Italian Developers Targeting Historic Area of Naples : Restoration: A proposal to revamp the city’s crumbling 16th-Century Spanish Quarter has enraged cultural groups.

On the Street of Small Hope, a forgotten Italy lives on.

Plump women hawk contraband cigarettes. Sewing machines whir in sweatshops. Crammed-in families gather around supper tables just a few feet from their beds.

“Here, nothing ever changes,” notes shopkeeper Antonio Vecchione, gesturing to the crumbling golden tenements lining Naples’ 16th-Century Spanish Quarter.

But recently, a dramatic proposal from a business group has put in question the future of the Via Speranzella (Street of Small Hope) and the rest of Naples’ vast, dilapidated historical zone.

The proposal, which envisions restoring or replacing thousands of apartments, has prompted charges that one of Europe’s biggest historic areas could be erased and its occupants forced out.

The city has not yet said how much of the plan it will approve. However, the proposal’s powerful backers--and its critics--believe it has a good chance of becoming reality.

“We must intervene,” declares Enzo Giustino, president of the business group, known as “The Kingdom of the Possible.” “The city runs the risk of being left behind by history.”

Neapolitans are intensely proud of their city, known for its songs, its dark-blue bay and its history, illustrated by medieval castles and graceful palaces from the 15th to 18th centuries.

But while Italy has become one of the world’s biggest industrial powers, Naples has remained dogged by unemployment, organized crime and corruption. Its narrow streets are choked with traffic; thousands of families live in dark, one-room apartments.

“The Kingdom of the Possible” argues that only a dramatic step by the private sector can save the cultural heritage, livability and economy of the 1,780-acre historic center.

“The Italian state is the weakest in the world,” Giustino contended in an interview. “It can’t solve these problems by itself.”

Four years ago, Giustino, a construction executive and top official of the Italian employers’ association, assembled a coalition of some of the city’s most powerful forces--banks, construction firms and state-owned businesses.

They enlisted dozens of architects, economists and sociologists to study the historic center of the city of 1.2 million. Last year, their 700-page proposal was presented to the Italian prime minister in Rome and local officials.

Cultural groups were outraged.

Their biggest objection: The proposed demolition of at least 663 apartments to make room for parks, and the vast alteration or destruction of 21,066 others to make room for more modern apartments.

“It would mean rubbing out a part of our history,” protested Guido Donatone of the national preservation group Italia Nostra.

From a hillside, he pointed to the patchwork of gray and brown roofs in the Spanish Quarter, named for the troops encamped there when Naples was under Spanish rule in the early 1500s.

“This would all be skyscrapers,” he said.

Actually, the proposal would leave the renovation of the Spanish Quarter to an architectural competition.

The plan calls for keeping the character of most historic neighborhoods. The exteriors of some buildings would be preserved while apartments inside are rebuilt, for example, and others would undergo extensive to minor restoration.

But critics still fear that the project would become dominated by speculators, who in the past have covered Naples’ hillsides with anonymous concrete apartments.

Giustino disagrees with that conclusion, saying his group has presented all its ideas publicly.

Critics also maintain that the plan would force out artisans and shopkeepers and prompt a rush of yuppies.

Their concern is a proposal to finance the $7.4-billion project by charging the owners of the apartments, assisted by state or local funds.

“This has a social cost that is not quantified,” said Maurizio Barracco, a director of the cultural group Naples 99. “How many people will have to leave?”

Despite the objections, the city is now drawing up renovation proposals. Its urban planning chief, Maurizio Cardano, said, “We see the possibility of harmonizing their project with ours.

“We have a kind of strange attitude in Italy,” he added. “We preserve everything without discrimination.”

He added that improved living conditions were often more important than preservation--a view shared by people in the Spanish Quarter.

“This is really degraded,” said a dark-haired woman, indicating the street outside her toiletries shop. “It should all be knocked down.”

Shopkeeper Vecchione said he favored rebuilding but expected little change.

“They haven’t done it yet, I don’t think they ever will,” he said with a shrug.