ECONOMY

Italy's economy lay in ruins at the close of WWII but the country wasted little time in setting about repairing the damage. By the early 1950s Italy had regained pre-war levels of production. The boom if the 1950s and early 1960s, known as the Economic Miracle, relied to a great extent on the masses of workers who migrated from the poorer south of the country to the industrial north, providing an ample but low-paid workforce.

Today, services and public administration account for 65.8% of GDP, industry 31.6% and agriculture 2.6%. Most raw materials for industry and m re than tree-quarters of energy needs are imported. Tourism remains an important source of income. In 1999 estimate taking were about US$28.4 billion and Italy ranked fourth in income from international tourism. Italy's main exports include clothing and textiles (Italy's fashion industry is one of its style flagships around the world), motor vehicles, food, drink, tobacco, engineering products, chemicals and production equipment.

Following its sustained growth of 3% through much of the 1980s, Italy became the fifth-largest economy in the world, made possible largely by a national tendency to produce entrepreneurs. As well as the household names, such as Agnelli (Fiat), De Bendetti (Olivetti) and Berlusconi (media), numerous ordinary Italians run their own businesses. Some 90% of Italian firms have fewer than 100 workers, and many of these firms are family businesses - officially at least. There are those who suggest that many companies artificially divide themselves into smaller units to sidestep tax and labour laws that apply to larger firms.

Some would say that Italian business succeeds in spite of the national government. Massive public debt, widespread corruption and arcane legal and tax systems have always combined to restrain economic progress. As well as this, many of the country's top business people were implicated in the Tangenttopoli corruptions scandals in the early and mid-1990s. Foreign firms have long found all this, combined with the country's seemingly endless political wrangling, a strong deterrent to investing i Italy.

Although Italy entered the European economic and monetary union with the first wave of members in 1999, it continues to have trouble respecting the economic parameters laid down by the Maastricht Treaty Reining in government debt financing (the external debt stands at US$45 billion) and waste remain among the most intractable problems facing the country.

That the country is, however, firmly locked into Europe is illustrated by the fact that more than half its exports go to EU partners. Industry slowed in the late 1990s and growth fell as low as 1.4% in 1999 but by 2001 it was above 2%, more or less in line with a fairly stagnant Europe.

In spite of all the post-war effort to promote growth in t he poor south, the gap between north and south remains as great as ever. Although the desperate poverty of the past is a memory and regions such as Apulia and Abruzzo have seen real progress, the fact remains that Italy's richest regions (Piedmont, Emilia-Romagna and Lombardy) are all northern and its poorest, (Calabria, Campania an Sicily) are all southern. Unemployment in the south is double the national average of 11.5 % and three times the level in the north. Infrastructure remains poorer and several attempts to establish industry in the south (mezzogiorno) have come to little, in spite of the trillions of lire - in the form of subsidies, tax breaks and loans - spent. As the EU contemplated the enormous task of extending its membership to as many as 12 countries, mostly Eastern European and in need of hefty subsidies, Italy dug in its heels and demanded that the EU funds for southern Italy be affected by the entry of new and poorer member nations.