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Trading and Procurement Policy

Business analysis

Macroeconomic context

2011 was a year marked by severe tensions concerning sovereign debt in the eurozone and by a sharp worsening of the economic outlook, not attributable solely to temporary factors. Continuing low levels of employment, less expansive budget policies in the countries of Europe and widespread uncertainties regarding the solution of financial imbalances are causes of considerable concern.

In Italy, there was a sharp slowdown in the economy from the end of the summer onwards, with gross domestic product (GDP) rising by just 0.4% on an annualised basis. This represents a decrease of 0.7% in the fourth quarter of 2011 compared with the previous quarter, and of 0.5% compared with the fourth quarter of 2010 (preliminary ISAT estimates published on 15 February 2012).

Inflationary pressures were held in check, against a background of moderation of costs and weakness of demand. In the closing months of the year, increases in indirect taxes caused a rise in consumer prices, and a further increase will be produced by the hikes in fuel duties coming into effect from the beginning of 2012 in some regions.

The employment recovery begun at the end of 2010 was progressively halted, and in the final months of 2011 there was probably a rise in the unemployment rate, which for young people now stands at 30%.

With regard to raw materials, 2011 saw a net rise in prices for all fuels, concentrated mainly in the first four months, consolidating an upward trend already evident in 2010.

Brent crude ended the year a little above $111/bbl (representing a rise of 40%), far exceeding the upward expectations expressed by the markets during the course of the previous year. The rise reached its peak in April, when it hit more than $120/bbl, close to the monthly highs seen in the summer of 2008, before gradually falling to around $110/bbl at the end of the year. With regard to the outlook, the futures markets are expecting substantial price stability in 2012, with a slight decline in the second half.

For coal too, albeit to a lesser degree, 2011 represented a year of further recovery from the collapse of 2009, with prices rising to $121.5/MT (+20.2% year-on-year).

In line with the trends seen for oil and coal, the gas market was also marked by rising prices in 2011.

On the foreign exchange markets, the first few months of 2011 saw the euro appreciating against the dollar until the end of August. From September, growing fears regarding “country risk” (Greece and Italy) triggered a sharp rise in the dollar.

The average value of the US dollar in 2011 against the euro was €1.3917, representing an increase of 5% compared with 2010.

With regard to interest rates in the eurozone, tensions on the government securities markets in 2011 and the consequent uncertainty that spread through the financial markets hit the revenues of the banks, particularly with regard to wholesale products. These difficulties had a serious impact on the availability of credit. Despite the intervention of the European Central Bank, which reduced the official rate on two occasions, bringing it down to 1%, the credit squeeze is severely affecting the possibility of any expansion or recovery of the economy.

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