Since 1999 the Italy joined the euro area. The common currency and monetary policy have protected the Italian economy from the currency crises that had shaken it in the previous fifteen years.
From the mid-nineties the world economy was in the meantime changing radically: a new production paradigm based on information and communication technologies was affirming itself, and the large Asian countries were proving to be productive and competitive realities on a global level. In the face of these transformations, the Italian production system has lost competitiveness, delayed by a structure in which the small size of the company and a specialization in traditional goods with a low technological content predominate. The pace of development has decreased, placing itself below the European average, which is already lower than in the most dynamic areas of the world.
The production structure
According to the data obtained from the general ISTAT census, in 2001 the Italian production system had about 4 million industrial and service enterprises, in which over 15 million people were employed. The number of very small enterprises was high: 95 % had fewer than ten employees, 58% only one. The average size was 3.8 employees, a decrease compared to the 1991 census. The 30 % ca. of businesses were located in the North-West, 27% in the South, 22% in the North-East and, finally, 21in the center. The productive fragmentation, underway since the 1970s, appeared to be a phenomenon common to all geographical areas. It continued in the nineties of the 20th century. and in the first decade of the new century the relative weight loss of agriculture and manufacturing industry: according to the national accounts of the ISTAT the share in terms of employed increased between 1992 and 2005 from 7 % to 4 % in agriculture and from 23 % to 20% in the manufacturing industry. The contraction in industry also reflected the progressive outsourcing of many service activities, with a consequent greater development of employment in the tertiary sector, equal to 65 % of the total in 2005. Similar trends are seen in the creation of added value: in 2005 the 68 % of value added was produced in the services sector, 30 % in industry, 2 % in agriculture. Despite the ever increasing competitive pressure from emerging countries, the number of employees in the so-called made in Italy companies (textile processing, clothing and footwear, furniture) is still high, albeit decreasing. Employment in the retail sector is decreasing, partly due to the emergence of new organizational forms based on larger sales surfaces. Thanks to the development of the real estate market, the number of active companies and employment in the construction sector are increasing sharply.
The main macroeconomic variables
Between 1998 and 2005, according to USAERS, Italy’s gross domestic product (GDP) grew in real terms at an average annual rate of 1.3 %, about one percentage point less than the rest of the euro area. Furthermore, during this period the pace of expansion slowed down: just over 2 % on the average for the four-year period 1998-2001, it was almost nil in the average for the following four-year period (0.3 %); in 2003 and 2005 economic activity stagnated. The trend in GDP was affected both by the progressive weakening of domestic demand and, above all, by the brake exerted by foreign trade. Among the internal components of demand, the most important contribution to production growth came from consumer spending. of households: over the entire period it supported GDP by 0.8 percentage points on average each year, but the contribution became nil in 2005. The low trend in overall consumption reflected that of the non-durable goods and services component, while purchases of durable goods, with the exception of the 2001-02 two-year period, continued to record high increases. Capital accumulation provided an average contribution to the GDP growth rate of half a percentage point per year, decelerating considerably in the 2002-2005 four-year period (0.2 points, compared with 0.8 in the 1998-2001 four-year period); purchases by companies of machinery, equipment and means of transport, which had recorded sustained growth up to 2000, slowed down in the following years and then contracted in 2003 and 2005. The trend in investments in construction was instead positive, reflecting above all the performance of the residential sector, albeit with a slowdown since 2003: Between 1998 and 2005, the difference between exports and imports of goods and services subtracted on average half a percentage point from the expansion of GDP. Sales abroad contracted in the two-year period 2002-03 ; after the partial recovery in 2004, they remained almost stationary in 2005. Their share of world exports, valued at constant prices, gradually decreased, falling in 2005 to 2.7 %, from 4.6 in 1995. While exports declined, imports only slowed (from 4.3 % on average over the period 1998-2001 to 1 % in the following four years), affected by the deceleration of domestic demand, so that the trade balance and that of the current account of the Italian balance of payments have worsened. Between 1999 and 2005 the current balance went from a surplus of 0.7 % of GDP to a deficit of 1.5 ; the commercial one with a 2.0 surplus% to a draw. The worsening reflected the progressive loss of competitiveness of Italian products and, at the same time, the entry into international trade of large countries characterized by low labor costs and sector specialization in part similar to that of Italy; On the import side, the progressive and marked growth in the prices of oil and energy products, compared to the minimum reached in 1998, contributed to this. Faced with current account deficits from 2000 onwards, the balance of payments financial account recorded net inflows of foreign capital which helped to direct our international investment position towards net debt: this, which at the end of 1999 turned out to be active for 4.5 % of GDP, it had become passive again at the end of 2002 ; at the end of 2004 the total net debt of the Italy, with the rest of the world was equal to 6.5 % of GDP.
During the 1990s, the annual growth in consumer prices in Italy fell from levels above 6 % to values close to those of the other euro area countries, settling at around 2 % in the two-year period 1998-99, in in line with the convergence criteria established by the Maastricht Treaty for joining the euro area. Inflation underwent modest increases in subsequent years, up to 2.7 %, mainly due to the sharp increases in oil prices since the spring of 1999, unit labor costs rising due to system productivity losses, and the temporary impact of the introduction of euro coins and banknotes; the impact, based on empirical analyzes, remained moderate, mainly affecting certain services. In 2004-05, the pace of growth in consumer prices returned to values close to 2 %.
The labor market and productivity
After the sharp decline in the early 1990s, employment grew seamlessly from 1995 to 2003. The moderation of labor costs, mainly attributable to the income policy initiated with the 1993 agreements between the government and the social partners, and the more flexible regulation of labor relations (Law 24 June 1997 nr. 197 and Law 14 February 1997. 2003 no. 30, known as Treu and Biagi law) are the underlying factors that prolonged expansion phase. In 2004-05 this was interrupted, also due to the stagnant economic trend: in 2004 the full-time work units of national accounts remained unchanged and in 2005 they decreased for the first time since 1995 (- 0.4 %). Overall, the number of employees measured by the national accounts increased between 1997 and 2005 by 2.25 million (+ 10.2 %); in terms of standard units – which bring part-time jobs, layoffs and multiple job positions back to full-time work units – of 1.5 million (+ 6.8%). The growth mainly affected the Northern and Central regions; it was more modest in the South.