Blow as power demand falls by a third

By Guy Dinmore in Rome

Published: December 3 2008 02:00 | Last updated: December 3 2008 02:00

Italian industry has slashed its electricity consumption by almost a third in two months in a stark sign of the force of the recession and serious blow to efforts by Silvio Berlusconi’s centre-right government to play down the depth of the crisis.

Terna, the company responsible for electricity transmission across the national grid, recorded a 30 per cent fall in October and November, Flavio Cattaneo, chief executive, said. Output of steel and cars was particularly affected.

Terna’s observations fit a stark pattern. On Monday the transport ministry reported that car sales of domestic and foreign cars in Italy dropped by 29 per cent in November from a year earlier.

Italy is already in recession following two quarters of shrinking economic output. After a decade of lagging behind European growth rates, the eurozone’s third largest economy is heading towards a longer and deeper recession than its peers, according to analysts’ forecasts.

Cisl, the second largest trade union federation, reported yesterday that 180,000 workers in manufacturing and construction lost their jobs from January to October. It warned that 900,000 jobs were at risk over the next two years.

The government’s public response has been to accuse the centre-left opposition and unions of scaremongering and assert that Italy is in good shape. “Italy today is more solid than we are disposed to believe,” Giulio Tremonti, finance minister, said a week ago.

On Friday, launching a modest fiscal stimulus package constrained by Italy’s already large public debt and budget deficit, he told reporters: “The message we want to send is one of confidence, for consumers and for workers.”

Italians can be forgiven if they feel confused. Eight months ago at the height of the election campaign, “Italy is on its knees” and a promise to pick it up was one of Mr Berlusconi’s favourite slogans in attacking the centre-left government of Romano Prodi.

Yesterday Il Giornale, the Berlusconi family-run newspaper, attacked what it called the left-wing doom-laden “catastrofisti” who were “painting an Italy on its knees”. Inflation was falling and Italians had one of Europe’s best savings records, it said.

Analysts say conservative lending practices have helped shelter Italian banks from the worst of the global financial storm, but Italy - with a large industrial sector as the world’s second largest exporter of capital goods - cannot escape the storm hitting the real economy.

Tito Boeri, professor of economics at Bocconi university, slammed the “miserable third of a point of GDP” stimulus, accusing Mr Tremonti of being fiscally lax during the previous 2001-06 centre-right administration, but now adopting a “drip drip” policy when tax cuts were really needed.

Copyright The Financial Times Limited 2008

Tags: peak oil investments

This entry was posted on Wednesday, December 3rd, 2008 at 10:18 pm and is filed under The Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.