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  • Fernando Napolitano

On Europe, Italy & USA

Europe is a work in progress. If analyzed through US and British lenses its doomsday appears imminent.

By Fernando Napolitano

Is Europe worth the effort?

Does Italy deserve its reputation in business?

What will be the current US administration’s legacy?

Are Italy’s banks the weak link in Europe?

Do countries need to own their narrative in English to drive investments?

See what thought-leaders from Europe and the US have to say. trust you and your loved ones are safe.New York based NEWEST (formerly The Italian Business & Investment Initiative) provides fact-based perspectives and organizes gatherings to enhance business understanding between USA and Italy. The idea behind NEWEST is to involve Europe and Italy more in the dialogue with the USA. NEWEST is the editor of The Voice of Business.

If analyzed through US and British lenses, its doomsday appears imminent.

Europe is a work in progress. If analyzed through US and British lenses its doomsday appears imminent. With only sharing a single currency in common and a complex governance with 27 members makes its integration harder. Since 1945, however, European countries have not waged war against one another, it is the second largest economy in the world in nominal terms with US$ 18 trillion in GDP after the Unites States at US $ 19.4 trillion. The Euro is a robust single currency and a legal framework that accommodates the legacies of each member state. Europe operates according to the rule of law.

The current US foreign policy represents a stimulus for Europe to accelerate its progress. A crucial aspect is the emergence of companies with sufficient scale to compete with the US and China. With the possible exception of Airbus dueling on par with Boeing, European manufactures and service providers – e.g. financial services, telecoms, media …– must grow both in size and in profits.

Among the top 10 companies in the world by market capitalization, none is from Europe: 7 US, 2 Chinese, 1 from Saudi Arabia, Saudi Aramco being the world’s largest at US$ 2.1 trillion. The first European is the Swiss Nestlé (16th) at US$ 343 billion. LVMH (27th) is the first French at US$ 237 billion, SAP (46th) is the first German at US$ 183 billion, Enel (118th) is the first Italian at US$ 87 billion.

Italy suffers from peculiar malaise: it is the country in Europe where English is spoken the least. In the 2019 English Proficiency Index (EF EPI), Italy ranks 34th in the world and 26th in Europe.

Not surprisingly, Italy does not have an English language media outlet targeting US and International investors. Italy as a country therefore does not own its narrative. In fact, Italy’s narrative, image and perception are intermediated and therefore shaped by the four musketeers: NYT, WSJ, FT and The Economist.

The head of the Singaporean sovereign fund once told me that a seminal decision by Lee Kuan Yew when Singapore became independent in 1965, was to select English as the official language. France founded France-24 in 2006 and its channels broadcast in French, English, Arabic, and Spanish and are aimed at the overseas market, similar to BBC World News (UK), DW (Germany), RT (Russia) and VOA (USA). The website of the Italian government has no tab in English.

While Italy must fix those areas of concern to foreign investors that discourage investments – bureaucracy, justice system, labor market, taxation …–, the perception of doing business in Italy is worse than the reality.

Italy is a wealthy country. Italians are frugal savers: US$ 5.1 trillion vs a GDP of US$ 1.9 trillion according to the Bank of Italy and Eurostat. Of these, US$ 1.24 trillion sits in checking accounts. The pre-pandemic stock of public debt stood at 130% of GDP, or 48% of total national savings, the debt will hit 160% of GDP by 2020 year-end. The net financial wealth as percentage of GDP is 195.1 for Italy, 160.8 for France and, 123.7 for Germany.

  • The EU Recovery Fund will provide US$ 240 billion for Italy starting from 2021

  • Italy boasts 911 miles of high-speed trains, two carriers serving Turin, Milan, Bologna, Rome, Naples, Salerno and Venice. In less than 3 hours commuters cover the 360 miles distance between Milan and Rome, and vice-versa. The top speed is 186 miles/hour

  • Italy is the 2nd manufacturer in the world on a per capita industrial production after Germany

  • Out of the 5.117 world products, Italy’s export ranked #1 for 235 products worth $70 billion+

  • There are 131 industrial districts hosting 280,000 SMEs and 31 Scientific & Technology parks (e.g., Aerospace, Biotech, ICT, Pharma)

  • Infrastructures: 6 of the 30 most important traffic axes involve Italy directly —highways, high speed trains, intermodal—

Italy must hurry to own its narrative abroad.

Italians, in the meantime, continue to be misled by the remarkable success of four global iconic industries: Fashion, Food, Furniture and Ferrari (the 4 Fs). When traveling to the world’s capitals, Italians are overwhelmed by the sheer scale of the “Made in Italy” showings. Italians return home self-assured that America and the world know Italy.

Numbers, regrettably, tell a different story.

In a pre-pandemic environment, Foreign Direct Investments –FDI– to Italy did not budge: US$ 22 billion in 2016 –3.6% of Europe’s FDI–, vs US$ 24 in 2018, according to Kearney FDI Confidence Index. A study by the American Chamber of Commerce in Italy, points out that in 2019 the United States invested US$ 3.5 trillion in Europe. Italy attracted approximately 1%, Germany 4.2%. Italy is the 11th destination in Europe for US investments and, globally, Italy slips to a meagre 24th position. Italy’s GDP is the 12th largest in the world and it is the 3rd largest in continental Europe after Germany and France.

The same goes for exports. According to the US Census Bureau, in 2019 Italian exports to the US were US$ 57 billion, about 10% of Italy’s total exports. Surprisingly, Americans buy more Pharmaceutical Preparations, US$ 8.8 billion, than wine and food combined, US$ 3.2 billion. Germany’s exports to the US in 2o19 were US$ 127 billion.

Who is investing in Italy?

There are two clusters of foreign investors. Those that have invested in public listed or private companies – the habitué that have learned how to interpret Italy– and the rest, turned off by a predominant negative narrative driven by the mayhem of Italian politics. The habitué have enjoyed hefty profits.

Despite the opportunities, the group of investors remain exiguous if compared to Italy’s necessity to convert SMEs in mid-cap if it wishes to keep on competing globally.


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