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Trading and Procurement Policy

Macroeconomic scenario

2010 was a year in which worldwide growth reached almost 5%, considerably higher than expectations at the beginning of the year, though even in the major industrialised countries the economic crisis continued to be felt after the financial system bailouts, while in emerging countries, the improved debt situation made it possible to end the year with strong growth.

In Italy, the gross domestic product (GDP) increased by 1.1%, though the increase in the fourth quarter of 2010 of 0.1% was modest compared to the previous quarter. During 2010 the crisis in the Eurozone was characterized mainly by the increase in sovereign risk.

Inflationary pressures have been contained in developed economies, including in OECD (Organization for Economic Cooperation and Development) countries, inflation over the 12 months increased by 2.1% in December from 1.8% in November.

The conditions in the labour market in the Eurozone continued to level off in recent months while in Italy employment continued to decrease, particularly among young people, in the third quarter.

Insofar as raw materials are concerned, following the significant decreased in 2009, the year just ended showed a recovery in the prices of all fuels, mainly concentrated in the third quarter, when the trend turned decisively upwards.

Brent returned to levels above 79 dollars per barrel (+28.9%, on a trend basis), realigning itself to 2007 levels, after a two year period of excellent values and performance.

In 2010, coal also recovered from the slide it experienced in 2009. Its prices increased to slightly over 101 dollars/metric ton (MT) (+43%, on a trend basis).

In 2010, annual prices at the natural gas exchanges also increased, in line with the gas and coal markets.

In regard to currencies, 2010 was a year of depreciation for the Euro due to the tensions caused by sovereign risk in the Euro area. The tensions peaked in June bringing the EUR/USD exchange rate to 1.18 to then invert again, though this too stopped after the second phase of the tensions linked to Ireland.

The average USD to EUR rate in 2010 was 1.3268, a decrease of 4.77% compared to 2009 (source: Italian foreign exchange office).

In 2010, the interest rate dynamics in the Euro area were strongly influenced by Portugal, Ireland, Greece and Spain (PIGS) and in particular the intervention of the European Union (EU) and the International Monetary Fund (IMF) in Greece; these actions resulted in a short term stabilisation of the rates and lowering of the medium-to- long term rates.

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