Their hand-crafted Nativity scenes are world renowned but artisans on a famous Naples street warn they may not be around for much longer as the economic crisis hits their family businesses.

“It’s a nightmare, the crisis is really starting to hit us hard. We’ve lost 50 per cent of revenue in this period compared to last year,” said Genny Di Virgilio, whose family has owned the workshop and adjoining shops since 1830.

Via San Gregorio Armeno is usually bustling at this time of year as Italians and tourists come for brightly painted figurines, from the Mary and Child, to the Angel Gabriel, to the richly-robed Three Wise Men.

But statuettes of humble fruit sellers or weather-worn shepherds gazing in awe at the new-born infant Jesus have had their prices slashed and at the end of the street one artisan is having an everything-must-go sale.

“The government has bled us dry, taxes and more taxes. Now people have stopped buying. What choice to I have? It’s over,” said 70-year-old Salvatore, as a couple of people lingered around his stand, before moving on without buying.

As Rome signs off on €20 billion in spending cuts and tax hikes aimed at saving Italy from ruin – the third austerity plan this year – Italians are bracing for sacrifices and the craftsmen are in dire straits.

“The future is very bleak indeed. We get no help from the state,” said Luciano Capuano, who runs his family business in a little courtyard tucked away off the main street, along with his brother Vincenzo, their wives and sisters.

The “winter of recession” has already hit Italy, according to employers federation Confindustria, which recently revised its forecast for weak 0.2 per cent growth next year to a radical 1.6 per cent drop in output.

In the grip of the crisis, 64 per cent of Italians were planning to cut Christmas shopping this year and 22 per cent will reduce their spending by more than half from last Christmas, retailers’ group Confesercenti has said.

The financial crisis has also stoked anger over another threat to traditional artisans: shopkeepers who have begun to cut overheads and draw in hard-up customers by selling mass-produced figurines imported from China.

Capuano’s classic terracotta statuettes, hand-painted and adorned with fine silks and satins, cost upwards of €500 – while he says competitors up the street are flogging lower-quality versions for as little as €20.

Marco Ferrigno, a 43-year-old artisan whose love for figurines began age six when he started helping out in the family workshop after school, said he was fighting off the crisis by making celebrity and personalised figurines.

“We’re having to re-invent ourselves to survive but we Neapolitans are very good at that,” he said. “Along with the traditional nativity figurines we now have fun models of pop stars, footballers, politicians – even the Pope!

“The crisis has been bad, I was really pessimistic but actually things are slowly getting better,” Ferrigno said as a gaggle of boys clustered around statuettes of US singer Michael Jackson and Argentinian footballer Maradona.

To distinguish himself from the others on the street, Ferrigno has also begun making personalised statuettes to order, modelled on photographs customers send him of their friends and family, or a favourite actor or star.

“We’re making everything from models of people’s grandmas to famous truffle chefs. People come to us because we really manage to catch a likeness,” he said, before rushing off to take an order by phone from the Vatican.

But many traditional artisans are not convinced by the celebrity statuettes, which some see as little more than “vulgar commercial publicity” which detracts from their main selling point – the quality of their craftsmanship.

“Naples is one of the most beautiful cities in the world but it suffers from crime, corruption and garbage crises,” Di Virgilio moaned.

“The statuettes are the only thing it has got going for it, but for how much longer?”

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