Recently, Turin-based Juventus football club issued a stern directive to its star players. Italy's most successful club, owned by the Agnelli industrial dynasty, which has a 30.5 per cent controlling stake in Fiat, was annoyed that its exorbitantly paid stars were turning up for work (training) in a whole fleet of Mercedes, BMWs, Porches and Volvos rather than in an "in-house" car, namely a Fiat.

In future, the players were told, you will arrive at training in the Fiat company cars (essentially Fiat, Alfa Romeo or Lancia) that we have given you. Non-Fiat brand cars are strictly for private use.

Footballers, of course, are modern-day popular icons. Their tastes reflect and influence a wide range of popular market choices. If it is good enough for David Beckham or Alessandro Del Piero, then it is good enough for me.

The trouble for Fiat is that, for some time now, it has not been good enough not only for its own footballers but, more importantly, for its key domestic and European markets. In the latest phase of an ongoing company crisis, Fiat Auto two weeks ago announced 8,100 lay-offs, equivalent to a fifth of its entire Italy-based workforce.

The lay-offs have been prompted by a combination of increasing debt and decreasing market share. Fiat Auto, which generates 45 per cent of Fiat group revenue, earlier this year reported a first-quarter loss of €429 million, compared with just €16 million 12 months previously. Media reports this week suggest that, in the first nine months of 2002, Fiat Auto has lost €1.2 billion, equivalent to more than a third of company capital.

Furthermore, Fiat Auto's current share of its key domestic market is 28.7 per cent or less than half its share of 15 years ago, while Fiat sales in the European car market fell 20 per cent in April and 22.6 per cent in May by comparison with 2001. On top of that, the group company has a net debt of €6.6 billion.

Industry analysts are concerned that the cuts announced last week may permanently close down entire plants such as the one at Termini Imerese in Sicily.

Arguably even more worrying is the consideration that, such is the depth of the current crisis, Fiat will soon be left with little option but to sell off Fiat Auto to US giant General Motors, which already has a 20 per cent stake in the company as well as a "put" option on the remaining 80 per cent for 2004.

Interestingly, General Motors appeared to react negatively to the Fiat crisis when it announced earlier this week that it had "written down" the value of its stake in Fiat Auto from the €2.4 billion it paid in 2000 to €220 million. Fiat chairman Mr Paolo Fresco, however, suggested that the writedown might simply be a General Motors tactic in order to buy out the rest of the company at a much cheaper price.

It was the Vatican daily L'Osservatore Romano, a newspaper not normally noted for its economic and industrial analysis, which put the current Fiat crisis into true perspective last week when it wrote: "The symbol of Italian industry is crumbling, and the consequences of this crash are falling on the workers."

Throughout much of the past century, and especially in the post-war era, Fiat has indeed been precisely that, the symbol and flagship of Italian industry. No company more epitomises the initial difficulties and subsequent triumphs of Italy's post-war economic miracle.

As Italians recovered from the shambles and destruction of the second World War, it was the low-cost Fiat car that literally (and to a certain extent metaphorically) put them back on the road. Until recently, Italian public opinion tended to identify the successes and failures of Fiat with the economic wellbeing of Italy as a whole.

Given that as recently as the late 1980s Fiat controlled 12 per cent of all stock market-quoted companies in Italy, such a viewpoint made good sense.

Throughout the 1950s and 1960s, Fiat worked closely with a succession of Christian Democrat governments in the planning of the Italian economy. The pay-off came by way of heavy state investment in an extensive autostrada system, limited investment in public transport, low petrol prices and a protected domestic car market.

There are those, including European Commission President Mr Romano Prodi, who now argue that Fiat's protected place in the domestic market may, in the long run, have done the Turin company more harm than good. Mr Prodi was head of state-holding company IRI when he tried to sell IRI-owned Alfa Romeo to Ford back in 1986.

The sale to Ford was a "done deal" until Fiat, late in the day, became active, eventually persuading Socialist prime minister Mr Bettino Craxi to sell Alfa Romeo to Fiat instead (arguably on much less-favourable terms for the Italian exchequer).

That deal left Fiat with a virtual monopoly of car production in Italy, a domestic monopoly that deprived Fiat of the life-blood of competition, argues Mr Prodi. This most recent Fiat crisis has put the centre-right government of media tycoon Mr Silvio Berlusconi into an awkward bind.

In the past, an Italian government would have simply bailed out Fiat. Such state assistance, however, would today risk running foul of European Union norms on competition.

It also goes against the free-market principles that Mr Berlusconi has always proclaimed as one of his guiding lights.

Against those principles, however, Mr Berlusconi must weigh the negative socio-political implications of short-term job losses not to mention the long-term loss of Italy's automobile industry.

Lest he had any doubts about the contrasting pressures he currently faces, Sicilian parliamentarians from his own coalition have already reminded him by threatening not to support the 2003 budget unless it includes measures to help Fiat workers.

After a recent meeting with Fiat executives, including Mr Umberto Agnelli and chairman Mr Fresco, the prime minister indicated that he was looking for a "market solution" to Fiat's problems. At first, this appeared to involve the sale of Fiat Auto to a newly created company that would include General Motors, the Italian state and Fiat's main creditor banks.

Those same banks (Intesa BCI, San Paolo IMI, Unicredito and Capitalitalia), however, have categorically rejected such a deal, arguing that the restructuring plan of lay-offs was the best way forward for Fiat.

The four banks, too, pointed out that they have already done their bit by making €3 billion available to the company this summer on a three-year credit plan.

Other government options currently under consideration include a €3,400 "eco-incentive" proposed earlier this week by environment minister Mr Altero Matteoli.

For many commentators, the Fiat crisis has ramifications that go far beyond Italy's leading private- sector company, since it comes against the background of an apparently ailing economy (0.6 per cent growth in 2002) afflicted by high inflation, falling tax revenues and growing public debt (close to 110 per cent of GDP).

Now is the time for decisive action from the prime minister, Mr Berlusconi. Does he go the protectionist, subventionist way of old or does he follow his avowed free-market principles and leave Fiat out in the rain?