2010 Investment Climate Statement - Italy

2010 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2010


The Government of Italy (GOI) maintains a welcoming posture to foreign investment and has made modest progress in addressing the structural economic disincentives that discourage investment, innovation and greater economic dynamism. The 2009 budget, for example, implemented some tax benefits for start-ups and modest measures aimed at reducing red tape for starting businesses. But significant stumbling blocks to investment remain, such as rigid labor laws, high input costs and taxes, and inefficient public services. The current government has waged a high profile campaign against absenteeism and poor work habits in government offices, prompting protests from public sector employees.

The government’s economic team has engaged primarily in efforts to mitigate the global recession’s effects on Italian households and businesses, leaving structural reforms for another day. At times during 2009, the GOI made overtures to foreign sovereign wealth funds to invest in shares of Italian parastatals and some banks, but it did not orchestrate a comprehensive effort to sell Italy to foreigners as a desirable investment destination, whether for portfolio or direct investment. Italy’s high debt-to-GDP ratio will constrain the government’s latitude to further stimulate investment with infrastructure spending, incentives, or lower taxes.

Thus, Italy in 2009 remained a challenging place for foreigners to invest, all the more so given the turbulent global economy. The large role of Italy's public sector, a muddled commercial law system, and the perception of corruption and latent economic nationalism discourage investment in Italy by outsiders. The presence of organized crime also constitutes a deterrent to investment in some parts of the country. Many Italian institutions and international organizations examining various aspects of Italy’s investment climate concur in this assessment. Italy in 2009 slipped slightly in virtually every international NGO ranking of regulatory transparency and ease of doing business.

Italy’s investment climate is often cited as a contributing factor to its low economic growth rate. Over the last ten years, Italy’s economy has grown significantly more slowly than the rest of Europe and during the 2009 global recession suffered a larger GDP drop (down 4.8 per cent) than most of its neighbors.


Italy’s economy, the seventh largest economy in the world, is fully diversified, and dominated by small and medium-sized firms (SMEs). It is an original member of the 15 nation eurozone. Germany, France, and the U.S. remain Italy's most important export markets. Tourism is an important source of external revenue. Italy lags behind many industrialized nations as a recipient of direct foreign investment. According to the UN Conference on Trade and Investment, Italy has bilateral investment treaties with 96 nations, although not with the United States (see para. 51 for full list).


Italy welcomes and encourages foreign direct investment, but the government of Prime Minister Silvio Berlusconi that took office in April 2008 has taken only modest steps toward structural economic reform that could increase investment, business creation, production and employment. Economic policymakers have been mainly preoccupied addressing the effects on Italy of the severe global economic downturn. The GOI has focused on measures to stimulate aggregate demand and demand for products of sensitive sectors such as autos and household durable goods. In early 2009 the government adopted additional modest fiscal incentives for companies, foreign ones included, investing in research and some new equipment, and temporarily eliminated a small surtax on firms.

As an EU Member State, Italy is bound by EU treaties and legislation, some of which have an impact on business investment. Under the EU treaty’s right of establishment, Italy is generally obliged to provide national treatment to foreign investors established in Italy or in another EU member state. Exceptions include access to government subsidies for the film industry, capital requirements for banks domiciled in non-EU member countries, and restrictions on non-EU-based airlines operating domestic routes. Italy also has investment restrictions in the shipping sector.

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, most of which are controlled to some degree by the para-statal defense conglomerate Finmeccanica.

The EU in 2009 ordered the GOI to recover from a US investor previously agreed subsidies for electricity. The GOI had provided these subsidies to induce the investor to keep two plants operating in Italy. The fate of the plants is up in the air, pending the GOI finding an acceptable mechanism to make energy available to the investor at a market-comparable price, i.e., close to the median cost of electricity in other western European countries.

Foreign investors are not precluded from investing in the privatization of government-owned companies, except in the defense sector. The privatization process has almost always entailed the GOI retaining a “golden share” (a government stake with controlling authority) in the privatized 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 in privatized companies. According to EU data, the Italian government retains special rights in six Italian firms -- ENEL (utilities), ENI (oil/gas), Finmeccanica (industrials/defense), Telecom Italia (telecommunications), Save (industrials), and Terna (utilities).

The Italian Trade Commission (ICE) reported in January 2009 that 7,152 foreign companies operate in Italy, employing 853,000 workers (down from a million in 2007), with overall sales of 429.5 billion euro. According to ICE, the stock of foreign investment in Italy equals 12 percent of GDP, far less than in 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 cites as key obstacles to foreign investment: labor taxes, lack of labor flexibility, red tape, and high corporate taxes. Net direct investment inflows in 2008 totaled USD 28.9 billion (equal to 1.2 percent of GDP), well below its Euro zone counterparts. Notably, inflows were exceeded by outflows – USD 33.8 billion in 2008, equal to 1.4 percent of GDP. (see FOREIGN DIRECT INVESTMENT STATISTICS).

The World Economic Forum’s 2009-2010 Global Competitiveness Guide ranked Italy 48th out of 133 countries with a CG index score of 4.3 on a 1-7 scale, up from 49th in 2008-2009. Despite the marginal improvement, Italy still ranked well below the other G7 countries. The report cites as Italy’s weak points the high level of public debt, institutional and bureaucratic inefficiencies, the rigidity of the labor market, the high level of corruption, organized crime, and the perception of a lack of independence on the part of the judicial system. On the positive side, Italy’s strong points, on which many U.S. firms in Italy concur, are sophisticated management in large and medium Italian companies, production of high quality goods, the large size of its internal market (the 7th in the world), the quality of health care and the primary education system.

The 2008 "Index of Economic Freedom," published by the Wall Street Journal and Heritage Foundation, ranked Italy as 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 several less developed nations.

In its Doing Business Report for 2010, the World Bank ranks Italy 78th in a list of 183 countries in terms of business friendliness. Italy’s position worsened from 74th last year; this is consistent with deteriorating indicators in specific areas, such as building permits (75th), time to start an industrial plant (78th), ease of hiring workers (99th), access to credit (87th), protection of investors (54th) and effectiveness in enforcing contracts (156th). The World Bank noted that high corporate taxes continue to be a major problem, ranking Italy 135th. Italy ranks below all other industrialized OECD countries, and below various developing nations. (Source: World Bank – Doing Business 2010 –September 2009)

At the same time, some young, well-educated Italians aim to break the cultural bias against entrepreneurship by showcasing their own efforts to start new firms and calling publicly for policy reforms. Unfortunately for Italy, several promising entrepreneurs have, in the interim, quit Italy and taken their ideas and energies to start firms abroad. Most high-tech, innovative start-ups attempted recently in Italy, are focusing on global, and not exclusively Italian, markets.


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 22,500) due to money laundering and terrorism financing concerns. Profits, payments, and currency transfers may be freely repatriated. Residents and non-residents may hold foreign exchange accounts.


The Italian constitution permits expropriation of private property for "public purposes," defined as essential services or measures 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 and dispute settlement mechanisms may discourage investment.


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. Businessmen and travelers to Italy should be aware, however, that the Italian legal system does not have some of the basic rights protections found in U.S and other European laws. Jury members are selected at random but are not vetted for prejudices nor are they sequestered during trials; accordingly, negative or inaccurate news stories can prejudice outcomes of trials. Italy has a written and consistently applied commercial and bankruptcy law. While the Italian judiciary is considered independent of the government, parties to disputes sometimes accuse Italian judges of political partisanship. Foreign investors in Italy can choose among different means of dispute resolution, including legally binding arbitration. Italian courts accept and enforce foreign and arbitral panel judgments only upon request, however, which puts the issue back into the Italian judiciary.

At the end of 2007, the GOI approved new bankruptcy regulations analogous to U.S. Chapter 11 restructuring, to provide more flexibility between firms and their creditors to reach a solution before declaring bankruptcy. The judiciary’s role in bankruptcy proceedings has been drastically limited to simplify and expedite the process.

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.


The GOI is in compliance with WTO Trade-Related Investment Measures (TRIMS) obligations. Foreign investors face specific performance requirements only in the telecommunications sector. While this has not prevented foreign investment in telecommunications, a notable lack of transparency in the sale of Telecom Italia drove a potential U.S. investor away in 2007.

The GOI offers modest incentives to encourage private sector investment in economically depressed regions, particularly southern Italy. The incentives are available to foreign investors as well, and U.S. companies can usually access grants if the planned investment is located in priority (less developed) regions and if the companies have subsidiaries in the EU or are partnered with local firms.

The Minister of Education, University and Research has identified, funded, and signed Framework Program Agreements with eleven "Technology Districts" and public-private joint laboratories focused on strategic sectors. The GOI has created Technology Districts 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.

The Italian tax system does not discriminate between foreign and domestic investors. The 2008 budget reduced corporate income tax (IRES) rates by 5.5 nominal points from 33 to 27.5 percent, and trimmed the regional business tax (IRAP) from 4.35 to 3.9 percent. Such cuts were in response to increased EU-wide competition for investment, particularly as the enlargement of the EU to 27 members ushered in various low cost, low tax East European states. Germany’s 2007 corporate tax rate cut rendered Italy’s corporate tax rate the highest in the EU. The U.S. and Italy enacted in 2009 an income tax agreement to prevent double-taxation of each others’ nationals and firms, and to improve information sharing between tax authorities.

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 improve enforcement of existing tax laws.


There is no limitation in the Italian constitution or civil law on the right to private ownership and establishment of investments.


Inadequate 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 offenses, 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, but 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.

Italy's restrictive interpretation of EU privacy laws prevents IP rights holders from monitoring downloading/uploading of copyrighted content over peer-to-peer networks. This makes it virtually impossible for rights holders to pursue civil or criminal actions against infringers. Currently there are no agreements between Internet Service Providers and rights holders on standard notice and take-down procedures.

Copyrighted works sold in Italy generally must bear a sticker issued by SIAE, Italy's royalty collection agency operating under loose authority from the Ministry of Culture. Business software is exempted, though obtaining this exemption requires some (tedious) paperwork. The music and film industries previously supported application of the sticker, but are now dissatisfied with the system, asserting it has become overly burdensome, costly, and has failed to provide adequate protection from piracy.

The GOI has pursued the following new initiatives to address the lack of IPR protection, though not all have been successful:

- The Economic Development Ministry in 2009 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 Directorate has begun efforts to obtain better data on protection of IPR protection efforts and to educate businesses and the public on the importance of intellectual property to the nation’s economy. The Directorate has also expressed an interest in collaborating with the USG on IPR protection projects. No tangible results for these efforts are yet evident.

- The Secretary General of the Prime Minister's Office in 2009 chaired an inter-ministerial anti-piracy committee. The committee hosted a series of hearings, but they did not result in an anti-piracy action plan or in any GOI action on piracy.

- An economic development bill passed by parliament increased criminal penalties for trademark infringement.

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, merely by placing on the work, their name, date of first publication, and the symbol (c).


Italy is subject to single market directives mandated by the EU, which are intended to harmonize regulatory regimes among EU countries. In reality, the average firm in Italy faces an uphill climb as regards compliance with business regulations. 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. 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. In its 2009 budget law, the government reintroduced provisions to enable entrepreneurs to "open a business in a day", working through the Italian Chamber of Commerce. Businesses report, however, that such a mechanism is as yet inoperable and does not exempt firms from fulfilling requirements established by local governments.

Various foreign firms, including some American ones, report that they have been harassed by the GOI at the instigation of politically connected competitors. A web of sometimes contradictory laws and regulations serves as a useful tool for vested interests to use against foreign upstarts. In addition, in some industries such as new media and financial services, investors complain that local judicial authorities seem to lack the technical capacity to apply appropriately Italian laws on, for example, consumer protection, IPR, and competition, especially when these lag process and product innovations in the market. For example, local prosecutors are seeking indictments against US financial services firms – among others – for allegedly violating usury laws and for allegedly misleading local government finance officials into inappropriate investments.


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. According to the Venture Capital Monitor, in the period 2004-2008 venture capital funds invested in 89 start ups, most of them located in the north. Only about 15 of these deals, amounting to 250 million euro, occurred in the start-ups’ critical “early stage”. What little venture capital exists is usually provided by established commercial banks and a handful of venture capital funds. “Angel investing” only began to take root in 2008; an earlier effort in this area was snuffed out by the dot-com bust.

The Italian stock exchange ("Borsa Italiana") is relatively small -- fewer than 300 companies -– and is effectively an inaccessible source of capital for most Italian firms. In 2007, the London Stock Exchange purchased the Borsa, raising expectations that governance standards and transparency of the Milan market would improve. 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.

Financial services companies incorporated in another EU member state may offer investment services and products in Italy without establishing a local presence, operating under authorization from CONSOB. In the wake of the 2008 global financial crisis and losses in equity markets, 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. Meanwhile, U.S. and other foreign banks complain that Italian interpretation of EU financial regulations tends to be stricter than in other countries. They also note that Italian tax rates for banks are higher than the EU average and have been rising the last two years. Still, the country’s foreign bank association continues to assert that Italy is an attractive market, especially for project finance.

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. Indeed, in 2008, 64 percent of trading on the Borsa was carried out by foreign brokerage houses. 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 averages around 22 percent. 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 acquire or increase its stake in an Italian bank equal to or greater than ten percent must be authorized by the Bank of Italy.

Thanks to conservative lending practices and a lower degree of exposure to the toxic, risky instruments that were at the center of the 2008 global financial crisis, Italian banks avoided the worst of the crisis. However, policymakers throughout 2009 remained concerned about the banking sector’s ability and/or willingness to maintain an adequate supply of financing to the economy during the economic downturn. While some government officials have criticized the industry publicly, there is no discernible government effort underway to interfere with private banking activity or operational decisions.

The banking sector has undergone significant consolidation in the last decade, with about 60 percent of total Italian banking assets involved. In 2009 a handful of mid-size banks and Italy’s biggest leasing company merged or were acquired by competitors. 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 52.1 percent of total banking assets.

Efficiencies from mergers and the expansion of online and other low-cost banking options are expected to have an impact on retail banking fees, currently among the highest in Europe. Possibly contributing to this trend are class actions promoted by consumer associations against several large banks. The Bank of Italy has urged Italian banks to become more competitive by cutting high transaction charges and improving services.

A prohibition on non-bank companies (either Italian or foreign) acquiring more than 15 percent of a bank's capital was abolished by the legislature in late 2008, with the aim of implementing a new European directive. Firms have used complex cross-shareholding arrangements to fight off takeover attempts in the financial sector. Still, the presence of foreign intermediaries in the Italian market increased in the last several years. In 2005, the Dutch Bank ABN-AMRO obtained control of an Italian medium-sized bank, Banca Antonveneta; in 2006, the French banking group BNP Paribas acquired 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 (subsequently acquired by Banca Intesa)and Banca Popolare Friuladria; and in 2008, U.S.-based GE Capital purchased Interbanca from Spanish bank Santander. No further significant acquisitions or mergers occurred in 2009 as the industry digested the previous years’ deals.

At end of 2008, 82 subsidiaries of foreign groups accounted for 11.7 percent of system assets. A year earlier, 21 subsidies of foreign banks accounted for 9.3 percent of system assets. Throughout 2008-09, however, various foreign banks closed or significantly scaled back operations in Italy, with accompanying layoffs and lost business.


Political violence is not a threat to foreign investments in Italy, but corruption, especially associated with organized crime, can be a major hindrance, particularly in the south – see next section.


Corruption and organized crime are significant impediments to investment and economic growth in Italy. Transparency International's (TI) Corruption Perceptions Index 2009 ranked Italy 63rd out of 180 countries evaluated, down from 55th in 2008 and 41st two years ago. While better than 117 other countries, Italy lags behind most of its G-8/EU/OECD partners, but also below Turkey and Namibia and just above Saudi Arabia. TI’s International Corruption Perceptions Index is an annual poll of polls ranking countries for perceived public-sector corruption. TI has for years raised concern about the dampening of anti-corruption efforts in Italy stemming from large-scale ownership of media outlets by Prime Minister Berlusconi.

According to TI, less than 30 percent of Italy’s population believes the government is effective in fighting corruption. In TI’s latest 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, and last among the countries of Western Europe. The NGO Global Integrity (GI) noted that Italy has poor mechanisms to fight corruption in public administration and lacks effective laws 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 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.

One of PM Berlusconi’s first acts in office was to eliminate the High Commissioner for Anti-corruption. Later in 2008, the GOI established, at the instigation of Transparency International, the Anticorruption and Transparency Service (SAeT), tasked to monitor corruption trends, establish guidelines for public ethics, participate in international anti-corruption efforts and publicize its work. SAeT is charged also with streamlining and speeding payments from public entities to private contractors and service providers. Though TI lobbied the government to have SAeT adopt TI’s recommended institutional model, it appears SAeT’s powers remain very limited. It has not as yet been a prominent player in anti-corruption efforts. In its first report in March 2009, SAeT estimated that corruption in public administration constitutes a burden ranging from €50 to €60 billion, i.e. almost €1,000 per capita. The report characterized corruption as an immoral and hidden tax on families that erodes and slows economic growth.

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.

Organized crime is present throughout Italy, but is particularly prevalent in four regions of the south (Sicily, Calabria, Campania, and Apulia). 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) had a turnover of 130 billion euros, including legitimate commercial activities accounting for 92 billion euros, or 6 per cent of Italy's GDP. Organized crime is involved in racketeering, loan sharking, drug smuggling, illegal toxic waste disposal, the manufacture and distribution of pirated and counterfeit products, and prostitution. Confesercenti estimates loan sharking accounts for 15 billion euros of Mafia income. Narcotics’ trafficking is by far the most profitable activity, traded across Europe and worth 59 billion euros. The Confesercenti report underscored recent warnings by anti-Mafia prosecutors that criminal gangs were expanding their activities into trade, tourism, the gaming industry, restaurants, construction, waste 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 6 billion euros a year. For example, a stall in a food market in Naples has to pay 5 - 10 euros a day, while a Palermo construction site may hand over 10,000 euros 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. Organized crime is not limited to the south; in fact, the main crime syndicates are heavily involved in money laundering throughout the country and abroad.


As of December 2008, Italy has bilateral investment agreements with the following countries:
Belize (signed, not enforced)
Bosnia and Herzegovina
Brazil (signed, not enforced)
Cape Verde (signed, not enforced)
Cote d'Ivoire (signed, not enforced)
Czech Republic (not into force)
Cyprus (signed, not enforced)
Democratic Republic of Congo (signed, not enforced)
Dominican Republic (signed, not enforced)
Ghana (signed, not enforced)
Hong Kong, China
Hungary (not into force)
Iran, Islamic Republic of
Korea, DPR of (signed, not enforced)
Korea, Republic of
Latvia (not into force)
Macedonia, Republic of
Malawi (signed, not enforced)
Malta (signed, not enforced)
Mauritania (signed, not enforced)
Moldova, Republic of
Panama (signed, not enforced)
Paraguay (signed, not enforced)
Russian Federation
Saudi Arabia
Slovakia (not into force)
Slovenia (not into force)
South Africa
Sri Lanka
Sudan (signed, not enforced)
Syrian Arab Republic
Turkmenistan (signed, not enforced)
United Arab Emirates
Tanzania, United Republic of
Venezuela (signed, not enforced)
Zambia (signed, not enforced)
Zimbabwe (signed, not enforced)


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).


Italy's unemployment rate, at 8.5 percent in December 2009, has crept up as a decade of low growth and the slowing world economy take their toll. The December 2009 data is the highest figure since March 2004. Post and various economists expect the unemployment rate to remain high in 2010 and 2011. Traditional regional labor market disparities remain unchanged, with the southern third of the country posting a significantly higher unemployment rate compared to northern and central Italy. Despite these differences, internal migration within Italy remains modest, while industry-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.

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 education 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 specialized young Italian employees.

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.

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.

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.


The main free trade zone in Italy is located in Trieste, in the northeast. Legislation provides for creating others in Genoa and Naples, but has not yet been implemented. A FTZ in Venice operated for a period but is being restructured. 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:

-- As regards Trieste, 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 and re-exported to a non-EU country.

In December 2009 the GOI implemented a simplified version of the regulation of urban free zones (aimed to accelerate the creation of micro-companies and to stimulate employment) which are expected to involve 23 local governments, mostly in the south. There is no customs duty exemption in these zones.


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.


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 2008 totaled USD 28.9 billion (equal to 1.2 percent of GDP), well below its Euro zone counterparts. Notably, inflows were exceeded by outflows – USD 33.8 billion in 2008 (equal to 1.4 percent of GDP).

Data on Italian Investment Inflows (direct and portfolio) is available at http://www.unctad.org/en/docs/wir2007_en.pdf or http://www.bancaditalia.it/pubblicazioni /relann/rel08/rel08it.

Table 1: Italian Foreign Direct Investment Inflows by Economic Sector (Net) 2005-2008 (USD Millions) (1) (*)

Energy10057.14104.34387.1 7481.0
Industry6996.3 7549.06629.04254.4
of which:
Building and
Public Works205.0283.9239.3314.3
of which:
Trade653.43570.42106.2 -290.9
Other Services
(Not For Sale)10532.94231.25963.76691.6
T O T A L18695.729914.632319.128862.6

Table 2: Italian Direct Investment Outflows by Economic Sector (Net) 2005-2008 (USD Millions) (1) (*)

of which:
Building And
Public Works159.0-113.1114.2252.9
of which:
Transportation/Communication110.62069.11658.6 -552.6
Other Services
(Not For Sale)1264.62939.78061.8 7162.2
T O T A L17980.134087.961790.333827.5

Table 3a: Stock of Foreign Direct Investment in Italy by Major Investors; Year End 2005-2008 (USD Millions) (1)

United States21451.025826.125581.331707.6
EU (3)145179.5185773.4238404.1252374.3
of which:
United Kingdom25434.530461.135584.235377.1
Other EU (4)4839.47141.013878.516901.2
T O T A L201318.8252383.4313767.2323706.2

Table 3b: Stock Of Foreign Direct Investment In Italy by Major Investors; Year End 2005-2008 (Percentage of Total)

United States10.710.29.49.8
United Kingdom12.612.111.310.9
Other EU (3)
T O T A L100.0100.0100.0100.0

Table 4a: Stock Of Italian Direct Investment Abroad by Major Recipient; Year End 2005-2008 (USD Millions) (2)

United States19617.526118.627439.225974.6
United Kingdom22617.524847.226086.420378.5
Other EU (3)10716.612681.117869.721779.8
T O T A L243982.3305940.7407518.3410885.6

Table 4b: Stock of Italian Direct Investment Abroad by Major Recipient; Year End 2005-2008 (Percentage of Total)

United States8.
of which:
United Kingdom9.
Other EU (3)
T O T A L100.0100.0100.0100.0

Table 5a: U.S. Investment in Italy by Economic Sector End-Year 2005-2008 (USD Millions) (2)

of which:
of which:
Other Services2533.53079.13187.53350.3
T O T A L21451.025826.129581.325974.6

Table 5b: U.S. Investment in Italy by Economic Sector End-Year 2005-2008 (Percentage of Total)

of which:
of which:
Other Services11.812.010.813.0
T O T A L100.0100.0100.0100.0

Table 6a: Italian Investment in the U.S. by Economic Sector -- End-Year 2005-2008 (USD Millions) (2)

Agriculture62.6 71.171.766.4
of which:
Machine2850.1 7910.48007.38113.0
of which:
T O T A L19617.526118.627439.231707.6

Table 6b: Italian Investment in the U.S. by Economic Sector -- End-Year 2005-2008 (Percentage of Total)

of which:
of which:
T O T A L100.0100.0100.0100.0

Table 7: Direct Investment by Origin and Destination End-Year 2008 (USD Millions) (4)

InvestmentInvestment Italian
in ItalyAbroadPosition
of which:
United Kingdom35377.120378.5-14998.6
Other (3)16901.121779.74878.5
of which:
T O T A L323706.2410885.687179.4

(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:


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:

Euro/Dollar 0.8470.7590.744 0.684

(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-2008
exchange rate of one dollar = 0.708 euro.

Sources: Bank Of Italy Annual Report 2008 http://www.bancaditalia.it/pubblicazioni- /relann/rel08/rel08it