No more dolce vita

Italy's problems should be a warning to the rest of Europe, says Will Hodges
Commercial awareness
Politics and economics

How can a modern European nation be led by this man? In recent weeks, he's barely scraped through a parliamentary vote of no confidence, thousands of students have taken to the streets to protest at his leadership, and he's been embroiled in yet another sex scandal. But while being viewed almost unanimously as a figure of ridicule abroad, Berlusconi continues to enjoy significant popular support in Italy. The upper middle classes, and the over-50s in particular, view the 74-year old as a safe pair of hands, ensuring the continuation of the status quo.

However, the younger generation and the unemployed are pointing to his pitiful record on issues such as the economy and job creation. And prospects are indeed bleak on these fronts. In Berlusconi's Italy one in three under-35s is unemployed. With positions for university graduates few and far between, 52 per cent of those with a degree are liable to emigrate to Germany, France or the UK within five years of leaving university. This kind of brain drain is largely unheard of elsewhere in Europe and illustrates just how far the Italian economy has regressed in the past 20 years.

Roman empire

It was not always this way. Skip back to the early 1980s and British economists looked enviously towards Italy's booming export industry. Pride of place was the Italian car manufacturer Fiat, though in addition Italy boasted leading brands in domestic goods, electronics, industrial machinery and shipbuilding, not to mention the country's world-renowned food and wine industries. In 1987, the Italian media raved enthusiastically about "il sorpasso". Loosely translated, this phrase means "the overtaking") and was used to refer to the fact that the Italian economy had outgrown that of the UK for the first time. While Thatcherite Britain was coming to terms with seemingly inexorable decline following the liquidation of its manufacturing base and export sector, Italy was a country on the up. The country's rapid progress from a poor, largely agricultural nation to the world's fifth largest economy in little over 30 years stood in sharp contrast to the UK's fading economic might. Italy's relative success in the post-war era was attributed to the country's innovative and flexible entrepreneurs - small, family-run firms who were able to find a place in the global marketplace, unlike Britain's old and clunky corporations.

Much has changed since then, however. Over the past 15 years, roughly the time in which Berlusconi has been in or around government, the UK has once again overtaken its erstwhile rival thanks largely to a growing expertise in financial and legal services. Italy's once world-leading firms, meanwhile, have found themselves squeezed out of the global marketplace by the rapid progress of Asia's manufacturing giants, many of them hailing from China and South Korea. Tiny family-run enterprises have proved no match for the conveyor belts of East Asian manufacturing.

Family values

While graduate unemployment is the current focal point of Italy's malaise, the nation's economic problems also present themselves in other alarming statistics. Italy is the home of the Catholic church and so you might expect it, thanks to the Vatican's opposition to contraception, to be teeming with large families. But it isn't - Italy currently has the world's third lowest birthrate, behind only Japan and Hong Kong. Many Italians, stuck in low-paid jobs and without access to the affordable housing, are simply not having children. And Italy's population growth would certainly be even lower if it weren't for the reviving effect of its immigrant population, which has expanded rapidly during the past decade. In Turin, Italy's third largest city, 26 per cent of children under four are born to parents whose first language is not Italian.

Far from being a unique case, however, Italy's problems are a constant reminder of the challenges facing much of the European Union as it struggles to keep pace with emerging economies. Berlusconi's kingdom may have its problems - the country's public debt, for instance, stands at a staggering 115 per cent of GDP - but Spain is not far behind. And France and the UK too both face the task of stimulating economies weighed down by decades of excessive government spending, ageing workforces and diminishing export competitiveness. Britain may boast a strong financial services sector on which to fall back but, as the events of 2009 showed, it is far from indestructible. The UK's economic problems may not yet match those of Italy's, but the future prosperity of both nations is far from assured.

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