Italy

D

Manufacturing

After World War II, Italian industry expanded rapidly, and Italian products gained worldwide popularity for their fine design and quality. Small-scale and medium-sized industries dominate, with many firms employing fewer than 100 people. These industries tend to be concentrated by products in a particular region—for example, glassmaking in Murano, silk production in Como, tomato canning in Salerno. Smaller companies flourish in part because of the many regulations placed by the government on large industries. Among the internationally known companies in Italy are the automobile manufacturer Fiat, the telecommunications (formerly typewriter) firm Olivetti, and the tire and cable manufacturer Pirelli.

Italy’s major industries are metals and metal products; machinery and motor vehicles; food and beverages; chemicals; and textiles, footwear, and clothing. Italy has important steel, aluminum, zinc, and lead industries. It produces various kinds of machinery, including tractors and agricultural equipment, household appliances, passenger cars, trucks, and buses. The production of food includes pasta and tomatoes. Sulfuric acid, ammonia, petrochemicals, and pharmaceuticals are among its chemical products. Textiles and shoes are manufactured in a number of northern towns and cities. Milan is the center of Italy’s fashion industry. Italy’s trend-setting designs make it one of the leading furniture manufacturers in the world.

E

Energy

Italy generates only about a quarter of the energy it consumes, relying mostly on imported fossil fuels. Some 82.35 percent of Italy’s yearly output of electricity is generated in thermal plants burning petroleum products, natural gas, coal, or lignite, and most of the remainder is produced in hydroelectric facilities. The country’s nuclear energy program was abandoned because of public opposition following the 1986 accident at Chernobyl’ in Ukraine. In 2003 Italy’s annual output of electricity was 270 billion kilowatt-hours.

F

Currency and Banking

The monetary unit of Italy is the single currency of the European Union (EU), the euro (0.80 euros equal U.S. $1; 2005 average). Italy is among 12 EU member states to adopt the euro. The euro was introduced on January 1, 1999, for electronic transfers and accounting purposes only, and Italy’s national currency, the lira, was used for other purposes. On January 1, 2002, euro-denominated coins and bills went into circulation, and the lira ceased to be legal tender.

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The Bank of Italy is the Italian national bank. A public institution, the Bank of Italy has branches in each provincial capital. In addition, Italy has many private banks. The 1990 Banking Act introduced a number of changes in the country’s banking system, reducing public ownership of banks and loosening regulations on external and foreign capital, as part of the move by the European Community (now the EU) toward currency union and free capital movement within Europe. Milan and Rome are major financial centers.

As a participant in the single currency, Italy must follow economic policies established by the European Central Bank (ECB). The ECB is located in Frankfurt, Germany, and is responsible for all EU monetary policies, which include setting interest rates and regulating the money supply. On January 1, 1999, control over Italian monetary policy was transferred from the Bank of Italy to the ECB. The Bank of Italy joined the other EU countries that adopted the euro as part of the European System of Central Banks (ESCB).

G

Foreign Trade

Italy’s economy depends heavily on foreign trade. More than half of its trade is with other member countries of the European Union. The dependence of Italy on imported coal, petroleum, and other essential raw materials for many years yielded an unfavorable balance of trade, especially during the 1970s and 1980s. However, the tourism industry supplements export earnings, improving the trade balance. Exports increased in the early 1990s when the lira was devalued against other European currencies, making Italian manufactures less expensive to foreign buyers. Rising exports and trade surpluses helped pull Italy from a recession.

In 2004 Italian exports earned $349.1 billion per year and imports cost $351.1 billion. Italy’s exports include machinery, motor vehicles, chemicals, clothing and footwear, textile yarn and fabrics, food and wine, and furniture. Imports include machinery and transportation equipment, petroleum, chemicals, and food, especially meat. Principal markets for Italy’s products are Germany, France, the United States, the United Kingdom, and Spain. Chief sources for imports are Germany, France, Netherlands, United Kingdom, United States, Belgium, and Spain.

H

Tourism

Tourism’s importance to Italy’s economy has increased enormously in the last 50 years, and today tourism contributes a larger portion to the economy than agriculture. Italy offers both natural and cultural attractions to the tourist. As far back as the 16th century, the education of an English gentleman was incomplete until he had seen Italy as part of the so-called Grand Tour of European cities. Today, tourists visit Italy for its ancient Greek and Roman ruins in Sicily, Paestum, Pompeii, and Herculaneum; for the Byzantine and medieval art and architecture in Ravenna and Venice; and the major monuments of the Renaissance found in Tuscany, especially Florence, and regions nearby. A trip to Rome generally includes visits to the ancient forum, the Colosseum, Saint Peter’s Basilica, and the museums and Sistine Chapel of the Vatican City.

Italy’s landscapes are diverse, and the scenery is magnificent in all regions of the country. Especially popular with tourists are the lakes of Lombardy in northern Italy and the hilltowns of Tuscany and Umbria. For outdoor enthusiasts beach resorts abound, including Rimini, on the Adriatic coast, Taormina in Sicily, Positano on the Bay of Sorrento, San Remo on the Italian Riviera, and the Costa Smeralda (Emerald Coast) of Sardinia. The beaches of Calabria, in the south, have recently been developed for tourism but are still less frequented than those of other regions. Skiing and other winter sports are popular in the Dolomites and Italian Alps.

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