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Effects of the Credit Crunch in Sicily
by Maria Luisa Romano

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Signs of Crisis: Street protests and gold buyers.Whatever the politicians say, the scariest part of any recession can be expressed in one simple word: Unemployment.

Each country has its own criteria and definition of what constitutes the national unemployment rate, but anybody who sincerely believes that Italy's current (April 2010) unemployment level is really only 8.7%, compared to 9.7% in the United States, should book a place on the next Alitalia space flight for Fantasy World. Then there are the statistics on "youth unemployment," which in Italy could mean just about anything. Here the "official" figure is a more credible 26%, still understated but at least in the universe of plausibility. This does not even touch on the "poverty level" as defined by ISTAT (Italy's national statistics institute), or the more credible fact of extremely low salaries throughout Italy but especially in the South. In Italy the official GDP figures are just as unreliable as the employment numbers presented for public consumption. It's better to focus on observable realities.

It's important to bear in mind that the "real" unemployment level anyplace is often higher than the "official" one. In the American state of Michigan, for example, the actual unemployment level is estimated at 20% if not higher.

Factories and other businesses are closing throughout Italy as part of a serious economic crisis which began at least two years before the current "credit crunch" suffered since 2008. Italian politicians like to say that Italy's banks were less involved in the events leading to the current recession than those of Britain, Germany and the United States. This is true, strictly speaking, but the aftershocks in Italy's economy have been catastrophic - particularly in tourism and in industries such as fashion and furniture-making. The government now admits that Italy's exports are at their lowest level since 1969.

If the current recession seems less evident in Sicily than elsewhere in Italy it is only because the local economy was already a disaster, with chronically high, long-term unemployment hovering around an astounding, frightening 25% (if not more), accompanied by a terrible rate of underemployment - people working at jobs which don't pay nearly enough to live on, for example a call centre position paying around 600 euros per month. Accurate figures are scarce in a place where tax evasion is a way of life, but officially the average Italian household has an annual income of around 26,000 euros while the average in Sicily is around 16,000. About fifty percent of Italians declare earnings of less that 15,000 euros per year, while fewer than one percent declare 100,000 or more. The underground economy is especially large in Sicily.

Here are some facts based on recent developments.

The FIAT plant in Termini Imerese, which has always been propped up with tax breaks, numerous incentives and barrels of public money, is scheduled to close in a year or two. This is not the first time FIAT has considered closing the plant (we wrote about it years ago), but it looks as if this time it will actually close. The situation prompted an article by the Wall Street Journal.

More immediately, Palermo's ship yard, which nowadays constructs oil rigs and other platforms more than ships, fills its last contract in July, with no more scheduled. This will bring layoffs.

Italtel's electronics assembly plant outside Carini is planning cutbacks. Their recent protest is shown here, and while street protests are nothing new in Italy those of the last year have been undertaken with a certain sense of urgency. They're not just an excuse to make noise and detour traffic.

In each of these cases, the jobs will probably end up overseas, if anywhere - possibly in Eastern Europe (yet perhaps in EU countries such as Poland or Romania), effectively lost forever. This phenomenon is certainly related to the recession, but its causes cannot be said to be rooted directly in the credit crunch. What we're seeing is really an indirect effect, part of a chain reaction or even a parallel development. That's academic. The point is that Sicilian jobs are disappearing, just as manufacturing jobs are vanishing in the rest of Italy.

Then there's the question of the various "make-work" programmes and low-paying public-sector jobs. For example, when the publicly-funded agency that handled ticket sales at historical sites went under hundreds of jobs were lost. Strangely - though not too bizarre by local standards - the regional government now plans to assign management of the sites to a number of smaller agencies and organisations instead of assuming direct administration itself. The cycle of corruption continues.

In a field where only the strongest survive, a number of tour operators have either closed or scaled down their operations. This has led to (for example) some tour guides working less, and villa rental agencies in Sicily discounting rentals to an amazing extent.

But some of the most unfortunate - and most visible - results of the recession in Sicily strike at the heart of the underclass. The last two years have seen the openings of dozens of betting and gaming businesses around Sicily, particularly in larger cities like Catania and Palermo, and the installation of electronic slot machines and such in coffee bars and other places, with lotteries more popular than ever.

In tandem with this sad development, pawn shops specialising in the purchase of gold (far below the market rate) have sprung up like mushrooms after the rain, not only in larger cities but in towns as well. (One such shop is shown here.)

While the Italian government, recently branded the most corrupt of the European Union, understates the national unemployment rate, it admits that unemployment benefit claims are at their highest level in decades. Some things are not easy to conceal. Nepotism, for example, remains a reality in the Sicilian workplace, and so does corruption; the underclass suffers most during any economic crisis.

Certain sectors of the economy are showing signs of life. Tourism is improving slightly this year, and for the curious traveller Sicily is just as inviting as ever. Agriculture is stable, though underdeveloped - the olive oil and wine taste just as good now as they did before the recession. Unfortunately, the economy of a region populated by over five million can't survive on a single industry.

About the Author: Maria Luisa Romano has written about social topics for various Italian magazines, including this one.

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© 2010 Maria Luisa Romano