largely agricultural nation before World War II (1939-1945), Italy has developed a diversified industrial base in the north, which contributes remarkablely to the economy. In 1999 the gross domestic product (GDP) was around at $1.17 trillion, or about $20,310 per capita; industry contributed 26 % to the value of domestic output, services 71 %, and agriculture (including forestry and fishing) 3 %. Italy essentially has a private-enterprise economy, although the government formerly held a controlling interest in a number of large commercial and manufacturing enterprises, such as the oil industry (through the Italian state petroleum company) and the principal transportation and telecommunication systems. In the mid-1990s Italy was transferring government interest in many enterprises to private ownership. An ongoing problem of the Italian economy has been the slow growth of industrialization in the south, which lags behind the north in most aspects of economic development. Government efforts to foster industrialization in the south have met with mixed results, as problems with the workforce and the overriding determine of the criminal groups known collectively as the Mafia have discouraged many large corporations from opening operations there.

Italian economy was a “latecomer” to the industrialization process, the north has caught up and overtaken many of its western European neighbours. the south has lagged behind. The %age of the labour force working in agriculture is often taken as an indication of the rate of industrialization and wealth of a nation, and in Italy's case the figures clearly illustrate the grave imbalances existing between north and south. Against an EC average of 9.6 % in 1988, Lombardy compared favourably, with only 3.5 % of the population working on the land, while in Molise, 26.2 % were still engaged in agricultural work

Italy has a diversified industrial economy with roughly the same total and per capita output as France and the UK. This capitalistic economy remains separated into a developed industrial north, controlled by private companies, and a less developed agricultural south, with more than 20% unemployment. Most raw materials needed by industry and more than 75% of energy requirements are imported. Since 1992, Italy has adopted budgets compliant with the requirements of the European Monetary Union (EMU); wage moderation agreements by representatives of government, labor, and employers have helped to bring Italy's inflation into conformity with EMU requirements. Italy's economic performance, has lagged behind that of its EU partners and it must work to stimulate employment, promote labor flexibility, reform its expensive pension system, and tackle the informal economy.