Identifier
Created
Classification
Origin
09NAPLES74
2009-06-23 07:39:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Naples
Cable title:  

GROWTH PLUMMETS IN ITALY'S CAMPANIA REGION

Tags:  ECON EFIN KCRM KCOR IT 
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VZCZCXRO6449
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHNP #0074/01 1740739
ZNR UUUUU ZZH
R 230739Z JUN 09
FM AMCONSUL NAPLES
TO RUEHC/SECSTATE WASHDC 6431
INFO RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHMIL/AMCONSUL MILAN 0183
RUEHFL/AMCONSUL FLORENCE 0153
RUEHNP/AMCONSUL NAPLES 1182
UNCLAS SECTION 01 OF 02 NAPLES 000074 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN KCRM KCOR IT
SUBJECT: GROWTH PLUMMETS IN ITALY'S CAMPANIA REGION

REF: A) NAPLES 53, B) 08 NAPLES 97

NAPLES 00000074 001.2 OF 002


Sensitive but unclassified - handle accordingly.



UNCLAS SECTION 01 OF 02 NAPLES 000074

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN KCRM KCOR IT
SUBJECT: GROWTH PLUMMETS IN ITALY'S CAMPANIA REGION

REF: A) NAPLES 53, B) 08 NAPLES 97

NAPLES 00000074 001.2 OF 002


Sensitive but unclassified - handle accordingly.




1. (SBU) Summary: A new report by Italy's central bank shows
that the country's second-most populous region, Campania, has
the lowest growth rate in Italy and the lowest rate of
employment of any region in the EU. The region has experienced
stagnant growth for about fifteen years, but the global
recession has exacerbated the situation. The tourism industry,
on which the region relies heavily for income, is experiencing
its worst crisis in 23 years, with hotels virtually empty.
According to an anti-Mafia prosecutor, the recession has been a
windfall for organized crime; flush with cash, the local Camorra
is the only alternative for businesses and individuals no longer
able to obtain credit from banks. To speak of a recovery in a
region that has seen a long and steady erosion of living
standards is almost irrelevant; what is needed is a development
plan that confronts the insidious environment of corruption, bad
government, organized crime and long-neglected infrastructure.
End summary.




2. (U) Campania -- Italy's second-most populous region and home
to Naples, the country's third-largest city -- has the lowest
growth in the country, according to a new report by the
country's central bank, Banca d'Italia. Campania also has the
lowest rate of employment among people of working age of any
region in the European Union. As noted in reftel, the economy
in southern Italy had already suffered over a decade of economic
malaise, but the worldwide recession has exacerbated the
situation. In 2008, Campania's GDP fell by an estimated 1.6 to
2.8 percent (compared with 1 percent for the nation as a whole);
Banca d'Italia projects the region's economy to contract at a
higher rate than the rest of the country in 2009.




3. (U) The central bank's Director General presented its annual
report on Campania's economy in Naples on June 15. Among the
telling statistics:



-- In the industrial sector, output has fallen below the
recession levels of 1992 and 1993, and sales are expected to
fall by at least 3.5 percent in 2009.



-- The construction sector's output declined by 5.3 percent in


2008.



-- Exports from Campania decreased by 14 percent in the final
quarter of 2008 and dropped 21.6 percent in the first two months
of 2009 (compared with the same months in 2008). Imports fell
by 0.4 percent in 2008.



-- Consumer spending in the region dropped by 1.7 percent in
2008, while prices rose by 4.3 percent (the second-highest rate
of inflation in Italy).



-- The number of persons employed in Campania decreased by 2.2
percent in 2008. The construction sector was the hardest hit,
with an employment decline of 8.8 percent, followed by the
industrial sector with a drop of 3.8 percent. At 42.5 percent,
the employment rate of working-age individuals in Campania is
the lowest of all regions among the 27 members of the European
Union. The official unemployment rate is 12.7 percent. The
only segment of the economy that saw improvement in employment
was retail, which grew by 4.5 percent in 2008. We note that
according to EU statistics, Campania is tied with Sicily for the
lowest rate of female employment (28 percent) in the European
Union (Campania's neighboring region, Apulia, has the lowest).



-- Campania's average household income is far less than the
national average, and statistics show it to have the country's
least equitable income distribution. Some 21.3 percent of

NAPLES 00000074 002.2 OF 002


families live below the poverty line in Campania, compared with
a national average of 11.1 percent.




4. (U) The availability of credit has also shrunk. Bank
lending to businesses decreased by 2.4 percent in 2008, and
banks have also tightened loan criteria. The cost of lending in
Campania has increased relative to the national average, from an
average cost of 1.25 percent more to 1.42 percent. According to
a Banca d'Italia survey conducted in October 2008, 38 percent of
businesses in south said they face increasing debt. Lending to
households has also fallen.




5. (U) As host to major attractions such as Pompeii, Capri,
Ischia and the Amalfi Coast, Campania has traditionally relied
heavily on tourism for income (ref B). Although the bank's
report did not single out this sector, other sources report that
it has been among the hardest hit by the global crisis. The
number of visitors to Naples dropped by 12 percent in May 2009
compared to the previous year (May is traditionally one of the
city's busiest months for tourism). The number of visits to
Capri is down 43 percent for the first five months of 2009
compared to last year. These figures represent the biggest
decline in the tourism sector since 1986. Constanzo Iannotti
Pecci, who follows tourism for the Campania Industrialists
Federation, told us in mid-June that hotels in the region are
"practically empty." Despite the recession, the cruise ship
business in Campania grew by 7.4 percent in 2008. Few cruise
ship visitors spend a significant amount of time or money in the
region, though.




6. (U) Several of the speakers at the presentation of Banca
d'Italia's report openly blamed local and national politicians
for the disastrous state of the economy. Several complained
that the dilapidated infrastructure, poor education and
corruption have contributed to Campania's downward spiral. A
professor emeritus of philosophy and former politician added
that cultural factors and the prevalence of organized crime have
also played major roles.




7. (SBU) Perhaps the only business that is profiting in
Campania these days is the Camorra, the local Mafia. Naples
anti-Mafia prosecutor Rosario Cantelmo told us June 18 that
Camorra clans are flush with cash, and have expanded loan
sharking as people are unable to obtain credit from banks. He
added that the drug trade (controlled by organized crime)
continues to be a growth industry in Naples, despite the
recession. Cantelmo believes that the Camorra is allowing many
local businesses to make lower extortion payments, but that the
mob has actually increased the total number of victims, hitting
up even the smallest of entrepreneurs.




8. (SBU) Comment: While northern and central Italy hope for
economic "recovery," this word would hardly seem apt to Campania
residents who have seen a steady erosion of their quality of
life over the last fifteen years. In fact, the region's economy
grew by only one percent this decade before the 2008 global
financial crisis. A visitor to Naples could easily think he had
accidentally taken the wrong flight and landed in the Third
World, given the city's crumbling infrastructure and chaotic
conditions. Few investors, either foreign or domestic, come to
open businesses in the region. The obstacles -- bad government,
pervasive organized crime, poor transportation connections,
roads marked by potholes, an overburdened legal system -- are
seen as insurmountable. Campania is one of the EU's poorest
regions, and only the political will to take on corruption,
inefficiency and organized crime will help its residents climb
out of the vicious cycle of poverty.
TRUHN