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Italian Families Spend Savings to Get By as Economy Contracts

Oct. 30 (Bloomberg) -- Italian families are consuming their savings as the economy contracts, weakening the safety net highlighted by former Prime Minister Silvio Berlusconi as a chief source of the country’s financial strength.

Thirty-one percent of families dipped into their savings in the last year, compared with 29 percent in 2011, according to a survey released today by ACRI, an association of Italian cooperative banks. The share of families that added to their nest eggs fell to 28 percent from 35 percent.

More Italians are falling back on accumulated wealth to shield them from poverty as unemployment rises and the recession deepens. The culture of private savings in Italy, which has the third-lowest consumer debt in the 17-nation euro area, has given many families a buffer as tax increases and cuts to government spending dampen economic activity.

“Italians still have a strong propensity toward saving, which has now become an anchor for their security,” ACRI said in a statement. About 40 percent of Italians consumed what they earned, according to the ACRI survey.

Italy’s public debt is 126 percent of gross domestic product, the second-highest ratio in the euro area behind Greece. The difference in yield between Italian and German 10-year bonds widened 19 basis points to 356 basis points yesterday.

The downturn in the country’s financial fortunes has put pressure on the austerity policies implemented by Prime Minister Mario Monti, who replaced Berlusconi last year, to protect Italy from Europe’s sovereign debt crisis. Voters in Sicily, Italy’s most impoverished region, cast 15 percent of their ballots on Oct. 28 for the anti-austerity party of comic-turned politician Beppe Grillo.

Absolute Poverty

Absolute poverty rose in Italy last year to claim 3.4 million people, or 5.7 percent of the population, from 5.2 percent in 2010, according to the country’s statistics office, Istat.

Savers in Italy, as the debt crisis intensified, have been invited to give greater to support to the country’s treasury. The government launched a four-year bond this year aimed at retail investors. This month, the third sale of the so-called Btp Italia received orders for 18 billion euros ($23 billion), doubling the two previous offers combined.

“Our system is different than that of other countries that are used to spending more than what their families can afford,” Berlusconi said in Naples on Oct. 1, 2008 in a speech about the importance of Italian savers.

About two-thirds of Italians prefer to keep their savings in liquid instruments, ACRI said. The portion of Italians who consider real estate “the ideal investment” fell to 35 percent from 43 percent last year and 70 percent in 2006, according to ACRI.

To contact the reporters on this story: Andrew Frye in Rome at afrye@bloomberg.net; Chiara Vasarri in Rome at cvasarri@bloomberg.net.

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net

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