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Italy Defence and Security Report Q4 2010
Business Monitor International, Oct 2010, Pages: 101
The Italy Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Italy's defence and security industry.
Italy is beginning to struggle underneath a mountain of public debt, which has risen from 115% of GDP in 2009 to 119% in 2010. Furthermore, its fractious politics, ongoing corruption scandals and a problematic coalition have left it in a potentially weak position from which to deal with the lasting effects of the financial crisis. The use of the confidence vote in order to pass a EUR25bn austerity package is emblematic – it is the 36th time this tactic has been used by Berlusconi’s government in the past two years.
Given these conditions, Italy had to reduce its defence budget by 7% in 2009, and has further reduced defence spending by 10% for 2011. With the passage of the EUR25bn austerity package in July and the stated aim of reducing the government deficit from 5.9% now to 4.6% by year-end – and to under 3% by 2012 – it appears more government cuts are likely. Of particular note for the defence industry is the budget cut for the Industry Ministry, which has been supporting large scale procurement projects through ‘top-up’ funds. The headline projects are the Frecia armoured vehicle, FREMM frigates and the Eurofighter. All three of these projects are to expect both cuts and delays in the coming years.
However, the Italian defence industry is not suffering in a way that this news may suggest. Finnmeccanica’s CEO Pierfrancesco Guarguaglini revealed a series of significant developments for the company, which is the largest defence firm in Italy. He predicts that emerging markets will at least pick up any slack in European or domestic arms consumption – and will be worth EUR6.5bn during 2011. The expectation is that during 2011, less than half of the company’s orders will come from traditional ‘home’ nations – the US, the UK and Italy. In revealing the price tags placed on some recent high-profile deals, the CEO stated clearly that the company is on target for solid results for the remainder of 2010 and 2011.
With over EUR1bn of expected orders in the future from both Libya and Brazil, and an activist role for an interested stake-holder Government, capacity is unlikely to dramatically fall.
As of August, Italy had 3,400 troops in Afghanistan serving with ISAF forces, based in Herat province. In August, two further Italian troops were killed by an IED in the west of Afghanistan. The Italian government has reported that they were bomb disposal experts, who had successfully defused another IED. This brings the total of killed soldiers and diplomats to 26, since the beginning of 2004. During August, the threshold of 2,000 troops killed in Afghanistan was reached. However, July deaths were substantially down from June, leaving some hope that the insurgency is losing intensity.
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