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Italy Facing an Impending Winter with Energy Crisis and Implications for Businesses

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Italy is currently grappling with a looming energy crisis that threatens the country’s economy and the livelihoods of its citizens. A sharp increase in electricity and gas prices has led to a reduction in production by businesses, and in some cases, the closure of firms. This article delves into the details of the energy crisis, its potential impact on the Italian economy and businesses, and the measures required to mitigate the situation.

The situation in Italy is dire, and it is only expected to worsen. Confcommercio-Imprese per l’Italia estimates that about 120,000 service sector firms and 370,000 jobs are at risk from today until the first six months of 2023, with the primary cause being the skyrocketing cost of energy and an inflation rate of almost 8%, mainly due to the rapidly increasing energy commodity prices.

Several sectors in Italy are most vulnerable to the energy crisis, including the retail industry, specifically large-scale food distribution, which experienced a fivefold increase in power and gas bills in July 2021. The restaurant and hotel sector is also at risk, with prices rising three times higher than those in July 2021. The transportation sector is also affected, with fuel prices having risen by 30-35% since the beginning of the pandemic, and now facing the need to suspend methane-fueled vehicles due to the rising cost of raw materials.

Other sectors at risk include freelance professionals, travel agencies, artistic and sporting activities, business support services, and the clothing sector, which is expected to feel the effects of the situation after a slightly profitable sales season.

According to estimates by Confcommercio-Imprese, total energy expenses for the service sector in Italy in 2022 will be €33 billion, three times more than in 2021 (€11 billion), and more than twice the amount spent in 2019 (€14.9 billion). The situation is alarming, and without concrete interventions and new support measures, the economy could experience severe slowdowns in the second half of the year, especially in light of Russia’s planned gas supply cuts.

The new government will need to respond urgently by accelerating action on the European Energy Recovery Fund and setting gas price limits. The reduction in energy costs is necessary for all businesses, including those that are not energy-intensive, to prevent the failure of the country’s economic revival in recent months.

The situation is also affecting the ceramics industry, with manufacturers either not starting all production lines or considering reducing working hours. In the most extreme cases, companies may have to resort to an “integration fund,” leading to the transfer of costs to the government due to mandatory temporary closures. The ceramics sector employs almost 20,000 people directly, providing employment to an additional twenty thousand indirectly.

The energy crisis in Italy is a significant threat to the country’s economy, with the potential to lead to the closure of businesses and loss of employment for many. Urgent measures need to be taken to mitigate the crisis, including reducing energy costs for all businesses and accelerating the implementation of support measures. The situation also calls for a need to explore alternative energy sources, making the country less dependent on energy commodity imports, and enhancing energy conservation measures.

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