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Factba.se: Australia DFAT Country Briefs - Italy
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COUNTRY BRIEFS


OVERVIEW

Australia and Italy enjoy a warm and long-standing relationship underpinned by strong community ties. Trade and investment and the development of cultural and educational links continue to grow. According to the 2006 census, 852,418 Australians claimed Italian ancestry with 199,124 Australian residents having been born in Italy. At least 30,000 Australians are estimated to live in Italy.

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POLITICAL OVERVIEW

The constitution of Italy was adopted in 1947, following a referendum on 2 June 1946 that abolished the Italian monarchy and established Italy as a parliamentary republic. The constitution came into effect on 1 January 1948 and established a bicameral parliament (Chamber of Deputies and Senate), a separate judiciary, and an executive branch composed of a Council of Ministers headed by the President of the Council (Prime Minister). The constitution also created the position of President (elected for a seven year term) to fulfil the ceremonial roles of the (former) Italian monarchy. Giorgio Napolitano was elected by Parliament as the eleventh President of the Italian Republic in May 2006. Silvio Berlusconi was appointed Prime Minister (for a five year term) following elections on 8 May 2008, but was forced to resign on 12 November 2011 after he failed to command a parliamentary majority in the face of a deteriorating economic outlook for Italy. He was replaced by Mario Monti, a former European Commissioner and respected economist, following the adoption of an economic stability package a few days later. Monti’s government, despite its technocratic nature, received solid parliamentary endorsement in confidence votes on 17 and 18 November and is expected to lead the country through to new elections by May 2013.

Both houses of parliament are directly elected and are of equal authority. The electoral system in the Senate is based upon regional representation. The Chamber of Deputies has 630 members and the Senate 315 elected senators; in addition, the Senate includes former presidents and several other persons appointed for life according to special constitutional provisions. Both houses are elected for a maximum of five years, but either may be dissolved before the expiration of its normal term. Legislative bills may originate in either house and must be passed by a majority in both.

In the 2006 elections, Italians living abroad (about 2.7 million people) were eligible to vote for the first time. They elected 12 members of the Chamber of Deputies and six Senators representing four overseas divisions: Europe; South America; North and Central America; and Africa, Asia, Oceania and the Antarctic.

Italy is divided into regions, provinces and municipalities. The constitution lists 20 regions, which are further divided into 95 provinces. Of the 20 regions, five enjoy special constitutional status: Friuli-Venezia Giulia, Sardinia, Sicily, Trentino-Alto Adige and Valle d'Aosta. The regions are responsible for electing their own regional parliaments that exercise substantial autonomy.

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ECONOMIC OVERVIEW

The Italian economy has changed dramatically since the end of World War II. From an agriculture-based economy, Italy has developed into an industrial state ranked as the world's eighth largest economy. It is a member of the European Union (http://europa.eu/abc/index_en.htm) , the OECD (http://www.oecd.org) , and the G8 (http://en.wikipedia.org/wiki/G8) and G20 (http://www.g20.org) economic forums.

Italy's economic strength is in the processing and manufacturing of goods, primarily in small and medium-sized enterprises. The majority of these enterprises are family-owned and are focused on the domestic market and exports to EU and Mediterranean countries. Italy's major industries are tourism, precision machinery, textiles, chemicals, pharmaceuticals, food processing, motor vehicles, electrical goods, furniture, clothing and footwear.

Most raw materials needed for manufacturing and more than 80 per cent of the country's energy sources are imported.

Despite its strengths, economic growth in Italy has been sluggish at an average of 1 per cent per annum for the last decade. Italy was also hit hard by the Global Financial Crisis (GFC), which precipitated Italy's worst recession since World War II. Manufacturing was hit heavily by falls in demand; Italian exports fell and there was also a significant decline in private consumption expenditure. The economy started to grow again in 2010, albeit at a rate of only 1.1 per cent, again below the eurozone average (1.7 per cent) and with a record trade deficit of over 27 billion euro, reflecting the country's 1 billion euro per week energy imports. The growth forecasts for 2011 and 2012 were recently revised down, however, with growth expected to be less than zero for both years, if not negative in 2012.

In addition, Foreign Direct Investment (FDI) in Italy remains well below the levels achieved by its benchmark competitors and outward Italian FDI is limited and largely concentrated in Europe and the Mediterranean. Unemployment is around 8.4 per cent (est. 2011) and is forecast to remain around that level for a number of years. There remains a sharp disparity between the near-full employment enjoyed in the north and the double-digit unemployment rates in the south.

The events in Greece have exacerbated Italy’s economic problems raising fears of a financial collapse. Of particular concern is the high level of public debt, which now exceeds $2.6 trillion (approximately 120 per cent of GDP) and amounts to a quarter of the entire euro zone sovereign debt.. Low investor confidence in the Italian economy sent Italian borrowing costs on 10-year bonds soaring in the second half of 2011 to unsustainable levels of over 7 per cent in November, the highest since the adoption of the Euro 10 years ago.

Italy’s debt is largely driven by a generous social welfare system. Pensions are equivalent of 14 per cent of GDP, compared to an OECD average of 7 per cent. The pension burden will likely increase as the country has a rapidly aging population - it was the first country in the world to record more people aged over 65 than under 15. Attempts to reform the pension system and reduce the burden on the public purse have been unsuccessful. In November 2011 Italy agreed to have the IMF and the EU monitor its progress in meeting targets on pension, labour and structural reforms that were agreed with EU leaders in late October in an effort to restore investor confidence and stave off Europe-wide recession.

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BILATERAL RELATIONSHIP

Australia and Italy have concluded bilateral agreements (http://www.dfat.gov.au/treaties/index.html) covering culture, double taxation, air services, economic and commercial cooperation, reciprocal social security and health care benefits, and film co-production. A bilateral Working Holiday Maker Arrangement became operative in January 2004. The two countries have also signed a number of Memoranda of Understanding (MOUs) covering science and technology cooperation, defence materiel, defence industry, motor vehicle safety certification, sports cooperation, game meat exports and trade cooperation. In July 2009 an MOU was signed regarding cooperation on the Square Kilometre Array, a proposed international advanced radio-telescope project. Many state governments have signed MOUs with Italian regional governments to promote cooperative activities and exchanges between the two parties.

There are a range of Australian business groups in Italy, including the Italy-Australia Business Council, Australian Business in Europe (ABIE) in Milan and the Australian Business Network in Rome.

High-Level Visits

(Note: Positions indicated in the list below were held at the time of the visits)

To Italy

2011

-- Her Excellency Ms Quentin Bryce AC, Governor-General of the Commonwealth of Australia (to represent Australia at celebrations surrounding the 150th anniversary of Italian Unification)

-- The Hon Kevin Rudd MP, Minister for Foreign Affairs (to attend the Second Libya Contact Group meeting)

-- Senator the Hon Mark Arbib, Minister for Sport (to open the Australian Sports Commission’s European Training Centre in Gavirate, Varese)

2010

-- The Hon Kevin Rudd MP, Minister for Foreign Affairs

-- The Hon Anthony Albanese MP, Minister for Infrastructure and Transport (for the second Ministerial Conference on Global Environment and Energy in Transport)

-- Australian Parliamentary Delegation, led by the President of the Senate, Senator the Hon John Hogg

-- Senator the Hon Penny Wong, Minister for Climate Change, Energy Efficiency and Water (for Major Economies Forum on Energy and Climate)

-- Senator the Hon Kim Carr, Minister for Innovation, Industry, Science and Research

2009

-- The Hon Kevin Rudd MP, Prime Minister

-- The Hon Penny Wong MP, Minister for Climate Change and Water

-- The Hon Martin Ferguson MP, Minister for Resources and Energy

-- The Hon Tony Burke MP, Minister for Agriculture, Fisheries and Forestry

-- The Hon Anthony Albanese MP, Minister for Infrastructure, Transport, Regional Development and Local Government

-- The Hon Bob McMullan MP, Parliamentary Secretary for International Aid

To Australia

2009

-- Ms Stefania Craxi, Undersecretary of State for Foreign Affairs

-- Mr Adolfo Urso, Vice Minister for Trade

-- Mr Lamberto Dini, Italian Minister for Foreign Affairs, visited Australia in 2001.

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BILATERAL ECONOMIC AND TRADE RELATIONSHIP

In 2010 Italy was the world's eighth largest economy and a significant market for Australia. It was our sixth largest export market in the European Union (EU) and our third largest source of EU imports. In 2010-11 Italy was Australia's 14th largest merchandise trading partner, with bilateral trade in goods favouring Italy by a ratio of 4:1. Our services trade in 2010 shows a similar trend with imports from Italy amounting to 1.7 per cent of total share compared to just 0.6 per cent for exports to Italy.

Italian investment in Australia is relatively weak, reflecting Italy's generally low FDI abroad, most of which is directed within the EU and Mediterranean area. There is, however, interest in Australia as a base for expansion into Asia. Total stock of FDI from Italian companies in Australia in 2010 was A$631million.

The main Italian companies with investments in Australia are Parmalat (dairy product manufacturers), Ferrero (confectionery), Iveco Trucks (motor vehicle manufacture and service), Luxottica (eyewear), Ansaldo STS (railway signalling and infrastructure), Permasteelisa (construction, aluminium, glass), Prysmian Cables & Systems (cables) and Amplifon (hearing aids). ENI, the Italian energy producer, is also active in offshore gas and oil exploration in Australia, often in partnership with other companies. In November 2011, SAIPEM, part of the ENI Group, won a €1.3 billion offshore gas pipeline project in Australia.

Trade successes

Major Australian investments in Italy include Po Valley Energy which owns a number of onshore and offshore gas exploration and production licences and owns and operates two gas treatment plants in Italy, Bovis Lend Lease which participates in major Italian and European infrastructure projects via its Milan headquarters, and architectural firm Woodhead which has established a joint venture with Italian firm Interplan to service the European market. Cochlear, Chep, Aconex, Australian Wool Innovation, Berrigner Blass, Nufarm, Dyesol, Solahart and Vix-ERG are other Australian businesses with a direct presence in Italy, while NewsCorp wholly owns Italy's leading satellite TV company, SKY Italia.

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EXPORT OPPORTUNITIES

Two-way merchandise trade in 2010-11 was $A6.1 billion, in Italy's favour by a ratio of almost 4:1. Items such as coal, wool, iron, steeland leather dominated the mix of Australian exports, making up over 70 per cent of total Australian exports to Italy. Italian imports are highly diversified. Major Australian imports from Italy in 2010 included medicaments, organo-inorganic compounds, railway vehicles and household-type equipment.

The Australian Trade Commission (Austrade) is the Australian Government's trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio. The section 'For Exporters' on Austrade's website (http://www.austrade.gov.au) is a valuable starting point for information on export opportunities to many countries, including Italy. Overseas companies interested in establishing their business in Australia can visit the 'For Investors' section. Austrade maintains an office in Milan. For further information please contact Austrade in Australia on 13 28 78 or email info@austrade.gov.au (mailto:info@austrade.gov.au) .

In addition, Australian Wool Innovation Ltd has an office in Biella in northern Italy to support its Western Europe market (Italy continues to be the world's second largest wool processor and manufacturer of woollen clothing after China).

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Last Updated: December 2011

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