Italy, which has long suffered from low economic growth due to lingering traditional obstacles, has plunged into an economic downturn since the contagious financial crisis broke out last year.

Analysts say the current downturn may last for a considerable period in the country as it battles against traditional old obstacles that impede its development while trying to pull through the economic crisis.

Traditional limitations on economy

Italy enjoyed vigorous growth in the mid 1990s and became one of the first 11 eurozone countries. However, from the late 1990s it plunged into a downturn, when most years its economic growth was behind that of Europe's average level.

In 2005, Italy had the worst economic data in the eurozone countries: zero growth in GDP, and the deficit jumped to 4.1 percent of GDP. In 2006, thanks to the Torino Olympic Winter Games, it saw a rise of 1.9 percent in GDP, while Britain and Germany both increased 2.7 percent. In 2007, Italy's GDP rose 1.5 percent, while the European Union enjoyed a 2.9 percent increase.

Italy has faced a series of problems that have slowed development.

First, instead of having a large number of world-class multinational corporations like other economies of equivalent size, Italy's main economic strength was its large base of small- and medium-size companies, which usually suffered from high labor costs. As the developing countries took advantage of the low cost of raw materials and labor, their products, although sometimes blamed for poor quality, adversely affected the local companies.

In order to cut costs and gain bigger profits, the Italian small- and medium-size companies began to invest in East Europe and Asia, moving their manufacturing plants there, which led to a decrease in jobs, an increase in unemployment and a greater pressure on public spending in the country.

Second, Italy underwent a considerable economic gap between its northern and the southern areas. The annual average income of people in the south was only 75 percent of that in the north in 2007. In order to boost economic development, the Italian government kept investing in the south, which, to their disappointment, had little effect.

Third, Italy was not good in the high-tech fields like the bio, electronic, and information industries, which made it more difficult to develop its high-value added industries and less competitive in the knowledge economy.

Furthermore, analysts say, the country's huge public debt in Europe and corruption in government also contributed to the decline of its economy.