Italy at a glance

Capital: Rome
Population: 58,126,212
Government Type: Republic
GDP: $1.823 trillion
Imports: $546.9 billion
Exports: $546.9 billion

Italy is largely homogeneous linguistically and religiously but is diverse culturally, economically, and politically. Italy has the fifth-highest population density in Europe — about 490 per sq. mi. Minority groups are small, the largest being the German-speaking people of Bolzano Province and the Slovenes around Trieste. There are also small communities of Albanian, Greek, Ladino, and French origin. Immigration has increased in recent years, while the Italian population is declining overall due to low birth rates. Although Roman Catholicism is the majority religion — 85% of native-born citizens are nominally Catholic — all religious faiths are provided equal freedom before the law by the constitution.

Italy has been a democratic republic since June 2, 1946, when the monarchy was abolished by popular referendum. The constitution was promulgated on January 1, 1948. The Italian state is centralized. The prefect of each of the provinces is appointed by and answerable to the central government. In addition to the provinces, the constitution provides for 20 regions with limited governing powers. Five regions — Sardinia, Sicily, Trentino-Alto Adige, Valle d’Aosta, and Friuli-Venezia Giulia — function with special autonomy statutes. The other 15 regions vote for regional “councils.” The establishment of regional governments throughout Italy has brought some decentralization to the national governmental machinery, and recent governments have devolved further powers to the regions. Many regional governments, particularly in the north of Italy, are seeking additional powers. The 1948 constitution established a bicameral parliament (Chamber of Deputies and Senate), a separate judiciary, and an executive branch composed of a Council of Ministers (cabinet), headed by the president of the council (prime minister). The president of the republic is elected for 7 years by the parliament sitting jointly with a small number of regional delegates. The president nominates the prime minister, who chooses the other ministers.

The Council of Ministers — in practice composed mostly of members of parliament — must retain the confidence of both houses. The houses of parliament are popularly and directly elected by a proportional representation system. Under 2005 legislation, the Chamber of Deputies has 630 members (12 of whom are elected by Italians abroad). In addition to 315 elected members (6 of whom are elected by Italians abroad), the Senate includes former presidents and several other persons appointed for life according to special constitutional provisions. Both houses are elected for a maximum of 5 years, but either may be dissolved before the expiration of its normal term. Legislative bills may originate in either house and must be passed by a majority in both.

The Italian judicial system is based on Roman law modified by the Napoleonic code and subsequent statutes. There is only partial judicial review of legislation in the American sense. A constitutional court, which passes on the constitutionality of laws, is a post-World War II innovation. Its powers and the volume and frequency of its decisions are not as extensive as those of the U.S. Supreme Court.

U.S.-Italian Relations

The United States and Italy cooperate closely on major economic issues, including within the G-8. With a large population and a high per capita income, Italy was the United States’ 12th-largest trading partner in 2008, with total bilateral trade of $51.6 billion; exports to Italy totaled $15.5 billion, and imports from Italy were worth $36.1 billion. The United States’ $20.7 billion trade deficit with Italy in 2008 was slightly below the $20.9 billion deficit registered in 2007. Machinery and aircraft are becoming important U.S. exports to Italy. U.S. foreign direct investment in Italy at the end of 2007 exceeded $28.4 billion.

Foreign Relations

Italy was a founding member of the European Community — now the European Union (EU). Italy was admitted to the United Nations in 1955 and is a member and strong supporter of the North Atlantic Treaty Organization (NATO), the Organization for Economic Cooperation and Development (OECD), the General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO), the Organization for Security and Cooperation in Europe (OSCE), and the Council of Europe. It chaired the CSCE (the forerunner of the OSCE) in 1994, the EU from July to December 1990, January to June 1996, and July to December 2003, and the G-8 in 2001 and in 2009. Italy served a 2-year term on the UN Security Council in 2007–2008.

Italy firmly supports the United Nations and its international security activities. Italy leads the UN mission in Lebanon (UNIFIL) and has actively participated in and deployed troops in support of UN peacekeeping missions in Somalia, Mozambique, and Timor-Leste. It provides support for NATO and EU operations in Afghanistan, Bosnia, Kosovo, Albania, Georgia, and Chad. Italy, under NATO’s ISAF, maintains a Provincial Reconstruction Team in the western Afghanistan province of Herat, commands RC-West, and maintains a Carabinieri police training center. Italy supports reconstruction and development assistance to the Iraqi people through humanitarian workers and other officials, particularly in Dhi Qar Province, and is a leading contributor to the NATO Training Mission-Iraq, with approximately 100 military personnel and Carabinieri police trainers. Currently almost 9,000 Italian troops are deployed, including 2,100 in Kosovo, 2,350 in Lebanon as part of UNIFIL, and more than 2,600 in Afghanistan.

The Italian Government seeks to obtain consensus with other European countries on various defense and security issues within the EU as well as NATO. European integration and the development of common defense and security policies will continue to be of primary interest to Italy.

Economy

The Italian economy has changed dramatically since the end of World War II. From an agriculturally based economy, it has developed into an industrial state ranked as the world’s sixth-largest market economy. Italy belongs to the Group of Eight (G-8) industrialized nations; it is a member of the European Union and the Organization for Economic Cooperation and Development (OECD).

Italy has few natural resources. With much land unsuited for farming, Italy is a net food importer. There are no substantial deposits of iron, coal, or oil. Proven natural gas reserves, mainly in the Po Valley and offshore in the Adriatic, constitute the country’s most important mineral resource. Most raw materials needed for manufacturing and more than 80% of the country’s energy sources are imported. Italy’s economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized family-owned firms. Its major industries are precision machinery, motor vehicles, chemicals, pharmaceuticals, electric goods, and fashion and clothing.

Italy continues to grapple with budget deficits and high public debt — 2.6% and 105.9% of GDP for 2008, respectively. Italy joined the European Monetary Union in 1998 by signing the Stability and Growth Pact, and as a condition of this Euro zone membership, Italy must keep its budget deficit beneath a 3% ceiling. The Italian Government has found it difficult to bring the budget deficit down to a level that would allow a rapid decrease of that debt. The worsening of the economic situation is expected to jeopardize this effort. The deficit is expected to grow well above the 3% ceiling in 2009 and 2010.

Italy’s economic growth averaged only 0.8% in the period 2001–2008; 2008 GDP decreased 1.0%, largely due to the global economic crisis and its impact on exports and domestic demand. GDP is expected to contract further, with a huge decrease in 2009 (ranging from 2% to 3%) as the Euro zone and world economies slow.

Italy’s closest trade ties are with the other countries of the European Union, with whom it conducts about 60.1% of its total trade (2007 data). Italy’s largest EU trade partners, in order of market share, are Germany (12.9%), France (11.4%), and the United Kingdom (5.8%). Italy continues to grapple with the effects of globalization, where certain countries (notably China) have eroded the Italian lower-end industrial product sector.

The Italian economy is also affected by a large underground economy, worth some 27% of Italy’s GDP. This production is not subject, of course, to taxation and thus results in loss of revenue to local and central governments.

Agriculture

Italy’s agriculture is typical of the division between the agricultures of the northern and southern countries of the European Union. The northern part of Italy produces primarily grains, sugar beets, soybeans, meat, and dairy products, while the south specializes in fruits, vegetables, olive oil, wine, and durum wheat. Even though much of its mountainous terrain is unsuitable for farming, Italy has a large work force (1.4 million) employed in the sector. Most farms are small, with the average size being only 7 hectares.

Best Export Opportunities

Italy is a major U.S. trading partner. In 2007, U.S. exports to Italy totaled $14.1 billion, an increase of 12.8% over the previous year, and U.S. imports from Italy reached $35.0 billion. U.S. exports to Italy through November 2008 totaled $14.5 billion, an increase of 12.6% over the same period in 2007. The United States is Italy’s 11th largest supplier. The top four supplier countries are Germany, France, the Netherlands, and China. U.S. suppliers will find opportunities in several market sectors in Italy, including  medical equipment, pleasure boats, automotive parts, and pet products.

Detailed information on these and other sectors in the Italian market can be found in the Best Export Opportunities Section of the Italy country profile.

Transparency of Regulatory System

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 US$5,000 in fees. Italian newspapers reported that in order to open a small business (such as a wedding photography business), some 50 forms from more than 20 different government agencies need to be filled out. The study found that it costs more to open a business in Italy than nearly anywhere else in Europe, with the exceptions of Greece and Austria. Government efforts to enable entrepreneurs to “open a business in a day” have not been successful. For further information on the regulatory system and property rights, please see the Trade Data section of the Official Export Guide’s Italy country profile.

Transportation

Italy has a total of 101 airports with paved runways located throughout the country. Rail services are also widespread, and the service is reliable. The country also has a large number of seaports equipped for handling ro/ro, container and bulk cargo.

Rental automobiles are available at numerous locations. A valid state driving license is acceptable, accompanied by an international license (which serves as a translation only). Traffic lights are limited and often disobeyed, and a different convention of right-of-way is observed. Italy has over 5,600 kilometers (3,480 mi.) of Autostrada, or superhighways. Commercial and individual vehicles travel and pass on these well-maintained roads at very high speeds. Accidents occur in which contributing factors include excessive speed, alcohol/drug use, and/or sleepiness of long-distance drivers. Italy has one of the highest rates of car accident deaths in the European Union.

Map of Italy