Italy - Economic analysis of government's policies, investment climate and political risk.






ITALY: Economic Policy Analysis

This site presents an analysis of the Italian government's economic policies as compared to a list of 34 economic policies as prepared by student brothers Rami and Sami Saltagi with the McKeever Institute of Economic Policy Analysis (MIEPA) in the Fall of 2004. To read the analysis scroll through this site. To learn more about the background policies, click here

Introduction and Policy Recommendations

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Several foreign born students living in California have completed a study of their home country governments' economic policies as compared to the MIEPA list of policies as outlined above. The study on Italy is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 1996. Used herein with permission]

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Comparison of Italy's economic policies to MIEPA criteria as prepared by native students of South Africa, Rami and Sami Saltagi, studying in San Francisco in Fall 2004.



      1               4.5           13.5             15.0        90%

      2               4.5           13.5             15.0        90

      3               4.0           12.0             15.0        80

      4               5.0           15.0             15.0       100

      5               4.5           13.5             15.0        90

      6               4.1           12.3             15.0        82

      7               4.7           14.1             15.0        94

      8               3.8           11.4             15.0        76

      9               3.5           10.5             15.0        70

      10              4.0           12.0             15.0        80

      11              5.0           15.0             15.0       100

      12              3.4           10.2             15.0        68

      13              5.0           10.0             10.0       100

      14              4.0            8.0             10.0        80

      15              3.0            6.0             10.0        60

      16              2.8            5.6             10.0        56

      17              2.0            4.0             10.0        40

      18              4.8            9.6             10.0        96

      19              4.5            9.0             10.0        90

      20              4.7            9.4             10.0        94

      21              1.8            3.6             10.0        36

      22              2.5            5.0             10.0        50

      23              4.5            9.0             10.0        90

      24              3.5            7.0             10.0        70

      25              4.8            9.6             10.0        96

      26              3.5            7.0             10.0        70

      27              3.0            6.0             10.0        60

      28              4.6            9.2             10.0        92

      29              3.0            3.0              5.0        60

      30              5.0            5.0              5.0       100

      31              4.2            4.2              5.0        84

      32              4.0            4.0              5.0        80

      33              5.0            5.0              5.0       100

      34              3.0            3.0              5.0        60           

  TOTAL             134.2          295.2            375.0       78.7%
                    =====         ======           =====        =====
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ITALY: Individual Economic Policy Analyses

1. Freedom from Internal control 4.5

Italian citizens are free to move within the boundaries of the country as they please. No form of restriction of personal freedom is permitted. In extraordinary situations the authority of public safety may adopt temporary provisions, which will have to be communicated within 48 hours to the judicial authority. If the judicial authority does not validate these provisions within the 48 hours they will be revoked without taking effect. And Italians are also free to travel in and out of the country without restrictions and have possibility to immigrate or return at any given time with no further consequences.


2. Freedom of speech 4.5

the Italian constitution gives great power to the freedom of speech and it could be seen on news papers and in the streets, television is more of a problem this is because there are 6 main TV channels which are visualized nation wide and three of them are private and the other three are public or the governments and the privet ones are owned by mediaset which is owned by Berlusconi and now Berlusconi being the prime minister now runs the public TV so in other words all the main television channels are now owned from the same person but Mr. Berlusconi claims he has no influence on the television. The only requirement stated in the constitution that regulates the press are those of common sense or actions that can be associated with crime or criminal related activities. Art. 21 of the Italian constitution clearly states that all citizens have the absolute right to express their thoughts orally, written, or any means of diffusion.


3. Effective fair police force 4.0

There are 4 different types of police force in Italy and each one has his own job in keeping the country secure, these forces are: 1. Polizia dello Stato (National Police), 2. Polizia Municipale (Local Police), 3. Carabinieri (Military Police), 4. Guardia di finanza (Boarder Police). But still with all of these internal security forces problems like southern Italy remain. In Naples for example the organized crime is expanding due to the poverty in that region of Italy.


4. Private property 5.0

Italian constitution protects the privet property principle, there are many laws in the Italian and European constitution that will protect privet property, it?s more of a sacred thing no one can take your property away from you unless you signed some strange contract handing over the property. Banks in Italy facilitate the process of lending money to citizens to buy a house. Most of the times the requirements for a loan is a fixed job contract, collateral and credit history are not investigated.


5. Commercial banks 4.5

Commercial banks in Italy have a very large network to ensure all the needs and requirements of ordinary savers, investors, and businesses. Commercial banks Italy are monitored by the Italian central bank which operates as a supervisor to ensure financial stability even though it is run by the government. The great privatization of the banking system of the nineties led to the creation of a very large banking network reaching in December 2001 some 28,177 branches in Italy and 94 abroad. The privatization also gave great contribution to the growth of the Italian stock market. Market capitalization, which grew from 18% to 65% of the GDP between 1989 and 1999, was also a result of new investments from privatized companies. By 2000 a total of 39 businesses had been added to a new market which was created alongside of the Italian exchange in 1999, which aimed at new businesses with good growth potential, beginning the new capitalization of 22 billion ?.


6. Communication system 4.1

The largest communication system in Italy are cell phones having various providers and each provider having various plans there is a plan that will fit each and every person ( it is predicted that by 2007 the diffusion cell phones among the population will reach 100% a cell phone per citizen). Internet has been growing in the last few years but the big internet boom happened in 2001 there were more companies providing internet and better connection over the country, but still the more advanced part of Italy in communication is the north down in the south of Italy internet is not very popular. And now the education system is introducing internet in the Italian schools.


7. Transportation 4.7

Transportation in Italy is very efficient and easy to cope with buses in the city will get almost everywhere each city has its timings and schedules but the most efficient transportation system are the trains since trenitalia was created in the year 2000 a public transportation group of the train system, prices are still slightly high for the euro star train but no train can beat the comfort and speed of the euro star. Busses are a very efficient mean of transportation in the cities, they cover most of the urban area of the country. Various problems are arising with the Italian air company alitalia after 9/11 the company almost went bankrupt but it saved it self after joining the sky team alliance which is an alliance of several air companies to facilitate traveling for everybody. Although as in most cases it must be said that the levels of efficiency in transportation vary a lot from north to south. And in most cases the further south the poorer the quality and the smaller the network.


8. Education 3.8

The Italian education system is very different from the American one. In Italy the total of school years are 13 of witch 5 elementary school then 3 mid school and 5 high school, and that seems to work fine the problem and I must say a very big problem is the university system, most university?s are public and very low in cost so there are insufficient teachers classes are over populated and attendance is not mandatory and exams can be postponed, and the average graduating age is 28 years old. However since the year 2002 the government reformed the Italian university to a 3 year program or a 3+2 year program which is much closer to the American system and much more fast and efficient.


9. Social mobility 3.5

In this field Italy is very divided from south to north, down south due to the high rate of people dropping out of school to work to feed their families so they end up doing low wage jobs that most of the time have no advancement future then we go up north there is more of a school culture where most students go through all there school years and have a better probability of earning money and getting a more secure job. In this sense Italy is very divided but the government is trying to encourage all students to stay in school and offering scholarships to most universities and since 2002 the European union is offering financial aid with very low interest rates to young people to start off businesses and that is something that the Italian population did not fully take advantage of yet. But overall an average Italian worker is fully capable of maintaining a family.


10. Freedom from outside control 4.0

Italy being part of the European union has to respond to the laws of the European union but each Italian citizen only responds to the Italian government and will be judged by an Italian court which goes by Italian laws in Italy and the Italian government also being part of the nato has to respond to them too.


11. Foreign currency transactions 5.0

Since 2002 all the monetary transactions in Italy and most European countries is in the European currency the euro and the euro being very stable and powerful its one of the best currencies in the world and most transactions now day are already in euro. This also encourages tourism to increase thanks to the unified currency with twelve countries.


12. Border control 3.4

After 9/11 and the war in Iraq the Italian government increased its border controls but still the main problem is the arrival of illegal immigrants through the sea from Albania and some African countries and all these immigrant do not have identification documents so they do not know where there from and cannot sent them back to there home countries so they are put in welcome homes where these people are free to go out and most of these ships carrying illegal immigrants are also carrying illegal substances which are then sold in the country.


13. Currency 5.0

Italy being part of the European union is also part of the European currency the euro which has been effective since the 1st of January 2002 and now on the market is one of the most powerful and stable currency?s in the world, it is being sold compared to the US dollar: 1? = 1.25USD.


14. Cultural language homogeneity 4.0

There are many different communities in Italy but the predominant language is still Italian and now the most growing community is the Chinese community and its one of the only ones that do not mix with the locals and still speak in there own home language some that live in Italy do not even speak Italian all the others are starting to adapt to the culture and language. But the biggest problem is the different dialects in the Italian language and some of them are incomprehensible.

Although there being different ethnicities in Italy, most of them tend to mix with the locals. The most conservative ones are the Chinese that tend to form there own communities.


15. Political effectiveness 3.0

The government in the last three elections has changed 3 times from right wing to left wing to central party, and these parties have different ideas and objects but due to all these changes there effectiveness is very low and still all the main businesses and companies are all located in the main city?s of the country. Solving problems by the government was never very effective due to all the disapprovals in the different parties they were never really united. An example of this was the government before Berlusconi's election. Due to the very short time these governments have been in power, they have not been capable of fixing the country's long term problems.


16. Institutional stability 2.8

Institutional stability in Italy is very unstable the government has changed in the last 4 elections 4 times its always bouncing from left wing to right wing and 2 of these last 4 governments failed and the country had to go to advanced elections, the reason for the party failure is the continuous disagreements between the same party members and the brake up of some alliances. Although all the government instability, the school system remained efficient. So have many other public owned companies like water and postal services.


17. Honest government 2.0

Since Berlusconi took over the Italian government in 2001 was turned in a very weak government witch its main goal is self profit. one of the laws of Berlusconi witch were approved recently after his election was the law on inheriting which before Berlusconi there was a tax to be paid on the amount inherited and the new low eliminates this tax this is just one of the obvious laws for self profit due to his large property and money that will be inherited by his children this would have cost him millions of euros. It is said that there is a great deal of corruption in the south regions of the country, this is due to organized crime (mafia, camorra, ndrangheta).


18. Common laws 4.8

Laws in Italy are the same all over the country, even though Italy is divided in regions, all the regions have to follow the same laws. No region has its own laws, but the same laws are applied nation wide, and this is been strictly controlled since the European community started forming, and Italy had to put up with the European standards. More money was invested to provide a better justice.


19. Central bank 4.5

Before the euro came in the Italian currency was very weak this is due to the control of the money printing by the central bank which was established and is controlled by the government. Now that the euro has been in since 2002 the stability and power of the euro is so great even though the money is still printed by the BANCA DI ITALIA the government bank but its not influenced by the Italian government because it still has to follow the European lows and limitations.


20. Domestic budget management 4.7

Since the euro was effective in 2002 Italy suffered a great inflation in prices of all products this is because it had to adapt to the other European countries but the Italian wages still stayed the same taxes went up and people are making the same amount of money that they were making before the euro and this is causing a lot of problems to the population. Being part of the European Union Italy had to adapt its budget to the other countries and at the beginning the government started to sell miner public governmental activities to major ones like the gas company ENEL.


21. Government debt 1.8

The Italian debt is 142 trillion dollars Berlusconi is going to have to do a miracle to cover it and get reelected and now that the elections are coming up many promises are being said but nothing efficient has started yet but the new government will have to deal with this great bargain. Comparing the debt to the GDP, which is of 1,552 billion, there it is a big difference.


22. Economic statistics 2.5

Italy was believed to have accurate economics statistics and can all be visualized on several public statistic web sites but the economic statistic are no longer believed to be very accurate due to the big crack that happened to one of the biggest Italian companies known world wide and effected a lot of world wide markets this company is parmalat.


23. Protection of public health and safety 4.5

Public health is free in Italy for every Italian citizen. The only problem of being public it?s not really efficient, this is one of the biggest government debates on how to render it more efficient. Even though the infant mortality rate is only 4%.On the other hand there is the public security that is very efficient with 4 different police and military forces and plus Italy is part of the NATO which gives it extra protection.


24. High wage policies 3.5

Italy compared to the rest of Europe has fairly low wages but to the rest of the world there averagely high the minimum wage in Italy is 4.50/Euro and if we look at the rest of Europe its about 7/Euro per hour this is a great factor that discourages people to go work for such a low wage and not afford the products sold in the country and due to the low working force the major businesses are obligated to export there factories in countries where there is more working force for low wages like India or Pakistan. It is very hard for the average worker to afford a family and provide them with expensive items.


25. Environmental protection 4.8

Italy being a very rich country in art and nature. One of the main money resources for the country is tourism, so many laws have risen in the last 20 years for the protection of the nature, and to decrease the amount of pollution in the cities. And some cities have taken also drastic measures to decrease pollution, like limitation the transit of motor vehicles in the center of the city.


26. Strong army 3.5

The Italian army is not one of the best armies in the world but it?s not bad. It was mandatory for all Italian males that qualify to join the army when they turned 18 one of the only excuse for postponing it was still being in school but now the new law that says that each male that is born after the year 1986 does not have to join the army. But in the last 6 years the people that had to join the army had a second alternative to do community service for 10 months. Now that weakened the army significantly no one was joining the army any more.


27. Foreign trade impact: 3.0

Italy's trade has been increasing from year to year this is since it has joined the European Union. The quantity of goods imported and exported are both high. In 2003 Italy imported a total of 135 million euros and exported 1.096 million euros. Italy imports more than it exports.


28. Protection of foreign currency earning enterprises: 4.6

Having one of the most powerful economy in the world Italy still maintains an open economy, and is apart of the EU (European union) and the multilateral economic organization the G-8 and the organization for economic corporation and development and the international monetary fund and also the WTO (world trade organization). This provides Italy with a high protection from foreign currency earning enterprises.


29. Management of foreign currency budget: 3.0

Since the euro kicked in Italy has not been having currency problems that's thanks to the high stability of the euro and its increase in value towards other currencies, especially the increase it's been having on the US dollar. And now most of the trades are in euro anyway.



Italy has a wide variety of collective enterprises. Italy is a democratic state based on the parliament. The Republic consists of 20 regions. The first article of the Constitution states that "the sovereignty belongs to the people". The Parliament is composed of the Chamber of Deputies and the Senate. The people indirectly elect deputies and Senators, by electing politicians form a wide range of parties. As part of its history, Italy has always had many different political ideas in the political scene. 24 parties support the actual Government. This very democratic system let everybody be represented, but at the same time small parties that represent a very small percentage of the population have sometimes a very great influence on political issues. There are a lot of political organizations through the country, for young and for adults. Citizens are invited to participate in social life by many different organizations, starting from school.

Sources: personal information, Ms. Valentina Rizzo

31. Pro business climate 4.2

Italy has one of the worlds most advanced industrial economies, offering substantial opportunities for people wanting to invest and do business there. It is a major market serving a population of more than 57 million people. In addition, Italian firms are active throughout the Mediterranean and Europe, including the emerging markets in Canada and Eastern Europe and are frequently interested in participating with firms on projects in third countries. Italy's thousands of companies are engaged in a vast range of industrial and commercial activities. Not to mention the vast business opportunities for firms due to the Turin 2006 winter Olympics.


32. Government enterprises: 4.0

The Italian government in the last few years has started the privatization of some governmental organization and enterprises. Thus to be able to expand, improve a service and cut down losses that occurred or that will occur. The greatest example of the privatization of a government owned company occurred in 1995 with the privatization of ENEL the Italian electrical company. The mission of ENEL is to pursue excellence in the management of large infrastructures and in the supply of goods and services. The privatization of many government companies is occurring and this is saving the government a lot of money because they do not have to support these companies any more.


33. International security agreement: 5.0

being part of the NATO (intergovernmental organization established in 1949 to guarantee the peace and security of Europe) Italy gets a lot of strength military wise, thanks to the NATO that has 19 member countries: Belgium, Canada, Czech republic, Denmark, France, Germany, Greece, Hungary, Island, Luxembourg, Norway, the Netherlands, Poland, Portugal, Spain, Turkey, the united kingdom and the united states. NATO and the EU have agreed on the need to pursue consultation and cooperation on issues of joint concern in relation to security and defense and crises management.


34. Protection of domestic enterprises from government mandate costs: 3.0

Italy being a member of the EU, now needs to maintain certain European standards. And work by the new European community criteria. A great example in that would be the standards enterprises must obtain nowadays in the ecological field to be able to operate in accordance to the new EU laws. In 2001 only 700 Italian enterprises obtained a certificate in eco-efficiency. Today the number of enterprises has become 1.250 and are expected to grow by next year to 2-3 thousand, as has been confirmed by the vice president of confindustria (Founded in 1910, confindustria is the leading organization representing the manufacturing and service industries in Italy. It groups up together more than 113,000 voluntary member companies of all sizes, for a total of nearly 4,200,000 players)



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