Italian respite

February 2, 2010

By Guy Dinmore in Rome

published on February 2 2010

Jobless Italians yesterday won some relief from the crisis under a new scheme that allows them to suspend mortgage payments for up to a year as unemployment levels continue rising despite a slow return to economic growth.

Assurances by Silvio Berlusconi, centre-right prime minister, that the “worst is behind us” have looked increasingly hollow over the past week with major companies, including Fiat, aluminium producer Alcoa and defence conglomerate Finmeccanica, announcing plans to lay off thousands of workers.

Even Pope Benedict intervened on Sunday, calling on governments and businesses to exercise a “huge sense of responsibility” in saving jobs. Workers gathered in St Peter’s square cheered the pontiff as he specifically mentioned Fiat’s Termini Imerese plant in Sicily and Alcoa’s smelter in Sardinia which both face closure.

Official figures last week showed a sharp leap in Italy’s jobless levels to 8.5 per cent of the workforce at end-2009. This puts Italy just below the EU average rate of 9.6 per cent, ranging from 4.0 per cent in the Netherlands to 22.8 per cent in Latvia. The jobless rate in the eurozone is at its highest since August 1998.

Behind the figures, however, a debate is raging over the true jobless levels in Italy, the third largest eurozone economy.

In a report that irritated the government, the Bank of Italy noted last month that the real rate would be some 3.0 percentage points higher if figures included temporary laid-off workers on state-backed support schemes as well as “discouraged workers” who have dropped out of the job market altogether.

Trades unions also point to another segment of unrecorded Italians who are “employed” in the private sector but have not been paid for months.

On the other hand, Marco Valli, chief Italian economist at UniCredit Research, sees a trend reversing. He notes that the number of employed in Italy actually rose in December, though only by some 7,000.

“Italy’s numbers are better than they look at first sight,” he said, explaining that more “discouraged workers” have started looking for work again, boosting unemployment and employment numbers at the same time. He predicts Italy’s jobless rate will rise above 9.0 per cent this year.

More than 100,000 families are expected to apply for the mortgage suspension scheme, according to the Association of Italian Banks which negotiated the plan.

Arrigo Sadun, IMF executive director for Italy, noted that the labour market lags other sectors in economies emerging from recession, as Italy did in the third quarter of 2009. But he said Italy’s jobless rate had increased less than others on average because of increased labour flexibility in recent years.

Speaking at a conference organised by Sace, Italy’s export credit agency, Robert Wescott, former financial advisor to president Bill Clinton, expects consumer confidence to remain under pressure because, contrary to reality, one third of workers worry that they will lose their job.

(Additional reporting by Giulia Segreti)

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