Parmalat, which purchases some 8 percent of the country’s milk production, is the largest Italian food company. Its collapse jeopardizes tens of thousands of workers’ jobs, spread around the world, as well as the livelihood of dairy farmers in Italy and Brazil.

Prime Minister Silvio Berlusconi said December 21 the government would “intervene to bail out the company and save jobs.” The cabinet promptly appointed a regulator to put together a “rescue” plan, and amended laws to shield the company from creditors’ demands for debt repayments. Berlusconi’s government also appealed to Brussels-based administrators of the European Union, which is dominated by Paris and Berlin, to waive EU restrictions on state aid to insolvent companies.

On December 19, directors of the stock exchange in Rome suspended trading in Parmalat shares, which had declined in value by $1.5 billion euros. Eight days later the company was declared insolvent by a court in the northern city of Parma, its home base. Parmalat’s total losses are estimated to be as high as $16.2 billion.

Among those owed money are dairy farmers across Italy, who say they have not received $157 million in payments for milk and other dairy products. Farmers in the town of Collecchio, where the Tanzi family that dominates Parmalat got its start, picketed the local factory in late December to demand payment.

The tremors from the food giant’s financial cave-in are not confined to Italy. Parmalat employs some 36,400 people in 30 countries, including 4,000 in Italy itself. In the four decades in which it has operated, the company has carved out a big slice of the dairy market in Brazil and several other semicolonial Latin American countries, and has been a competitor in the imperialist economies of the United States, Canada, Australia, Western Europe, and elsewhere.

Eight company executives and advisors are now in jail or being sought by the Italian police. In the United States the Securities and Exchange Commission (SEC) filed suit against it December 29. According to the Washington Post, the SEC accused Parmalat of inducing investors in the United States to buy more than $1.5 billion worth of bonds and other securities, while undertaking—in the government agency’s words—“one of the largest and most brazen corporate financial frauds in history.”  
 
U.S. banks under scrutiny
The SEC has also announced that it is looking into dealings by U.S. banks, including Bank of America and Citigroup, with the insolvent company. An attempt by Parmalat’s directors to pass off a pasted-together fax with Bank of America letterhead as authority for almost $5 billion worth of nonexistent assets in the Cayman Islands helped to expose the fictitious character of much of the company’s claimed holdings. Bank of America reported the apparent fraud in December.

Such crude methods were not unusual according to investigators, reported the Wall Street Journal December 31. “Over the course of years,” it stated, “documents were poorly forged on a scanner then run through a fax machine to make them look authentic. Signatures, they add, were lifted from old letters and copied onto new ones, and official stamps tampered with. Then four times a year, when quarterly results were due, they say financial accounts and transactions were inflated.”

The Journal contrasted the Italian firm’s “cut and paste forgery” with what it claimed were the “sophisticated financing vehicles and partnerships” used to similar ends by the American energy company Enron, which crashed amid similar scandals in 2002.

Whatever the difference in methods, however, the stripping away of both companies’ false assets was tied to broader economic problems, including the decline in the stock markets worldwide and the deeper economic crisis in key Third World markets.

Parmalat’s founder, Calisto Tanzi, one of those jailed, told investigators that he and his cohorts were prompted to conceal Parmalat’s problems after it was hit by losses at its huge operations in South America. According to the December 31 New York Times, an investigating judge said Tanzi had described “adjustments to the balance sheet” as necessary “to overcome crisis situations which, beginning in about 1998, were caused above all by the South American market and, last year, by the exchange rate situation with respect to Brazil and Argentina.”

The government of Brazil, where Parmalat operates nine plants, devalued the country’s currency in January 1999—a step that was followed in late 2001 by the near-collapse of the Argentina economy, including a de facto default on payments on the country’s foreign debt. Parmalat’s other Latin American holdings include facilities in Ecuador and Venezuela, where its chief honcho is being sought by police.  
 
Crisis of Italian capitalism
The Tanzis are a prominent ruling-class family in Italy. Calisto Tanzi cultivated an image as a patron of Parma’s Catholic Church, music, and owner of the city’s soccer club—a lucrative business venture in its own right, now likely to be placed on the auction block along with other assets. He also built close links with the Christian Democratic Party, which ruled the country for decades until it fell apart in the 1990s under the impact of the growing economic crisis and social polarization.

In a December 30 article the New York Times noted that the company’s collapse, along with the continued decline of the Fiat auto company and other major firms, spelled bad news for the ability of Italian capitalists to “compete in the global market.” It cited a U.S. Chamber of Commerce survey showing that Italy, Europe’s third biggest economy, attracts only 2 percent of total investment abroad from the United States—one-fifth the level of the Netherlands and one-tenth that of the United Kingdom.

“The fall of the Tanzi family sends a clear signal of the need for the reform of family-controlled capitalism,” said Alberto Carneval Maffé, a professor at the Bocconi University Business School in Milan, approvingly quoted by the Times. The control of major corporations by superwealthy families, however, far from being unique to Italy, is the way capitalism works everywhere, with the New York Times itself—owned by the Ochs-Sulzberger family—being a case in point.

What irks the U.S. rulers is not this reality of capitalism, but the fact that the working-class resistance in Italy to the bosses’ efforts to roll back social rights won by working people—as well as the protectionist measures imposed by the Italian capitalists—raises the overhead costs of U.S. investment in the Italian economy.

The Berlusconi government’s attempts to cut further into workers’ social wage—especially retirement benefits—have sparked protests by the major trade union federations. Resistance has been sparked by other attacks as well. In mid-2003 tens of thousands of airline and health-care workers carried out stoppages to protest layoffs and contract takebacks by the bosses.

The Confederation of Workers Unions has announced a series of strikes for mid-January. “Ten thousand workers of the Customs offices, 45,000 workers of the fiscal agencies and 33,000 firemen will strike for eight hours,” stated the Italian news agency AGI January 2. These workers have been awaiting the renewal of their contracts for two years, it reported.  
 
 
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