Fiat’s Agnelli Warns Italy on Competitiveness

Gianni Agnelli, honorary chairman of Fiat, Italy’s largest industrial group, warned that Italy is losing competitiveness and called for pension reform and wage moderation while opposing changes to the single European currency.

Agnelli, 77, considered the elder statesman of Italian business, said a 2.1% falloff in Italian exports to its European partners in the first half of this year was the latest sign of the economy’s doldrums. He estimated the overall decline at 9% since 1994.

If the trend continues, “not only will the prospects of Italian industry and its employment levels be under threat,” he said in a speech delivered at a meeting in Cernobbio. “The whole of the economy will feel the effects, with the development gap compared to the rest of Europe becoming all but unbridgeable.”

Since the single currency was born in January, Italian inflation has been outstripping that of its euro partners, increasing the costs the economy must support faster than those of its European competitors. Annual inflation in the euro region was 1.1% in July, after a 0.9% rise in June, well below the European Central Bank’s 2% threshold. Italian prices grew at a faster 1.7% pace in July, compared with Germany’s 0.6% and France’s 0.4%, and rose at the same rate in August.

Agnelli’s comments echo remarks made in June by European Union President Romano Prodi, the prime minister who brought Italy into the euro group. Speaking to a chemical-industry group, Prodi’s comment that Italy’s ability to remain in the single currency long-term was in doubt if inflation continued to rise at double the rate of its competitors.

Along with the inflation differential, Agnelli said Italian companies bear higher costs than those in other euro member states. These include energy costs about 20% higher than the European average, higher communications spending and spreads between bank deposit and loan rates almost 15% higher than in other euro nations, he said, citing international organizations including the United Nations and the International Monetary Fund.

Agnelli said improvements in education, more competition, the state’s exit from the economy, better infrastructure and “the wider spread of information technology” are prerequisites for faster economic growth.