Ekonomske analize
Italy

Italy

Population 60.8 million
GDP 29866 US$
A3
Country risk assessment
A2
Business Climate
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Synthesis

major macro economic indicators

  2014 2015  2016(f) 2017(f)
GDP growth (%) 0,2 0.6 0.9 0,8
Inflation (yearly average) (%) 0.2 0.1 -0.1 0.8
Budget balance (% GDP) -3.0 -2.6 -2.4 -2.4
Current account balance (% GDP) 1.9 2.2 3.0 3.0
Public debt (% GDP) 131.8 132.4 132.1 132.3

 

(f) Forecast

STRENGTHS

  • Relatively high weight of the industry
  • High-end products (fashion, homewares, agri-foods, mechanical engineering)
  • Moderate debt levels of private sector, particularly households; savings capacity
  • 5th most popular tourist destination

WEAKNESSES

  • Low labour productivity and loss of competitiveness
  • Weak profitability of small companies and banks
  • Inadequate private and public investment
  • High level of structural unemployment
  • High level of public debt
  • Sizeable informal economy
  • Regional disparities

Risk assessment

A limited recovery

The recovery continued at a moderate pace in 2016, driven by domestic demand. But consumption has lost its role as the leading growth driver because of higher uncertainty and waning consumer confidence. And yet employment has increased and wages have risen in real terms thanks to low inflation. On the other hand, unemployment has only seen a slight decline due to higher activity rates. Investment saw a marginal increase (by far the most dynamic component being transportation equipment). Exports rose slightly due to lower sales towards non-EU member countries. Corporate insolvencies have declined by 6.6% in 2016.

Growing political instability, which adds to uncertainty about the banking sector could weigh on the attitude of households and businesses in 2017. This would be likely to curb consumption and private investment. Despite fiscal support measures and more favourable financing conditions, the latter remains deficient due to sluggish corporate margins and the weakness of demand and credit supply. The downward adjustment of payroll tax exemptions granted under the new permanent contracts should also slow the progress of employment. Nevertheless, public investment is expected to increase and exports would benefit from a moderate increase in foreign demand.

 

Massive public debt but surplus external accounts

Fiscal policy has been eased since the crisis in an effort to aide recovery. This trend should continue in 2017, the budget providing for measures to stimulate investment, lower corporate tax rates and an increase in small pensions. The authorities should negotiate budgetary measures with Europe to accommodate spending related to the earthquake and the migration crisis. The decline in the primary surplus (excluding debt service charges) should be offset by a further reduction in interest payments. The debt burden is expected to remain at a very high level but stable thanks to low interest rates and GDP growth. However, it will remain an important source of vulnerability, even given the fact that risks are mitigated by the relatively long maturity of debt (almost 7 years), its significant proportion at fixed rates and the fact that the residents hold 2/3.

The country has suffered from de-industrialisation but its manufacturing sector still accounts for a significant part of its economy (15% of GDP). Italy is the second manufacturing power in Europe and seventh worldwide. This industry is up selling, continuing a highly profitable niche strategy (luxury clothing, household goods, food processing, mechanical, goods, motor vehicles), and for many years has achieved a large trade surplus. Tourism revenues are not left out, thanks to major heritage assets, but are offset by significant costs of transport. The current account would remain largely positive in 2017, the slight increase in energy costs was offset by the moderation in domestic demand and a slight increase in foreign demand.

 

A banking sector weighed down by bad debts

Doubtful receivables are at a high level, some 18% of bank portfolios. The results were very mixed for the sector in the last stress tests conducted by the European Banking Authority (July 2016). They revealed that Unicredit could not forego another recapitalisation while the worst result in Europe was displayed by Monte dei Paschi di Siena (3rd Italian bank) whose rescue plan includes a capital increase of at least 5 billion euros. This bank is struggling to raise fresh funds on the markets, which could result in State intervention.

 

The "no" to the constitutional referendum opens a new period of political uncertainty

Matteo Renzi, whose term of office started in 2014, relied on his political reforms to end chronic governmental instability in the country. He took a chance on customising the Senate, which was rejected in a referendum in December 2016. His resignation opens a new period of political uncertainty. The President of the Republic asked Paolo Gentiloni, of the Democratic Party (PD) in power, to lead the government until elections were held in February 2018. The latter will manage the banking crisis and harmonise the electoral laws that apply to the lower house and the Senate. His durability will be at the mercy of a vote of no confidence. In the current state of these laws, in case of early elections, Beppe Grillo's Five Start Movement, neck-and-neck with the PD in the polls, could win a majority in the lower house.

 

Last update : January 2016

Payment

 

Trade notes (cambiali) are available in the form of bills of exchange or promissory notes. “Cambiali” must be duly accepted by the drawee and stamped locally at 12/1000 of their value, being issued and payable in the country. They are stamped locally at 9/1000, being issued in the country and payable abroad, and finally stamped at 6/1000 in the country if stamped beforehand abroad, with a minimum de 0.50 €.

 

In case of default, they constitutede factoenforcement orders as the courts automatically admit them as a writ of execution (ezecuzione forzata) against the debtor.

 

Signed bills of exchange are a fairly secure means of payment but are rarely used on account of the high stamp duty, the somewhat lengthy cashing period and the drawee’s fear of damage to his reputation caused by the recording and publication of protested unpaid bills at the Chambers of Commerce.

 

Since the rules on cheque amounts were relaxed in April 1990, payment by cheque has become commonplace. Besides the date and place of issue, cheques established in amounts exceeding 1,000 EUR and intended to circulate abroad must bear the endorsementnon trasferibile(not transferable) since they can only be cashed by the beneficiary.

 

To make the use of cheques more secure and efficient, the new banking provisions reaffirm that, since 1st September 2006, any bank or postal cheque issued without authorisation or with insufficient funds will subject the cheque drawer to administrative penalties and listing by the CAI (Centrale d’Allarme Interbancaria), which automatically results in exclusion from the payment system for at least six months.

 

Bank vouchers (ricevuta bancaria) are not a means of payment, but merely a notice of bank domicile drawn up by the creditor and submitted by him to his own bank for presentation to the debtor’s bank for the purposes of payment (the vouchers are also available in electronic form, in which case they are known as “RI.BA elettronica”).

 

Bank transfers are widely used (90 per cent of payments fromItalyare made by bank transfer), and in particular SWIFT transfers, as they considerably reduce the period of processing. The bank transfer is a cheap and secure means of payment once the contracting parties have established mutual trust.

 

Debt collection

 

As elsewhere, an out-of-court settlement is always preferable to legal action. Demands and telephone dunning are quite effective, as are on-site visits that provide an opportunity to restore dialogue between supplier and customer, and so to conclude a settlement, but in this case (personal visit) a specific license has to be gathered.

 

Settlement negotiations focus on payment of the principal, plus any contractual default interest as may be provided for in writing and accepted by the buyer.

 

Where there is no such agreement, the rate applicable to commercial agreements concluded after 8 August 2002 (Decree-Law of 9 October 2002) is the six-monthly rate set by the Ministry of Economic Affairs and Finance by reference to the European Central Bank’s refinancing rate, raised by 8 percentage points, till 30.06.2015.

 

Failing an out-of-court settlement with the customer, the type of legal action taken will depend on the type of documents justifying the claim.

 

Based on “cambiali notes” – bills of exchange, promissory notes – or cheques, creditors may proceed directly with forced execution beginning with a demand for payment (atto di precetto) served by a bailiff preliminary to attachment of the debtor's moveable and immoveable property barring receipt of actual payment within the allotted time.

 

The resulting auction proceeds will be used to discharge outstanding claims.

 

Creditors can obtain an injunction to pay (decreto ingiuntivo) via a fast-track procedure if they can produce, besides copies of invoices, written proof of the claim’s existence by whatever means or a notarized statement of account.

The injunction issued by the court will also specify the amount of legal costs, according to an established schedule, payable by the debtor. A forty-day period is granted to the defendant to lodge an objection.

 

Since 4 July 2009, ordinary summary proceedings are introduced (procedimento sommario di cognizione) for no complicated disputes which can be settled upon simple presentation of evidence. Sitting with a single judge, the court determines a hearing for appearance of the parties, and delivers a provisionally executory ruling if it acknowledges the merits of the claim; the debtor however has 30 days to lodge an appeal.

 

Lacking the requisite supporting documents or in case of objection to the “decreto ingiuntivo”, a creditor must take ordinary legal action to establish his right to payment, a process still slow despite several reforms of the civil procedure. Such lawsuits can take up to three years, although the applicant may obtain, during that period, a provisional payment order equivalent to a writ of execution.

 

The new civil procedure code, effective since March 2006 and July 2009, is intended to speed up the pace of proceedings by reducing the procedural terms, by imposing strict time limits on the parties for submitting evidence and making their cases, by introducing written depositions in addition to oral depositions.

Insolvency trend Italy
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