2012 Investment Climate Statement - Italy

2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012

Italy’s high level of public debt, perennially slow growth, and the ongoing Eurozone financial crisis led to widespread concern in 2011 that Italy could be forced to pay unsustainable yields to service its sovereign debt. While these concerns were likely overstated, the Italian government responded with three “austerity” measures in the form of new taxes and spending cuts totaling more than USD 100 billion during the second half of 2011. The pressure from financial markets also contributed to political change when Prime Minister Silvio Berlusconi stepped aside in November for Mario Monti to lead a non-elected, technical government. Monti moved quickly to address a number of economic structural impediments to reassure financial markets, encourage growth, and improve Italy’s investment climate. Monti’s efforts – including on rigid labor markets, opaque tax and commercial laws, tax evasion, and excess regulation -- have continued into 2012.

Even if the Monti government makes progress in changing decades of norms and convincing entrenched interest groups to allow reform, old challenges continue to deter investors, including the presence of organized crime in many parts of the country. In 2011, Italy ranked below nearly all its EU peers in international NGO rankings of regulatory transparency and ease of doing business. Not coincidentally, Italians in 2011 again invested more abroad than foreigners invested in Italy. Net investment inflows dropped from 15.6 billion euros in 2009 to 7.2 billion euros in 2010, while net Italian investment abroad was almost unchanged from 2009 at 15.9 billion euros.

In 2011, progress on the government’s “fiscal federalism” project - to reform the public finance system by devolving decision-making and accountability from the central government to regional and local entities – ground to a halt. The government, however, renewed its push to attract investment in the south, partially through targeted use of EU structural funds, to address the region’s high levels of corruption, unemployment, and lack of infrastructure.

The GOI in 2011 remained open to specific foreign sovereign wealth funds to invest in shares of Italian companies and banks and continued to make information available online to prospective investors. Other GOI efforts to sell Italy as a desirable direct investment destination were increasingly overshadowed in 2011 by the Eurozone financial crisis, Italy’s political turmoil, and the country’s high debt-to-GDP ratio. Italy’s new government announced some measures in early 2012 that could bolster infrastructure spending in targeted areas and provide investment and tax incentives. Italy’s large, relatively affluent domestic market, proximity to emerging economies in North Africa and the Middle East, and assorted centers of excellence in scientific and information technology research remain attractive to many investors.

U.S. investors in 2011 encountered problems stemming from excessively complex and seemingly arbitrary interpretation of tax regulations by authorities, in particular rules on transfer pricing for multinational firms' transactions with Italian subsidiaries. Some Italian local governments and independent prosecutors sued several U.S. financial institutions over allegedly fraudulent sophisticated financial transactions between government entities and the banks. Internet content providers battled Italian authorities' somewhat draconian interpretation of privacy laws that purported to hold the firms accountable for all content uploaded by users of social media and community sites. Italy's digital infrastructure remained markedly subpar in 2011.


Italy’s economy, the eight largest in the world, is fully diversified, but dominated by small and medium-sized firms (SMEs), which comprise 99 percent of the number of businesses in Italy. It is an original member of the 17-nation Eurozone. Germany, France, the U.K. and the U.S. remain Italy's most important trade partners, with China gaining ground as a supplier of consumer goods. Tourism is an important source of external revenue. Italy continues to lag 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. 50 for full list).


Italy welcomes foreign direct investment. As an EU Member State, Italy is bound by EU treaties and laws, including those directly governing or indirectly impacting business investments. Under the EU treaty’s Right of Establishment and the Friendship, Commerce and Navigation Treaty with the U.S., Italy is generally obliged to provide national treatment to U.S. 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.

Foreign investors were not precluded from investing in the privatization of government-owned companies that occurred at the turn of the century, except in the defense sector. The process, however, almost in all cases 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 agreed to keep their shares for a minimum period. The Italian government retained special rights in six Italian firms -- ENEL (utilities), ENI (oil/gas), Finmeccanica (industrials/defense), Telecom Italia (telecommunications), Save (industrials), and Terna (utilities). As a result, government policy in these key economic sectors tends to favor the interests of these specific firms, and not necessarily the broader economic good. As part of a wide range of planned government reforms to liberalize services in Italy’s economy, the government proposed in early 2012 unbundling of natural gas production and distribution.

The Italian Trade Commission (ICE) reported in January 2010 that 7,608 foreign companies operate in Italy (compared to 7,152 in 2009), employing 931,924 workers (up from 853,000 in 2008), with overall sales of 496.9 billion euros (up from 429.5 billion euros in 2009). This appears, in part, to be a result of recovery from the 2008-9 global crisis. According to ICE, the stock of foreign investment in Italy continues to equal 12 percent of GDP, far less than in many EU nations. Approximately 82 percent of foreign companies operating in Italy are located in the north, a percentage that has grown in recent years as the number of companies in the south has contracted. 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 2011 totaled USD 9.2 billion, well below Italy’s Eurozone counterparts. Outflows exceeded inflows. (see para. 60).


The World Economic Forum’s (WEC) 2011-2012 Global Competitiveness Guide ranked Italy 43rd out of 133 countries with a score of 4.8 on a seven-point scale. While this represented a five-place (and half-a-point) improvement over the previous year, Italy remains the lowest-ranked G-7 member country on almost every individual element. In more complex areas measured, particularly the sophistication of its businesses environment, Italy internationally ranked 26th for its business clusters and production of goods high on the value chain (down three slots from the year before). The WEC ranked Italy 123rd for its rigid labor market and poor job creation (a five step downgrade). Although Italy’s ranking for business development finance climbed four spots, the report still deemed that area insufficient. Other institutional weaknesses the WEC cited included high levels of corruption and organized crime and a perceived lack of independence within the judicial system – all of which increase business costs and undermine investor confidence. Italy ranked 92nd overall for its institutional environment.

The World Bank Report on Doing Business 2011, based on the criteria of the International Finance Corporation (IFC), ranked Italy 80th (down from 76th in 2010) in a list of 183 countries in terms of business friendliness. Italy was ranked below all other industrialized OECD countries, and below Belarus (69th), Rwanda (45th) and Albania (51st). Several specific indicators had deteriorated, including building permits (92nd), time to start-up an industrial plant (95th), access to credit (89th), protection of investors (59th) and enforcing contracts (157th). The World Bank noted that high corporate taxes and excessive taxation of profits continued to be major problems and consequently ranked Italy 128th. On a positive note, Italy ranked 30th on ease of closing a business, due to recent reforms of bankruptcy procedures.

The government began trying to reduce many market rigidities in early 2012, by issuing a “liberalization” decree that, inter alia, could open up the energy and transportation sectors; introducing a “simplification” decree aimed at reducing red tape for companies and increasing online government services; and commencing a dialogue on labor reforms. Full implementation and enforcement of these measures could improve Italy’s economic freedom index considerably.

Transparency International's (TI) Corruption Perceptions Index 2011 ranked Italy 69th out of 182 countries evaluated, down from 63rd in 2009 and 41st three years ago. While better than 113 other countries, Italy lags behind most of its G-8/EU/OECD partners and countries such as Turkey (61st) and Saudi Arabia (57th). TI’s International Corruption Perceptions Index is an annual poll of polls ranking countries for perceived public-sector corruption.

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.” Italy ranked 15th out of the 28 largest global economies in perceptions of bribe paying, and last among the countries of Western Europe. The NGO Global Integrity (GI) noted in 2010 that Italy had poor mechanisms to fight corruption in public administration and lacked 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.


In accordance with EU directives, Italy has no foreign exchange controls. There are no restrictions on currency transfers; there are 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. A tax-evasion measure in force since December 2011 requires all payments over €1000 to be electronic. The law exempts e-money services, banks and other financial institutions, but does not exempt payment services companies (such as those who can perform wire transfers abroad).


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.


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.

The Italian Government legally mandated steps to speed up civil trials in August 2011. The judicial system had six months to draft implementing legislation, which had yet to be announced as of February 2012. One civil court in Torino, Italy, cut the average time of arbitration there by half simply by implementing two new internal practices: requiring judges to follow one case at a time (instead of several) and requiring judges to pass incomplete cases to a colleague if going on leave.

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.

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.


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. Overall, Italy’s effective tax rate decreased from 37.35 percent to 31 percent. However, austerity packages implemented in 2011 reversed some of these cuts. First, the government increased the IRAP tax rate to: 4.2 percent for most companies with government contracts (agriculture, highway management and tunnels contracts were exempted); 4.65 percent for banks and financial companies; and 5.90 percent for insurance companies. In December 2011, the government attempted to provide limited IRAP relief by allowing companies to deduct the full amount of IRAP paid for new hires of women and youth in 2012. Nevertheless, Italy’s corporate tax rate remains the highest in the EU.

In 2009 the U.S. and Italy enacted an income tax agreement to prevent double-taxation of each others’ nationals and firms, and to improve information sharing between tax authorities. Two firms have complained that a new stamp tax on money transfers is in violation of that tax treaty.

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 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.

Italy was included in the Watch List in the 2011 United States Trade Representative Special 301 Report. Key concerns cited in the 2011 report include continued widespread copyright piracy and trademark counterfeiting; the lack of an expeditious legal mechanism for rights holders to address piracy on the Internet; and lack of systemic deterrent sentences. The report also welcomed signs of renewed commitment by the Italian government to address Internet piracy. Italy’s Communications Regulator – AGCOM – is preparing regulations to address online piracy, including via a notice-and-takedown system and possibly action regarding websites operating from other countries.

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. This process has at times introduced additional uncertainty for U.S. companies.

For example, 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 firm operated its plants for several months under considerable uncertainty, until the GOI found a mechanism acceptable to the EU through which to provide the agreed financial support.

In general, the average firm in Italy faces an uphill climb to comply 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. The government issued a simplification decree in early February 2012, which aimed to reduce the amount of red tape and fees required to open a business by eliminating 15 obsolete laws. Additionally, the decree aimed to increase the amount of e-government services available. A “liberalization” decree of January 2012 provided limited incentives for entrepreneurs under age 35 to start a new businesses, decreasing the registration fee to 1 euro in 2012 and dramatically reducing filing requirements.

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 enforce Italian laws on, for example, consumer protection, IPR, and competition, especially when these lag process and product innovations in the market.


The banking system in Italy has consolidated significantly since several major 2007 mergers. Anti-trust regulations required significant reduction of personnel, sale of assets and reduction in the number of branches follow those mergers. At the end of 2010, there were 23 subsidiaries of foreign companies or banks operating in Italy out of 760 total banks. Two of these foreign subsidiaries figured among the Italy’s top ten banking groups, holding 9.5 percent of total Italian assets. Thirty-seven foreign shareholders – mainly from EU countries – held equity interests of more than five percent in 47 banks.

Despite major strains to the financial system in Italy due to rising borrowing costs in the second half of 2011, the Italian banking system appears relatively sound. Tensions in the sovereign debt market in 2011 and the enforcement of new European rules for evaluating bank assets affected banks’ ability to raise funds, which in turn squeezed bank profit margins. Additionally, with few exceptions, Italian banks undertook capital increases in 2010 and early 2011, which further stressed profits. Despite long-running recommendations from the Bank of Italy to reduce fees, bank fees remain among the highest in Europe.

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 that exists is usually provided by established commercial banks and a handful of venture capital funds.

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. Italian firms seem to prefer to get capital from banks. The London Stock Exchange owns the Milan Stock exchange. The Italian Companies and Stock Exchange Commission (CONSOB), established in 2005 after a spate of scandals, is the Italian securities regulatory body. In January 2011, EU Member States established three EU-level regulatory agencies for financial services and related activities: A London-based banking oversight institution (EBA), a Paris-based financial market oversight institution (ESMA), and a Frankfurt-based insurance and pension funds oversight institution (EIOPA).

Financial services companies incorporated in another EU member state may offer investment services and products in Italy without establishing a local presence. Cross-EU standardization of regulations should address U.S. and other foreign banks’ complaints that Italian interpretation of EU financial regulations tends to be stricter than in other countries. Europeans have as yet to resolve the question of authorizing non-EU financial services firms to operate under one comprehensive regulatory regime, as opposed to several dozen national ones.

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. Less than ten 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 five percent must receive authorization from the Bank of Italy.



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 parts of Italy. In 2008, the Anti Corruption High Commissioner’s Office (an independent authority) was closed and replaced by an office within the Ministry for Public Administration, the Anticorruption and Transparency Service (SAeT). SAeT monitors corruption trends, establishes guidelines for public ethics, and participates in international anti-corruption efforts with fewer resources and less independent authority than the previous Commission. However, a new independent advisory Committee on Corruption was created in 2011 with an apparently strong mandate from the new Monti government. The Committee is expected to recommend additional amendments to anti-corruption legislation that has been pending since 2010 in parliament. If the pending legislation is approved, the Committee will expand its structure and mandate by assuming many of the powers previously held by the Anti Corruption High Commissioner and some currently assigned to SAeT.

In its annual Corruption Perception Index Report, Transparency International (TI) placed Italy in 69th position alongside Ghana and Macedonia. Italian authorities claim that the ranking is misleading and unfair to Italy. While highly publicized anti-corruption enforcement activities have been underway for years, there is general agreement that a high level of corruption limits Italy’s economic growth and ability to attract foreign investment.

Italy ratified the 1997 OECD Convention on Combating Bribery and implemented its provisions in September 2001. However, it is unclear whether SAeT's powers enable Italy to prosecute the bribery of foreign officials, a key obligation under the convention. According to SAeT, Italy Italy enacted the United Nations Convention against Corruption in 2009. Corruption is punishable under Italian law although, as in all judicial processes, much discretion regarding punishment is left to the presiding judge. Most recent corruption convictions have involved government procurement or bribes to tax authorities. Bribes are not considered deductible business expenses under Italian tax law.

Organized crime is particularly prevalent in four regions of the south (Sicily, Calabria, Campania, and Apulia). Organized crime (Mafia, Camorra, ‘Ndrangheta and Sacra Corona Unita) had an estimated turnover in 2011 of 140 billion euros (including legitimate commercial activities accounting for 92 billion euros), or 7 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. There is anecdotal evidence that organized crime groups may be attempting to profit from the tight credit climate, by increasing their loan-sharking activities. 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 June 2011, Italy has bilateral investment agreements with the following countries:











Belize (signed, not in force)


Bosnia and Herzegovina

Brazil (signed, not in force)



Cape Verde (signed, not in force)





Cote d'Ivoire (signed, not in force)



Czech Republic (signed, not in force)

Cyprus (signed, not in force)

Democratic Republic of Congo (signed, not in force)

Dominican Republic (signed, not in force)








Ghana (signed, not in force)



Hong Kong

Hungary (signed, not in force)



Iran, Islamic Republic of





Korea, DPR of (signed, not in force)

Korea, Republic of


Latvia (signed, not in force)




Macedonia, Republic of

Malawi (signed, not in force)


Malta (signed, not in force)

Mauritania (signed, not in force)


Moldova, Republic of










Paraguay (signed, not in force)






Russian Federation

Saudi Arabia

Slovakia (signed, not in force)

Slovenia (signed, not in force)

South Africa

Sri Lanka

Sudan (signed, not in force)

Syrian Arab Republic



Turkmenistan (signed, not in force)



United Arab Emirates

Tanzania, United Republic of



Venezuela (signed, not in force)



Zambia (signed, not in force)

Zimbabwe (signed, not in force)


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, which reached 8.4 percent in December 2011, has crept up as a decade of low growth and the slowing world economy have taken their toll. Most observers expect the unemployment rate to increase in 2012 because of the projected economic contraction of between one and two percent of GDP and the expiration of some unemployment benefit programs. The official unemployment data does not count temporarily laid-off employees receiving benefits from the “wage guarantee fund” (for struggling or restructuring companies). The Bank of Italy believes that the real unemployment rate is at least two percentage points higher than official data.

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. Shortages in the North of unskilled and semi-skilled labor are often filled by immigrants from Eastern Europe and North Africa.

In December 2011, the unemployment rate for youth between the ages of 14 and 25 was more than 30 percent, well above the EU average and lower than only Spain, Greece, Slovakia, and Portugal. An estimated 2.2 million Italians between the ages of 15 to 34 do not study, do not work, and are not looking for a job. The government stated that the harsh employment climate for youth will be a major focus in 2012. There is anecdotal evidence of “brain drain,” particularly among the well-educated. Data indicate an increasing willingness, particularly by young Italians, to move for employment – both within Italy and abroad. Firms interested in investing in Italy may have difficulty finding specialized and experienced young 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 substantial 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. The government views reduction of inequalities, imbalances, and rigidities in the labor market as a necessary component of its growth and fiscal discipline agenda. In early 2012 the Italian government initiated high-level discussions with key constituencies on ways to reform the labor market, including making firing easier, standardizing labor contracts, and reforming unemployment benefits.

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 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. At Trieste FTZ, customs duties are deferred for 180 days from the time the goods leave the FTZ and enter another EU country. The goods may undergo transformation free of any customs restraints. An absolute exemption is granted from any duties on products coming from a third country and re-exported to a non-EU country. Legislation to create other FTZs in Genoa and Naples exists, but has yet to be implemented. A free trade zone operated in Venice for a period but is being restructured. Currently, goods of foreign origin may be brought into Italy 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.


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 the United Nations Committee on Trade and Development(UNCTAD) figures, net foreign investment into Italy in 2009 totaled USD 9.2 billion (equal to 0.6 percent of GDP), well below its Eurozone counterparts. Outflows of USD 34.1 billion in 2009 exceeded inflows of USD 9.2 billion.

Data on Italian Investment Inflows (direct and portfolio) is available at