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In Rome, the economic reality is setting in on the streets.Eric Reguly/The Globe and Mail

Italy has been an economic slug for the better part of two decades – grazie, Silvio Berlusconi – and went into deep recession last year. But it is only now, after five years in Rome, that I feel that the economic downturn is grinding away at street-level life, changing the city in ways I never could have imagined. The evidence comes from a stroll through my neighbourhood, Testaccio, on the southern fringe of the city's historic centre, just beyond the 4th Century Severian Walls and close to the tombs of Keats and Shelley in the Protestant Cemetery.

Testaccio was once a grubby working class area, dominated by one of Europe's biggest slaughterhouses, that gentrified rapidly after the 1960s. Today, tiny apartments go for €500,000 or more and smart shops that sell designer shoes sit next to mom-and-pop shops that churn out fresh pasta, repair the straps on your handbag and replace the tires on your Fiat. Testaccio has everything you need for quotidian life. I almost never have to leave the area to find anything from printer ink to Norwegian salmon. And all my shopping is done on foot, even if I look rather un-masculine dragging my little two-wheeled shopping cart behind me.

Italians were in denial at first about the recession and Mr. Berlusconi's endless economic happy talk did not help. Small businesses and shops kept their doors open, assuming the downturn would magically reverse itself rather quickly, as so many had before. Now they are giving up hope and shops are closing everywhere.

The first victims were the car dealerships. Rome's are not like North American ones. Most are tiny; some had enough room for only one or two vehicles and they would sit smack next to pizzerias or butcher shops. In the last couple of years, no fewer than three dealerships within a 10-minute walk from my house have vanished. I noticed this morning that two motorcycle shops – one selling Triumphs, the other Kawasakis – have given up the ghost.

My favourite Vespa shop is about to close. I give the owner credit for trying hard. Not long ago, he invested a small fortune to sex up the greasy old place, making it a slick showpiece for Italy's most famous scooter brand. All for naught. Italian motorcycle sales are plummeting, as are car sales, which were down about 20 per cent last year. Fiat, led by Italian-Canadian CEO Sergio Marchionne, now makes more money from its once hopeless and recently bankrupt Chrysler subsidiary than it does in its core Italian market (from January through November, 2012, Fiat's sales were down 18.8 per cent, though Ford, Opel and Renault lost about a third of their Italian market).

Now the recession is, indiscriminately, mowing down other shops. A nautical store that sells small boats, outboard motors and foul-weather gear – being a sailor, I love the place – has been on the auction block for a year, with no takers. My old deli is gone. The owners of small clothing stores tell me that their sales are down 20 per cent. A mattress maker I know said his sales are down 50 per cent or more – purchases of big-ticket domestic items like mattresses can be put off for years. I fear that these shops are doomed. Hit with rising unemployment and austerity taxes implemented by prime minister Mario Monti, who replaced Mr. Berlusconi 14 months ago, Italians' disposable income is getting crunched.

Recessions are not entirely bad things. They can act as cleansing agents, wiping out the marginal businesses, to be replaced by new entrepreneurs with fresh, competitive ideas. But I cannot say this is happening in Rome, at least not in my neighbourhood. Distressingly, some of the old independent shops are being replaced by chain stores, eager to pounce on the suddenly cheap real estate. Two Barclays banks have cropped up near me, as if the world needs more banks. One of the bigger auto dealerships turned into a Tuodi discount supermarket. The place feels like it was plucked from suburban Ohio and air-dropped into the middle of Rome.

As the independents move out and the chains move in, Rome risks losing its alluring village character. London and Paris are already chain store hell. Rome too? Please no. It's happening. One of the newest restaurants in Testaccio is the Roadhouse Grill, a chain rip-off of the very worst of American food culture. The foreigners in Rome are worried that Starbucks is next. Italy is a Starbucks-free zone, so far.

But the ultimate proof that Italy's recession is deep and enduring is the proliferation of shops I have never seen before. They all have the same names and ugly designs, even though they have different owners: "Compro Oro" – I Buy Gold. At least two have opened within a minute's walk from my house. Italians love gold; they hand down gold jewellery from generation to generation and the state is loaded with it. Italy, after the United States and Germany, is the third biggest sovereign holder of gold.

The shops exist to turn gold coins and jewellery (also silver) into cash, at a discount of course. When Italian families are forced to unload their beloved gold, you know something is seriously wrong with the economy. Italy's recession is real. The next prime minister, whoever he is – the election is Feb. 24 and Feb. 25 – is about to enter an economic bear pit.

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