic comment about Disneyworld is an allusion to Italy’s necessary and painful transition from an industrial to a services economy. Increasing tourism is simply one part of this.
A balanced assessment of where this process is at can be found in this piece from Morgan Stanley’s Vincenzo Guzmann yesterday.
Italy?s industrial sector is ill. Manufacturing value added to GDP was down 1.8% in Q4/04 from a year earlier, the third phase of outright contraction in three years. In fact, we might well say that the sector entered a protracted recession in early 2001 and has never come out of it since, except for negligible periods. The trade balance, measured as a 12-month rolling sum, dipped into the red in October 2004, and the gap widened steadily thereafter. While we could blame the strong Euro for the loss of some market shares, Italy visibly lost ground also against the other Euro partners throughout the past eight years. The country?s growth model based on traditional cheap low-tech production is falling under the axe of global competition. In our view, the implications are twofold: First, industry will have to rethink its own role; second, the secular shift from industry into services will intensify. Growth will likely become more dependent on services and domestic demand, leading to more pressure for deregulation in sectors so far shielded from competition.