Italy fumes against company relocations in bitter election campaign

Italian prime Minister Paolo Gentiloni (R) and Italian Economic Development Minister, Carlo Calenda in a file photo dated 9 November 2017. [Alessandro Di Meo/EPA/EFE]

European Union rules are helping less wealthy nations swipe jobs from their bigger partners, Italy’s industry ministry said yesterday (20 February), as plans by a multinational to shift production to Slovakia took centre stage in the national election campaign.

Embraco, a Brazil-based firm controlled by US domestic-appliance giant Whirlpool, has announced it will close a factory in northern Italy that makes compressors for fridges, at a cost of 497 jobs, and relocate to eastern Europe.

Confirmation of the move came on Monday, less than two weeks before a 4 March election, and was seized on by opposition parties like the far-right League which have long blamed the EU for Italy’s many economic woes.

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Looking to halt the relocation, Industry Minister Carlo Calenda flew to Brussels to try to persuade European Commissioner for Competition Margrethe Vestager to declare Slovak enticements to Embraco as illegal state aid.

“There is a clear issue of the system not working as it should,” Calenda told reporters after his meeting, saying smaller economies could offer lower operating and labour costs than bigger ones because they receive EU economic aid.

“It is one thing to compete with France and Germany or Spain, with levels of taxation that are different but don’t depend on the level of development,” he said.

“It is another thing to compete with those who have much lower cost structures.”

Italy says Slovakia is set to receive €20 billion in EU structural funds between 2014 and 2020 to stimulate its economy, which in turn helps it lure multinational operations.

Vestager is due to address the issue at a news conference on Wednesday, Calenda said.

Ruling party trailing

The ruling centre-left Democratic Party (PD), which promotes itself as pro-European, is trailing in the polls to the anti-establishment 5-Star Movement and a broad centre-right alliance that includes the fiercely eurosceptic League.

League leader Matteo Salvini said the planned Embraco shutdown signalled the government’s failure to renegotiate free market regulations within the EU.

“I can guarantee you that with a Salvini government, this system which is killing Italians will be overturned,” he was quoted as saying by ANSA news agency.

Calenda, a member of no political party, denounced the Embraco management as “riffraff” on Monday after the firm rejected government attempts to mediate.

There was no immediate comment from Embraco.

Its planned relocation follows in the footsteps of other firms that have decided to quit Italy to cut costs, including US conglomerate Honeywell, which has said it will close its Atessa factory in Italy and, like Embraco, move to Slovakia.

The tax wedge, which measures the gap between what employers take home in pay and what it costs to employ them, is 47.8% in Italy against 41.5% in Slovakia, according to the Organization for Economic Cooperation and Development.

Businesses in Italy say suffocating bureaucracy and a lethargic legal system also deter investors.