A young and dear friend of mine sent me this video https://youtu.be/LdhQzXHYLZ4. John Oliver’s show on HBO is a pungent and inexorable satire on Italy’s Prime Ministers candidates. My young friend’s comment was: “Terrible!”.

A few hours later, my former US business school professor sends me the article of the Wall Street Journal on the Italian elections of March 4 https://www.wsj.com/articles/the-real-italian-job-make-the-economy-more-productive-1519756469 commenting: ” depressing “. And lastly The Economist: “Povera Italia. Italy goes to the polls with bleak electoral prospects. The world’s eighth-largest economy faces a woeful set of choices” https://www.economist.com/news/leaders/21737511-worlds-eighth-largest-economy-faces-woeful-set-choices-italy-goes-polls.” Please do watch and read the above articles.

The following is, possibly, a holistic counter-view on the Italian situation. It does not deny the challenges presented by our international observers, moreover, it adds others. It suggests, however, avoiding a doom’s day attitude. Italy has the resources for a turnaround. Italians, especially those who live and work internationally, should consider going to the polls “en masse” to express their free opinion in the upcoming elections on March 4. Expressing oneself at the polls is a sign of leadership.

The economic framework (as illustrated herein after) is such that the choices are limited and painful. Knowledge and competence should drive Italians to cast their vote.

Warning: this is not a tweet.

Is Italy so terrible and depressing?

The answer is: it is not! Satire and articles rest on part of the truth.

When behemoths such as HBO, the WSJ and The Economist communicate they have such firepower that, in the absence of alternative narrations (and from Italy there is none as we shall see), their opinions become “shared and common perceptions” which, in turn, become the truth. It is as if these colossi would broadcast, concerning the US, only news of the shootings in high schools. The perceptions would be of a country out of control and violent and the truth would become, therefore, terrible and depressing.

The counterargument shall rest on:

  • The media and the silence of non-innocents: the Italians
  • Quality of human capital in politics: yet it moves
  • The new CEO job description
  • Post crisis, a stronger cluster of small and medium-sized enterprises: the often overlooked backbone
  • The caliber of Italian universities: per aspera ad astra
  • Against the odds: Political stability of the Italian Regions

For my young talented friend, the following will demonstrate that he is in the right place and at the right time: in his country that is on the awakening. Let’s see why.

The media and the silence of non-innocents: the Italians
Italy still has no multimedia platform in English published and edited by Italy. A platform (social included) with adequate investments to speak English to the rest of the world. The Italian government website www.governo.it does not have a tab in English. France, Russia, China do it but also the countries in the Midle East, e.g. Al Jazeera. The undisputed and uncorrected Italian heralds to the world are the Financial Times, the New York Times, The Wall Street Journal and the weekly The Economist.

Italy, however, continues to shrug-off such criticism. It is, indeed, a strategic mistake. Not managed, the identity and reputation are segmented and atomized, creating several smaller Italy but without a goodwill. The final value is less than the sum of these micro-parts. Finally, one does not control one’s destiny.

Italians, solely and uniquely, are guilty. Italy is like a company of 62 million employees that does not have the marketing and sales divisions. It is therefore not surprising that Spain attracts more tourists than Italy (Spanish is the first language in the Americas), that Italy is the 38th destination of US investments and that, more broadly, Italy is perceived as excellent limited to the extraordinary 4 Fs industries (Food, Fashion, Furniture and Ferrari) but not for doing “serious business”. As far as Italy can be proud of Oscar winning movies, fifty years apart, the “Dolce Vita” by Federico Fellini and the “Great Beauty” by Poalo Sorrentino blew an upper-cut to Italy’s reputation, stereotyping a lascivious, bon vivant and cynical country.

Fedele Confalonieri, Chairman of Mediaset (Italy-based mass media company and Italy’s largest) however, launched the gauntlet of the challenge to the Italian ruling class “It’s time equip Italy with a media in English” http://italianbusiness.org/e-lora-di-creare-un-media-inglese-fedele-confalonieri-presidente-mediaset/.
Equipped with a multimedia platform in English edited by Italians, international observers could be informed constantly and more fully.

Silvio Berlusconi has undisputed merits (even the French media and the former director of The Economist Bill Emmott had to change their previous standing), for example, in foreign policy. His geo-political initiative gave stability to a vast territory stretching from the Balkans to Libya. He recovered the relationship with Mu’ammar Gheddafi (not without painful compromises) arresting the migratory flows, brought the current Turkish President Recep Tayyip Erdogan closer to Europe making him feel as a “primus inter pares” and not a pariah, he welcomed to Europe, after a century, Vladimir Putin’s Russia with the Pratica Mare agreements. A historic turning point for the birth of the NATO-Russia Council. Sarkozy’s France, Cameron’s UK – the initiator of the Brexit referendum – and a hands-off US, not without Italian complicity, air-bombed and destroyed this “Pax Italiana “. Today Italy, above all, is footing the bill.

Matteo Renzi, the Democratic leader and former Prime Minister aged 43, has forged a European social democratic force, gave the country a sense of urgency, launched important reforms such as the one on the labor market and the social agenda, offered a possible new constitution.

Matteo Salvini, the North League leader aged 44, has inherited a political party destroyed by the scandals, has extended the reach to the Center and to the South giving voice to the Italians who suffer the wave of immigration in a country with high youth unemployment rates and where the criminality has diminished the sense of security of the citizens.

Luigi Di Maio, leader of the 5 Star aged 31, represents a movement that has the undeniable merit of having democratically channeled the anger and frustration of an important part of the Italian society. To put this rage into perspective, in the 80’s Italy was struck by the far-left terrorist military organization Red Brigades. Among other terrorist attacks, the Red Brigades kidnapped and killed (May 9 1978) a sitting Prime Minister, Aldo Moro. Furthermore, two university professors advising the government on the reform of the labor market were both assassinated: Massimo D’Antona (murdered in Rome in 1999) and Marco Biagi (murdered in Bologna in 2002). The 5 Star Movement is the first Italian political party.

These leaders, according to American standards, would all be branded as self-made-men. And they are. They worked their way up and, two of them in their teens, participated to TV shows. They deserve respect.
The anti-euro drives have vanished. Foreign funds, in fact, increased their shareholding in the Italian listed companies and continue to buy the Italian public debt. Experienced investors have learned to read Italian politics.
Sometimes the rallies and the enthusiasm of the crowds have led to verbal excesses and sentences beyond decency. It is unbecoming. It happened. Italy, however, is a mature democracy; political parties, across the spectrum, cherish the values enshrined in the Constitution of the Republic of Italy. This is a fact.

Interviewed by Richard Quest on CNN, I have shared some of the reasons why the business community is vigilant but not anxious. http://italianbusiness.org/cnn-interview-quest-means-money-feb-22-2018-2/

Quality of human capital in politics: yet it moves
Competence will be the name of the game. Italy’s economic status demands painful policies. Unlike in the past, all political parties agree. The center-right alliance officially nominated Antonio Tajani, current President of the European Parliament, an expert on Europe and internationally appreciated. He was our guest in February 2014 to discuss with Gary Hart — then Chairman of the State Department of International Security Advisory Board– and Vali Nasr –John Hopkins Advanced International Studies — of “USA and Europe geopolitical and economic perspective, TTIP Challenges and Opportunities” moderated by CNN’s Fareed Zakaria http://italianbusiness.org/ii-summit-2014-new-york/. Furthermore, this alliance appears to be decisive in lower the total tax rate.
The 5 Star Movement has presented its potential future Ministers drawing on the world of professions. Di Maio noted that these ministers in pectore did not vote for the movement and that is why they were chosen: for their skills and their independence.
The outgoing central-left government has, as well, claimed responsibility for positive economic data and the quality of their “team”.

And then there is the Presidency of the Republic of Italy.

After the elections, the President of the Republic will take his time. He will listen to the delegations of the political parties, appoint the President of the Council of Ministers (a Prime Minister is not foreseen by the Constitution. The President of the Council of Ministers is a primus inter pares. Among other limitations, he/she cannot fire a cabinet Minister) who, in turn, will present a list of Ministers that the President of the Republic will have to approve. The newly appointed government will eventually have to obtain the vote of confidence of the two chambers. The Presidency of the Republic, as always in precarious times, has assured the country a government. In a situation of impasse, the President could choose external personalities. It happened. Italy abounds with competent and skilled men and women and of international standing.

The new CEO job description
Stuart Zimmer is the CEO of a US$ 15 billion fund in New York with a net 28% return over the last 15 years. On February 22nd in New York at the conference “The International Business Exchange. Investing in Italy and New Europe” he stated that Italian CEOs today represent a new management ” school “. They are among the best in the world as they master the art of cost optimization with innovative strategies that increase shareholders’ value.
Edelman’s Trust Barometer provides interesting data. Trust in governments, media, non-governmental organizations and, to a lesser extent, companies is in free-fall. It is of the United States that year over year loses 9 trust points, the worst performance. The US government at the end of 2017 enjoyed the confidence of 33% of the population. A new space opens up for CEOs and top management as agents of influence and change. 64% of respondents, in fact, ask the CEOs to exercise leadership and make necessary changes without waiting for the government to show the way. In Italy, only 27% of citizens trust the government against 54% who trust companies (https://www.edelman.com/trust-barometer).
Compared to the recent “époque of changes” dictated by technological revolutions, this is a “change of époque ” because it revolutionizes the structure of spheres of influence and social competence in favor of companies. Compared to governments, companies define technological chains, employ human capital of absolute excellence, have strength and leverage, ability to execute and learn from mistakes. They enjoy stable leadership and global experience. This globalization, perhaps ended with the advent of Trump, is the first in history based on the “rule of law” instead of armies. For the first time in history, CEOs are more experienced and competent than the state apparatus. The CEOs in Italy have the opportunity to accompany the change. An additional asset.

Post crisis, a stronger cluster of small and medium-sized enterprises: the often overlooked backbone Listed companies in Italy are a small part of the national economy. At the end of January 2018, the capitalization of the FTSE MIB of Italian companies was € 521 billion, a fraction of the Gross Domestic Product not a multiple as in other advanced economies. The Italian economy is above all small and medium-sized enterprises. They worked well during the crisis and forced themselves to the international markets. In 2015, Italian companies invested US $ 7.5 billion in the United States. For the first time the stock of Italian investments in the US is higher than the US stock in Italy. Exports, in other words, are accompanied by direct investments that strengthen the expansion in those markets, allowing companies to grow in size. Many financial instruments are now available to grow in size from the SPAC to US operators that offer mini-bonds. Italian exports in 2017 increased by 7% compared to 2016 and are worth Euro 450 billion. US private equity begins to invest directly in Italy.
There will also be a “trickle down effect”. The excellent managerial practices practiced by large companies will be transmitted to the medium and small sectors thus ensuring management and culture for dimensional growth. Italy will witness a process of dimensional growth, regardless of politics.

The caliber of Italian universities: per aspera ad astra
From Turin to Palermo, Italian universities improve and climb international rankings. The Bocconi University on its Milan campus hosts 14,000 university students and graduates, of whom 70% comes from Europe, 15% from Asia and 9% from the Americas. Students have the opportunity to study abroad for a semester including Princeton, Yale and NYU. In 2017, according to US News Best Colleges, Bocconi ranked 7th in Europe and 28th in the world. His Masters in Finance is ranked 7th in the world and 6th in Europe according to the Financial Times.

In Emilia Romagna a consortium of producers -Ferrari, Maserati, Lamborghini, Ducati, Dallara, Toro Rosso, Haas F1 and Magneti Marelli – in collaboration with the Universities of Bologna, Modena-Reggio, Ferrara and Parma, have launched the Motor Vehicle University of Emilia Romagna.

From September 2017 this university offers, in English, two international and inter-university master’s degrees on Advanced Automotive Engineering and Advanced Automotive Electronic Engineering, motorvehicleuniversity.com/en/.

With about 40,000 students, the Politecnico di Milano is the largest Italian university for engineering, architecture and industrial design and is ranked among the most important European universities in these sectors. The university has seven campuses and 12 departments dedicated to research. Many programs are taught entirely in English. Some of the most famous Italian scientists and architects studied and taught at the Milan Polytechnic. Among these, Renzo Piano and Aldo Rossi, both Pritzker Price, and Giulio Natta, Nobel Prize winner.

Against the odds: Political stability of the Italian Regions
Italy enjoys 20 Regions. The electoral voting system ensures political stability. Appointed for five year term, a President of a Region is a stable business interlocutor as he/she can leverage both national and European funds.
While Lombardy and Tuscany are very well known, Emilia Romagna has less awareness but is well run and economically buoyant.
Here are some interesting data:

  • Area: 22.451 Km2
  • Population: 4.45 million (Italy 62 million)
  • GDP 2016: Euro 156 billion (Italy: Euro 1,9 trillion)
  • GDP 2016: +1.4% (+ 0.9% nationally)
  • Consumption: +1.7%
  • Investments: +2.7%
  • Export: +1.9% (>US$60 billion)
  • Capital: Bologna
  • Universities: Bologna, Ferrara, Modena-Reggio, Parma, Piacenza
  • 40,000 manufacturing enterprises
  • Med-tech (mechanics, automotive, food, ceramic tiles) and bio-tech innovation clusters
  • Big data Bologna Technopole

Check this out in terms of investment opportunities: Lamborghini and Philip Morris deals.
Italy is in an economic recovery phase (even if not vigorous). In the third quarter of 2017, the net debt of the public administration in relation to GDP was 2.1%, with an improvement of 0.3 percentage points compared to the same quarter of 2016 (2.4%). In the nine months, according to ISTAT data, there was a deficit equal to 2.3% of GDP, even here improving by 0.2 points on the same period of the previous year. This is the lowest value since 2007 (always looking at the first nine months).
However, areas of great concern persist.
The picture, whoever wins the election, is summarized in the bullets that follow.
Solutions (reforms) will be painful.
Productivity, North-South divide, bureaucracy, reduction of the stock of public debt, excess of State presence in the economy through local and regional companies, health, taxation, management of migratory flows, organized crime, reform of justice, … these are some of the areas of intervention that only a competent government team with immediate international standing will be able to manage. Germany will be the first partner with whom a renewed relationship of trust will have to be established.

  • Non-consolidated 2016 debt: € 2.269 billion, 132% of GDP; Japan (222%), Greece (179%), Lebanon (146%)
  • Average residual debt life: 7.5 years
  • 4% deficit Debt holders: 36% foreign funds
  • NPL (non performing loans): 16% vs. Average Eu 7%
  • Output gap (deviation between the actual level of the product and the potential level) 2017 between -1.5 and -4.5%
  • Employment: 22.7 mln as in 2006, population from 58 to 60 mln but aging (> 65 years from 11 to 13 million)
  • Consensus impact reforms on GDP (from + 2% to + 8% of GDP) and timing: long term, OECD 10 years
  • Spread with upward trajectory
    Revenues: $ 872.6 billion
    Expenditures: $ 917.7 billion (2016 estimate)
    Gap: $ 45 billion
  • Taxes and other income: 47.1% of GDP (2016 estimate)
  • Deficit -2.4% of GDP (2016 estimate)
  • Public debt 132.5% of GDP (2016) 132.1% of GDP (2015

Italy has the means and the resources in all sectors to implement credibly what the numbers dictate. The question remains whether the country is, finally, tired and fed up of being patronized. Only Italian voters will be able to say it.
My young friend will have understood that there is still a lot of work to do but we have the raw material.
To my American professor and friend: we are working hard.