Italy's boot ready to kick the crisis back

As Italians emerge from the current holiday season they know that 2012 will be a trying year - one that will possibly define the future of the country beyond the current generation.

This comes to Italians as no surprise because 2011 has already tested them beyond their expectations. The year 2011 was supposed to be a year of celebration as the nation feted the 150th anniversary of the reunification of the Italian Peninsula under Piedmont Savoy's dynasty, with a ceremony marked by the presence of high-level officials coming from around the world. China honored my country with the presence of Vice-President Xi Jinping.

But with the crisis from Greece, Ireland and Portugal spilling over into the bigger European economies such as Spain and Italy, the structural problem of public debts within the eurozone provided international financial speculators with painful leverage.

To prove its commitment to the economic benchmark of the times - budgetary discipline - within the space of six months, Italy changed government and passed three austerity budgets, one more severe than the other. The last one, which was approved by the Italian Parliament just before Christmas, in a case of the government feeling the pain of the common man, even elicited public tears from a cabinet welfare minister.

Yet, despite the gloom of the current economic outlook, Italians know that the fundamentals of the economy are strong. Just to mention a few but significative signs: a small budget deficit, a low debt of the private sector, a strong manufacturing sector (second in Europe only to Germany, the fifth in the world), a solid financial condition of households, the soundness of the banks, and limited foreign debt.

While Italy has been thankfully endowed with unsurpassed beauty, its land is remarkably poor of natural resources. Its greatest asset is human capital, which over a span of 3,000 years - almost on a par with China - has made the Italian Peninsula a beacon of civilization and ideas, a source of bewildered admiration from foreign visitors.

Italians are not only an inventive, creative and resourceful people. They also remain a thrifty and industrious one. SMEs (Italy's "pocket multinationals" as they are called) give a sound economic contribution and guarantee the country's prominence in world exports. These companies are known for their niche specialization and the quality and reliability of their products. It is no small feat that in the middle of the severest world recession since 1929, the country is still achieving one of the largest foreign trade surpluses in manufactured products.

Italians remain frugal and wary of private debt. The financial condition of Italian households is solid. The household total net wealth is high by international standards estimated a 178 percent of the size of the GDP. In the real estate market - like in China also Italy's favorite investment - prices are stable, thus preserving family's net worth.

True to the legacy of a people that has produced 19 Nobel Prize laureates, Italy's educational performances appear in line with the OECD countries. Scientific productivity of Italian researchers ranks at the top in Europe, a source of technological innovation for Italian firms of any size and sector with the country banking on a booming green economy to increase value within the Italian productive fabric.

At times of crisis it is reasonable to take stock of one's own assets. While Italians take comfort in the fundamentals of their economy, they know that what the country lacks in natural resources is more than compensated with intangible and invaluable asset provided by its unique and distinct culture and creativity.

The Canadian-American economist John Kenneth Galbraith once remarked that the real reason for the miracle of post-World War II Italian reconstruction was that "Italy had incorporated in its products an essential component of the culture found in cities such as Florence, Venice, Rome, Naples and Milan".

The claim that culture is Italy's oil sounds true still today. There are few other ancient civilizations that have as much steadily produced as Italy.

Culture is well rooted in our past and it is also a pillar of the present, of progress and sustainability.

The gravity of the economic challenge posed will not deter Italy from remaining also in 2012 actively engaged in the international arena where since 1945 it has been a provider of peace, stability and security also outside of its immediate reaches in the European continent and the Mediterranean.

History has often put Italy in the position of being "Europe's comeback kid". We have been there before and while we do not necessarily relish this situation - far from it - we know that we can come successfully back one more time and overcome the challenges ahead in the coming Year of the Dragon.

The author is Italy's ambassador to China.

(China Daily 01/12/2012 page9)