Market View

The Italian Miracle

2012/2/22 Wednesday
Ludovico Santasilia, VP Consultancy & Marketing, Imageware, Milan, Italy
Ludovico Santasilia, VP Consultancy & Marketing, Imageware, Milan, Italy As the European economic and financial crisis is coming to a crucial moment, Italy is undergoing a period of important reforms that will affect the economy and society for the coming years.

The new Government, headed by Mr. Mario Monti, former EU Commissioner and well-respected economist, passed last month a package of measures aimed at spurring competition and boosting economic growth by streamlining the country’s bureaucracy and opening up professions. In December his Government pushed through 20 billion euros ($26 billion) in tax increases and spending cuts that have further choked growth.

The “victims” of Mr Monti’s legislation are fighting the liberalization measures that have been approved on January 20th. Taxi drivers held a several-day national strike to protest at a proposal to increase the number of licences. Chemists, who are facing a rise in the number of pharmacies, are to close down for a day of strike. Lawyers, who oppose the abolition of minimum and maximum charges, plan a two-day strike later during the year. Railway workers, upset by proposals to increase competition. And discussions for a more flexible labour market started in the last two weeks, with a strong debate among the Government, Trade Association and Labour Unions.

A complex scenario, but Italy also has significant strengths that sometimes are not clear to all. Aggregate debt (government, household, non-financial corporations and financial institutions) is slightly more than 315% of GDP, similar to Switzerland (313%), France (323%), the United States (296%), and even Germany (285%), all 2009 numbers. But household debt is very low, at less than 50% of GDP. Moreover, a long-standing pattern of high household savings, in the range of 17%-30% of income, means that individual and household net worth is higher than in most advanced countries.

That is not all. The businesses and industries of central and northern Italy are efficient, innovative, and globally integrated. And budget deficits were held in check during and after the crisis, unlike in many other advanced countries. Of course, while this was necessary, given the high initial public-debt burden, it limited counter-cyclical stimulus and impeded growth.

It is difficult to say how these negative and positive aspects will affect the communication industry and how marketers will respond to this new situation, but it is possible to define a few important trends:

  • Slower sales and little access to capital by small and medium businesses
  • Entrepreneurialism boom: during crisis people tend to change work, find new ideas, re-think their life
  • Growing number of M&A and business re-organizations
  • More export to balance the weakness at local level
  • The new Government' measures include a huge investment on Technologies and Innovation and a new Authority: key drive for the national Economy, the e-Democracy, Public Sector efficiency, the companies business
  • International / European companies trust more new Government and Mario Monti to plan investment in Italy
  • Less branding more product, lead generation and support to sales
  • Less traditional ADV , in behalf of Internet and Digital ADV(in 2011 +12,3%)
  • More digital campaign and social media
  • Always on, always connected
  • Boom of tablet, smartphone, iPad and Appls (new opportunity also for the Media that lose readers)
  • More channels, more contents
Time Magazine For many years Italy was unable to reform itself as private interests were successful in influencing governments and it’s only thanks to this crisis that a “technical” Government is finally changing the rules and putting under control the Public Debt. But while in the short term all these reforms might cause unpredictable fights, in the long term they will help enhance productivity, produce better services and lower inflation.

And while Italians seem to respect more than in the past the decisions that the Government is taking, Time Magazine just dedicated its cover to Mr. Mario Monti, with the headline “Can this man save Europe?”