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The economy of Italy is the 3rd largest national economy within the European Union (EU), and the 8th largest in the world when ranked by nominal gross domestic product. The Italian economy is a founding member of the current EU. It is worth noting that Italy was also a cornerstone of the European Economic Community (EEC) in 1957, when the Treaty of Rome forged the “common market” into legislation. The nation has also helped found a number of the other peaceful organizations such as the G-series summits and the Organization for Economic Co-operation and Development (OECD).
Along with its commitments to community-led efforts for improved economies, Italy adds to the EU economically by being the 8th largest exporter in the world, including Germany, France, the United Kingdom, and the United States. Italy has this exporting power thanks to infrastructural rearrangement after the world wars which did considerable damage to Italy’s agrarian economy. Currently, the nation is the largest producer and manufacturer in the EU after Germany. The Italians are also uniquely positioned to produce a niche range of quality goods such as Italian leather and wines that cannot be produced anywhere else in the world. This article will cover the financial system of Italy, as well as a range of market information covering currency, futures, and stocks.
show moreUnlike many of its other European neighbors, Italy has only one stock exchange, namely the Borsa Italiana S.p.A, based in Milan. The stock exchange is responsible for managing and organizing the domestic market, while regulating the procedures for admission and listing of the companies and intermediaries while also supervising disclosures for listed companies.
While the exchange was traded publicly for some time, it became privatized in the late 1990’s after being purchased by the London Stock Exchange Group. However, the overall capitalization for the exchange is responsible for some 35% worth of the Italian gross domestic product.
The Italian Lira was traded for some time in the foreign exchange market but has been rendered obsolete by the adoption of the euro. Before its adoption, the Italian lira was valued at 1 American dollar for every 120 Italian lira; proportions that did not exactly give Italy a strong position among world economies. As the forex market became more modernized around the same time, the lira was phased out in favor of the euro. This economic strategy led to the stabilization of the Italian peninsula.
Currently, the euro is the 2nd most popularly traded currency in the global market with 23% of the total daily forex market traded as the euro against the American dollar. The Eurozone has the competitive advantage of combining 28 different countries to maintain a globally leading gross domestic product, however the American dollar is the reserve currency of the world, meaning it is used in financial transactions around the world. It is also worth noting that even though the Eurozone (and with it, the Economic Monetary Union) is almost 30 countries banded together, the American economy ranks neck and neck with the European giant. Both the euro and the American dollar are currencies used by over 300 million people every day.
The euro (€) is the official currency of the European Union (EU). Although Italy joined the EU in 1957, euro banknotes and coins were only introduced in Italy as the official currency in 2002.
The Italian lira (plural lire) was the currency of Italy from the mid 1800’s until the adoption of the euro in 2002. During the transitionary period between 1999 and 2002, the Italian lira was accepted officially as a national subunit of the euro. At this stage, the euro was only used for accounting purposes, while cash payments could only be made in lira as the central bank had yet to issue euro banknotes and coins. The lira was also the official currency of the Napoleonic Kingdom of Italy between 1807 and 1814, an interesting tie-in with the French leader’s Corsican heritage.
The lira is also one of the world’s few currencies that was backed by silver instead of gold. In fact, the term lira originates from the value of a latin description of weight (libra). The term is originally a direct cognate from the Pound Sterling and in some neighboring countries such as Malta and the Republic of Cyprus, the two currencies were used as equivalents. Until World War II, the Italian lira was subdivided into 100 centesimi (singular: centesimo), which translates to “hundredths” or more commonly “cents”.
Italy boasts a small handful of actively traded indexes on its singular exchange, the Borsa Italiana S.p.A. These indexes are one way of quickly assessing the profitability of investing in the Italian stock market. The typical small, medium, and large cap indexes are listed plainly enough but the Italian exchange seems to lack the niche indexes that competing indexes boast, listing their country’s own best performing nuanced companies.
The Italy 40 is the best index for introducing investors to the Italian market. Unsurprisingly, this index is made up of mainly the financial sector, services, and of course, Ferrari. The Italian stock market is not the most volatile in the world, nor is it the most secure. Many investors are usually looking for one of the two extremes with regard to investment vehicles for their capital, while the Italian exchange offers something of a medium between the two sides.
