Guido Guzzetti of Prime Investment Management in Milan, who will run the company's open pension fund, believes the Italian market along with other continental European markets has bright prospects".

These prospects, he says, are directly dependent on the success of the EMU project.

Guzzetti notes that the Italian stock market correlates with the French, German and Spanish ones and that these markets should show the best growth in comparison to the UK, Netherlands and Switzerland "which behave a bit apart".

"If not just the numbers but the underlying social change is achieved, then we should see great benefits," he adds.

He is also relatively unconcerned about a possible German interest rate rise. "We shouldn't be too worried about German interest rates, because a rise will probably help convergence without endangering the EMU process," he says.

Guzzetti regards declining bond returns as the most important stock market driver, particularly because of its effect on retail savers. "It is just at the beginning now. When people become accustomed to poor returns on treasury bills and bonds they will have to chase more interesting investments. This will bring them to the Italian bourse first and then to other bourses."

He adds that flows of money from the new pensions system will be part of a much slower process. "It will be steady but it starts from zero and will need time to develop."

He also expects increased international interest because of restructuring, coupled with poor prospects elsewhere.

"If you look around the world there are not so many opportunities. The US stock market is well done, the Japanese market is still in flux, and the Far East and Asia have gone to the wall, something that is not going to change overnight."

In terms of sectors he believes that the market will not necessarily follow the patterns seen in previous economic recoveries. "It will not show purely cyclical themes except in the very short term. Growth-oriented sectors such as technology and investment goods should benefit. All over Europe we have a big restructuring while pure consumption is not going to be buoyant for some time."

He does not foresee any major risks apart from the collapse of EMU due to unforeseen circumstances. "It would be a great pity because it is not an opportunity that we will findagain for some years. Everything would have to be reassessed.""

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