News Analysis: Italian authorities seek better tools against organized crime

The presence of the mafia has scared foreign investors away from Italy with an estimated loss of some 16 billion euros (18.55 billion U.S. dollars) in recent years, the governor of the Bank of Italy has said.

This notion imparted to the well-known Italian problem an even darker implication, all the more now that the country badly needs more foreign capital to overcome a long-standing economic crisis.

Yet, in their efforts to assess the impact of the mafia on economy, authorities have developed a refined awareness that may help fight organized crime more successfully, analysts noted.

In a hearing at the anti-mafia parliamentary committee in Rome on Wednesday, Governor Ignazio Visco said that "organized crime has a negative impact on investments in general, and on those coming from abroad in particular."

Direct foreign investments in Italy between 2006 and 2012 would have been 15 percent higher if Italian institutions were as "mafia-free" as those in the rest of the eurozone, Visco said, quoting a Bank of Italy's study in September 2014.

"The most significant economic impact of the mafia does not lie in the output of its criminal activities, but in the value of what is not produced because of the distortions created by the mafia," the central banker pointed out.

This passage particularly pleased those involved in the fight against organized crime.

"Visco showed a global and complex perspective of the phenomenon, with which we fully agree," Tonio Dell'Olio, head of the international department of Italian main anti-mafia group Libera, told Xinhua.

"His analysis approach steers the debate toward a key notion: economy is not an accessory, but the core issue in today's fight against organized crime," Dell'Olio said.

Italy entered its third recession in six years in August 2014, and unemployment hit a record-high 13.4 percent in November. The ability to attract more foreign capital is seen as crucial to reignite growth.

Meanwhile, the three major Italian mafia groups have spread their economic activities worldwide, with 'Ndrangheta from Calabria producing an estimated 2013 annual turnover in excess of 50 billion euros.

Indeed, studies on the economic effects of the mafia have increased in Italy in order to understand more clearly what mechanisms are at work in the affected societies.

In his report, Visco recalled two recent Bank of Italy's studies. The first was focused on the southern regions of Puglia and Basilicata, which were exposed to mafia infiltration only during the last few decades. There, an estimated 16 percent loss in the GDP-per-capita over 30 years was forecast compared to a control group of other regions.

The study was authored by economist and assistant professor at Bocconi University in Milan Paolo Pinotti.

"In the study, I observed private investments fell down in both regions after the increase of mafia activity," Pinotti told Xinhua.

He explained that private investments were replaced by public ones, and yet public capital did not result in employment increase, which meant they were not productive.

"My research showed the potential loss of investments exceeded by far any supposed wealth the criminal activities might provide in the short run," he added.

According to Pinotti, the runoff of private capital has often been forgotten when assessing the damages caused by the mafia, and this was why Visco's analysis appeared so valuable.

The second study quoted by the Bank of Italy's governor showed that the presence of the mafia pushes up the cost of credit, leads banks to ask more guarantees to lend money, and affects the insurance market.

All these distortions prevent entrepreneurs, and especially foreign investors, from doing business in Italy because the mafia "increases in the long term the risk and uncertainty of the business environment, which ultimately lowers the growth potential," Pinotti concluded in his paper.

These analyses seem to have given Italian authorities a more sophisticated knowledge of mafia methods, allowing them to refine their tools against organized crime.

Besides scores of anti-mafia police operations, for example, Italy recently passed a new provision to make self money-laundering a crime, and reformed the legislation on mafia vote-buying to provide a more specific definition of this illicit conduct and stricter conviction terms for politicians who commit it.

"Italy is moving well at a legislative level. We have passed quite effective new laws, even though implementation is still to be perfected," anti-mafia activist Dell'Olio said.

Dell'Olio said further steps would be necessary, such as a better management of seized mafia assets, or a new provision to allow also the confiscation of assets to those convicted for corruption. Yet, the knowledge developed by Italy could be a model.

"It would be most useful within the European Union, where the economic fight against the mafia still differs a lot from country to country, up to the goal of a single EU public prosecutor that Italy has been promoting," Dell'Olio said. Endit