January 29th, 2009
02:14 PM GMT
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ROME, Italy - There is a saying in this country that what is good for automaker Fiat is good for Italy, meaning that if the government can save Fiat, it will save hundreds of thousands of jobs. The problem is, who can save the Italian government?

Fiat worker Luigi Mercogliano said the government needed to inject more money to re-launch the industry.
Fiat worker Luigi Mercogliano said the government needed to inject more money to re-launch the industry.

Fiat is the top private employer in Italy, producing more than 10percent of the country's GDP. It has a domestic workforce of roughly 78,000 but hundreds of thousands of people including spare parts suppliers and sales and after-sales service providers owe their jobs to the carmaker.

The head of Italy's business association estimated that the entire auto industry here has a workforce of 1 million.

This is why when there is talk about bailing out Fiat, in reality the government needs to include a vast number of businesses that go beyond the car giant itself.

Unfortunately the cash-strapped Italian government can't afford the billions of dollars other European nations are pumping into their economies to revive the automotive sector.

Fiat's chief executive was recently quoted warning that 60,000 jobs in the automotive sector could be lost if the government did nothing to help. Fiat has already enforced temporary production halts at its Italian plants, sending thousands of workers home on reduced pay.

After a series of top-level talks between government officials, trade union representatives and auto bosses, the minister for economic development promised to unveil "within the next 10 days" a series of measures to help the sector.

The new measures pale if compared to the billions of dollars that are being promised to automakers in the U.S. and elsewhere in Europe. All the Italian government can afford at this time, according to people familiar with the plan, is roughly $650 million aimed mainly at promoting the sale of new car models with a low environmental impact.

For example, if you own a car that is at least 10 years old, and you plan to trade it in for a new and less polluting model, the government would give you roughly $2,000 to purchase it (a similar plan is already in place, but covers up to $1,000).

Government officials say companies researching new eco-friendly technology would also receive financial assistance.

There are also talks about increasing road taxes for the largest and more polluting models, such as sports cars and SUVs.

The plan, which is still under discussion, sparked protests among Fiat autoworkers, especially those who have been sent home with reduced pay.

"We don't spit on the government's good intentions," said Luigi Mercogliano, who has worked just one week since September at the Fiat plant near Naples. He and a few hundred were demonstrating outside the prime minister's office on Wednesday night while the talks were under way. "But the money they are talking about is not sufficient to re-launch the automotive sector in Italy," he added. "In other countries, in Germany, in France and in the U.S., their governments are already putting in a lot more money for the technological renewal and the development."

The Italian government knows what needs to be done. But it doesn't have the money to implement a large-scale investment plan. So, while it can't simply sit on the sidelines and watch other European partners pumping money into their car industry, it is trying to avoid having to deal later with the problem of massive layoffs.

Fiat's top managers say the situation is difficult, and called for quick and decisive measures. But the government appears reluctant to intervene massively to assist the car industry knowing that other sectors are asking for similar treatment.

Indeed representatives of construction and infrastructure businesses are not sitting on the sidelines watching the government bail out the car industry. They warn that some 250,000 jobs are at risk over the next six months, and are asking for billions of dollars in aid.

Italy's GDP is in freefall (like that of many other EU countries), but the problem here is that its current debt is greater than the total value of its economy (roughly 104 percent of its GDP). The outlook is bleak.

So, while construction workers, automakers, fishermen, farmers, parmesan producers and their extended families are asking for bail out money, my question is: who will bail out the Italian government?

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January 29th, 2009
12:29 PM GMT
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DAVOS, Switzerland – If Angelina or Brad had been at Davos this year, they would have been given the treatment ‘Royal celebs' deserve. But they are not here, so in the absence of glitz we have to find other ‘stars' to hang onto.

Thankfully there are plenty of alternative delegates worthy of our attention. For instance, economists like Stephen Roach of Morgan Stanley Asia and Joseph Stiglitz formerly of the World Bank. Not heard of them? Not hanging on to their every utterance? Tut tut. No wonder you're in this mess!

These men may not have the good looks or dashing manner of Hollywood stars, but here at Davos this year they are ‘rock stars' in their own right.

When they walk through the hallways they are feted. Crowds gather to hear the words from their lips. A private chat with one or the other is economic nirvana.

Just this morning as I walked through the lobby, there was Roach holding court; cameras recording his words, journalists jostling to hear his view on how bad things would get.

For some time both men have been forecasting the horrible financial disaster we now face and were sneered at. They said it was going to get worse...and it did. And now at Davos both men can look us in the face and say "told you so". Neither is actually saying that of course. Instead they are putting forward ideas and solutions to get us out of the mess.

What worries me is Roach and Stiglitz are saying the plans on the table won't work, from stimulus packages, to co-ordination, to regulatory reform, they claim more needs to be done. We have ignored these economic rock stars before, to our cost. Let's not make THAT mistake again.

Tune in to CNN International each evening at 1900 GMT to catch my new show, ‘Quest Means Business.'

For more coverage of this year’s World Economic Forum, go to our special Davos page.



January 29th, 2009
11:32 AM GMT
Share this on:

If Angelina or Brad had been at Davos this year, they would have been given the treatment ‘Royal celebs' deserve. But they are not here, so in the absence of glitz we have to find other ‘stars' to hang onto.

Thankfully there are plenty of alternative delegates worthy of our attention. For instance, economists like Stephen Roach of Morgan Stanley Asia and Joseph Stiglitz formerly of the World Bank. Not heard of them? Not hanging on to their every utterance? Tut tut. No wonder you're in this mess!

These men may not have the good looks or dashing manner of Hollywood stars, but here at Davos this year they are ‘rock stars' in their own right.

When they walk through the hallways they are feted. Crowds gather to hear the words from their lips. A private chat with one or the other is economic nirvana.

Just this morning as I walked through the lobby, there was Roach holding court; cameras recording his words, journalists jostling to hear his view on how bad things would get.

For some time both men have been forecasting the horrible financial disaster we now face and were sneered at. They said it was going to get worse...and it did. And now at Davos both men can look us in the face and say "told you so." Neither is actually saying that of course. Instead they are putting forward ideas and solutions to get us out of the mess.

What worries me is Roach and Stiglitz are saying the plans on the table won't work, from stimulus packages, to co-ordination, to regulatory reform – they claim more needs to be done. We have ignored these economic rock stars before, to our cost. Let's not make THAT mistake again.

Tune in to CNN International each evening at 1900 GMT to catch Richard's new show, ‘Quest Means Business'.

For more coverage of this year’s World Economic Forum, go to our special Davos page.



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