With news that Italy’s lingering recession is worsening, and with few signs of recovering on the offing, the national economic outlook is fairly grim.

But, in keeping with the character of a country that only unified and started speaking the same language a century and a half ago, the picture is a regional patchwork, with vast discrepancies among the constituent parts. When measured in isolation, stretches of northern Italy remain some of the wealthiest, most industrialised parts of Europe. 

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The lynchpin of this wealthy heartland is Lombardy. Its GDP, at €333bn in 2011, ranks second among European regions, according to Eurostat. It produces more than 20% of Italian GDP and contributes the same percentage towards the national added value. The average monthly family spending figure (€3033 according to national statistics agency Istat) is the highest in Italy.

Because of this clout, if Italy is to come charging back from crisis point, the resurgence will need to be led by Lombardy. The region’s key city of Milan, then, becomes central.

Forza Milan

“Milan is the most prominent city in Italy economically, and the one that can help the most in the full recovery of the Italian economy. I do not see any other city in Italy that can have the same impact,” Giuliano Pisapia, the centre-left mayor of Milan, tells fDi in an interview in his Piazza Scala offices.  

“In the past couple of years I have received many delegations and many of them were international investors willing to invest in Italy, especially in Milan. There has always been a lot of interest and availability to invest in Milan. The city is seen as the most able to produce returns on investments, [largely] because it has resisted the effects of the financial crisis better that many other European cities,” he says.

Pier Andrea Chevallard, secretary-general of the Milan Chamber of Commerce, seconds this assessment. “Milan, and the Lombardy region, were undoubtedly affected by the political uncertainty [in Italy] but not as much as one might imagine because our business is generated mainly by small companies. Those companies are not directly affected by the government,” he says.

Some investors have inevitably been deterred by uncertainty about Italy’s national politics and its economic woes, but Mr Pisapia believes that the installation of a new government in May, led by Enrico Letta of the centre-left, has calmed nerves. The mayor was also reassured by Mr Letta’s stated commitment to Expo 2015, a global showcase event to which Milan will play host in two years’ time.

Expo hopes

Expo Milano 2015, to be held between May and October 2015, will be centred around the theme of 'feeding the planet' and will highlight the agribusiness and agricultural science sectors – a fitting focus for a country renowned for the quality of its food.

While some have questioned whether such an event is too big of a financial burden and whether other priorities should take precedence, supporters say it is an opportunity for Italy show the world that it is overcoming its problems. And, as has been the experience of host cities of other major international events, it also provides an impetus for necessary investments in infrastructure and other improvements.

“We are facing big challenges in the next two years in order to revamp Milan ahead of the Expo, which is going to be the biggest event held in Italy after the crisis. [To answer these challenges the country needs] political stability and [to pay] particular attention to Milan,” says Mr Pisapia.

Not surprisingly, the mayor is bullish on Expo, and insists it will pay dividends in global exposure for the city and, more tangibly, increased inward investment. “I am sure there will be new investments in Milan as a result of the Expo. We are expecting 20 million tourists, with more than 130 countries participating. Milan will be at the centre of the world,” he says.

To cope with this influx of tourists, transport networks are being upgraded. This includes two new metro lines, the M5 and the M4 (one is already in place, the other has experienced delays), and there will also be a high-speed railway station (which will mean Turin can be reached within 35 minutes of the Expo site), as well as new road and railway networks and waterways.

Service driven

These new transport links should also be put to good use by the Lombardy region’s many thriving local small and medium-sized enterprises, whose exports to foreign markets are on the rise this year despite the economic challenges they face, according to the Milan Chamber of Commerce.

Advanced manufacturing is a pillar of the economy of northern Italy, and while Lombardy is active in this sector, Milan’s real strength lies in services. Famed for fashion and design, the city’s economy is fuelled by services supporting such less glamorous sectors. 

“If you want to operate in [the service] sector in Italy, you have to be in Milan,” says Mr Chevallard. “Milan is one of the most important cities in the world for the service sector. If we talk about banking, insurance, advertising or publishing, Milan is on the top 10 among Western cities. It means that for any company coming to Milan there is the chance to be supported by a very strong service sector.”

In order to thrive, a services-led economy needs companies, consumers and customers to serve. In that respect, Milan will need to maximise the spotlight and public investment brought in by Expo 2015 to bring in new foreign companies to add to its corporate base. But it can also count on organic growth, because while some of the region’s small companies are bound to falter, a strong entrepreneurial streak means that others may pop up in their place.

If Italy is a land of entrepreneurs (it is said in the country that there is one entrepreneur for every 11 Italians), then Milan is the nerve centre. “Milan is the only ‘American’ city in Europe. In the US, you have a lot of young people that consider being an entrepreneur the best way to work and they are willing to take the risks associated with this; in Milan it is the same,” says Mr Chevallard.

These young Milanese entrepreneurs, and the small companies they form, will need to be prepared to carry not just huge risks, but also help carry Italy’s recovery on their backs.