ROME—Patrizia Zanotta, owner of a welding firm in northern Italy, survived the country's worst recession since World War II without layoffs by cutting her 10 employees' hours and scrimping on new equipment.

Though orders are finally starting to pick up from her clients abroad, demand remains weak from the local builders that are her main clients. She blames Italy's extraordinarily high business and payroll taxes, which together take some two-thirds of a company's gross earnings.

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