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According to GDP calculations, as measured by purchasing power parity (PPP), Italy is ranked as the seventh largest economy in the world in 2006, behind the United States, Japan, Germany, China, UK, and France, and the fourth largest in Europe. According to the OECD, in 2004 Italy was the world's sixth-largest exporter of manufactured goods. This capitalistic economy remains divided into a developed industrial north, dominated by private companies, and a less developed agricultural south. Most raw materials needed by industry and more than 75% of energy requirements are imported. Over the past decade, Italy has pursued a tight fiscal policy in order to meet the requirements of the Economic and Monetary Union and has benefited from lower interest and inflation rates. Italy joined the Euro from its conception in 1999. Italy's economic performance has at times lagged behind that of its EU partners, and the current government has enacted numerous short-term reforms aimed at improving competitiveness and long-term growth. It has moved slowly, however, on implementing certain structural reforms favored by economists, such as lightening the high tax burden and overhauling Italy's rigid labor market and expensive pension system, because of the current economic slowdown and opposition from labor unions. Italy has been less successful in terms of developing world class multinational corporations. Instead, the country's main economic strength has been its large base of small and medium size companies. These companies typically manufacture products that are technologically moderately advanced and therefore increasingly face crushing competition from China and other emerging Asian economies. Meanwhile, a base of corporations able to compete in markets for advanced goods and services is underdeveloped or lacking entirely. It is not obvious how Italy will overcome this significant structural weakness in the short run, and Italy has therefore been referred to as the new "sick man of Europe". |
Italy Information: Inside
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