VZCZCXRO6449
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHNP #0074/01 1740739
ZNR UUUUU ZZH
R 230739Z JUN 09
FM AMCONSUL NAPLES
TO RUEHC/SECSTATE WASHDC 6431
INFO RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHMIL/AMCONSUL MILAN 0183
RUEHFL/AMCONSUL FLORENCE 0153
RUEHNP/AMCONSUL NAPLES 1182

UNCLAS SECTION 01 OF 02 NAPLES 000074 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN KCRM KCOR IT
SUBJECT: GROWTH PLUMMETS IN ITALY'S CAMPANIA REGION 
 
REF: A)  NAPLES 53,  B)  08 NAPLES 97 
 
NAPLES 00000074  001.2 OF 002 
 
 
Sensitive but unclassified - handle accordingly. 
 
 
 
¶1.  (SBU) Summary:  A new report by Italy's central bank shows 
that the country's second-most populous region, Campania, has 
the lowest growth rate in Italy and the lowest rate of 
employment of any region in the EU.  The region has experienced 
stagnant growth for about fifteen years, but the global 
recession has exacerbated the situation.  The tourism industry, 
on which the region relies heavily for income, is experiencing 
its worst crisis in 23 years, with hotels virtually empty. 
According to an anti-Mafia prosecutor, the recession has been a 
windfall for organized crime; flush with cash, the local Camorra 
is the only alternative for businesses and individuals no longer 
able to obtain credit from banks.   To speak of a recovery in a 
region that has seen a long and steady erosion of living 
standards is almost irrelevant; what is needed is a development 
plan that confronts the insidious environment of corruption, bad 
government, organized crime and long-neglected infrastructure. 
End summary. 
 
 
 
¶2.  (U) Campania -- Italy's second-most populous region and home 
to Naples, the country's third-largest city -- has the lowest 
growth in the country, according to a new report by the 
country's central bank, Banca d'Italia.  Campania also has the 
lowest rate of employment among people of working age of any 
region in the European Union.  As noted in reftel, the economy 
in southern Italy had already suffered over a decade of economic 
malaise, but the worldwide recession has exacerbated the 
situation.  In 2008, Campania's GDP fell by an estimated 1.6 to 
2.8 percent (compared with 1 percent for the nation as a whole); 
Banca d'Italia projects the region's economy to contract at a 
higher rate than the rest of the country in 2009. 
 
 
 
¶3.  (U) The central bank's Director General presented its annual 
report on Campania's economy in Naples on June 15.  Among the 
telling statistics: 
 
 
 
-- In the industrial sector, output has fallen below the 
recession levels of 1992 and 1993, and sales are expected to 
fall by at least 3.5 percent in 2009. 
 
 
 
-- The construction sector's output declined by 5.3 percent in 
¶2008. 
 
 
 
-- Exports from Campania decreased by 14 percent in the final 
quarter of 2008 and dropped 21.6 percent in the first two months 
of 2009 (compared with the same months in 2008).  Imports fell 
by 0.4 percent in 2008. 
 
 
 
-- Consumer spending in the region dropped by 1.7 percent in 
2008, while prices rose by 4.3 percent (the second-highest rate 
of inflation in Italy). 
 
 
 
-- The number of persons employed in Campania decreased by 2.2 
percent in 2008.  The construction sector was the hardest hit, 
with an employment decline of 8.8 percent, followed by the 
industrial sector with a drop of 3.8 percent.  At 42.5 percent, 
the employment rate of working-age individuals in Campania is 
the lowest of all regions among the 27 members of the European 
Union.  The official unemployment rate is 12.7 percent.  The 
only segment of the economy that saw improvement in employment 
was retail, which grew by 4.5 percent in 2008.  We note that 
according to EU statistics, Campania is tied with Sicily for the 
lowest rate of female employment (28 percent) in the European 
Union (Campania's neighboring region, Apulia, has the lowest). 
 
 
 
-- Campania's average household income is far less than the 
national average, and statistics show it to have the country's 
least equitable income distribution.  Some 21.3 percent of 
 
NAPLES 00000074  002.2 OF 002 
 
 
families live below the poverty line in Campania, compared with 
a national average of 11.1 percent. 
 
 
 
¶4.  (U) The availability of credit has also shrunk.  Bank 
lending to businesses decreased by 2.4 percent in 2008, and 
banks have also tightened loan criteria.  The cost of lending in 
Campania has increased relative to the national average, from an 
average cost of 1.25 percent more to 1.42 percent.  According to 
a Banca d'Italia survey conducted in October 2008, 38 percent of 
businesses in south said they face increasing debt.  Lending to 
households has also fallen. 
 
 
 
¶5.  (U) As host to major attractions such as Pompeii, Capri, 
Ischia and the Amalfi Coast, Campania has traditionally relied 
heavily on tourism for income (ref B).  Although the bank's 
report did not single out this sector, other sources report that 
it has been among the hardest hit by the global crisis.  The 
number of visitors to Naples dropped by 12 percent in May 2009 
compared to the previous year (May is traditionally one of the 
city's busiest months for tourism).  The number of visits to 
Capri is down 43 percent for the first five months of 2009 
compared to last year.  These figures represent the biggest 
decline in the tourism sector since 1986.  Constanzo Iannotti 
Pecci, who follows tourism for the Campania Industrialists 
Federation, told us in mid-June that hotels in the region are 
"practically empty."  Despite the recession, the cruise ship 
business in Campania grew by 7.4 percent in 2008.  Few cruise 
ship visitors spend a significant amount of time or money in the 
region, though. 
 
 
 
¶6.  (U) Several of the speakers at the presentation of Banca 
d'Italia's report openly blamed local and national politicians 
for the disastrous state of the economy.  Several complained 
that the dilapidated infrastructure, poor education and 
corruption have contributed to Campania's downward spiral.  A 
professor emeritus of philosophy and former politician added 
that cultural factors and the prevalence of organized crime have 
also played major roles. 
 
 
 
¶7.  (SBU) Perhaps the only business that is profiting in 
Campania these days is the Camorra, the local Mafia.  Naples 
anti-Mafia prosecutor Rosario Cantelmo told us June 18 that 
Camorra clans are flush with cash, and have expanded loan 
sharking as people are unable to obtain credit from banks.  He 
added that the drug trade (controlled by organized crime) 
continues to be a growth industry in Naples, despite the 
recession.  Cantelmo believes that the Camorra is allowing many 
local businesses to make lower extortion payments, but that the 
mob has actually increased the total number of victims, hitting 
up even the smallest of entrepreneurs. 
 
 
 
¶8.  (SBU) Comment:  While northern and central Italy hope for 
economic "recovery," this word would hardly seem apt to Campania 
residents who have seen a steady erosion of their quality of 
life over the last fifteen years.  In fact, the region's economy 
grew by only one percent this decade before the 2008 global 
financial crisis.  A visitor to Naples could easily think he had 
accidentally taken the wrong flight and landed in the Third 
World, given the city's crumbling infrastructure and chaotic 
conditions.  Few investors, either foreign or domestic, come to 
open businesses in the region.  The obstacles -- bad government, 
pervasive organized crime, poor transportation connections, 
roads marked by potholes, an overburdened legal system -- are 
seen as insurmountable.  Campania is one of the EU's poorest 
regions, and only the political will to take on corruption, 
inefficiency and organized crime will help its residents climb 
out of the vicious cycle of poverty. 
TRUHN