In fearful middle Italy, crisis has deep roots

SULMONA, Italy – View of central square, Piazza XX Settembre, in the Italian town of Sulmona, birthplace of the Roman poet Ovid, whose statue stands in the middle of the square. In Sulmona, Italians expressed their anger with their government and fears austerity measures announced on Friday will hit jobs and incomes in already depressed times.

SULMONA, Italy, Aug 13 - As the sun warms Renaissance palazzos round a cobbled square where locals and languid tourists sip cappuccino and watch the morning bustle, the ageless face of middle Italy betrays no hint of the crisis in distant Rome.

Yet stop and talk to those going about their business in the central piazza of Sulmona, a town of 25,000 near Italy's geographical center, and the anger running through the nation's middling folk boils to the surface, as do fears that a decade of economic decline is about to be made even worse.

"Sulmona is black. No jobs, no nothing," complained Franca Minichini, 51, as she hurried past a sunlit, pensive bronze statue of the ancient city's favorite son, the Roman poet Ovid.

Walled in above a fertile valley in the Apennine mountains, on a historic frontier between Italy's poor south and industrial north, Sulmonese have survived centuries of invasions and crises. Many today stress it is not passing dramas on financial markets that worry them, but a bleak outlook for jobs and wages.

At an annual average rate of just 0.3 percent over a decade, Italy has grown faster than only Zimbabwe, Eritrea and Haiti. Now, measures unveiled Friday to meet EU demands for Italy to cut its debt -- though its current deficit is already relatively low -- are likely to stifle demand further.

"This isn't new for us. This area has been depressed for a long time," said Fabrizio as he stood in his dimly lit newspaper kiosk surrounded by headlines screaming "Crisis," "Stockmarket Collapses" and "Chaos in Government." "But ... people are afraid now. They expect measures to hit the middle classes especially."

Consumer spending is down 4-5 percent on last year across the Abruzzo region, said Franco Ruggieri, local vice president of the national small business association Confesercenti, as he served up cappuccino in the cafe he runs on the Corso Ovidio.

"It's still falling," he said, not helped by the lingering effects of the 2009 earthquake which devastated nearby L'Aquila. "People aren't spending and more cuts won't help.

"But the real worry now is the uncertainty. Two months ago they said everything was fine and now there's one emergency measure after another," he said. "We don't know who to believe."

EURO PAIN

Franca Minichini felt her own job in local government was safe. But she fretted for her children in a city where the past decade has left the industrial zone beyond the walls a virtual ghost town: "There's no end to it," she said. "Everyone's been laid off ... Even if you work, you can't afford to live."

Real purchasing power has fallen 4 percent in 10 years.

For 22-year-old Laura Pallotta, on vacation from her political science studies in Rome, cuts in funding for education were a big concern, but her generation was also deeply fearful for its future: "The biggest worry for us now is finding a job after we graduate ... It's a worry for all of us."

How Italians may respond to more pain is unclear.

Anger but also deep resignation is a common emotion directed at not just Prime Minister Silvio Berlusconi's right-wing government but at an entire political elite seen as corrupt and unaccountable. "They should all go," said Minichini. "If there are to be cuts, they should start by cutting themselves."

But asked who she would prefer to govern in place of the veteran media tycoon, she could offer only a shrug and a smile.

Like others, she associated the decline of local industry with the introduction of the single European currency a decade ago: "The euro ruined everything," she said.

But like most Italians, the idea of the euro zone's third biggest economy opting out of the project does not seem practical, even if a return to the often-devalued lira might offer a short-term fix for the debt burden and sluggish exports.

"Before the euro, Sulmona was doing really well, but now our prices are too high. We've lost our factories," said Alfonso De Dominicis, 58, a former factory and construction worker who now drives a taxi. "Since we had the euro, it's been awful."

DISCREDITED POLITICS

But, he said, it was too late to opt out. The best way forward for politicians of right and left, who seemed uniformly to him to be "thieves" not worth voting for, would be to follow the example of economic growth set by Germany, where he himself spent many years as a young "guest worker" in the 1970s and 80s.

"We should learn from the German example. We have the workers, the skills," De Dominicis said. "It's the government that's to blame. In Germany, they have a government that does what's good for the country. Here, ours just think 'I'm doing all right' and they don't give a damn for anyone else.

"It's always us who pay, the ordinary people."

The idea of greater EU intervention in national affairs is anathema in much of Europe, but in Italy, where Economy Minister Giulio Tremonti suggested Saturday more integration of public finances across the bloc [nR1E7J6027], added external leverage over a discredited ruling class has attractions for some.

"Our politicians have done nothing for years," said one small trader who did not want to be quoted by name.

"They're only acting now because Europe is forcing them, otherwise we'd be risking total bankruptcy. It wouldn't be bad perhaps if we had more European government. Ours are no good."

SURVIVAL, METAMORPHOSES

While Sulmona's young people start to follow forebears in heading north or abroad for work, and some of those left behind mutter darkly about "revolution," there is daily talk of efforts to save the city from the latest of its many crises.

This month a plant producing components for carmaker Fiat announced hirings for a new assembly line. Tourism is contributing more to the town's economy. And local gourmet foodstuffs, from fine Abruzzo pasta to saffron, truffles and famed Sulmona red garlic, are also increasingly promoted abroad.

Emanuele Giammarco, 32, is the 10th generation of his family to manage the Rapone company producing a luxury artisan version of 'confetti', the sugared almonds ubiquitous at Italian weddings and for which Sulmona is renowned. For him, the answer to the crisis is a focus on luxury quality -- and new markets.

Cheaper foreign competition has hit the confetti factories. But, said Giammarco as he served in the family's antique shop on the piazza beneath photographs of celebrity customers: "We in the luxury sector don't feel the crisis as much as mass-market producers. As Italians spend less, we are always finding new markets, in the Middle East, China, Russia, eastern Europe."

In a line that echoed the theme of constant change from "Metamorphoses," the great epic of Sulmona-born Ovid who stands in bronze outside, Giammarco concluded: "High finance is a big bubble. But we have to adapt and we must go forward."

(Editing by Rosalind Russell)