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Italy : one firm out of 50 subject to insolvency procedure

All European countries undergo the consequences of the financial crisis. Italy is obviously one of them.
The truth had been hidden by the previous government which minimized the impact of the crisis; the Monti government keeps reminding to citizens how critical the situation has become and you can feel it even in the daily life.

Firms, and SMEs in particular, are the first victims. This is especially worrying because Italy has twice as many SMEs as France. Entrepreneurship is a deeply rooted tradition but remains fragile because it is anchored in familial business very small enterprises of less than 4 persons. Familial SMEs remain fragmented and do not follow always the most modern business practices which put them especially at risk in times of crisis. I dare to say that most Italian SMEs are not well prepared to face an economic downturn.

The latest statistics show that 1 Italian firm out of 50 (2%) is currently subject to an insolvency proceeding. Early this year Italian newspaper announced that another 34000 firms were at risk of falling in the same trap, a worrying figure. The latter can be compared to the situation of Belgium where more or less 1000 firms go bankrupt each month.

Several countries (among them Belgium) had ruled on exceptional subsidies to limit bankruptcies. I’m wondering what the fate of these subsidies will be, given that budgets have to be cut and expenses drastically reduced. What is best? Sustain artificially with public money old-fashioned firms or let them die to promote a new generation of more modern firms on the middle and long-term?

My take:

I don’t have the answer to that question but I think there is no good answer. Eventually I fear that an arbitrary ruling, like in the antique Rome, will decide on whether those firms will survive or die.

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Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)

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