Flag of Italy

Italy country brief

Political overview

The constitution of Italy was adopted in 1947, following a referendum on 2 June 1946 that abolished the Italian monarchy and established Italy as a parliamentary republic. The constitution came into effect on 1 January 1948 and established a bicameral parliament (Chamber of Deputies and Senate), a separate judiciary, and an executive branch composed of a Council of Ministers headed by the President of the Council (Prime Minister). The constitution also created the position of President who is elected for a seven year term and has a largely ceremonial role.

Both houses of parliament are directly elected and are of equal authority. The electoral system in the Senate is based upon regional representation. The Chamber of Deputies has 630 members and the Senate 315 elected senators. In addition, the Senate includes former Presidents and several other persons appointed for life according to special constitutional provisions. Both houses are elected for a maximum of five years, but either may be dissolved before the expiration of its normal term. Legislative bills may originate in either house and must be passed by a majority in both.

The President of the Italian Republic, Giorgio Napolitano, was re-elected by Parliament for a second term on 20 May 2013. It was the first time in Italy’s modern history that a President was re-elected. His appointment came two months after Italy’s parliamentary elections on 24 and 25 February 2013, which had resulted in a hung parliament and failed to produce a government. Immediately after his re-election, President Napolitano appointed deputy-secretary of the Democratic Party, Enrico Letta, as Prime Minister.

On 8 December 2013, the then mayor of Firenze Matteo Renzi was elected Party Secretary of the Democratic Party.  On 13 February 2014, the Democratic Party voted in favour of replacing then Prime Minister Letta with Party Secretary Renzi.  On 17 February 2014, President Napolitano asked Mr Renzi to form a new government, which was sworn in on 22 February 2014.  The coalition government of Prime Minister Renzi includes the New Centre-Right party, the Union of Centre party, Civic Choice (the party founded by former Prime Minister Mario Monti) and a number of independent ministers.  The largest party in opposition remains the Five Star Movement (M5S), a new force in Italian politics that won 25 per cent of the vote at the elections in February 2013.

Since 2006, Italians living abroad (a total of about 4.3 million people) have been eligible to vote in the Italian elections. They may elect 12 members in the Chamber of Deputies and six Senators representing four overseas divisions: Europe; South America; North and Central America; and Africa, Asia, Oceania and the Antarctic. During the 2013 elections, 3.4 million Italians living abroad were eligible to vote in the lower house elections, against 3.1 million in the Senate elections. Two Australians members of the PD were elected to represent the Oceania and the Antarctic division: Marco Fedi in the Chamber of Deputies and Francesco Giacobbe in the Senate.

Italy is divided into regions, provinces and municipalities. The constitution lists 20 regions, which are further divided into 110 provinces. Of the 20 regions, five enjoy special constitutional status: Friuli-Venezia Giulia, Sardinia, Sicily, Trentino-Alto Adige and Valle d'Aosta. The regions are responsible for electing their own regional parliaments that exercise substantial autonomy.

Economic overview

Italy has a highly-developed and sophisticated industrial base supported by a strong medium to small enterprise sector, the majority of which is family owned or controlled, Italy is the world’s ninth-largest economy, fifth-largest manufacturer and third-largest bond market.  It sits in the elite clubs of the largest economies (EU, OECD, G7, G8 and G20) and has a central role in global trade and financial systems.  Nonetheless, Italy faces serious economic challenges.

For the last decade, economic growth has barely exceeded one per cent per annum (GDP contracted 2.5 per cent in 2012 and is forecast by the IMF to contract 1.8 per cent in 2013) reflecting weak demand, tight credit conditions, fiscal adjustments and depressed confidence.  Unemployment reached 12.9 per cent in January 2014.  In addition, Italy is divided into a developed industrial north and less-developed south.  Foreign Direct Investment (FDI) remains well below the levels achieved by its benchmark competitors and outward Italian FDI is limited and is largely concentrated in Europe and the Mediterranean.  Italian exports have been falling as a percentage of global trade.  Most raw materials needed for manufacturing and more than 80 per cent of the country's energy sources are imported.  Italy has a sizeable underground economy concentrated in the agriculture, construction and service sectors, which by some estimates accounts for as much as 17 per cent of GDP.  As the first country in the world to record more people aged over 65 than under 15, Italy's low fertility rate and rapidly aging population form a strain on the economy.  Italy has a very high ratio of home ownership and very low household and company debt, but public debt has increased steadily since 2007 exceeding 130 per cent of GDP in 2013.  Low investor confidence about the euro-zone crisis have sent borrowing costs on government debt soaring.  The Italian debt crisis reached its high point in late 2011 and resulted in the appointment of a technocratic government under Mario Monti in November that year.

There are signs of stabilisation.  Industrial production rose 0.7 per cent in the last quarter of 2014.  Business and household confidence is improving.   Exports orders have picked up.  The measures pursued by the Monti and Letta Goverments—including tax increases, pension reforms, and cuts to public administration—have helped contain borrowing costs and the fiscal deficit which is expected to remain around 3 per cent of GDP.  Prime Minister Renzi has outlined an ambitious reform plan to revive growth, tackle structural problems and create jobs.  But the outlook remains one of weak recovery.  Italy is forecast to grow between 0.6 and 1 per cent in 2014.

Bilateral relationship

As two highly-developed economies with robust international engagement and enduring people-to-people ties, Australia and Italy share a warm relationship with much scope for expansion.  Our cooperation will intensify later in 2014 during Australia’s chairmanship of the G20 and Italy’s Presidency of the European Union.

According to the 2011 census, 916,120 Australians claimed Italian ancestry with 185,402 Australian residents having been born in Italy. At least 30,000 Australians are estimated to live in Italy and in 2011 767,000 Australians were recorded travelling into Italy. On 13 December 2011, Governor General Quentin Bryce became an honorary citizen of Conzano, a small town in the Piedmont Region, following her official visit to the region for the 150th anniversary of the Unification of Italy in June of that year.

In March 2011, then-Sports Minister Mark Arbib opened the Australian Sports Commission’s European Training Centre in Varese.  The facility is regularly used by a range of high performance Australian athletes as a recognised Olympic Training Centre and is central to the preparation of Australian Olympic Teams for both the Summer and Winter Games.

Australia and Italy have concluded bilateral agreements covering culture, double taxation, air services, economic and commercial cooperation, reciprocal social security and health care benefits, and film co-production. A bilateral Working Holiday Maker Arrangement became operative in January 2004. The two countries have also signed a number of Memoranda of Understanding (MOUs) covering science and technology cooperation, defence materiel, defence industry, motor vehicle safety certification, sports cooperation, game meat exports and trade cooperation. In April 2013 an updated science and technology MOU was signed. In July 2009 an MOU was signed regarding cooperation on the Square Kilometre Array, an international advanced radio-telescope project. Many state governments have signed MOUs with Italian regional governments to promote cooperative activities and exchanges between the two parties.

High-Level Visits

(Note: Positions indicated in the list below were held at the time of the visits)

To Italy

2012

2011

2010

2009

To Australia

2012

2009

Bilateral economic and trade relationship

As the world's ninth largest economy, Italy is a significant market for Australia.  In 2012 it was our sixth-largest export market in the European Union (EU) and our third-largest source of EU imports after Germany and the United Kingdom.  Overall, Italy was our 14th largest merchandise trading partner.  Two-way merchandise trade in 2012-13 was $6.2 billion, in Italy's favour by a ratio of almost 7:1.  Items such as coal, wool, wheat and leather dominated the mix of Australian exports.  Major Australian imports from Italy in 2012-13 included medicaments, pumps, electric plant and organo-inorganic compounds.

Against the backdrop of one of Italy’s longest economic recession, tourism arrivals from Italy to Australia grew over 10 per cent to 70,500 during 2013.  Expenditure by Italian visitors in Australia rose 12 per cent to over $400m in the same period.  In the year ending June 2013, Italy was Australia’s 15th largest outbound market, with 160,700 departures to Italy. 

Australian merchandise imports from Italy remain strong growing 5.5 per cent in 2012-13. Italian investment in Australia is relatively low, reflecting Italy's generally low levels of FDI abroad, most of which is directed within the EU and Mediterranean area. Total stock of investment from Italian companies in Australia in 2012 was $1.7 billion.  However, there has been a recent welcome interest by Italian companies in investing in Australia including as an entry-point to the dynamic Indo-Pacific region.  Italy’s largest infrastructure group Salini Impregilo entered the Australian market in 2012 winning a $350m tender in 2013 in New South Wales. A range of other Italian companies, such as Ansaldo STS, Ghella and Rizzani de Eccher, have also successfully tendered for major infrastructure projects in the Northern Territory, Queensland and South Australia..The main Italian companies with investments in Australia are Ferrero (confectionery), Iveco Trucks (motor vehicle manufacture and service), Mapei (building materials) Luxottica (eyewear), Ansaldo STS (railway signalling and infrastructure), Permasteelisa (construction, aluminium, glass), Prysmian Cables & Systems (cables) and Amplifon (hearing aids). ENI, the Italian energy producer, is active in offshore gas and oil exploration in Australia, often in partnership with other companies.  In November 2011, SAIPEM, part of the ENI Group, won a €1.3 billion offshore gas pipeline project in Australia.

Major Australian investments in Italy include Po Valley Energy which owns a number of onshore and offshore gas exploration and production licences and owns and operates two gas treatment plants in Italy, Lend Lease which participates in major Italian and European infrastructure projects via its Milan headquarters, and architectural firm Woodhead which has established a joint venture with Italian firm Interplan to service the European market. Cochlear, Chep, Aconex, Australian Wool Innovation, Berrigner Blass, Nufarm, Solahart and Vix-ERG are other Australian businesses with a direct presence in Italy..  Westfield is investing in a new shopping mall project in Milan which, when completed, will be worth around $1.3bn.

The Australian Trade Commission (Austrade) is the Australian Government's trade and investment development agency, operating as a statutory agency within the Foreign Affairs and Trade portfolio.  The section 'For Exporters' on Austrade's website is a valuable starting point for information on export opportunities to many countries, including Italy.  Overseas companies interested in establishing their business in Australia can visit the 'For Investors' section. Austrade maintains an office in Milan.  For further information please contact Austrade in Australia on 13 28 78 or email info@austrade.gov.au.

Last updated March 2014