Old and new woes: Business turmoil awaits the winner of Italy’s election

Old and new woes: Business turmoil awaits the winner of Italy’s election

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Written by Gavin Jones and Angelo Amanti

TERNI, Italy (Reuters) – Inflation, a looming recession and impossibly high energy bills are among the dire economic problems that await whoever wins Italy’s election on Sunday, casting a long shadow over the industrial city of Terni.

According to the Milan-Cerd economic think tank, about 24.5% of Terni’s 16,000 businesses are at risk of near-term bankruptcy, the second highest anywhere in the country after Crotone in the southern low-lying region of Calabria.

It is located 100 kilometers (62 miles) north of Rome, and for more than a century, the fortunes of Terni’s 106,000 residents were closely linked to its main employer, Acciai Speciali Terni, one of Italy’s largest steel mills.

Paralyzed by rising gas and electricity costs, the plant last week sent 400 of its 2,278 workers home on reduced wages until better times. Departing workers see no cause for hope.

“We already have our own energy problem at home with gas and electric bills, so now we have a labor crisis on top of a local one,” said Igor Morisi, who worked at the plant for 22 years on steel sheet winding machines.

Italy’s energy-intensive steel sector has seen its costs rise tenfold since last year, according to data from the Federacciai steel producers’ lobby.

As in much of Europe, it is not just energy prices that are hurting Italian businesses and families. The overall inflation rate, exacerbated by the war in Ukraine, reached 9.1% in August to the highest level since the launch of the harmonized index with the European Union in 1997.

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Instability

As with most young Italians, job security was a mirage for Jacopo Calabresi, 31, another worker sent home from a steel mill in Terni. He secured temporary contracts for his first five years at the factory before finally securing a stable position just two months ago.

“After years of total uncertainty, I experienced a short period of remission. Now of course I feel very anxious again,” he said.

ISTAT says the number of temporary contracts in July reached its highest level since records began in 1977. This temporary spread of low-paid work is driving thousands of young Italians to seek better prospects abroad.

On top of Italy’s chronic problems are weak growth, stagnant productivity, huge public debt, low employment, a faltering bureaucracy and a sluggish justice system.

If opinion polls are correct, after Sunday all of this will fall into the lap of Giorgia Meloni, leader of the nationalist Italian Brotherhood party that looks set to be Italy’s first female prime minister.

Guido Crusito, a close aide to Meloni and co-founder of her party, warned this month that the full impact of energy costs on the economy will be felt later in the fall, potentially leading to widespread social unrest.

“It will be like Gotham City,” he said, pleading with opposition parties to help the new government but ruling out another national unity coalition like the one led by outgoing Prime Minister Mario Draghi.

Meloni says she will push for Europe to cap gas imports from Russia – something Draghi has been trying unsuccessfully for months – and wants to break the link between domestic gas and electricity prices.

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She pledged sweeping tax cuts while pledging to be “cautious” about public finances. The manifesto provides Italy’s fraternity, like all major parties in Italy, with few details on how they finance their policies.

red ribbon

In the current situation, even the most successful Tierney companies are feeling the pinch.

Fratelli Canalicchio, which makes luxury boat components, has been expanding since its founding 30 years ago, but co-owner Giovanni Canalicchio said there are increasing difficulties to overcome.

He said that steel prices have doubled over the past year, reducing profit margins, while successive governments have failed to reduce red tape that most Italian companies are complaining about.

“Other European countries have much less bureaucracy and this allows their companies to be faster and more responsive to changes,” he said in his factory, which has about 60 workers cutting and forming the steel parts of yachts.

“How do I see the country’s economic situation? Frankly, it’s not very rosy.”

Meloni has targeted a large part of her campaign at Italian small and medium companies such as Canaleccio, and while he did not reveal who he would vote for on Sunday, the businessman said he could understand her popularity.

“She is the only one who did what she said, remained in the opposition and did not participate in the unity government led by Draghi, so her two parties are the only party that stands out from the rest,” he said.

About 5 kilometers down the road, Coppini, a family-run business with 23 workers, has been producing another Italian specialty olive oil since 1955.

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CEO Michaela Coppini said the company was unable to plan ahead or make investments due to the risk that its suppliers of glass and paper for their bottles would have to suspend production due to rising energy costs.

She said Copeni’s electricity costs rose 251% in the first quarter from a year earlier, although the company mitigated the impact by installing solar panels before the current crisis.

“The next government will have to take measures to reduce energy bills, or else the country’s production system risks shutting down,” she said.

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