Economists see hard year ahead for Italians

THE popping of spumante corks and firecrackers this Christmas are unable to drown warnings of a black year for Italy in 1993. Some 400,000 people will fall below the poverty level, joining the 6 million living on around pounds 350 a month, according to the social research institute, Censis. This is largely because of increased health charges imposed by the government's austerity programme.

Meanwhile, production in December will have fallen by more than 6 per cent and orders by more than 8 per cent compared with the same month last year, according to Confindustria, the Italian industrialists' association, setting a trend which is likely to continue during the year. Christmas shopping has confirmed this: Italians are buying fewer, and cheaper gifts and sales are down by 10 to 20 per cent or more.

One slight glimmer is that inflation is down from 4.9 per cent in November to 4.7 per cent, but largely to lure customers, and not a sign that industry is starting a necessary slimming cure. 'It is not linked to cuts in production and distribution costs,' remarked Ottaviano del Turco, deputy head of the left-wing CGIL trade union federation. 'The truth is that inflation is falling because people are beginning to buy less.'

The debts of Italian industry have ballooned as companies try to maintain a good level of investment while profits have shrunk, according to the year-end study by Mediobanca, the powerful investment bank, based on 180 key firms representing about one-third of the country's business.

And the Organisation for Economic Co-operation and Development (OECD) predicted this week that gross domestic product will increase only 0.8 per cent next year, about 30 per cent less than this year and half the growth forecast by the government. Production, it said, is likely to increase by only just over 1 per cent and the beginning of recovery cannot be expected until 1994.

Giuliano Amato, the Prime Minister, has pointed out that many of Italy's economic problems are the result of worldwide depression. But much also has to do with its own economic and structural crisis, caused by years of maladministration and the resulting colossal state deficit. At a traditional end-of-year news conference, Mr Amato said the problems of Italy's political system were more worrying than the country's crippled economy. 'Political corruption is an evil that must be uprooted. It can be like a floating mine that threatens to blow up the entire democratic system at any time,' he said.

Vittorio Merloni, a former president of Confindustria, said: 'It all goes back to the period between November 1989 and April 1992,' thus laying the blame, without naming him, on the former prime minister, Giulio Andreotti, for failing to bring about a much-needed restructuring of industry.

The OECD report said the government was on the right track with its austerity programme, but it warned that the Italian economy will have to go at a speed unprecedented in any industrialised country if it is to fulfil the obligations of the Maastricht treaty and remain in Europe. 'The stakes for Italy have never been so high since the end of the war,' it said.