ROME LETTER:Italians' careful attitude with money may serve the country well as financial storms blow, writes Paddy Agnew
AND, IN these times of economic crisis, how is dear old Italy and how does she stand? Curiously, as the icy blasts of recession and crisis blow, "the sick lady of Europe" is, for once, not looking quite so bad. When you ask people about the economic crisis, you tend to get a stock, jocose answer: "Crisis? Recession? Sure, how could we tell? We've been in crisis for years now." The bottom line would seem to be that if you have never had a boom, then the level of your letdown and recession will be much contained. Even expert economists are making noises in this direction. According to Giuseppe Sacco of Rome's Luiss University, "Italy will continue to float rather better than some others".
At a briefing with the foreign press corps the other day, Italian finance minister Giulio Tremonti suggested that Italy will perhaps ride out the current financial storms better than some for two very obvious reasons linked to the "real economy". Firstly, Italy has a relatively low level of private debt, and secondly there has been no significant real estate boom here in recent times.
The minister has a point, or indeed, two points. In more than 20 years of living in Italy, I have never ceased to be impressed by the extent to which ordinary Italians are careful and ultra-cautious when it comes to money matters. A 2007 Nielsen Consumer Panel Survey shows that the British, French, Spanish and Germans (and the Irish if they had been included) all have a much higher level of family debt than Italians.
Basically, Italian private debt represents 43 per cent of earnings as opposed to 66 per cent in France, 100 per cent in Germany, 112 per cent in Spain and 148 per cent in the UK.
No surprise, here. I can immediately think of a number of friends who prove the point. Take "Paola", for example. She is a senior civil servant who deals with foreign commerce. She got her first credit card at the age of 48. She almost never uses it in Italy but uses it only when on holiday. She and her husband have had bank loans but only of the 10-year variety, promptly repaid on schedule.
Or take "Federico". Even though he is in his late 30s and runs his own small building company, he has never had a credit card. When he is not busy working for clients, he is currently building a house for himself. He has been at this for years, building bit by bit as his earnings allowed. Yet, he would never dream of taking out a bank loan to speed up the process, indeed he has never been in debt to a bank in his life.
Or take "Francesca". She is an old family friend. A couple of years ago, she accompanied the Baroness on a trip to Portugal. For the purposes, she decided to get her first ever credit card. We are talking about a 45-year-old mother of one and a government employee, not a penniless student.
The Nielsen survey confirms the point. While 52 per cent of Brits, 43 per cent of the French and 39 per cent of Spaniards use credit cards regularly, only 17 per cent of Italians use them. Overall, 66.8 per cent of all Italian transactions are done in cash. Italian bank UniCredit estimates that of EU countries, only Poland effects more cash transactions.
What does all this mean? Well, that Italians are a canny lot. They might suffer from a staggering public debt (108 per cent of GDP, or thereabouts) but they are pretty careful with the home accounts. This could be an attitude that will stand by them, too, in these difficult times.
Then there is the real estate question. Speaking of Spain (but it has relevance for Ireland), Prof Sacco says: "We're not going to have the dramatic collapse that Spain will experience. The Spanish boom has been based on housebuilding. In 2006 for example, they built 800,000 new houses, more than France, Germany and the UK put together. You simply can't sell many of these houses or apartments today." Sounds familiar? Prof Sacco also points to another Italian anomaly. He argues that international markets are moving ever more towards a "social injustice". This means that certain top of the range products will continue to do well, despite everything. Witness, he says, the long queues of potential buyers of million-euro yachts at the Genoa Boat Show recently or the fact that while both Opel in Germany and Nissan in Japan have basically had to close down for two weeks, Ferrari and Maserati in Italy are doing just fine.
All of this is, of course, very relative. Yet, Italians are good at belt-tightening. When George W's daddy opted for the 1991 "Desert Storm" invasion of Iraq, some Italians thought the third World War was on the way. All of a sudden, you could not find sugar for love or money. Perhaps, this was an expression of the hard times experienced during the second World War, hard times ingrained into the Italian collective psyche. Could be a useful attitude to have these days.