Tue, Oct 21, 2003 page12

• Renaissance to begin with `I love Italian shoes' slogan

  FRENCH CONNECTION Many Italian businessmen and politicians are pining for the good old days of protectionism, when they did not have to deal with the EU's rules

  • REUTERS
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  "I love Italian shoes."

  That's the name of a new initiative from Italian shoe-makers aimed at buffing up flagging sales abroad.

  But shoes are not the only Italian products to have lost their shine of late.

  The small and medium-sized companies that produce a wide range of the country's trademark, "Made in Italy" goods say they are suffering like never before. They blame bureaucracy, the strong euro and a wave of cut-price imports from Asia.

  From manufacturers of bathroom fittings to luxury textiles, globalization has left many Italian companies -- and some of the country's most powerful politicians -- hankering for a return to the days of protectionism.

  Italy's share of global exports in its traditional sectors slumped almost a third between 1987 and 2000 to 13 percent, while China's stake virtually quadrupled to 15 percent.

  Finance Minister Giulio Tremonti has led an outspoken campaign against the surge in imports from Asia and recently urged the EU to cut red tape to help boost the region's competitiveness.

  "If rules continue to be made on poultry [for example], Europe will end up like a chicken ... in other words, in the pot of a Chinese cook," Tremonti said after hosting a meeting of his European counterparts in September.

  While many Italian firms say they are struggling to beat China in terms of costs, they say they still win hands down in terms of quality and style.

  "We want to make the consumer aware of the elegance, quality and style of Italian shoes. The Italian shoe is a shoe to love in the true sense of the word," said Rossano Soldini, president of Italian shoemakers association ANCI.

  However, Soldini says foreigners' love affair with Italian elegance has been hit by the surging euro.

  CYCLICAL STRIFE

  The euro has jumped around 30 percent against the dollar since the start of the year, whacking all sorts of exports.

  "There was certainly a major slowdown in US demand," said Pietro Fanticini, a cheese-maker from Parma who exports 60 percent of his produce.

  "The worst was the initial impact when it was unclear how long the euro would hold up against the dollar," he said.

  But critics say Italy's problems run deeper than over-regulation or currency fluctuation, and lie principally in a lack of innovation over the years.

  Analysts say Italy's cottage industries -- once a backbone of production -- are predominantly in slow growth sectors and little adapted to a changing economic environment.

  "Countries that have seen most growth are those which are focused on modern products -- electronics and information technology," said Fedele De Novellis, an economist at Milan-based research group REF.

  Italian big business has also appeared slow to modernize.

  Carmaker Fiat, Italy's largest private industrial employer, has seen its market share sink to record lows thanks largely to its failure to invest in new products.

  Fiat's Western European registrations fell 12.5 percent year-on-year in the first eight months of the year and it is only now getting new models onto the market to tackle the crisis.

  INNOVATION NEEDED

  Clothing retailer Benetton still has growing exports but it has been overtaken by more innovative rivals like Spain's Zara which has been quicker to pick up on trends and get them onto the rails of its stores more quickly.

  EU Competition Commissioner Mario Monti said Italy had rested too long on its laurels, accustomed to a level of relative affluence after decades of industrial expansion.

  "There is scarce planning for the future. I note a certain psychological inertia," he told reporters recently.

  That's something Italy is belatedly trying to address. The government has earmarked between 5 and 6 billion euros (US$5.8 to US$7.0 billion) next year to boost growth of which 2 billion euros will go on infrastructure and innovation projects.

  As European Commission President Romano Prodi -- a former Italian prime minister -- put it: "The route to revitalizing our economy, to reinvigorating our industrial system lies in rediscovering our capacity and hunger for innovation."

  Diego Della Valle, chief executive of Italian luxury shoe and bag maker Tod's said closer relations with Asia were the way forward and that he was looking at the possibility of opening a factory in China.

  "We cannot wait for them to colonise our market," he said. "Between the two nations we can forge excellent relations which can lead to synergies."

  Whatever the solution, the difficulties are not unique to Italy.

  "All of the Western world has to face the challenge of cheap labor costs in other markets. These are the new rules of the game and Italy must learn to adjust to them," said Vincenzo Guzzo, an economist with Morgan Stanley in London.
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