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The political, economic and social outlook for Italy is muddled – and not for the first time. Voters’ rejection of former prime minister Matteo Renzi’s constitutional reforms – and his resulting resignation – have led to an uncertainty that the populist Five Star Movement is keen to exploit. Led by maverick Beppe Grillo, m5s is neck and neck with the Democratic party in the polls.

However, as anyone who studies the country’s political and economic quagmire will know, in Italy instability is not always a bad thing: the figures suggest that political chaos doesn’t necessarily lead to a worsening economic situation.

There are even whispers of optimism: the economy is growing (albeit far too slowly) and Italy continues to excel in key areas centred around specialised manufacturing. The troubles that have beset the EU, most notably the migration crisis and Brexit, have seen Italy take its place on the centre stage of European foreign policy. The world has seen and largely admired how Italy has reacted to the refugee crisis.

Milan continues its path of world domination when it comes to fashion and design and the excitement generated by its Expo in 2015 hasn’t diminished. Rome, however, is facing a virtual meltdown in term of politics and city finances. The land of contrasts par excellence, Italy is showing remarkable resilience and sobering stagnation in equal measure.

Foreign policy

With Paolo Gentiloni as prime minister and political heavyweight Angelino Alfano as Italy’s new foreign minister, the country’s foreign ministry feels robust and willing to flex its diplomatic muscles. It needs that strength now more than ever. The refugee crisis has thrust Italy to the fore. “We are the natural bridge between Europe and Africa,” says Luigi Maria Vignali, director for migration affairs at the Foreign Ministry’s imposing La Farnesina HQ in Rome.

This positioning and experience will have to be successfully tapped as anti-migration rhetoric makes waves both north of the Alps and on the other side of the Atlantic. “As one of the EU founders, Italy has experience in negotiating reasonable compromises among the member states,” says Vignali.

This pivotal role should hold sway in the short-term – when he was foreign minister Gentiloni visited close neighbours Libya and Tunisia in an effort to resolve a difficult situation. Italy also has the blessing (or curse) of hosting the G7 Summit in Sicily in May, which US president Donald Trump has agreed to attend. Migration will be high on the agenda and Italy has an opportunity to influence and persuade.

State of the economy

At just shy of 1 per cent, Italy’s economic growth was anaemic in 2016 and lagged behind nearly all its European partners. But it’s not as bad as some feared: the doom and gloom that was thought to be the likely result of Renzi’s referendum rejection and resignation has not materialised.

Indeed on a macro level some argue that Italy’s economy tends to fare better at times like this. “When you have a weak government in Italy, paradoxically you have the right conditions to do the right things for the economy,” says Carlo Alberto Carnevale Maffè, professor of strategy at SDA Bocconi School of Management in Milan. “As a weak government you are not tied to any political promises,” he says; instability therefore allows for a diverse, inclusive set of economic responses to emerge. That’s the theory at least.

Fashion and design

The manufacturing of bags and shoes continues to a be growth area; Italian production is still taken as a given for all manner of luxury brands. High levels of micro-innovation on product features and design also keep Italy competitive in this field. The country’s long-famed regional and city clusters are having to diversify into design innovation. Transport design emanating from the great automotive centre of Turin still has much of that value-added Italian kudos.

Tourism

Tourist numbers (both domestic and international) are increasing year on year. But some hot spots are struggling to cope: the Cinque Terre area was up 20 per cent on the previous year and although Venice was up by a lower rate of 5 per cent, the fact that the tiny island-city has millions of visitors each year makes that problematic.

Leader’s performance

Seen as a trusted pair of hands by the ruling Democratic party, Paolo Gentiloni was drafted from his post as foreign minister immediately after Renzi’s resignation in December. Despite health problems early in his tenure, Gentiloni has resolutely taken hold of the reins and delivered a degree of stability. However, he is very much the epitome of the unelected establishment figure, which will continue to rile populists.

Experts

“Italy is a credible defender of Europe’s future. We are important to fellow founders such as Germany and France but also to newcomers. They see us as a rock that defends the achievements of the European project.”
Luigi Maria Vignali
Minister plenipotentiary and director for migration affairs

“The Five Star Movement has been successful because people are fed up of corruption, nepotism and political patronage. And they are more likely to forgive the m5s over other politicians; they know that Beppe Grillo is being foolish but they say, ‘Hey, at least he’s honest.’”
Gianni Riotta
Journalist, La Stampa, L’Espresso, Corriere della Sera

Soft-power credentials

Trade fairs: Milan’s 2015 Expo revived Italy’s love affair with the big Fiera (trade fair). Think Salone del Mobile (Milan: furniture and design) and Pitti Uomo (Florence: menswear). But even if it’s children’s books (Bologna) or wine (Verona) that you’re after, Italians love to show their wares.

Food: The culture of gastronomy is serious business in Italy; it seems natural that Rome is where the UN’s Food and Agriculture Organisation is based. Italian brands are familiar fridge fodder on every continent.

Alcohol: A fine barolo or primitivo instead of the once ubiquitous chianti give vivid flavour to the image of Italy abroad. Meanwhile, from craft varieties to the mass-market Peroni and South Tyrol’s Forst, Italian beer is busy quenching an insatiable thirst.

What needs fixing

Tax: Taxation is high by European standards but Italians see little investment in public services in return. Cutting labour taxes and balancing the books with increased tax on real estate is one way to get more people working and earning again.

Rome: With creaking infrastructure and the poor management of its assets, Rome might be one of Europe’s worst capitals. Mayor Virginia Raggi has a lot on her plate, including being investigated for abuse of office, but the eternal slanging match needs to end.

Young entrepreneurs: Italy’s banks are in no mood for lending. But credit is at an all-time low, maybe as the coffers of parents and grandparents are drying up. Support needs to be available for Italy’s young business people.

Monocle view

The UK referendum result, the spectre of US isolationism and the migration crisis all have consequences for Italy. With Brexit looming the country should take centre stage in terms of European integration; it should also continue to use its skilled diplomatic corps to win friends in North Africa.
Grade: C. Further global integration will help get Italy back on the straight and narrow.

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