This analysis begins with the question, how can Italy pay back its public debt? The answer is simple: fighting the criminal associations and taking their wealth away from them. This operation will require time and investment, but in the long term it can be the best solution to boost the Italian economy.

The economic crisis that started in 2008 is not over and Italy is still enduring difficult times. At the moment, after Silvio Berlusconi’s resignation, the country is ruled by a technical government led by Mario Monti. The main role of this government is to ensure that Italy will be able to overcome the crisis. Given the scale of the Italian public debt, this is no easy task.

The technical government initiated some important restructurings. These reforms were characterized as ‘blood and tears’. Italian families will have to do many sacrifices. We are, however, not going to discuss whether the proposals of the government are wrong or right. What we want to talk about are four of the most prosperous Italian companies that are performing outstandingly well on a worldwide level, and seem to not be affected by the economic crisis at all. Actually, they are even becoming stronger, since more businesses need their money.

These four companies used to be based primarily in the south but then expanded to the North of Italy and even beyond. They are truly international. They make billions of Euros per year. In 2011 one of them collected 44 billion Euros, corresponding to 2.9% of the Italian GDP. Nevertheless, reading this data does not comfort the Finance Minister since he cannot tax these four outstanding companies. Why? Because all these associations are illegal. They are the four Italian mafias: the ‘Ndrangheta, Cosa Nostra, the Camorra, and the Sacra Corona Unita.

Reporters have underlined that in times of crisis the mafias become even more powerful, since there are more legal businesses that require money, facilitating their task of money laundering. Thanks to this process, the mafias start relationships with legitimate companies and they will continue them even after the crisis passes. It is thus fundamental to be alert and ready to react to this dangerous mechanism. However, although the mafias represent a dangerous threat to the Italian state, their activities could inspire a change in policy too.

The Italian government could place, as one of its top priorities, reforms that promote a more effective police force. Furthermore, the Government could declare ‘war’ to mafias.

This would be not be a war that is easy to win since these criminal groups have both military and political power. In fact, they have many affiliates and enjoy protection from politicians.

Starting these types of police operations would clearly call for increasing the budget of the Ministry of Internal Affairs and for the Ministry of Defense. But then also other ministries would have to intervene to improve the social conditions of the areas that were infected by the Mafiosi. The current government probably perceives that it would not be able to spend this huge amount of money in a period in which it envisaged to cut the costs rather than to increase them.

However, the money spent in contrasting organized crime is the most profitable investment that the Italian State can make. The returns would be extremely high since the government could confiscate all the properties of the Mafiosi and then resell them. It would thus gain a lot of money that can then be used to boost the economy and pay back the public debt. Furthermore, the economy would become a ‘healthy’ economy and the legitimate businesses would grow faster. For example, from a microeconomic perspective, the small shopkeeper would no longer have to pay the racket and could invest the money that he is saving in his preferred way.

The Italian government may also consider the need to legalize or at least to better regulate certain activities of the mafia groups, such as prostitution and soft drugs. In doing so it would immediately have some cash for its police operations. This would also weaken the underworld, since it would decrease its finances and take away some of its affiliates. The state would then be able to better fight the trafficking of human beings, which right now is in a way tolerated. If prostitution would be taxed, the control on it would be much stricter. Nevertheless, any type of legalization of illegal business has to be carefully evaluated.

Initiating a fight against the mafias, with the aim of destroying them once and for all, will require time since it is not enough to arrest all the bosses in order to prevail. But this should not stop the government from doing so, because all the solutions that the ministers are discussing will have positive effects on the long term too.

Italy needs help to fight these criminals and it should be able to count on its partners at the European Union since they are also affected by the plague of organized crime. Empowering the Europol could be a first step, but it would be better to create a federal European Police that could better face these transnational threats.

Diego Scarabelli, BCSP Guest Researcher - February 10th, 2012