REAL VERSUS FINANCIAL ISSUES ON THE THRESHOLD OF ITALIAN ECONOMIC-RECOVERY

This article studies the intertwining of real and financial elements i n the recent evolution of Italian industrial firms. Empirical data are used to treat three issues: the restructuring carried out in the late 1970s and early 1980s; the improvement in profitability due to consta nt gains in productivity and to the contribution of financial investme nt from 1984 to 1988; and the danger of a new financial ''crunch'' res ulting from renewed borrowing during the recent recession, in connecti on with the decline in self-financing, to complete investment plans al ready under way. Examination and analysis of the data locate the cause s of the developments studied essentially in the real economy, accentu ated by the emergence of financial factors. The conclusion is directly relevant to efforts to foster and amplify the incipient recovery, an objective that is attainable if technological progress is promoted chi efly by means of product innovation.