TERM PAPER

Economy of Foreign Countries

Topic: The internal economic problems in Italy.

Student: Dan Rezik

Group: International economic relations 19-1(e)
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Dnipro, 2021

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 CONTENTS
INTRODUCTION
CHAPTER 1. MAIN PROBLEMS OF ITALY. ECONOMICAL ASPECT
1.1 Italy in Eurozone. Difficulties with finding the way out of the crisis
1.2. SWOT analysis, reforms of M. Renzi.
1.3. General problems in the socio-economic segment.

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 INTRODUCTION
In University, we were having discussions about the economic situation of
different countries. As I thought, Italy has strong position in economical segment, but I
was wrong. So, the background of me doing this work – to expand my knowledge in
economy of foreign countries.
I am targeting to understand that the country may have many problems: internal
and external, but if the government makes wise decisions – any problem may be solved.
I will try to understand the background of the problems that Italy has and will try to find
the solution of solving them. This work, in my opinion, should be interesting and useful,
because when you do have intimate knowledge in solving internal problems of one
country, you will have enough experience to be able to solve similar problems in other
countries. Now let’s preview Italy’s economical processes.
Having the financial crisis in 2018, Italy was facing the difficulty with starting off
the growth, the country was way behind other ones in Europe. Because of inequality of
development and economic situation, Italy is called “a sick man in Europe”. It’s
exposed economy is an enormous risk to the European Unions’ reputation and status of
“the most stable Union”.
Nevertheless, many unpleasant figures are warning specialists: Italy's fragility
may increase. The country's leadership has recently lowered its annual growth
estimation from 1% to 0.2%. Eurostat lately confirmed that Italy's nationwide debt has
abandoned its downward trend and expanded by about 1% in 2018, reaching 132% of
gross domestic product (GDP). Overall, despite Italy’s debt is the biggest in European
Union, and the paltry growth predicted for this year, is expected to grow.

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 CHAPTER 1. MAIN PROBLEMS OF ITALY. ECONOMICAL ASPECT
1.1 Italy in Eurozone. Difficulties with finding the way out of the crisis
The national economy of Italy, the third largest in the eurozone and the fourth in
The European Union, for a long time (compared to other countries, especially the
Federal Republic of Germany) overcomes the consequences of the global crisis of 2008-
2009. We can say that the exit from it was unprecedentedly delayed. This is largely due
to the accumulated earlier problems: if the average annual dynamics of German GDP in
1999-2007 was + 1.7%, in 2008-2013 - + 0.7%, France - +2.2% and + 0.2%, Great
Britain - + 3.1% and -2%, in Italy - only + 1.5% and -1.5% (Togoh, 2020).
Italian GDP fell 2.4% in 2012 and another 1.9% in 2013. In 2014, contrary to
predictions, the recession continued: in the first quarter economy contracted by 1.2%, in
the second and third by 0.3%, and in the fourth by 0,5%. In absolute terms, the size of
gross domestic product in 2014 was lower than in 2008 ($2,071 billion versus $2,127
billion) (Conte, 2020).
The Italian economy has long been in need of wide-ranging reforms. This is
evidenced, among other things, by data from the World Bank: according to famous
Doing Business Report, Italy ranks a relatively modest 56th place among the rest of the
world. A relatively modest 56th place out of 189 countries surveyed (Britain 8th,
Germany 14th, and France 31st). In terms of some indicators Italy is even worse: 147th
in sales of contracts, 141st in terms of tax payments, building permits - 116th, In terms
of connections to the electricity grid - 102nd, in terms of loans - 89th.
This is confirmed by the World Economic Forum (WEF) study: after ranking
43rd among the 144 countries surveyed in 2011-2012, in 2014-2015 It has fallen to 49th
place in 2014-2015. Its national economy lags significantly behind the innovation-
oriented economies in other developed countries. In this group, Italy is inferior in most
of the most important indicators (with the exception of market size, infrastructure,
business sophistication, health care and secondary education), especially in terms of the
development of institutions, financial markets, labor market efficiency, and the quality
of the macroeconomic environment. This lag is especially noticeable in comparison
with other leading European Union countries - Germany, Great Britain and France.

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 Among the factors hindering business development in Italy, WEF experts
mention government bureaucracy, the level of tax rates and tax regulation mechanisms,
access to financial resources and market regulation, corruption and political instability.
One of the most complex structural problems of the Italian economy, along with
the high level of government regulation and the insufficient share of the size of the
public debt - more than 2 trillion euro, which accounts for 16.3% of the eurozone's total
debt. It largely determines to a large extent the overall solvency of the EMU. In the
period from 2009 to 2014, the share of public debt in Italy's GDP rose from 106.1 to
132.6% (see Figure 1.1), which not only because of the substantial budget deficit
(which, however, in the last two years has begun to meet the Maastricht criteria), but
also decline in the absolute size of GDP.

Figure 1.1. Ratio of public debt to Italian GDP, %

(Italy - Eurostat, 2019)
This limits the government's ability to raise additional funds (leading to a further
increase in debt) to finance necessary economic programs and implement reforms. Until
2014, the cost of refinancing Italy's public debt was constantly rising. The situation
changed with M. Renzi's accession to power: the markets reacted with cautious
optimism, Italian government securities became cheaper due to lower speculative
markups (risk reduction), which made it possible for the government to save 9 billion
euros in 2014 on their servicing.

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 The Italian economy is export-oriented. In recent In recent years, exports have
been the only motor that has provided the main impetus for economic growth. In 2012,
its growth was 2.1%. In addition to a significant decline in imports (by 8%). imports (by
8%), for the first time in many years, a trade surplus of almost 10 billion euros was
achieved. for the first time in many years, the trade balance reached a surplus of nearly
10 billion euros. In 2013, exports of goods remained almost level and imports decreased
again by 5.5%, resulting in an increase in the surplus to €30.4 billion (Eurostat, 2020) In
2014, exports grew by 3.3%, and imports 2.7%, which increased the foreign trade asset
(see Figure 1.2)

Figure 1.2. Balance of foreign trade in Italy, million euros

(Italy Balance of Trade | 2010-2014 Data | Calendar | Historical, 2020)
1.2. SWOT analysis, reforms of M. Renzi.
The German government agency GTAI has compiled a SWOT analysis of the
Italian economy, presented in the Table 1.1.
Table 1.1.
SWOT analysis of Italian economy
Strengths: Weaknesses:
1. Favorable geographic location; 1. Bureaucracy and a slow
2. Availability of small innovative judicial system;
enterprises with a high degree of 2. Extremely high level of government
flexibility; debt;

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 Table 1.1. Continued
3. Relatively even of industrial 3. Loss of competitiveness
infrastructure across the country; due to lower labor productivity;
4. The presence of small innovative 4. The gap between the level of
enterprises with a high degree of development
flexibility infrastructure; North and South of the country;
5. Availability of high-skilled labor 5.High tax burden and
force; cost of energy.
6. Functioning industrial clusters.
Opportunities/chances: Dangers/Risks:
1. Public policy, aimed at reforms and 1. High interest rates on loans and
stimulating economic growth; limited access to the capital market;
2. Striving to reduce the tax burden 2. The need for fiscal austerity, which
reduction of the tax burden and de- inhibits public investments;
bureaucratization; 3. Instability in the political sphere;
3. Improved efficiency of the judicial 4. A weakened banking sector;
system as a result of the ongoing 5. Shadow economy.
reforms.
4. Use of EU funds for
infrastructure projects, including those in
the south of the country;
5. Creating incentives for start-ups and
recruitment of young employees
In May 2014, the government introduced an income tax reduction for people with
minimal income. Along with other factors, this should have a positive effect on the
growth of private consumption. Government spending cannot support this positive
trend: consumption on the part of the state due to austerity has fallen sharply.
Among other things, there is a freeze on salaries in the public sector until 2017.
Public investment in infrastructure projects decreased by 40% from 2008 to 2012.
Private investment in housing construction fell by 30% from 2008 to 2013 (Eurostat,
2020) At the same time, investors responded positively to the introduction of tax
incentives for equipment repairs and energy efficiency, by increasing spending on
modernization of production.
М. Renzi, who took over the Italian government in February 2014, declared
willingness to carry out at least one major reform every month. Already in March, the
most pressing issue for the economy was put on the agenda of labor market
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liberalization. In April, tax and fee reductions were on the agenda. Then in April, it was
announced that improving the electoral law and the reform of Parliament reform was
announced as a necessary prerequisite for strengthening the stability of the executive
power (the government) and its ability to carry out economic reforms. However, by the
end of the summer these far-reaching plans had not realized. Therefore, in early
September 2014, a "plan for a thousand days" was declared, to which a specially created
Internet portal was dedicated (passodopopasso.italia.it - "step by step"), through which
the progress of its implementation increases the transparency of government structures.
We can state that M. Renzi and his team initiated many different reforms and
measures, but the most of the declared reforms have not yet been implemented into
practice. One of the most important among the unresolved challenges remains the
insufficient the lack of competitiveness of Italian goods and services, which is due, on
the one hand, to the high level of labor costs and, on the other hand, the relatively low
labor productivity. It will not be easy to implement The Stability Pact, which was
adopted, and which provides for reductions in government spending, will not be easy to
implement. Rome has already come under critical pressure from Brussels, demanding a
reduction of 6.3 billion euros.
1.3. General problems in the socio-economic segment.
The problems of modern Europe, highlighted by the current crisis, can be clearly
seen in the development of Italy. At the same time the processes taking place in Italy
reflect as in a mirror many important issues for modern Ukraine. In Italian "case" one
can see more distinctly the long-term crisis tendencies in development of representative
democracy, and difficulties in social regulation and maintenance of social state, which
European countries faced during the crisis, and the effects of regional disproportions on
social and economic development. The reason for the manifestation of this
"demonstration effect" is the unique fusion in the mass consciousness of Italians of
modernizing impulses and archaic archetypes that conditioned the tectonic political
shifts that took place in the country throughout the twentieth century.
Today's Italy faces the challenges of civic and national consolidation amid a
marked rise in Eurosceptic sentiment. Italy is an active participant in the European

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concert of nations, one of the countries which stood at the origins of European
integration. Unconditional supporters of European Traditionally Italians have viewed
Europe as a the motor of socio-economic and political modernization and national
consolidation around development priorities. Today, however, both rank-and-file voters,
and representatives of the intellectual community, the majority of them are traditionally
critical and even highly critical of their own political class, they believe that the
problem of national consolidation and the European "motor" is not working for the
solution.
To some extent, Italy remains a nation without a unifying civic identity. It is true
that not everyone shares this opinion; the importance of self-identification with the
country in the mass consciousness has traditionally been and remains high. But today its
content is blurred: the symbols that embody cultural heritage are deteriorating, and there
are no new universally recognized cultural inheritance and, most importantly, there are
no mechanisms in place to renew public life and to creatively replenish the cultural
wealth.
The country has become a museum, besieged by crowds of millions of tourists
from all over the world. And it is not only a museum of the cultural heritage of antiquity
and Renaissance, but also a kind of museum of the political processes and ideological
confrontations of the last two centuries. There has been a kind of "normalization" of the
political process: Italy became similar to its European neighbors, but with a "correction"
for corruption and an extremely low prestige of the political class, and this can be
considered a direct consequence of the Europeanization of Italian public life.
Such shifts in mass consciousness can be observed not only in Italy: they reflect,
on the one hand, a crisis in the development of European institutions, representative
democracy, disillusionment with politics and politicians. In Italy of the times of
Republic, the ideological and political choice was an integral part of the self-
identification of large groups of electorate - supporters of Catholic or socialist
subcultures. The blurring of this traditional distinction and the loss of the significance of
ideological and political reference points in the formation of civic identity, there has
been no adequate compensation for it. Consumer society has stimulated the growth of

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individualistic attitudes and continues to exacerbate the dissociation and social
atomization.
1.4 Growth of regional disparity in Italy
Large-scale regional imbalances have characterized the macroeconomic situation
in Italy for many years, in which the post-industrial north, which has reached the level
of Europe's leading states, and the industrial-agrarian south, which has a rather low level
of development and is unable to solve its socio-economic problems, coexist. Currently
35% of the population lives in the south, but only one fourth of Italy's GDP is produced
there.
The surface reasons are lower labor productivity and low participation of the
population in economic activities. These factors are due to the fact that undoubtedly,
first of all, a prominent role was played by the differences in the national mentality of
the inhabitants of the regions, formed over many centuries. Corruption and organized
crime are more widespread in the south, which largely determines the unattractiveness
of the region for investment and low ratings on the ease of doing business. However,
when explaining the emergence of disparities, one cannot limit oneself only to this
thesis. Of particular interest is the geographical factor. As we know, the first country to
be affected by the industrial revolution was England, and by the end of the XIX century,
all the leading powers, which took the path of industrialization, were to the north of
Italy. It is therefore understandable that, other things being equal, entrepreneurs
preferred to locate production closer to major industrial centers, i.e. in the north of Italy.
The south was hit harder by the crisis than the north, due to its lower
competitiveness and small attractiveness to investors. With a number of industrial
enterprises leaving the market, the south faced the threat of deindustrialization. Thus, as
a result of the crisis, average per capita income has fallen in all Italian regions, but the
size of this fall differs markedly in the North and the South. Despite the fact that the
south, as mentioned above, produces only about 25% of Italian GDP, it accounts for
36% of the total losses during the crisis.
While in the North the average annual rate of GDP decline over the period 2008-
2011 was 1%, in the South it was 1.7%. (Travaglini, 2010)

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 Growing unemployment also contributes to further deepening disparities between
regions. In Italy, the unemployment rate in 2012 reached a record 11.6%, and it is
particularly alarming among young people - 39%. Since the start of the crisis, more than
300,000 people in the south have lost their jobs, 60% of the total number of people out
of work. In 2012, the unemployment rate was 8% in the North and 18.3% in the South,
comparable in principle to the unemployment rate of Germany, one of the most stable
countries in the Eurozone, where it is 7%. Unfortunately, the south has to be compared
to less prosperous countries, especially when it comes to youth unemployment, which
reaches 46.7% and 56.1% for men and women, respectively. (Italy Employment Change
| 2009-2016 Data | Chart, 2015)
As a result, despite 20 years of extensive programs and initiatives aimed at
eliminating disparities between regions, the gap is not diminishing, giving rise to more
and more pessimistic thoughts about the future of the south of Italy.
Unfortunately, the many programs adopted to bring the levels of the south and the
north closer together have usually ended in failure, and for 40 years the state's leaders
have been unable to achieve positive results in this direction. To solve this problem, it is
necessary to focus on the development of the social sphere, improving the quality of
public services, health care and, of course, education.

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 CHAPTER 2. INTERNAL PROBLEMS OF ITALY.
2.1. Public sentiments in Italy in 2010s
The self-perception of Italians today is dominated by pessimistic sentiments. In
terms of subjective feelings of well-being, Italy is, according to “Gallup” polls, on a par
with Greece, Latvia and some of the poorest countries in Africa: only about one in ten
of Italy’s surveyed citizens believes that on three or more indicators of well-being the
country may be considered as a prosperous. The explanation for such deep
dissatisfaction is not only the economic downturn and falling living standards: the
poorer countries of Latin America show a markedly higher level of positive perceptions
of the world. The point seems to be pessimistic vision of the long-term prospects for
national development.
This is clearly demonstrated by the migration balance in Italy. According to
estimates, there are about 4.7 million immigrants living in Italy, not only immigrants
from other cultures (slightly more than 1 million), but also newcomers from the EU.
And at the same time, about 3.5 million Italian citizens today are outside Italy. (Italy
Population | 1980-2020 Data | Historical | Chart | News, 2020)
Young, motivated people are leaving to work in the in the information economy
and the service sector in other countries: in Italy there are few opportunities to find
work that corresponds to professional qualifications. In Italy there are few opportunities
to find a job that corresponds to their professional qualifications. They do not sever ties
with their country, but the attractive features of Italian daily life, the notorious “dolce
vita” and short friendships do not compensate the need for creative self-fulfillment, and
educated young people do not want to work in Italy.
They leave not only for traditional Italian countries of emigration (the United
States, Great Britain, and France), but also for Latin America, and to other corners of
the world. The reforms of the 40-year-old Prime Minister М. Renzi are oriented toward
the creation of new opportunities for youth on the labor market. But in today's Italy, the
capacity of the knowledge economy is still very small, and the task of achieving stable
growth in this sphere has never been more urgent. The task of achieving stable growth
in this sphere is more relevant than ever.

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 Figure 2.1. Italy youth unemployment rate (15-24), %
(Italy - Eurostat, 2020)
Generational ruptures in the social fabric are exacerbated by the uncertain
prospects of the welfare state, a problem faced by young people entering independent
life: "old people" have good pensions, the middle generation has secure jobs, while
young people struggle to get temporary contracts that meet neither their qualifications
nor their life expectations, or they leave (watch Figure 2.1.). There are also a lot of
simply unmotivated young people who have already resigned themselves to the role of
the "lost generation”. The problem of poverty, which seemed to have been resolved at
the end of the last century, has also returned to the public discourse, notable part of the
population is not making ends meet.
These gaps are aggravated by unresolved psychological complexes related to the
lack of understanding in the mass consciousness of the Fascist legacy, when the
majority of the population accepted Fascism or tolerated the attitudes imposed by the
Mussolini regime. In many respects, this is where the phenomenon of "Berlusconism,"
which has proven to be enduring in today's Italy, comes from. But for today's younger
generation, the Fascist period is already a distant history, and its "lessons" have not been
learned. For the 50-60-year-old generation the difficult period of history to comprehend
is the "lead" years (anni di piombo), the "strategy of tension" (strategia della tensione)
and the escalation of political violence of the 1970s and early 1980s, which deliberately
worked to undermine constitutional order and to prevent leftist forces from coming to
power. At that time, these attacks were repulsed.
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 The long-term result of these processes was the collapse of the existing political
order and radical changes in the political landscape in the 1990s and the end of the First
Republic. Gradually, this positive mindset changed, the balance of costs and gains
became situational. Authoritative Italian researchers believe that a milestone in the
evaluation of EU policies in "Old Europe" countries was the early 1990s, the creation of
the eurozone and the Maastricht agreements.
Hopes for a rapid narrowing of gaps in living standards and quality of life did not
and Eurosceptic sentiments began to grow, as evidenced by the results of the vote on the
European constitution. The introduction of the same "rules of the game" for very
heterogeneous national economies pushed the integration strategy, despite the nominal
rapprochement, to a "policy of leveling the playing field" by means of fierce
competition.
2.2. Specifics of immigration processes in Italy
Italy began to attract immigrants much later than other EU member states. It is
one of those countries that, because of their weak economic development until the early
1980s, they themselves were suppliers of migrants to the more developed European
states, interested in in attracting a labor force to compensate the decline of the native
population and economic growth. Most of the flow came from poorer agricultural areas
of southern Italy. But beginning in the late 1970s, emigration processes slowed down
and the inflow of immigrants from third countries began to grow rapidly. Italian society
was not ready for such a dramatic transition from emigration to immigration.
In the 1980s, the main reason for the increase in the number of immigrants in
Italy were the so-called “push factors” related to the complex socio-economic
conditions and political turmoil in Third World countries, which were the main
suppliers of migrants to Italy.
Unlike France and Britain, Italy was not one of the leading colonial powers, but
nevertheless held significant territories in Equatorial Africa (Ethiopia, Eritrea, Italian
Somalia), from which migration originally took place. But in the 1990s the influence of
the "pull factors" were: the economic boom in Italy, the rise of the shadow economy and
the labor shortage in low-prestige, labor-intensive industries such as construction and

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agriculture. The acceleration of the growth rate of the migrant population has been
facilitated by the existence of a large number of labor-intensive industries with the large
number of labor-intensive industries, as well as the lack, until 1986, of immigration
laws regulating stays in the country. Another reason for the growing flow of immigrants
is the geographic position of the Apennine Peninsula - the geographic proximity to
African continent and the Balkan countries.
Due to the low birth rate and the high proportion of people over the age of 70,
Italy's need for new labor migrants is constantly growing. At the same time the special
approach of the authorities to migration issues is linked to internal security, so Italian
immigration laws are mostly restrictive, even repressive. These two circumstances
constantly contradict each other and make it difficult to solve the problems of growing
migration.
In Italy the main motive for immigration is employment. The share of foreign
labor in the working-age population of the country is very high. More than 2/3 of all
foreign citizens are citizens of third countries outside the European Union.
Table 1.2
Proportion of foreign citizens in the population of Italy and a number of EU
countries by type of citizenship and countries of origin at the beginning of 2013, %
EU member Citizens of Citizens of Individuals born in Individuals,
states other EU third-country other countries born in third
member nationals - EU member states countries
states
Italy 2,2 5,2 3,0 6,5
Germany 3,7 5,7 4,4 8,0
France 2,1 4,1 3,2 8,3
Greece 1,8 6,0 2,8 8,3
Spain 4,4 6,4 4,5 8,7
Cyprus 13,0 6,6 13,1 10,0
UK 3,8 3,9 4,2 8,1
Source: (Italy - Eurostat, 2020)
The collapse of the socialist system and the expansion of the EU into Central and
Eastern Europe led to an increased flow of skilled workers with secondary, higher and
vocational education, mainly from Romania and Bulgaria, into Italy. The introduction

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of the "Blue Card" in 2009 to attract diploma holders to the EU has also contributed to
this. The presence of a large group of educated migrants from European countries with
similar cultural and religious values is an important difference between migration
processes in Italy in comparison with other EU countries, especially the former colonial
countries.
The growth in the number of sufficiently educated migrant workers was related to
shortage of local skilled labor: in the early 2000s 59.9% of the native population had a
low level of education (incomplete secondary education), while for foreign workers the
figure was 35.9%. In 2010 almost 50% of foreign migrants residing in Italy had
secondary education (the figure for the native population was 47.2%).
Despite their relatively high level of education, migrants tend to work in non-
prestigious, labor-intensive and low-paying industries and in fact, they are at the very
bottom of the social pyramid, even though they have legal residence status. Employers
consider migrants "a complementary element, not a substitute for the local workforce,
because they perform work unclaimed by the native population."
The factors that attract migrants are related to the continuing unevenness of
regional and sectoral development in Italy. At one time this uneven development was
the reason for mass migration from southern Italy to the more developed northern part
of the country. That is why migration processes in different regions of Italy have their
own peculiarities, from which one may conclude that the Italian migration model has
not yet been fully formed.
Another important feature of this model must be highlighted: the model is
multinational in the context of a heterogeneous and ethnically heterogeneous society.
Approximately 50% of the total number of immigrants are citizens of eight countries (in
Italy there are 150 different ethnic groups), while in other European countries (such as
France, Germany, Italy, and Portugal) half of the migration flow comes from two or
three states, often from former colonies. The Italian model is thought of as ethnic
integration, taking into account the socio-cultural specificity of different ethnic groups
and migrants' inclusion into a unified Italian nation based on common goals and values,
but while preserving cultural differences.

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 The heterogeneity of the immigrant population reduces the prospects for the
formation of closed ethnic communities, which already exist in a number of EU
countries. Despite the growing number of Muslim migrants, they do not represent the
dominant part of the foreign population. The fragmentation of communities and the
presence of many Muslim organizations that do not interact with each other make it
difficult to integrate Muslims into the host society.
2.3. The Italian Mafia phenomenon.
The phenomenon of the Italian Mafia is known to many people at least through
numerous classic works of fiction, from the movies “The Godfather” and “The Mafia
Kills in Summer” to the books “Gomorrah” and “Malavita”. In these works, regardless
of the accuracy of the plot or the accuracy of the characters, an important point is often
taken out of the equation: the almost inevitable imprisonment without parole for
members of criminal gangs.
Actually, the scale of the spread of the mafia on Italian territory was so great that
in 1991, under the Andreotti government, the Public Security Department of the
Ministry of Internal Affairs of the Italian Republic was forced to establish the Anti-
Mafia Department (La Direzione Investigativa Antimafia, literally Investigative
Division Antimafia). In constant collaboration with other police agencies it worked to
uncover criminal connections, identify funding channels, and search for leaders and
members of criminal networks and their accomplices. The mastermind of the "Anti-
Mafia" decree law, Giovanni Falcone, was murdered shortly after its adoption, along
with his wife, by the "Cosa Nostra" assassins.
The state body responsible for the execution of detentions and punishments was
founded at the same time and became known as the "Corps of Prison Police". This
police force reports to the Directorate of Prisons of the Ministry of Justice, and has
recently been placed under the control of the Anti-Mafia Directorate, with which the
police officers of the Penitentiary Police Corps work together. It performs penitentiary
functions: ensuring order and security in places of detention, escorting, prisoner
rehabilitation and other duties related to penitentiary law, such as ensuring the
functioning of pre-trial detention facilities. The penitentiary special unit employs

17
approximately 46,000 people with the status of civil servants. A penitentiary police
agent, on condition of anonymity (name known to the editorial staff), told Samizdat
how the police now fight the heads and associates of Mafia clans, how "special regime"
prisons function and why Italy will forever be a "Mafia country".
It is said that in Italy, in spite of all the established structures, Mafia groups are
still strong and dangerous. The best known are the Sicilian Cosa Nostra, the Neapolitan
Camorra and the Ndrageta of Calabria. If twenty years ago the problem of the mafia
affected mainly the southern regions and Sicily, but now the clans are expanding into
the prosperous Northern Italy, other European countries and the United States, where
they are trying to diversify their investments, recycling the huge profits from illicit drug
and arms trafficking. The criminal "powers" of the mafia extend to the economy,
politics and public life. Their sphere of activity is well known to many. These are
extortion, racketeering, garbage collection, construction of toll roads, tribute of ten
percent of profits from various shopping complexes and so on. Most businessmen prefer
to "stay out of trouble" and pay tribute to the mafia. For those who do not agree, the
standard set of "arguments" is prepared: threats against family members, burning cars,
beatings, torture.
A distinctive feature of the Italian Mafia is its total penetration into the daily life
of Italians. In Naples, in every neighborhood on the walls of residential buildings you
can see warning red "Camorra" inscriptions. What happens in such neighborhoods is
well known to the police. No trattoria or tobacceria would operate properly without
kickbacks to the boss "in charge" of the area. And any bar will provide him not only
with a morning espresso and cornetto, but also a full lunch with antipasti, first course,
dessert and the best wine of the Campania. Needless to say, they are known by sight,
both by the guards and by the citizens.
However, the official statistics provided by the Anti-Corruption Directorate show
that the agency has been more or less successful. For example, from 1991 to 2011,
property (villas, houses, objects of art and so on) worth more than two billion euros was
confiscated from mafia organizations. And this figure is constantly growing. In the
country, there are about ten prisons that accept inmates with "maximum risk" (about

18
7,000 of them) who have committed particularly grave crimes. These include setting up
a mafia clan and running an illegal business. All police officers working in prisons
under this regime undergo a medical examination and a psychological test every few
months. Some may be temporarily suspended, but these cases are rare.
2.4. An example of internal mismanagement: Coronavirus
In a short time, Italy has gone from diagnosing the first case of coronavirus
(January 31, 2020 among Chinese tourists in Rome) and infection (February 21, 2020)
to the critical situation: a month later Italy is already "overtaking" China in the number
of deaths from COVID-19. The pandemic, especially in its initial stages, once again
demonstrated the peculiarities of the administrative-territorial division of the country.
Italy is a unitary state, but the regional authorities have great autonomy.
Until now the Italian lands are a "patchwork quilt" in economic, political and
cultural dimensions. At the beginning of the epidemic, each region of Italy invented its
own "recipe" for controlling the coronavirus: somewhere the quarantine measures were
at once tough enough, somewhere the local government did not take the threat seriously.
For example, the mayor of Florence announced a "museum weekend" as an anti-
coronavirus measure, offering free admission for everyone to the museums subordinate
to the city. "I invite all Florentines and tourists not to close their homes: we have
concerts, theater performances, and exhibitions in Florence. We will not let this virus
change our habits", commented T. Sachi, cultural advisor. At the same time, various
cultural initiatives under the auspices of the Ministry of Culture were cancelled.
The experience of the two neighboring regions of northern Italy, Lombardy and
Veneto is demonstrating the point of mismanagement. In these regions, the first cases
were recorded almost simultaneously, but the regional authorities took different paths
and obtained different results. The main fundamental difference was in the way the tests
were carried out. In Veneto, mass screening of the population, including those without
symptoms, was carried out from the very beginning, after which asymptomatic carriers
and those with the disease were placed under strict quarantine. As a result, the number
of those infected in Veneto is now four times lower than in Lombardy.

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 Economists have yet to assess the damage of the epidemic to the Italian economy.
According to experts' preliminary estimates, Italy's GDP will fall by 8.3% by the end of
2020; the worst forecast is a fall of more than 10% (Togoh, 2020). A recession of such
magnitude combined with a national debt that could reach 150% (Chapter 1, 1.1),
increasing unemployment and decreasing purchasing power, would have not only
serious economic consequences, but also political and social.
An important political effect - the Pandemics became a powerful factor in
national cohesion (at least for a while). After the introduction of unified measures for
the whole country, Italian society united in the face of a common threat - this was
reflected in various social actions ("musical evenings" on balconies and the singing of
the predominantly national anthem).
The consequences of the coronavirus pandemic are not only material, but also
political and ideological. On the one hand, political determinants and divisions take a
back seat to the threat to human beings (in the national context). On the other hand, at
the global level coronavirus is a test of solidarity and a test of partnership. In addition,
the de facto coronavirus has forced states to recognize that they cannot fulfill their
primary constitutional obligation to guarantee citizens' safety. Unpreparedness for a new
type of global challenge - a pandemic exposed countries' aspirations to ensure the most
basic national interest: security. Primarily, this was reflected in fencing off the world,
closing borders, and a general reluctance to uphold universal values, especially in the
initial stage.

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 CONCLUSIONS
During the study, analyze of Italy’s internal problems was done: social and
economic aspects were covered. A deep examine into the problems was made.
All in all, there are various problems in the system: corruption, huge debts which
are growing constantly, internal mismanagement. In the study the job was done not only
to clarify problems, but to make some solutions of the way they may be handled.
If government won’t change the way they manage the country, problems will
overlap and make them even worse. In case of constant reformation aimed at social and
economic aspects, crime and taxes, taking into account that Italy is not a third-world
country and it has huge potential, it will become one of the most attractive to make
business and invest in countries. It is to be hoped that Italy will be able to make fruitful
use the resources of localism, to stimulate points of growth at the territorial level. The
current model of the nation state can be transformed into a multilevel model of
governance, and in this sense the resources of Italian cities and regions can demonstrate
new approaches to the organization of management development. On the political
agenda is the search for ways and adequate mechanisms of correlation between national
and local models to correlate national, local and macro-regional (European) integration
processes, and the Italian experience shows this with all the clarity.

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