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UNCLAS SECTION 01 OF 15 ROME 000171 
 
SIPDIS 
 
SECSTATE FOR EB/IFD/OIA 
SECSTATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB OPIC KTDB USTR PGOV IT
SUBJECT: INVESTMENT CLIMATE STATEMENT 2009 - ITALY 
 
REF: A) 08 STATE 123907 
 
 
¶1.  SUMMARY: Following is Post's submission for 2009 Investment 
Climate Statement for Italy. End Summary. 
 
 
OVERVIEW AND UPDATE 
------------------- 
 
¶2. A January 2008 article in London's Financial Times likened 
investing in Italy to "driving with the brakes on." It cited the 
dearth of global names and brands in the Italian economy and 
chronicled the tribulations that have dissuaded firms from AT&T to 
British Gas from investing in Italy.  The author asked rhetorically 
why there are over 400 Burger Kings in Spain, 500 in the UK, but 
only 39 in Italy.  The conclusion -- that an onerous public sector, 
unclear rules, and latent economic nationalism were to blame -- 
tracks with post's assessment of Italy's current investment climate. 
It is important to note that this negative assessment of Italy's 
investment climate is shared, in essence, by the Italian Trade 
Commission, by leading Italian business organizations, and by almost 
all of the international organizations that have examined the 
situation (see paras. 14 -16, 44) 
 
¶3. Italy's poor investment climate explains much of its low economic 
growth rate.  Over the last ten years, Italy's economy has grown 
significantly more slowly than the rest of Europe. Former U.S. 
Ambassador Spogli saw this "growth gap" as a major threat to Italy's 
ability to continue as an effective international partner of the 
U.S. This problem was deemed to be so serious, that the Ambassador 
took the unusual step of launching a major Embassy initiative - "The 
Partnership for Growth" in an effort to address it (see para. 17). 
 
¶4.  While the current Government of Italy (GOI) officially maintains 
a welcoming posture to foreign investment, it has made only modest 
progress in addressing the structural economic disincentives that 
discourage investment, innovation and greater economic dynamism. 
The current budget, for example, includes some tax benefits for 
start-ups and modest measures aimed at reducing red tape for 
starting businesses. 
 
¶5. Significant stumbling blocks to investment remain, however, such 
as rigid labor laws, high input costs and taxes, and inefficient 
public services, particularly a slow judicial system. The current 
government has sought to reform public administration, prompting 
protests from public sector employees long accustomed to a lax 
working pace and environment.  The GOI also introduced controversial 
measures to reform public education in a bid to improve the 
competitiveness of Italy's human capital. Otherwise, the 
government's economic team has been engaged primarily in efforts to 
mitigate the global financial crisis' effects on Italian households 
and businesses, leaving structural reforms for another day.  In the 
initial days of the world-wide equity markets' severe declines, 
Italian policy-makers publicly denounced the prospect of foreign 
sovereign wealth funds acquiring control of Italian companies (see 
para. 12), and the government instituted measures to strengthen 
firms' defenses against hostile takeovers.  Finally, Italy's high 
debt-to-GDP ratio will constrain the government's efforts to further 
stimulate investment with additional public spending or lower taxes. 
 
 
INTRODUCTION 
------------ 
 
¶6.  Italy's economy, the seventh largest market economy in the 
world, is fully diversified.  Small and medium-sized firms dominate 
the Italian economy.  Family-owned companies account for 93 percent 
of all Italian companies and 85 percent of GDP.  In the U.S., 
family-owned companies represent 96 percent of companies, but 
account for only 40 percent of GDP. Germany, France, and the U.S. 
remain Italy's most important export markets.  Industrial activity 
is concentrated in the north -- one of the most prosperous areas in 
Europe.  By contrast, the center and the south are less developed. 
Unemployment in some southern areas is three times that of the north 
and per capita incomes are substantially lower. 
 
OPENNESS TO FOREIGN INVESTMENT 
----------------------------- 
 
¶7. Officially, foreign direct investment in Italy is generally 
welcomed and encouraged.  The government of Prime Minister Silvio 
Berlusconi swept into office aided by general public disgust with 
the center-left and supported by a northern regional party whose 
 
ROME 00000171  002 OF 015 
 
 
highest priority is greater fiscal independence from the central 
government.  Despite anemic economic growth most of this decade, 
voters did not apparently charge Berlusconi with structural reform 
of the economy that could increase business creation, production and 
employment. 
 
¶8.  The Prodi government presided in 2007 over the contested sale of 
a controlling stake in Telecom Italia to a consortium of Italian 
banks and Spain's Telefonica.  A U.S. bidder, given the opportunity 
to put a deal together, withdrew from the competition after 
intervention from various government political figures made it clear 
that purchase conditions were liable to change and that a U.S. 
bidder was viewed unfavorably in many quarters.  While Prodi 
applauded the outcome, the deal prompted U.S. Ambassador Ronald 
Spogli to publicly call on the Italian government for greater 
transparency in such transactions and to urge a more welcoming 
attitude toward investment.  He stated specifically: 
"As American Ambassador I focus most of all on my country's 
investments. Here too, the situation is not comforting. Up to 2005 
the cumulative total of U.S. investment in Italy amounted to 
slightly less than $26 billion, well below the U.K. at $324 billion, 
Germany at $86 billion, France at $61 billion and even Spain at $43 
billion.  These numbers should provoke reflection. Investments do 
not come where they are not well received, and where the rules of 
the market are continually changed. Modifying the rules raises the 
level of risk, and makes it very difficult to program the future 
activities of a company, or a single citizen. I do not know the 
details of the Telecom negotiations, but the renunciation letter of 
[US Firm] clearly expresses reluctance to invest in a market where 
the rules are unpredictable." 
 
¶9. The GOI's efforts to sell its 49.9 percent share of Alitalia, the 
long ailing Italian flag carrier, put the Berlusconi government to 
an early test on openness to foreign investment and transparency 
managing the public's money.  During the election campaign 
Berlusconi had declared that the airline should remain Italian, even 
as Alitalia pursued merger/sale talks with European competitors. 
Union opposition to those deals and Berlusconi's statements led Air 
France to withdraw from buy out plans.  Once in office, Berlusconi 
used his personal and political skill to convince a group of Italian 
businessmen to commit to purchasing the airline and keeping it 
Italian.  He further enticed investors with amendments to the 
bankruptcy law that permitted Alitalia to split into two companies, 
one composed of attractive assets that were transferred to the 
buyers, and another composed of liabilities to be liquidated by the 
government and, by extension, the Italian taxpayer. But for this 
provision, worth hundreds of millions of euros, it is unlikely the 
deal with Italian investors would have been consummated. To survive, 
however, the airline still needed an international partner.  While 
the new owners sought to sell a minority stake to Air France/KLM or 
Lufthansa, Berlusconi repeatedly weighed-in, going so far as to 
recommend commercial agreements with those carriers rather than 
offering them even a minority stake in Alitalia.  Earlier, under the 
previous government, an American-led group walked away from its 
Alitalia bid in the face of an opaque process (to include the firm's 
financial statements) and labor and political hostility. 
 
¶10.  As an EU Member State, Italy is bound by EU treaties and 
legislation, some of which have an impact on business investment. 
As specified under the right of establishment set forth in the EU 
treaty (1957 Treaty of Rome), Italy is obliged to provide national 
treatment to foreign investors established in Italy or in another EU 
member state, except in a few instances.  Exceptions include limited 
access to government subsidies for the film industry, added capital 
requirements for banks domiciled in non-EU member countries, and 
restrictions on non-EU-based airlines operating domestic routes. 
Italy also has restrictions in the shipping sector. 
 
¶11.  The GOI retains the authority to restrict foreign investment in 
some cases.  EU and Italian anti-trust laws give EU and Italian 
authorities the right to review mergers and acquisitions over a 
certain financial threshold. The government may block mergers 
involving foreign firms for "reasons essential to the national 
economy" or if the home government of the foreign firm applies 
discriminatory measures against Italian firms.  Foreign investors in 
the defense or aircraft manufacturing sectors are likely to 
encounter an opaque process and resistance from the many ministries 
charged with approving foreign acquisitions of existing assets or 
firms. 
 
¶12. In the aftermath of the financial crisis' dramatic blow to 
equity prices worldwide, various Italian policymakers, including 
Berlusconi, made statements suggesting that Italy would not welcome 
certain foreign portfolio investments, and in particular those by 
 
ROME 00000171  003 OF 015 
 
 
sovereign wealth funds. Despite such statements, Italy did not in 
the end implement any regulation limiting the investment by 
sovereign wealth funds in Italy; to the contrary, the government 
hailed minority investments by Middle Eastern sovereign funds such 
as Libya and Abu Dhabi. In late 2008 Libya's Sovereign fund bought 5 
percent of Unicredit, Italy's largest bank, and a stake in ENI, 
Italy's energy para-statal.  Also at the end of 2008, Abu Dhabi's 
Sovereign Fund bought 3.3 percent of Atlantia, the company that 
manages Italy's toll-road network.  Another Abu Dhabi Fund, Mubadala 
Development, already controls 5% of Ferrari and 35% of Piaggio Aero 
Industries. 
 
¶13.  Foreign investors are not prevented from investing in the 
privatization of government-owned companies, except in the defense 
sector.  Privatization strategies often entail the GOI retaining a 
"golden share" (a government stake with controlling authority) in 
the company or establishing a core group of Italian shareholders who 
agree to keep their shares for a minimum period.  Italy is the only 
EU member country to keep significant "golden share" regimes for 
privatized companies.  According to EU data, the Italian government 
retains special rights in six Italian firms -- ENEL (utilities), ENI 
(oil/gas), Finmeccanica (industrials), Telecom Italia 
(telecommunications), Save (Industrials), and Terna (utilities). 
 
¶14.  The Italian Trade Commission (ICE) reported in January 2007 
that 7,200 foreign companies operate in Italy, employing almost one 
million workers.  According to ICE, the stock of foreign investment 
in Italy equals 12 percent of GDP, far less than many EU nations. 
Approximately 77 percent of foreign companies operating in Italy are 
located in the north, with the Lombardy Region alone hosting 46 
percent.  The ICE study cited as key obstacles to foreign 
investment: labor taxes, lack of labor flexibility, red tape, and 
high corporate taxes. Net direct investment inflows in 2007 were 
28.5 billion euros, while net outflows totaled 65 billion euros. 
 
¶15.  The World Economic Forum's 2008-2009 Global Competitiveness 
Guide ranked Italy 49th out of 134 countries with a CG index score 
of 4.4 on a 1-7 scale. This rank is not as strong as those in 
previous years, which ranked Italy at 46 in 2007 and 47 in 2006. The 
report cites as Italy's weak points macroeconomic fragility (related 
to the level of public debt), an inefficient labor market, lack of 
infrastructure, and institutional and bureaucratic inefficiency. 
Italy's strong points are the quality of health care and the primary 
education system, the diffusion of technologies, and sophisticated 
management in large and medium Italian companies. 
 
¶16. The 2008 "Index of Economic Freedom," published by the Wall 
Street Journal and Heritage Foundation, ranked Italy as having the 
world's 64th freest economy.  The study highlighted government 
interference in the economy, corruption, and a slow court system as 
contributing to Italy's ranking below less developed nations such as 
Uganda, Belize, Jamaica and El Salvador.  A lack of judicial 
effectiveness was also underlined by Italy's abysmal ranking of 156 
out of 181 countries surveyed by the World Bank in its 2008 edition 
of "Doing Business."  This compares to the average score for OECD 
members of 33.  The Foreign Investors Committee of Italy's 
industrial association Confindustria conducted a survey of 60 
foreign companies operating in Italy, including Coca Cola, GE, 
Glaxo-SmithKline and others.  The results highlighted bureaucracy, 
costly and inflexible labor, and complex, lengthy legal and taxation 
systems as the primary barriers to foreign direct investment. 
 
¶17. All the same, Italy can boast of a budding movement, aided and 
abetted by a US Mission to Italy program called "Partnership for 
Growth," to foster entrepreneurship among a young, well-educated 
segment of the population.  The movement has served to bring 
world-class scientific and technological researchers together with 
venture capitalists and the academic community.  The aim of these 
constituencies is to break the cultural bias against 
entrepreneurship and seek changes in Italy's policy environment to 
facilitate business start-ups, growth, and job creation emanating 
from scientific discoveries. 
 
 
CONVERSION AND TRANSFER POLICIES 
-------------------------------- 
 
¶18.  In accordance with EU directives, Italy has no foreign exchange 
controls.  There are no restrictions on currency transfers, only 
reporting requirements.  Banks are required to report any 
transaction over 15,000 euros (USD 19,000) due to money laundering 
and terrorism financing concerns.  Profits, transfers, payments, and 
currency transfers may be freely repatriated.  Residents and 
non-residents may hold foreign exchange accounts. 
 
ROME 00000171  004 OF 015 
 
 
 
 
EXPROPRIATION AND COMPENSATION 
------------------------------ 
 
¶19.  The Italian constitution permits expropriation of private 
property for "public purposes," defined as essential services or 
indispensable for the national economy, with fair and timely 
compensation.  There are a few long-standing disputes in Italy 
involving U.S. citizens who assert that municipal governments 
unjustly expropriated their real property or inadequately 
compensated them.  These disputes do not reflect systematic GOI 
discrimination against U.S. investments, but highlight how Italy's 
ineffective judicial process can hinder investment. 
 
 
DISPUTE SETTLEMENT 
------------------ 
 
¶20.  Though notoriously slow (civil trials average seven years in 
length), the Italian legal system meets generally recognized 
principles of international law, with provisions for enforcing 
property and contractual rights.  Italy has a written and 
consistently applied commercial and bankruptcy law.  While the 
Italian judiciary is considered independent of the government, 
Italian judges have often been accused of being politically 
partisan.  Italian courts accept and enforce foreign judgments only 
upon request. Foreign investors in Italy can choose among different 
means of dispute resolution, including legally binding arbitration. 
The method chosen should be specifically set forth in a contract 
between commercial partners. 
 
¶21.  At the end 2007, the GOI approved new bankruptcy regulations 
which went into effect on January 1, 2008.  The new regulations -- 
analogous to U.S. Chapter 11 restructuring -- provide more 
flexibility between parties to reach a solution before declaring 
bankruptcy.  The judicial role in bankruptcy procedures has been 
drastically limited to simplify and speed up the process. The new 
regulations change the requirements for declaring a company 
insolvent and they encourage corporate reorganization or debt 
restructuring as an alternative to liquidation. 
 
¶22.  Italy is a member of the World Bank's International Center for 
the Settlement of Investment Disputes (ICSID).  Italy has signed and 
ratified the Convention on the Settlement of Investment Disputes 
Between States and Nationals of Other States, and is a signatory of 
the New York Convention of 1958 on the Recognition and Enforcement 
of Foreign Arbitral Awards. 
 
 
PERFORMANCE REQUIREMENTS/INCENTIVES 
----------------------------------- 
 
¶23.  The GOI is in compliance with WTO Trade-Related Investment 
Measures (TRIMS) obligations.  Foreign investors face specific 
performance requirements only in the telecommunications sector. 
However, this has not deterred foreign investment in 
telecommunications.  For example, in 2005, Weather Investments, 
owned by an Egyptian financier, bought Wind, Italy's second largest 
telecommunications company; Vodafone, Italy's second largest mobile 
operator, is also foreign-controlled.  Spain's Telefonica is a 
significant investor in Telecom Italia, having purchased a stake 
from the GOI in a process that prompted a U.S. firm to withdraw. 
(see para.8) . 
 
¶24.  The GOI offers modest incentives to encourage private sector 
investment in economically depressed regions, particularly southern 
Italy.  (For more details, visit the website:  www.invitalia.it) The 
Ministry of Universities and Research has identified, funded, and 
signed Framework Program Agreements with eleven "Technology 
Districts" and public-private joint laboratories focused on 
strategic sectors.  Technology Districts created to facilitate 
cooperation between public and private researchers and venture 
capitalists, support the research and development of key 
technologies, strengthen industrial research activities, and promote 
innovative behavior in small- and medium-sized enterprises. 
 
¶25.  The Italian tax system does not discriminate between foreign 
and domestic investors.  The 2008 budget reformed the structure of 
the tax system (Legislative Decree No. 344/2003), reducing corporate 
income tax (IRES) rates by 5.5 nominal points from 33 to 27.5 
percent, and trimming the regional business tax (IRAP) from 4.35 to 
3.9 percent.  These tax cuts are in response to increased EU-wide 
competition for investment, particularly as the enlargement of the 
 
ROME 00000171  005 OF 015 
 
 
EU to 27 members ushered in various low cost, low tax East European 
states.  Germany's 2007 decision to cut corporate tax rates by ten 
points rendered Italy's corporate tax rate the highest in the EU. 
 
¶26.  The GOI has tried to off-set the effect of corporate tax cuts 
on public revenue by introducing compensatory measures that keep 
effective rates of taxation high.  They include: 
 
-- setting new limits to the deductibility of interest; 
 
-- abolishing accelerated depreciation; and 
 
-- revising the tax treatment of consolidated reporting. 
 
In addition, successive governments have sought to increase 
enforcement of existing tax laws. 
 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
-------------------------------------------- 
 
¶27.  There is no limitation in the Italian constitution or civil law 
on the right to private ownership and establishment of investments. 
 
 
PROTECTION OF PROPERTY RIGHTS 
----------------------------- 
 
¶28.  Enforcement of Intellectual Property Rights (IPR) remains a 
serious problem in Italy. While anti-piracy and anti-counterfeiting 
laws on the books are widely regarded as adequate, relatively few 
IPR cases are brought to trial. Judges still regard IPR violations 
(and copyright violations in particular) as petty offences, and the 
magistracy is a weak link in combating piracy in Italy.  The Italian 
Finance Police (GDF) and Italy's Customs Police are active in 
combating IPR theft; however they are frustrated that so few cases 
reach final sentencing. Italy remains on the Special 301 Watch List 
due to insufficient IPR enforcement and insufficient progress to 
combat Internet piracy. 
 
¶29.  Italy's restrictive interpretation of EU privacy laws now makes 
it virtually impossible for Internet copyright violation cases to be 
prosecuted. Currently there are no agreements between Internet 
Service Providers and rights holders on standard notice and 
take-down procedures. 
 
¶30.  Copyrighted works sold in Italy generally must bear a sticker 
issued by SIAE, Italy's royalty collection agency operating under 
authority from the Ministry of Culture (software purchased for 
business use is exempt). The music and film industries supported 
application of the sticker in the past, but are now dissatisfied 
with the system, asserting it has become overly burdensome while 
failing to provide adequate protection from piracy. 
 
¶31. New initiatives on the part of the GOI to address the lack of 
IPR protection include: 
 
- The Economic Development Ministry has created a General 
Directorate for Intellectual Property to take on functions 
previously shared between the Italian Patent and Trademark Office 
and the Anti-Counterfeiting High Commission. 
 
- The Secretary General of the Prime Minister's Office will chair an 
inter-ministerial anti-piracy committee. The committee is charged 
with presenting a national anti-piracy action plan in early 2009. 
 
- An economic development bill still under parliamentary review 
contains provisions aimed at facilitating investigations and 
increasing criminal penalties against trademark infringement. 
 
It is too soon to determine the effectiveness of the above measures. 
 
 
¶32.  Italy is a member of the Paris Union International Convention 
for the Protection of Industrial Property (patents and trademarks) 
to which the United States and about 85 other countries adhere. 
U.S. citizens generally receive national treatment in acquiring and 
maintaining patent and trademark protection in Italy.  After filing 
a patent application in the United States, a U.S. citizen is 
entitled to a 12-month period within which to file a corresponding 
application in Italy and receive rights of priority.  Patents are 
granted for 20 years from the effective filing date of application 
and are transferable.  U.S. authors can obtain copyright protection 
in Italy for their work first copyrighted in the United States, 
 
ROME 00000171  006 OF 015 
 
 
merely by placing on the work, their name, date of first 
publication, and the symbol (c). 
 
 
TRANSPARENCY OF THE REGULATORY SYSTEM 
------------------------------------- 
 
¶33.  In an effort to improve accountability and competition in the 
wake of the 2003-04 collapse of the dairy firm Parmalat and the 
scandal which ensued, Italy's Parliament approved a law in December 
2005 to overhaul the Bank of Italy (BOI) and improve corporate 
governance and oversight. The law also strengthened the powers of 
the Italian Companies and Stock Exchange Commission (CONSOB), the 
GOI's securities regulatory body, while reducing the BOI's scope in 
this area. Italy also is subject to single market directives 
mandated by the EU, which are intended to harmonize regulatory 
regimes among EU countries. 
 
¶34.  While such reforms are welcome, the average firm faces an 
uphill climb.  According to a 2004 World Bank study, an entrepreneur 
wishing to start a business in Italy must follow 16 procedures, 
spend an average of 62 days, and pay around USD 5,000 in fees. 
Italian newspapers reported that in order to open a small business 
here (such as a wedding photography business) some 50 forms from 
more than 20 different government agencies need to be filled out. 
The study found that it costs more to open a business in Italy than 
anywhere else in Europe, with the exceptions of Greece and Austria. 
Government efforts to enable entrepreneurs to "open a business in a 
day" have not been successful. 
 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
--------------------------------------------- ----- 
 
¶35.  Financial resources flow relatively freely in Italian financial 
markets and capital is allocated mostly on market terms.  Foreign 
participation in Italian capital markets is not restricted.  While 
foreign investors may obtain capital in local markets and have 
access to a variety of credit instruments, access to equity capital 
is difficult.  Italy has a relatively underdeveloped capital market 
and businesses have a long standing preference for credit financing. 
 What little venture capital exists is provided by established 
commercial banks and a handful of venture capital funds.  "Angel 
investing" has only begun to take root in 2008, after a brief 
existence snuffed out at the start of the century by the dot.com 
bust. 
 
¶36.  The Italian stock exchange ("Borsa Italiana") is relatively 
small -- fewer than 300 companies - and is an inadequate source of 
capital for most Italian firms.  In 2007, the Borsa merged with the 
London Stock Exchange, raising expectations that governance 
standards and transparency of the Milan market would improve.  Each 
of the partners will continue to be regulated by its respective 
national securities regulatory entity. 
 
¶37.  Financial services companies incorporated in another EU member 
state may offer investment services and products in Italy without 
establishing a local presence.  U.S. and other firms based in non-EU 
member states may operate under authorization from CONSOB.  In the 
wake of the global financial crisis and equity markets' losses, 
Italian policymakers and financial institutions have called for 
stricter regulation and supervision of financial institutions, as 
well as convergence and standardization of norms across the EU. 
 
¶38.  Most non-insurance investment products are marketed by banks, 
and tend to be debt instruments.  Italian retail investors are 
conservative, valuing the safety of government bonds over most other 
investment vehicles.  Only seven percent of Italian households own 
Italian company stocks directly. Of those who do own stocks, the 
weight of direct stock shareholding in their portfolios is only 22%. 
 A few banks have established private banking divisions to cater to 
high net worth individuals with a broad array of investment choices, 
including equities and mutual funds. There are no restrictions on 
foreigners engaging in portfolio investment in Italy.  Any Italian 
or foreign investor acquiring a stake in excess of two percent of a 
publicly traded Italian corporation must inform CONSOB, but does not 
require its approval. Any Italian or foreign investor seeking to 
increase its stake in an Italian bank above five percent must be 
authorized by the Bank of Italy. 
 
 
¶39.  Thanks to conservative lending practices and a lower degree of 
exposure to the instruments and markets most affected by the global 
financial turbulence, Italian banks have largely succeeded so far in 
 
ROME 00000171  007 OF 015 
 
 
avoiding the worst of the current economic crisis.  However, 
policymakers remain concerned about the banking sector's ability to 
maintain an adequate supply of financing to the economy in the 
ongoing economic downturn. The banking sector has undergone 
significant consolidation in the last decade, with about 60 percent 
of total Italian banking assets involved.  Following the appointment 
in 2005 of Mario Draghi as Bank of Italy Governor, the process of 
consolidation picked up sharply.  The top five banks' market share 
is larger than in Germany, but smaller than in France.  Two major 
mergers in 2007 created Italy's two largest banking groups, 
Intesa-San Paolo, and Unicredit Group.   The latter has become a 
major player in the European market, with recent acquisitions in 
western, central and eastern Europe.  Another transaction between 
cooperative banks created Italy's fifth largest bank,  Unione di 
Banche Italiane (UBI Banca), while the merger between Banco Popolare 
di Verona e Novara and Banca Popolare Italiana created Italy's 
largest cooperative banking group, Banco Popolare.  In November 
2007, Monte dei Paschi di Siena (MPS) bought Banca Antonveneta from 
Spain's Banco Santander.  MPS was the last of the large Italian 
banks not to merge or be acquired.  This purchase, in a rapidly 
consolidating market, made the Tuscan-based bank Italy's third 
largest lender with around 3,000 branches and a strong presence in 
the prosperous north-east of Italy.  Currently, the country's 
largest banks are: Unicredit Group, Intesa San Paolo, Monte dei 
Paschi di Siena, Banco Popolare, and UBI Banca.  The assets of 
Italy's five largest banks account for 53.5 percent of total banking 
assets. 
 
¶40.  Efficiencies obtained from mergers and from the entry of 
foreign banks are expected to have an impact on retail banking fees, 
currently among the highest in Europe.  The Bank of Italy has urged 
Italian banks to become more competitive by cutting high transaction 
charges and to   seek to merge among themselves to be more 
competitive against foreign banks. 
 
¶41.  Non-bank companies (either Italian or foreign) are not allowed 
to acquire more than 15 percent of a bank's capital, although 
emergency economic stimulus measures in late 2008 contemplated 
abolishing this restriction.  Complex cross-shareholding has often 
been used to fight off takeover attempts in the financial sector. 
The presence of foreign intermediaries on the Italian market 
expanded in the last several years.  In late 2005, the Dutch Bank 
ABN-AMRO obtained complete control of an Italian medium-sized bank, 
Banca Antonveneta, recently sold to Monte Dei Paschi di Siena.  In 
May 2006, the French banking group BNP Paribas acquired full control 
of Banca Nazionale del Lavoro, one of Italy's primary banks.  Credit 
Agricole acquired a controlling interest in Cassa di Risparmio di 
Firenze, di Parma e Piacenza and Banca Popolare Friuladria. No 
further significant acquisitions or mergers ocurred in 2008 as the 
industry digested the previous years' deals. 
 
¶42. At end of 2007, 22 subsidiaries of foreign groups accounted for 
11.2 percent of system assets, against 10 percent a year earlier. If 
the acquisision of Banca Antonveneta by MPA has already been 
completed, the share would fallen to 9.2 percent. 
 
 
POLITICAL VIOLENCE 
------------------ 
 
¶43.  Political violence is not a threat to foreign investments in 
Italy, but corruption, and especially that associated with organized 
crime, can be a major hindrance, especially in the south - see next 
section. 
 
CORRUPTION 
---------- 
 
¶44.  Corruption and organized crime are significant impediments to 
investment and economic growth in Italy. Transparency 
International's (TI) Corruption Perceptions Index 2007 ranked Italy 
55th out of 180 countries evaluated.  Among EU states, only Greece, 
Lithuania, Poland, Romania and Bulgaria scored worse. Moreover, less 
than 30% of the population believes the government is effective in 
fighting corruption.  In this survey Italians rated their Parliament 
and political parties as "very corrupt". TI's "Bribe Payer's Index" 
ranked Italy in the lower third of countries; in the same group as 
Saudi Arabia, Brazil and Malaysia.  Among the countries of Western 
Europe, Italy came last.  The NGO Global Integrity (GI) noted that 
Italy has very poor mechanisms to fight corruption in public 
administration and lacks effective law on conflict of interest.  GI 
also found serious weaknesses in the protection of 'whistle-blowers' 
and in the regulations governing political party financing. 
Finally, the World Bank in its 2007 "Governance Matters" report 
 
ROME 00000171  008 OF 015 
 
 
found Italy steadily deteriorating in its control of corruption. 
Among OECD countries only Mexico and Turkey had lower 
anti-corruption ratings from the World Bank. 
 
¶45.  Italy ratified the 1997 OECD Convention on Combating Bribery in 
September 2000.  However, with the recent reorganization of the 
Corruption Commission, it is unclear whether Italy is able to 
prosecute the bribery of foreign officials, leaving it unable to 
fulfill its obligations under the convention.  Although Italy has 
signed the United Nations Convention Against Corruption, as of 
January 2008 it has yet to ratify the document. Corruption is 
punishable under Italian law.  As in all judicial processes, much 
discretion regarding punishment is left to the presiding judge. 
Most corruption in the recent past has involved government 
procurement or bribes to tax authorities.  Bribes are not considered 
deductible business expenses under Italian tax law. 
 
¶46.  Organized crime is present throughout Italy, but is 
concentrated in four regions of the south (Sicily, Calabria, 
Campania, and Puglia).  In November 2008, Confesercenti, the Italian 
confederation of trade, tourism, and service company operators 
released a report estimating that organized crime (Mafia, Camorra, 
'Ndrangheta and Sacra Corona Unita) - is estimated to have a 
turnover of euros 130bn, with "commercial" activities accounting for 
euros 92bn, or 6 per cent of Italy's GDP.   Organized crime is 
involved in racketeering, loan sharking, drug smuggling, and 
prostitution.  Confesercenti estimates loan sharking accounts for 
euros 15bn of Mafia income. Narcotics are by far the most profitable 
activity, traded across Europe and worth euros 59bn.  The report 
underscored recent warnings by anti-Mafia prosecutors that criminal 
gangs were expanding their activities into trade, tourism, the 
gaming industry, restaurants, construction, rubbish disposal and the 
property and health sectors.  The report estimated that about 
150,000 shopkeepers pay the pizzo, or protection money, to Mafia 
gangs, amounting to euros 6bn a year. For example, a stall in a food 
market in Naples has to pay euros 5 - 10 a day, while a Palermo 
construction site may hand over euros 10,000 a month.  According to 
the press, loan-sharking seems to be increasing as banks have become 
more reluctant to lend in the current difficult economic 
environment. 
 
 
¶47.  Researchers estimate Italy's underground economy may be 
equivalent to between 20 and 27 percent of GDP.  A great deal of 
economic activity is kept "underground" to avoid taxation. 
 
 
BILATERAL INVESTMENT AGREEMENTS 
------------------------------- 
 
¶48.  As of December 2008, Italy has bilateral investment agreements 
with the following countries: 
 
Albania 
Algeria 
Angola (signed, not enforced) 
Argentina 
Armenia 
Azerbaijan 
Bangladesh 
Barbados 
Belarus 
Belize (signed, not enforced) 
Bolivia 
Bosnia and Herzegovina 
Brazil (signed, not enforced) 
Bulgaria 
Cape Verde (signed, not enforced) 
Chad 
Chile 
China 
Colombia (signed, not enforced) 
Congo 
Cote d'Ivoire (signed, not enforced) 
Croatia 
Cuba 
Czech Republic 
Democratic Republic of Congo (signed, not enforced) 
Dominican Republic (signed, not enforced) 
Ecuador (signed, not enforced) 
Egypt 
Eritrea 
Estonia 
Ethiopia 
 
ROME 00000171  009 OF 015 
 
 
Gabon 
Georgia 
Ghana (signed, not enforced) 
Guatemala (signed, not enforced) 
Guinea 
Hong Kong, China 
Hungary 
India 
Indonesia 
Iran, Islamic Republic of 
Jamaica 
Jordan 
Kazakhstan 
Kenya 
Korea, DPR of (signed, not enforced) 
Korea, Republic of 
Kuwait 
Latvia 
Lebanon 
Libya 
Lithuania 
Macedonia, Republic of 
Malawi (signed, not enforced) 
Malaysia 
Malta 
Mauritania (signed, not enforced) 
Mexico 
Moldova, Republic of 
Mongolia 
Morocco 
Mozambique 
Nicaragua 
Nigeria 
Oman 
Pakistan 
Paraguay (signed, not enforced) 
Peru 
Philippines 
Poland 
Qatar 
Romania 
Russian Federation 
Saudi Arabia 
Slovakia 
Slovenia 
South Africa 
Sri Lanka 
Sudan (signed, not enforced) 
Syrian Arab Republic 
Tunisia 
Turkey 
Uganda 
Ukraine 
United Arab Emirates 
Tanzania, United Republic of 
Uruguay 
Uzbekistan 
Venezuela 
Vietnam 
Yemen (signed, not enforced) 
Zambia (signed, not enforced) 
Zimbabwe (signed, not enforced) 
 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
-------------------------------------------- 
 
¶49.  The U.S. Overseas Private Investment Corporation (OPIC) does 
not operate in Italy, as it is a developed country.  Italy's Export 
Credit Agency, SACE, is a member of the World Bank's Multilateral 
Investment Guarantee Agency (MIGA). 
 
 
LABOR 
----- 
 
¶50.    Italy's unemployment rate, at 7.7 percent in December 2008 
has begun to creep up as a decade of low growth and the slowing 
world economy begin to take their toll.  This despite slightly 
liberalized temporary labor regulations and legalization of some 
underground employment.  Traditional regional disparities remain 
unchanged, with the southern third of the country posting a 
significantly higher unemployment compared to northern and central 
Italy.  Despite these differences, internal migration within Italy 
 
ROME 00000171  010 OF 015 
 
 
remains modest, as industry and sector-wide national collective 
bargaining agreements irrationally set equal wages across the entire 
country.  Labor shortages in the North are often filled by unskilled 
and semi-skilled immigrants from Eastern Europe and North Africa. 
 
¶51.  Italy's labor force is well-educated.  According to a 2006 
national survey, 9.7 percent of people aged 15 and older held 
university degrees and 42 percent completed upper secondary 
education.  According to the OECD 2005 Economic Review of Italy, the 
private internal rate of return -- which measures incentives to 
invest in human capital -- is much lower for higher education than 
the OECD average, indicating there may be limited incentive for 
Italians to pursue higher education.  This is due to the fact that 
persons with higher educations do not earn substantially more than 
persons with upper secondary educations.  As a result, Italy has 
experienced a mild brain-drain among the highly-educated, 
entrepreneurial young.  Firms interested in investing in Italy may 
have difficulties finding highly specialized young Italian 
employees. 
 
¶52.  On paper, companies may bring in a non-EU employee after the 
government-run employment office has certified that no qualified, 
unemployed Italian is available to fill the position.  In reality, 
the cumbersome and lengthy process acts as a deterrent to foreign 
firms seeking to comply with the law.  Work visas are subject to 
annual quotas, although intra-company transfers are exempt from 
quota limitations. 
 
¶53.  There are legal obstacles to hiring and firing workers although 
in recent years, the Italian labor market has become slightly more 
flexible.  A series of legal reforms has encouraged the hiring of 
part-time employees by reducing employer social security 
contributions for these workers.  New laws have also created 
opportunities for outsourcing, job-sharing, and use of private 
employment services. New types of contracts now exist that allow for 
reduced labor costs.  However, high costs and legal obstacles 
associated with laying-off workers still remain a disincentive to 
adding permanent employees. 
 
¶54.  Italy is an International Labor Organization (ILO) member 
country.  Terms and conditions of employment are periodically fixed 
by collective labor agreements in different professions.  Most 
Italian unions are grouped into four major national confederations: 
the General Italian Confederation of Labor (CGIL), the Italian 
Confederation of Workers' Unions (CISL), the Italian Union of Labor 
(UIL), and the General Union of Labor (UGL).  The first three 
organizations are affiliated with the International Confederation of 
Free Trade Unions (ICFTU), while the UGL has been associated with 
the World Confederation of Labor (WCL).  The confederations 
negotiate national level collective bargaining agreements with 
employer associations, which are binding on all employers in a 
sector or industry irrespective of geographical location. 
 
FOREIGN TRADE ZONES/FREE PORTS 
------------------------------ 
 
¶55.  There are two free trade zones in Italy, located in Trieste and 
Venice, both in the northeast.  Goods of foreign origin may be 
brought in without payment of taxes or duties, as long as the 
material is to be used in the production or assembly of a product 
that will be exported.  The free-trade zone law also allows a 
company of any nationality to employ workers of the same nationality 
under that country's labor laws and social security systems. 
 
Benefits of the free-trade zones include: 
 
-- Customs duties deferred for 180 days from the time the goods 
leave the free trade zone to enter another EU country. 
 
-- The goods may undergo transformation free of any customs 
restraints. 
 
-- Absolute exemption from any duties on products coming from a 
third country. 
 
U.S. Companies in Italy 
----------------------- 
 
¶56.  The largest U.S. companies in Italy, based on number of 
employees, are:  IBM, General Electric, Pfizer, Whirlpool, 
Electronic Data Systems (EDS), Accenture, Lear, and United 
Technologies. 
 
FOREIGN DIRECT INVESTMENT STATISTICS 
 
ROME 00000171  011 OF 015 
 
 
------------------------------------ 
 
¶57.  Italy lags behind many of its fellow EU member states in 
attracting and maintaining foreign investment.  According to Bank of 
Italy figures, net foreign investment into Italy in 2007 totaled USD 
32.3 billion (equal to 1.6 percent of GDP), well below its Euro zone 
counterparts.  Notably, inflows were exceeded by outflows - USD 61.8 
billion in 2007 (equal to three percent of GDP).  This reflects a 
huge increase of out-bound investments in the energy sector. 
 
Data on Italian Investment Inflows (direct and portfolio) is 
available at 
 
http://www.unctad.org/en/docs/wir2006_en.pdf 
 
or 
 
http://www.bancaditalia.it/pubblicazioni/rela nn/rel07/ rel07it. 
 
 
 
 
Table 1: Italian Foreign Direct Investment Inflows by Economic 
Sector (Net) 2004-2007 (USD Millions) (1) (*) 
 
                2004       2005       2006       2007 
 
Agriculture    234.8      511.8     -662.1       44.4 
 
Energy        4463.3    10057.1     4104.3     4387.1 
 
Industry      2016.2     6996.3     7549.0     6629.0 
of which: 
Machine       3690.7     1314.3     4871.9     5201.6 
Chemical     -3535.4      441.0      168.3      305.1 
Food           362.7     2388.8     1839.2    -1033.6 
Textiles       513.0      544.1      810.3     1289.0 
Mineral/Metal  687.0     1315.5      143.2      289.0 
Other          298.2      992.6     -283.9      577.0 
 
Building and 
Public Works   125.7      205.0      283.9      239.3 
 
Services      9576.4      925.5    18639.5    20919.3 
 of which: 
Banking/ 
Insurance     5749.1     1207.5     8810.3     7556.4 
Trade           36.0      653.4     3570.4     2106.2 
Transportation/ 
Communication  516.8   -11468.3     2027.6     5293.0 
Other Services 
(Not For Sale)3274.5    10532.9     4231.2     5963.7 
 
T O T A L    16416.2    18695.7    29914.6    32319.1 
 
 
Table 2: Italian Direct Investment Outflows by Economic Sector (Net) 
2004-2007 (USD Millions) (1) (*) 
 
                2004       2005       2006       2007 
 
Agriculture     21.1       70.8       42.7      143.8 
 
Energy        5336.7     2675.8     3775.1    37061.8 
 
Industry      7573.9     7629.8    13501.3    12364.3 
 of which: 
Machine       4234.8     3684.5     9218.6     5922.0 
Chemical      1730.4     1730.4     2267.6     2665.3 
Food           151.6      206.2      623.1      657.3 
Textiles       287.0      411.2      275.1      469.1 
Mineral/Metal  246.0      600.0     -224.9     1610.2 
Other          924.1      997.5     1341.8     1040.4 
 
Building And 
Public Works    85.7      159.0     -113.1      114.2 
 
Services      5037.3     7444.7    16881.9    12106.2 
 of which: 
Banking/ 
Insurance     2636.0     5164.6    10797.7      959.68 
Trade         1060.9      923.0     1075.4     1426.08 
Transportation/ 
Communication -923.0      110.6     2069.1     1658.60 
 
ROME 00000171  012 OF 015 
 
 
Other Services 
(Not For Sale)2263.4     1264.6     2939.7     8061.83 
 
T O T A L     18054.7    17980.1    34087.9    61790.3 
 
 
 
Table 3a: Stock of Foreign Direct Investment in Italy by Major 
Investors; Year End 2004-2007 (USD Millions) (1) 
 
                   2004      2005      2006      2007 
 
United States   22448.3   21451.0   25826.1   25581.3 
 
EU (3)         140651.5  145179.5  185773.4  238404.1 
 of which: 
 France         24608.6   25637.5   37040.8   44210.8 
 Netherlands    39009.4   40079.1   54304.3   72411.4 
 United Kingdom 26613.9   25434.5   30461.1   35584.2 
 Germany        14312.3   15309.3   11263.5   10959.0 
 Luxembourg     22336.5   24042.5   27911.7   31916.5 
 Sweden          3341.8    3034.2    3533.6    4203.5 
 Belgium         3335.1    1982.3    2353.1    7225.5 
 Spain           1941.0    4820.5   11764.2   18014.6 
 Other EU (4)    5286.9    4839.4    7141.0   13878.5 
 
Switzerland     21872.7   20115.7   23446.6   26269.4 
Liechtenstein    2105.9    1975.2    2330.7    2685.2 
Japan            3595.2    3419.1    3967.1    4272.3 
Argentina         257.4     246.8     288.5     329.4 
Brazil            128.7     184.2     320.2     373.4 
Other            9328.5    8747.3   10430.8   10781.8 
 
T O T A L      200379.4  201318.8  252383.4  313767.2 
 
Table 3b: Stock Of Foreign Direct Investment In Italy by Major 
Investors; Year End 2004-2007 (Percentage of Total) 
 
                    2004      2005      2006      2007 
 
United States       11.2      10.7      10.2       9.4 
 
EU                  70.2      72.1      73.6      76.0 
 France             12.3      12.7      14.7      14.1 
 Netherlands        19.5      19.9      21.5      28.8 
 United Kingdom     13.3      12.6      12.1      11.3 
 Germany             7.1       7.6       4.5       3.5 
 Luxembourg         11.1      11.9      11.1      10.2 
 Sweden              1.7       1.5       1.4       1.3 
 Belgium             1.7       1.0       0.9       2.3 
 Spain               1.0       2.4       4.7       5.7 
 Other EU (3)        2.6       2.4       2.7       4.4 
 
Switzerland         10.9      10.0       9.3       8.5 
Liechtenstein        1.1       1.0       0.9       0.9 
Japan                1.8       1.7       1.6       1.4 
Argentina            0.1       0.1       0.1       0.1 
Brazil               0.1       0.1       0.1       0.1 
Other                4.6       4.3       4.2       3.4 
 
T O T A L          100.0     100.0     100.0     100.0 
 
 
Table 4a: Stock Of Italian Direct Investment Abroad by Major 
Recipient; Year End 2004-2007 (USD Millions) (2) 
 
                   2004      2005      2006      2007 
 
United States   18851.2   19617.5   26118.6   27439.2 
 
EU             182521.4  178145.2  217375.5  306708.6 
 Netherlands    63268.1   65081.5   89822.1  117453.9 
 Luxembourg     26363.3   25154.7   22632.4   26131.8 
 France         24344.5   23866.6   29574.4   35262.1 
 United Kingdom 24158.2   22617.5   24847.2   26086.4 
 Germany        15758.7   15004.7   18126.5   22153.7 
 Spain          10882.0    9866.6   12350.5   53197.7 
 Belgium         5308.3    4944.5    6254.3    7404.1 
 Sweden           866.3     892.6    1087.0    1149.3 
 Other EU (3)   11572.4   10716.6   12681.1   17869.7 
 
Switzerland     10559.0   10007.1   11411.1   12838.9 
Brazil           3954.4    4935.1    5645.6    7404.1 
Argentina        2178.3    2211.3    2308.3    2298.7 
 
ROME 00000171  013 OF 015 
 
 
Japan            1249.9    1164.1    1196.2    1320.6 
Liechtenstein     194.4     175.9     200.3     222.5 
Other           24901.6   26460.5   41685.1   47890.2 
 
T O T A L      244410.2  243982.3  305940.7  407518.3 
 
 
Table 4b: Stock of Italian Direct Investment Abroad by Major 
Recipient; Year End 2004-2007 (Percentage of Total) 
 
                   2004      2005      2006      2007 
 
United States       7.7       8.0       8.5       6.7 
 
EU                 74.7      73.0      71.1      75.3 
of which: 
 Luxembourg        10.8      10.3       7.4       6.4 
 Netherlands       25.9      26.7      29.4      28.8 
 France            10.0       9.8       9.7       8.7 
 Germany            6.4       6.1       5.9       5.4 
 United Kingdom     9.9       9.3       8.1       6.4 
 Spain              4.5       4.0       4.0      13.1 
 Belgium            2.2       2.0       2.0       1.8 
 Sweden             0.4       0.4       0.4       0.3 
 Other EU (3)       4.7       4.4       4.2       4.4 
 
Switzerland         4.3       4.1       3.7       3.2 
Brazil              1.6       2.0       1.8       1.7 
Argentina           0.9       0.9       0.8       0.6 
Japan               0.5       0.5       0.4       0.3 
Liechtenstein       0.1       0.1       0.1       0.1 
Other              10.2      11.4      13.6      12.1 
 
T O T A L         100.0     100.0     100.0     100.0 
 
 
Table 5a: U.S. Investment in Italy by Economic Sector End-Year 
2004-2007 (USD Millions) (2) 
 
                   2004      2005      2006      2007 
 
 
Agriculture        40.2      41.3      46.1      52.7 
 
Energy            627.6     576.2     678.5     803.8 
 
Industry        13607.1   12958.7   15080.4   17692.5 
 of which: 
Machine          2979.7    2792.2    3205.5    4024.9 
Transportation 
Equipment         902.5     830.0     971.0    1121.5 
Chemical         3689.1    3447.5    4031.6    4642.8 
Food             1920.3    2003.5    2321.5    2635.4 
Textiles          273.6     260.9     304.3     355.8 
Minerals/Metals   451.9     433.3     502.0     578.3 
Other            3390.0    3191.3    3744.4    4333.8 
 
Services         8173.4    7874.8   10021.1   11032.3 
 of which: 
Trade             987.0     933.9    1097.5    1259.2 
Banking/ 
Insurance        4008.2    3771.0    4789.2    5386.5 
Transportation/ 
Communication     666.5     636.4    1055.3    1199.1 
Other Services   2511.7    2533.5    3079.1    3187.5 
 
T O T A L       22448.3   21451.0   25826.1   29581.3 
 
 
Table 5b: U.S. Investment in Italy by Economic Sector End-Year 
2004-2007  (Percentage of Total) 
 
                   2004      2005      2006      2007 
 
Agriculture         0.2       0.2       0.2       0.2 
 
Energy              2.8       2.7       2.6       2.7 
 
Industry           60.6      60.4      58.4      59.8 
 of which: 
Machine            13.3      13.0      12.4      13.6 
Transportation 
Equipment           4.0       3.9       3.8       3.8 
Chemical           16.4      16.1      15.6      15.7 
 
ROME 00000171  014 OF 015 
 
 
Food                8.6       9.3       9.0       8.9 
Textiles            1.2       1.2       1.2       1.2 
Minerals/ 
Metals              2.0       2.0       1.9       2.0 
Other              15.1      14.9      14.5      14.6 
 
Services           36.4      36.7      38.8      37.3 
 of which: 
Trade               4.4       4.3       4.2       4.3 
Banking/ 
Insurance          17.9      17.6      18.5      18.2 
Transportation/ 
Communication       3.0       3.0       4.1       4.0 
Other Services     11.1      11.8      12.0      10.8 
 
T O T A L         100.0     100.0     100.0     100.0 
 
 
Table 6a: Italian Investment in the U.S. by Economic Sector -- 
End-Year 2004-2007 (USD Millions) (2) 
 
                   2004      2005      2006      2007 
 
Agriculture        52.3      62.6      71.1      71.7 
 
Energy           1831.8    1877.2    2075.1    2079.1 
 
 
Industry         7254.8    7589.1   13080.4   13516.8 
 of which: 
Machine          2777.2    2850.1    7910.4    8007.3 
Transportation 
Equipment         950.8     966.9    1001.3    1045.4 
Chemical          205.2     212.5     332.0     411.4 
Food              273.6     289.3     304.3     320.6 
Textiles          741.6     813.5     851.1     882.9 
Minerals/ 
Metals           1589.1    1637.5    1724.6    1877.0 
Other             717.3     819.4     956.7     972.2 
 
Services         9719.6   10088.5   10892.0   11771.6 
 of which: 
Trade            1177.4    1201.9    1241.1    1276.7 
Banking/ 
Insurance        4615.7    4796.9    5035.6    5612.0 
Transportation/ 
Communication     232.0     242.0     278.0     329.4 
Other            3694.5    3847.7    4337.3    4553.5 
 
T O T A L       18858.5   19617.5   26118.6   27439.2 
 
 
 
Table 6b: Italian Investment in the U.S. by Economic Sector -- 
End-Year 2004-2007 (Percentage of Total) 
 
                   2004      2005      2006      2007 
 
Agriculture         0.3       0.3       0.3       0.3 
 
Energy              9.9       9.6       7.9       7.9 
 
Industry           38.3       38.7      50.1     50.1 
 of which: 
Machine            14.8       14.5      30.3     30.3 
Transportation 
Equipment           4.7       4.9       3.8       3.8 
Chemical            1.4       1.1       1.3       1.3 
Food                1.4       1.5       1.2       1.2 
Textiles            3.9       4.2       3.3       3.3 
Minerals/ 
Metals              8.4       8.3       6.6       6.6 
Other               3.7       4.2       3.6       3.6 
 
 
Services           51.5      51.4      41.7      41.7 
 of which: 
Trade               6.2       6.1       4.8       4.7 
Banking/ 
Insurance          24.1      24.5      19.3      19.3 
Transportation/ 
Communication       1.5       1.2       1.1       1.1 
Other              19.7      19.6      16.5      16.6 
 
 
ROME 00000171  015 OF 015 
 
 
T O T A L         100.0     100.0     100.0     100.0 
 
 
Table 7: Direct Investment by Origin and Destination End-Year 2007 
(USD Millions) (4) 
 
               Foreign         Italian         Net 
               Investment      Investment     Italian 
               in Italy        Abroad        Position 
 
EU              238404.1       306708.6        68304.5 
 of which: 
  United Kingdom 35584.2        26086.4        -9497.8 
  Netherlands    72411.4       117453.9        45042.5 
  Germany        10959.0        22153.7        11194.7 
  France         44210.8        35262.1        -8948.7 
  Spain          18014.6        53197.7        35183.1 
  Luxembourg     31916.5        26131.8        -5784.7 
  Belgium         7225.5         7474.1          178.6 
  Sweden          4203.5         1149.3        -3054.2 
  Other (3)      13878.6        17869.5         3991.1 
 
Non-EU           75363.1       100809.7        25446.6 
 of which: 
 USA             29581.3        27439.2         2142.1 
 Switzerland     26269.4        12838.9       -13430.5 
 Liechtenstein    2685.2          222.5        -2462.7 
 Japan            4272.3         1320.6        -2951.7 
 Canada           1070.3         1695.5          625.2 
 Argentina         329.4         2298.7         1969.3 
 Brazil            373.4         7104.0         6730.6 
 Other           10781.8        47890.2        37108.3 
 
T O T A L       313767.2       407518.3        93751.1 
 
 
(1) Annual net investment flow data compiled by Embassy Economic 
Section, based on Bank of Italy data and converted at the following 
end-year exchange rates: 
 
                   2004      2005      2006      2007 
 
Euro/Dollar       0.805     0.805     0.796     0.744 
 
 
Net = New Investment Less Disinvestment.  The volatility and huge 
changes from year to year in some sections can be explained in part 
by the fact that listed data are "Net": New Investment Minus 
Disinvestment. 
 
(2) Compiled by the Economic Section of the Embassy based on Bank of 
Italy data and converted at the following end year exchange rates: 
 
                   2004      2005      2006      2007 
 
Euro/Dollar       0.746     0.847     0.759    0.744 
 
(3) Austria, Denmark, Finland, Portugal, Greece, Ireland (other EU 
25 countries), plus Cyprus, Czech Republic, Estonia, Hungary, 
Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia (plus Bulgaria 
and Romania only for 2007). 
 
(4) Original data in euro and converted at the end-2007 exchange 
rate of one dollar = 0.683 euro. 
 
Sources:  Bank Of Italy Annual Report 2007 
http://www.bancaditalia.it/pubblicazioni/rela nn/rel07/ 
rel07it. 
 
DIBBLE