The effects of the global crisis on the economy of Friuli Venezia Giulia were significant. In industry, demand fell by 20 per cent in real terms with respect to the cyclical peak recorded at the end of 2007, wiping out the growth of the previous ten years. Feeble signs of recovery emerged in the second half of the year and gained strength in the first quarter of 2010. Exports decreased sharply in all the main industry sectors of the region except for shipbuilding, that delivered vessels ordered before the crisis. The performance of industrial production corresponded to that of sales, with the downswing coming to a halt in the fourth quarter.
According to the Bank of Italy's surveys, the effects of the recession on manufacturing firms' sales were less adverse in the region than in Italy as a whole. Investment plans for 2009, which reflected a 20 per cent cutback with respect to investment realized in the previous year, were basically fulfilled. The forecasts for 2010 point to a further decrease in fixed investment.
In the transport sector, traffic through the port of Trieste diminished, especially container traffic, for which Trieste has ample spare capacity and a growing gap with respect to competing Upper Adriatic ports.
Employment in the region fell by 2.5 per cent, more than the average for both North-East and Italy as a whole. Its reduction was greater among the self-employed as well as in the construction and service sectors, while among payroll workers and in industry there was massive recourse to income-support schemes. The unemployment rate rose to an annual average of 5.3 per cent. Between 2008 and 2009 the recourse to ordinary wage supplementation, connected with the cyclical situation in industry, increased more than tenfold, involving about 5,500 full-time equivalent employees, while the recourse to extraordinary wage supplementation, reserved to situations of company crisis, more than doubled, involving nearly 4,000 full-time equivalent employees. Alongside these standard instruments, wage supplementation under waivers, which had been negligible in previous years, involved more than 600 firms in the region in 2009.
Lending to residents in Friuli Venezia Giulia stagnated in the twelve months ended in December 2009. The fall in loans to firms, which continued in the first quarter of 2010, contrasted with the growth in lending to households.
Firms' financial requirements stabilized during the year. Financial requirements were increased by the need to restructure debt by maturity and technical form and to finance working capital, while they were decreased by the fall in fixed investment. The stagnation of firms' demand for credit was accompanied by a tightening of the terms and conditions of bank lending, especially to builders, with banks setting wider spreads and requiring more collateral.
Borrowers' risk characteristics were decisive for the evolution of lending to firms. The cost of bank debt, measured as the premium to the official rate, rose sharply at the end of 2008 for all risk categories. Several months later it returned to its pre-crisis level for firms rated as low risk, while for riskier firms the spread came down only slightly during 2009 from the highs recorded at the start of the year. Guarantees provided by the loan guarantee consortia in the region helped to mitigate the constraints for loan applicants, making for generally faster growth in loans and more moderate costs.
The quality of loans to firms, measured by the incidence of new bad debts, worsened considerably owing to the increase in new bad debts among loans to manufacturing and services; new bad debts also increased among loans to households.
Bank funding benefited from the historically low level of market interest rates, which prompted a reallocation of households' portfolios towards more liquid instruments such as current accounts. The search for a rate of return deemed satisfactory also favoured, among debt securities, those issued by banks and non-resident issuers, which grew to exceed 50 per cent of the total of securities held by households.
