Seb Country Analysis 2006 Italy

Italy SEB MERCHANT BANKING – COUNTRY RISK ANALYSIS

November 30,2006

Analyst: Rolf Danielsen. Tel : +46 8 763 83 92. E-mail : [email protected]

In the 1980s, many people were almost alarmed when statistics showed Italy passing Britan in economic power and income per capita. Since then the table has changed and Europe’s former sick man – or, perhaps, the lady – has become its economic power house, while Italy has become its unreformed anemic lagger. One rating agency recently downgraded Italy to single-A level. That also happened to Britain in the early 1980s. Is the recent downgrade a bad omen or should we take comfort in the hope that history will once again repeat itself?

Country Risk Analysis =====qÜÉ=ÉÅçåçãó=áë=~ää=Äìí=ëí~ääáåÖK==páåÅÉ=íÜÉ=ÄÉÖáååáåÖ=çÑ=íÜÉ=ÇÉÅ~ÇÉ=fí~äó=Ü~ë=ÖçåÉ= íÜêçìÖÜ=íÜêÉÉ=íÉÅÜåáÅ~ä=êÉÅÉëëáçåë=~åÇ=~îÉê~ÖÉ=ÖêçïíÜ=Ü~ë=ÇêçééÉÇ=íç=äÉëë=íÜ~å=MIS= éÉêÅÉåí=Ñêçã=~å=~îÉê~ÖÉ=äÉîÉä=çÑ=O=éÉêÅÉåí=ÇìêáåÖ=ãçëí=çÑ=íÜÉ=NVVMëK=tÜáäÉ=íÜÉ= ÉñíÉêå~ä=ÉåîáêçåãÉåí=íÜêçìÖÜ=íÜÉ=É~êäó=é~êí=çÑ=íÜÉ=ä~íÉëí=éÉêáçÇ=ï~ë=ÇáÑÑáÅìäíI=fí~äó= Ü~ë=ÄÉÉå=ä~íÉ=áå=Å~íÅÜáåÖ=ìé=ïáíÜ=íÜÉ=ÖäçÄ~ä=Äççã=çÑ=êÉÅÉåí=óÉ~êëI=~äíÜçìÖÜ=íÜáë=óÉ~ê= ëÜçìäÇ=ëÜçï=~=ÇÉÅÉåí=êÉÅçîÉêóK=^å~äóëÉë=çÑ=íÜÉ=éççê=éÉêÑçêã~åÅÉ=Ü~îÉ=ÑçÅìëÉÇ=çå= ëìééäó=ëáÇÉ=Ñ~ÅíçêëK=fí=Ü~ë=ÄÉÉå=éçáåíÉÇ=çìí=íÜ~í=ïÜáäÉ=ÄçíÜ=ÑáëÅ~ä=~åÇ=ãçåÉí~êó= éçäáÅáÉë=Ü~îÉ=ÄÉÉå=çîÉê~ää=ëìééçêíáîÉ=çÑ=ÅçåíáåìÉÇ=ÖêçïíÜX=fí~äá~å=éêçÇìÅÉêë=Ü~îÉ= äçëí=ÅçãéÉíáíáîÉåÉëë=~ë=~=êÉëìäí=çÑ=ïÉ~â=JJ=çê=ÉîÉå=åÉÖ~íáîÉ=JJ=ÖêçïíÜ=áå=çîÉê~ää=Ñ~Åíçê= éêçÇìÅíáîáíóI=áåÅäìÇáåÖ=éêçÇìÅíáîáíó=çÑ=ä~ÄçêK==tÜáäÉ=íÜÉ=éçëáíáîÉ=ëáÇÉ=çÑ=íÜ~í=Ü~ë= ÄÉÉå=êáëáåÖ=ÉãéäçóãÉåí=~åÇ=ÉîÉå=êÉÇìÅíáçå=çÑ=ìåÉãéäçóãÉåíI=íÜÉ=åÉÖ~íáîÉ=ëáÇÉ=áë= íÜÉ=äáâÉäáÜççÇ=íÜáë=áåÇáÅ~íÉë=~=ëíêìÅíìê~ä=ã~ä~áëÉ=çÑ=íÜÉ=fí~äá~å=ÉÅçåçãó=íÜ~í=åÉÉÇë=íç= ÄÉ=ÑáñÉÇ=Ñçê=íÜÉ=Åçìåíêó=íç=ã~å~ÖÉ=çíÜÉê=ãçìåíáåÖ=ÅÜ~ääÉåÖÉëI=áåÅäìÇáåÖ=~=ÇáÑÑáÅìäí= ÑáëÅ~ä=éçëáíáçåK== = `êáíáÅë=Å~å=éçáåí=íç=~=åìãÄÉê=çÑ=ëíêìÅíìê~ä=êáÖáÇáíáÉë=Ñêçã=ÜÉ~îó=ëí~íÉ= áåíÉêîÉåíáçå=áå=âÉó=éêçÇìÅí=ã~êâÉíëI=áåÅäìÇáåÖ=íÜÉ=íê~åëéçêí=~åÇ=ÉåÉêÖó=ëÉÅíçêëI= ìíáäáíáÉë=~åÇ=Ä~åâëI=ïÜáäÉ=ÜáÖÜ=ã~êÖáå~ä=í~ñÉë=ÇêáîÉ=ÄìëáåÉëë=~ÅíáîáíáÉë=áåíç=íÜÉ=Ää~Åâ= ÉÅçåçãó=~åÇ=ÇÉÉé=êççíÉÇ=îÉëíÉÇ=áåíÉêÉëíë=áå=î~êáçìë=ëÉêîáÅÉ=ëÉÅíçêë=ã~áåí~áå=~å= çìíÇ~íÉÇ=ëóëíÉã=çÑ=ÇÉí~áäÉÇ=êÉÖìä~íáçåë=çå=~åóíÜáåÖ=Ñêçã=í~ñá=ÇêáîáåÖ=íç=äÉÖ~ä= Åçåëìäí~åÅóK=qÜÉ=éêÉîáçìë=ÖçîÉêåãÉåí=íççâ=ëíÉéë=íç=äáÄÉê~äáòÉ=íÜÉ=ä~Äçê=ã~êâÉíI=Ñçê= Éñ~ãéäÉ=Äó=áåíêçÇìÅáåÖ=~=ãçêÉ=ÅçãéêÉÜÉåëáîÉ=ìåÉãéäçóãÉåí=áåëìê~åÅÉ=ëóëíÉã= ïÜáÅÜ=ã~âÉë=áí=É~ëáÉê=Ñçê=éÉçéäÉ=íç=êáëâ=àçÄ=ëÉÅìêáíó=Ñçê=åÉï=~åÇ=ÜáÖÜÉê=É~êåáåÖ= ÉåíÉêéêáëÉëK==_ìí=íÜÉ=çäÇ=ëóëíÉã=çÑ=äáÑÉ=íáãÉ=ÉãéäçóãÉåí=áë=ëíáää=éê~ÅíáÅÉÇ=áå=ã~åó= ëÉÅíçêë=âÉÉéáåÖ=~=äáÇ=çå=çîÉê~ää=ä~Äçê=ãçÄáäáíóK== = tÉ~âÉåáåÖ=ÉñéçêíëK=^ë=ÅçìäÇ=ÄÉ=ÉñéÉÅíÉÇI=íÜÉ=äçëë=çÑ=ÅçãéÉíáíáîÉåÉëë=Ü~ë= ëÜçïÉÇ=ìé=áå=ïÉ~â=Éñéçêí=ÑáÖìêÉëK==fí=Ü~ë=ÄÉÉå=Å~äÅìä~íÉÇ=íÜ~í=áå=êÉ~ä=íÉêãë=fí~äóÛë= Éñéçêí=Ü~ë=äçëí=OM=éÉêÅÉåí=çÑ=áíë=ã~êâÉí=ëÜ~êÉ=áå=ÖäçÄ~ä=íê~ÇÉ=ëáåÅÉ=íÜÉ=ÄÉÖáååáåÖ=çÑ= íÜÉ=ÇÉÅ~ÇÉI=ëáÖåáÑáÅ~åíäó=ãçêÉ=íÜ~å=çíÜÉê=br=ÅçìåíêáÉëK==qÜÉ=çÑíJèìçíÉÇ=êÉ~ëçå=áë=~= ä~Åâ=çÑ=ÑäÉñáÄáäáíó=áå=íÜÉ=Éñéçêí=ëíêìÅíìêÉI=áå=é~êíáÅìä~ê=áå=íÉêãë=çÑ=éêçÇìÅíë= Åçãéçëáíáçå=íÜ~í=Ü~ë=äÉÑí=fí~äó=áå=~=Ä~Åâï~íÉê=çÑ=“äçïJíÉÅÜÒ=éêçÇìÅíë=ïÜÉêÉ=íÜÉ= important your attention is drawn to the statement on the back cover of this report which affects your rights.

SEB Merchant Banking Country Risk Analysis November 23, 2006

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SEB Merchant Banking Country Risk Analysis November 23, 2006

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1

”When will the eurozone crack?” Centre for European Reform Policy, Simon Tilford 3