Southern Italy risks 'permanent underdevelopment'

Southern Italy is at risk of "permanent underdevelopment" after a seven-year recession and a deep demographic and industrial fall, a report warned on Thursday.

The gross domestic product (GDP) of Italian southern regions as a whole declined for the seventh year in a row by 1.3 percent in 2014, according to a study by the Association for the Industrial Development of Southern Italy (Svimez).

Southern Italy's output grew by 13 percent only between 2001 and 2013, and it was a particularly poor performance when compared to a 24 percent growth shown by Greece, which is among the European Union (EU) countries worst hit by the economic crisis, the report added.

"The crisis has given us a country which is even more divided and increasingly unequal than in the past," Svimez Director Riccardo Padovani told a press conference in Rome, after releasing a preview of the report.

The gap between the GDP per capita in the southern regions and that in the rest of Italy widened in 2014, reaching a record 53.7 percent, which was the largest since the year 2000, according to Svimez.

More specifically, GDP per capita reached over 31,500 euros in northern and central Italian regions and some 16,900 euros in the southern regions, with a national average of about 26,500.

Almost 62 percent of the population in the South earned less than 12,000 euros in 2014 against a 28.5 percent of those living in Central and Northern Italy, the report said.

The "Mezzogiorno", as Italy's southern regions are also known, has been plagued by economic backwardness for decades in comparison with the more industrial and wealthier North.

Yet, the level of industrial decline, unemployment, and general impoverishment has worsened so sharply during the crisis that Svimez's analysts feared these flaws might have become "permanent, rather than temporary".

"There is a risk the impoverishment of human, business, and financial resources might prevent the Mezzogiorno from benefitting from the likely new growth, and turn this cyclical crisis into a permanent underdevelopment," Padovani told Xinhua.

Household consumption in the southern regions fell by 0.4 percent in 2014, whereas it increased by 0.6 percent in Central and Northern Italy, the report showed.

It overall plunged by 13.2 percent against a 5.5 percent, respectively, in the 2008-2014 period.

Gross fixed investments, or the total business spending on fixed assets such as factories, equipment, and machineries, also shrunk by 4 percent in the South and by 3.1 percent in the rest of Italy last year, and by 38 percent and by 27 percent respectively between 2008 and 2014.

"The sharp fall in investments has affected Southern Italy's industrial capacity, which has further lost competitiveness," Padovani said.

"The length of the recession, the decreased resources allocated to public infrastructures, and the fall in domestic demand have all contributed to a "desertification" of the (South) economic landscape".

"In fact, these factors have not only affected inefficient firms, but have driven out of the market healthy businesses that were not 'equipped' enough to face such a challenging crisis," he explained.

A demographic ingredient would add to this decline.

Italy's fertility rate has indeed been falling for many years, yet it would weigh more on the impoverished Mezzogiorno than in the rest of the country, the report warned.

The number of children per woman decreased to 1.31 in the south compared to 1.43 in central and northern regions in 2014, and only 174,000 new-borns were registered in Mezzogiorno last year, the lowest figure in 150 years of the country's unification.

Overall, the think-tank's report appeared quite gloomy.

"At this point, it is difficult to determine whether the (southern) industry will be able to keep pace with the national and international recovery," Padovani said.

A solution would not be at hand, since the boost in foreign demand now driving a still weak recovery in Central and Northern Italy has a modest weight on the Southern economy, according to the analyst.

Furthermore, the current prevailing approach within the EU of "entrusting the recovery to a mechanism of internal devaluations by cutting costs and prices, and to a liberalization of domestic markets" would not be enough.

"This policy has ended up deepening the structural imbalances between the euro zone weakest and strongest areas," he warned.

"The lack of competitiveness and productivity needs to be rather addressed with a coordinated policy of investments for Europe, Italy and the Mezzogiorno," he said.

"In short, we need a policy of active development," he added. (1 euro = 1.10 U.S. dollars)