Экономические исследования
Italy

Italy

Population 60.5 millions
GDP 34,321 US$
B
Country risk assessment
A2
Business Climate
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Synthesis

major macro economic indicators

 

  2017 2018 2019 (e) 2020 (f)
GDP growth (%) 1.7 0.9 0.0 0.5
Inflation (yearly average, %) 1.3 1.2 0.7 1.0
Budget balance (% GDP) -2.4 -2.1 -2.0 -2.4
Current account balance (% GDP) 2.6 2.5 2.9 2.7
Public debt (% GDP) 131.3 132.1 133.1 133.7

(e): Estimate. (f): Forecast.

STRENGTHS

  • Manufacturing industry still important (automobile, pharmaceutical, textiles)
  • Regained competitiveness and strengthened export sectors
  • Bank asset quality has significantly improved
  • Comparative advantage in high-end food products
  • Vibrant tourist industry with still unexploited potential

WEAKNESSES

  • Public debt still very high, net international investment position very negative
  • Very high youth unemployment motivates brain drain
  • Large quota of small, low-productivity companies (more than 90% of firms have 10 employees or less)
  • Fragmented political landscape, convoluted and unstable parliamentary system
  • Strong regional disparities, organized crime still influential in the South

Risk assessment

Salvini’s failed gamble paves the way for a centrist-populist coalition

Emboldened by positive results in the European elections and his rising popularity, then interior minister and leader of the far-right Lega Matteo Salvini attempted to trigger a snap election by breaking the coalition with the 5 Star Movement (5SM), led by Luigi Di Maio. The move backfired in September as 5SM and the center-left Democratic Party (DP) set aside their deep disagreements to oust the Lega from office and form a new government led by Giuseppe Conte, an independent technocrat. Former Prime Minister Matteo Renzi, who had a pivotal role in brokering the new coalition, quickly left the DP to found a new political party (Italia Viva), further fragmenting the political landscape. With the controversial Salvini out of office, the new government is looking to normalize relations with Brussels, both in fiscal and immigration policy. However, due to longstanding animosity between the DP and the 5SM, as well as the intrinsic instability of the Italian parliamentary system, the coalition is unlikely to last long. In the event of a snap election, Salvini would be poised to take power.

 

As usual, growth will be conspicuous by its absence

Though the outlook will improve marginally, 2020 will be another year of Italy’s decades-long economic stagnation. Italy suffers from chronic structural deficiencies that its volatile democracy is struggling to address. Failure to improve productivity in the absence of exchange rate adjustment means that Italy can only gain competitiveness by compressing labor costs. But, with per-capita income unchanged since the Euro’s inception, the electorate has become impatient and hostile to reform. Destocking, which weighted down on growth in 2019, has run its course and will not be an obstacle in 2020. Unemployment, which despite the slowdown has dipped below 10% for the first time since 2012, is set to rebound slightly as labor productivity is unlikely to improve. This will affect disposable income, but higher social transfers and lower energy prices will offset the effect on consumption. The worst difficulties will continue to be felt by the manufacturing sector, and in particular the automotive and steel industries, while pharmaceuticals will again perform well. The political normalization will give a slight boost to private investment through two channels: improved business confidence and better financing conditions, courtesy of a declining sovereign spread. But, because of the coalition’s short life expectancy, said boost will be short-lived. Due to a rise in imports, the growth contribution of the external sector will become neutral. With a much smaller bad loan stock, the banking sector is in better health, though it is still interfering with destructive creation by evergreening loans to unproductive firms. Nonetheless, Italian banks have the highest domestic sovereign exposure out of all major Eurozone economies, meaning the bank-sovereign doom loop remains a latent threat.

 

Despite the change of government, the fiscal stance will remain moderately expansive

Last year, the EU had demanded that the 2020 budget reduced the structural deficit by 0.6% of GDP. The budget proposed by the 5SM-DP coalition instead involves raising both the structural and overall deficit targets to 1.1 and 2.2%, respectively. Nonetheless, taking into account the recessionary context and the new government’s collaborative attitude, the EU has decided not to reject the budget. Importantly, the plan avoids a VAT hike (from 22 to 24.2%) that would have been strongly detrimental to purchasing power and aggregate demand. To compensate the associated €23 billion of lost revenue, as well as €3 billion in tax cuts for low-income households, the government will rely on a set of measures to combat tax evasion, which is estimated to cost more than €100 billion a year. These include measures to incentivize non-cash payments, such as fines for not accepting cards, stricter prison sentences and a lowering of the maximum threshold for cash transactions. In addition, a “web tax” for digital companies is expected to bring in €700 million. Due to the appeasement with Brussels and the ECB’s easing, debt-service costs are at record lows, which is fundamental for keeping the public debt dynamic under control. Owing to a deteriorating external environment (global trade tensions, European slowdown) and stagnant competitiveness, a modest contraction of the current account surplus is expected. Italy’s export basket is skewed towards machinery, automotive and food products; making the trade balance sensitive to the trade war. Foreign manufacturing orders have been declining somewhat faster than in competitor countries (ex: Spain), suggesting a slight loss of market share.

 

Last update : February 2020

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. When issued in the country and payable abroad, they are stamped at 9/1000, and finally stamped at 6/1000 in the country if stamped beforehand abroad, with a minimum value of €0.50. In case of default, they constitute de facto enforcement orders, as the courts automatically admit them as a writ of execution (ezecuzione forzata) against the debtor.

Signed bills of exchange are a reasonably secure means of payment, but are rarely used due to a 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 contested unpaid bills at the Chambers of Commerce.

In addition to the date and place of issue, cheques established in amounts exceeding €1,000 and intended to circulate abroad must bear the endorsement non trasferibile (not transferable), as they can only be cashed by the beneficiary. To make the use of cheques more secure and efficient, 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 creditors and submitted to their 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% of payments from Italy), particularly SWIFT transfers, as they considerably reduce the length of the processing period. Bank transfers are a cheap and secure means of payment once the contracting parties have established mutual trust.

 

 

 

Debt collection

Amicable phase

Amicable collection is always preferable to legal action. Postal demands and telephone dunning are quite effective. On-site visits, which provide an opportunity to restore dialogue between supplier and customer with a view to reaching a settlement, can only be conducted once a specific licence has been granted.

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.

When an agreement is not reached, the rate applicable to commercial agreements 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 eight percentage points.

 

Legal proceedings

When creditors fail to reach an agreement with their debtors, the type of legal action taken depends on the type of documents justifying the claim.

 

Fast-track proceedings

Based on cambiali (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 timeframe). The resulting auction proceeds are used to discharge outstanding claims.

Creditors can obtain an injunction to pay (decreto ingiuntivo) if they can produce, in addition to copies of invoices, written proof of the claim’s existence by whatever means or a notarized statement of account. A forty-day period is granted to the defendant to lodge an objection.

Ordinary summary proceedings (procedimento sommario di cognizione), introduced in 2009, are used for uncomplicated 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.

 

Ordinary proceedings

The creditor must file a claim with the court (citazione) and serve summons to the debtor, who will file a defence (comparsa di constituzione e risposta) within ninety days via a preliminary hearing. The parties then provide briefs and evidence to the court. When the debtor fails to bring a defence, the creditor is entitled to request a default judgment. The court will usually grant remedies in the form of declaratory judgments, constitutive judgments, specific performance and compensatory damages but it cannot award any damages which have not been requested by the parties.

Undisputed claims are typically settled within four months, but the timescale to obtain an enforceable court order depends on the court. Overall, disputed legal proceedings take up to three years on average.

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

 

Enforcement of a legal decision

A judgment becomes enforceable when all appeal venues have been exhausted. If the debtor fails to comply with a judgement, the court can order compulsory measures, such as an attachment of the debtor’s assets or allowing the payment of the debt to be obtained from a third party (garnishee order) – although obtaining payment of a debt via the latter option tends to be more cost-effective.

For foreign awards, decisions rendered from a country in the EU will benefit from special procedures such as the EU Payment Order or the European Enforcement Order. Judgment from a non-EU country will have to be recognized and enforced on a reciprocity basis, meaning that the issuing country must be part of a bilateral or multilateral agreement with Italy.

Insolvency proceedings

Out-of court proceedings

The 2012 legal reform allows a debtor to file an application for composition by anticipation. Negotiation on an agreement commences 60 to 120 days prior to the initiation of judicial debt restructuration proceedings. The debtor retains control over the company’s assets and activities. A new pre-agreed composition plan may be agreed with the approval of creditors representing 60% of the debtor company’s debt.

 

Restructuring proceedings

This settlement is a court procedure which allows a company in financial difficulty to propose a debt restructuration plan. The debtor files a proposal to the court to repay the total amount outstanding to the secured creditors. If the court admits it, a commissioner trustee is appointed, and if the majority of the unpaid creditors accept the proposal, the court will officially validate the proceedings.

Alternatively, a debt restructuring agreement (accordi di ristrutturazione del debito) aims to restructuring the debt so as to rescue the debtor company from bankruptcy proceedings. The debtor must file a report on its ability to pay the remaining creditors in full, who otherwise can challenge the agreement before a bankruptcy court by requiring verification that their claims will be paid as normal.

 

Liquidation

This procedure aims to pay out the creditors by realising the debtor’s assets and distributing the proceeds to them. The status of insolvency justifies the adjudication of bankruptcy by the court, even where the insolvency is not due to the debtor’s misconduct. The court hears the evidences of the creditors’ claims and appoints a receiver to control the company and its assets. This receiver must liquidate all of the company’s assets and distribute the proceeds to the creditors to have the proceedings formally concluded.

Insolvency trend Italy
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