Ominous Oil Hangover

For months many economists have feared that the energy crisis would leave a disastrous economic hangover; skyrocketing petroleum prices, they worried, would start a vicious circle of protectionism among countries threatened by huge trade deficits. Last week brought an ominous sign that those pessimists might be right. Without consulting its eight partners in the European Economic Community (Common Market), the Italian government announced that importers of many foreign products would have to deposit half the purchase price with the state bank. The money would be held for six months and then refunded--without interest. With credit tight, the move amounts to a prohibitive 50% surcharge for many importers.

The scheme is intended to cut Italy's mammoth trade deficit, thus easing the country's 15.5% inflation and relieving pressure on the beleaguered lira. Of all the countries in Europe, Italy is the most dependent on Arab oil and therefore the hardest hit by the quadrupling of petroleum prices in the past seven months. The government has been predicting that unless something drastic is done to curb imports, the trade deficit may reach a whopping $8 billion this year, more than half of which would go to meet the petroleum bill alone.

Crude oil and other raw materials are crucial to Italy's booming economy, but an estimated 45% of other imports--including meat, processed foods and automobiles--are classified as "luxuries," or nonessential goods, and fall under the new restriction. In addition to discouraging all but the most necessary purchases from abroad, the measures are designed to take money out of circulation, thus cooling off the overheated economy while providing the state bank with extra funds to assist export-oriented industries.

Violated Spirit. In other Common Market capitals, the reaction to the Roman surprise was one of irritation tempered by caution. A number of European statesmen complained privately that the restriction represented a beg-gar-thy-neighbor attempt by the Italians to solve their own problems at other countries' expense. Some even questioned the legality of the move, suggesting that Italy had violated the spirit, if not the letter, of the EEC charter. The Common Market has been built on the idea of a free exchange of goods.

There is little danger of direct retaliation against the Italians. But other nations might follow suit and erect their own general trade barriers. U.S. reaction was mild; one American official even called the move "astute" and guessed that it might save Italy a much needed $580 million a year. Perhaps so; but real as the Italians' plight is, their action sets a worrisome example for dealing with the effects of high oil prices.

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