Italy's challenge

Deutsche Welle: Mr. Pudzich, Italy is stuck in a recession. Unemployment is high. How do you see the economic situation in Italy? Have we reached the bottom of the dip?

Norbert Pudzich: Anyone talking about the Italian economy has to differentiate: one part of the Italian economy has been internationalized for several years, is very successful abroad and is participating in the current export situation as well as the German economy. The other side is the very traditional part of the economy, which is very much aimed at the domestic market. This part really isn't doing very well. Here, the effects of sharply rising unemployment and falling consumption are having their full effect.

Outside Italy, many people have the prejudice that Italians mainly make Mozzarella, trendy shoes and maybe the odd red sports car. Is that true, or, if not, what are the main pillars of the Italian economy?

One glance at the economic structures and you would be fairly surprised, as the actual sectors are the same as those that characterize the German economy: machine construction, automobile manufacture, plastics, and the chemical and pharmaceutical industry. Only in the last places are the so-called "Made in Italy" areas: fashion, design, and food.

Italy is a country with a similar level of industrialization as Germany. Italy's economic activities are actually very complementary to the companies and sectors in Germany, so that here too there are very close and very traditional economic relationships. We can say that both economies are often very closely coordinated and attuned to each other.

Now the Monti government, the government of experts, has tried to set some reforms in motion, particularly in the labor market. How is that working in your opinion? Is enough being done?

Italy has really been in an economic crisis for the past ten years. That is partly because the labor market is stale, the tax system is complex and the total burden for companies and employers is too high. And there are few incentives to innovate. Monti's government recognized these problems, but since it was a purely technocratic government, it did not have the time or the opportunity to implement the solutions politically to actually achieve these aims. Some things have been achieved, some things have got better, but there is still a bottleneck of reforms.

People say that Italian labor law is too restrictive. Is the influence of the unions too great, or why is that?

The influence of the unions was very big in the past, but it has shrunk significantly in the past few years. But it is true that we have a very pro-employee legal system, which really does put the interests of the employee first. That certainly brings great security for the employee. But on the other hand, this situation has led to a real staleness in the labor market.

What should the new government do first, in your opinion?

I think Italy has largely lost its attraction as a place to invest. The government needs to start there, significantly improve the advantages of being here, and address the tax reform, which is long overdue. That is how incentives are created, so that Italian companies will once again invest in their own industries, and foreign companies will once again enjoy investing in Italy.

If you look in your direct vicinity - do you notice any direct effects of the crisis? Are people worse off than they were one or two years ago?

Italian society is characterized by one group or part of society which is still doing very, very well. This part also enjoys legal advantages. This is true for the freelance professions, for service professions in many cases, where these professions have been helped by fee structures and regulations for groups like notaries, lawyers or doctors.

The other part is the majority, which earns significantly less than in Germany. There you find much more often that people can't get by on their wages or salaries. That means it's especially businesses and consumer areas directed at these groups which are suffering from the crisis.

Is Italy more bureaucratic and slower, or perhaps even more prone to corruption than the countries of northern Europe? That is after all a popular prejudice or judgement.

Italian bureaucracy is organized differently from what we know in Germany. It's organized much more politically. The definition of the political appointment goes much further than what we are used to in Germany. That means that many people get important posts after an election who often don't have adequate qualifications beyond their political orientation, so that they're not adequately trained for the job they have to do. I think that's the biggest bottleneck in the Italian bureaucratic system.

If I understand you correctly, it doesn't really matter which political grouping takes over control. The new government doesn't have much choice about what it has to do. But everyone is waiting to see what actually ends up happening in practice.

If you look at the statements and the programs of the political parties, the center-left bloc and the center-right bloc have the same kinds of aims. But we're all waiting with great interest to see how it will work out in practice in the end.

Norbert Pudzich is director of the German-Italian Chamber of Commerce in Milan. The country's main industry is located in the north, around Milan. The Chamber of Commerce advises and helps German and Italian companies which want to do business together. It's the official representative of German business in Italy.