Depending on whom you talk to, the Italian publishing world is described either as dangerously stagnant or remarkably vital. Evidence suggests that both views are accurate.

On the positive side of the ledger, new publishing houses are sprouting up at a pace of 120 to 130 a year and the bookstores are full of a wide and extremely interesting range of imaginatively chosen and beautifully produced books. In fact between 1985 and 1990, the number of publishers in Italy jumped from 1,933 to 2,579, and the number of new books released each year grew steadily from 17,000 to 33,000.

Unfortunately, this rapidly growing number of publishers and books is chasing a smaller and smaller number of readers. During the 1980s, the percentage of Italians who bother to read one book or more per year dropped from 45 percent to 37 percent, among the lowest levels in Europe. Publishers have compensated by charging higher prices and printing fewer copies. (In the 1980s in Italy, the price of the average book went from about $7 to $28 a copy and the average printing dropped from 8,000 to 6,000 per book.) The result is that -- except for a few bestsellers -- books have tended to become an expensive passion for a relatively small elite.

To attract a larger audience, some publishers have adopted unusual promotional gimmicks. The small, elegant publisher Studio Tesi began offering after-dinner mints with some of its books, while the commercial colossus Rizzoli tried tortellini. Two years ago, Feltrinelli, which is both a major publisher and a bookstore chain, started the practice of selling books by the kilo during the month of July. It kicked off the campaign with the slogan: Is a kilo of mushrooms worth more than a kilo of Shakespeare? "It's a provocative challenge to the reader," says Carlo Feltrinelli, an editor in the family business. "It's been an extraordinary success: The bookshops have been as full in July as at Christmas time."

Many publishers complain that Italian readers are looking for a sure thing, favoring the two ends of the literary spectrum: bestsellers or classics. "In recent years we have had the phenomenon of one or two bestsellers each year that have dominated the market for at least six months," says Giuliano Vigini, author of a recent study of the Italian book market, L'Italia del Libro (Italy of the Book). For instance, 1989 was dominated by Umberto Eco's Foucault's Pendulum. This year it is the turn of Oriana Fallaci's massive novel about the Lebanese civil war, Insciallah. Staples of the English and American bestseller lists, such as Ken Follett, Scott Turow and Tom Clancy, are also highly successful here. But authors of less obvious commercial appeal, such as Isabel Allende, Milan Kundera and Gabriel Garcia Marquez often sell at the same clip. In both literary and popular fiction, foreign authors outsell Italians by a wide margin. The Passing of Giants PERHAPS the most emblematic event in the Italian literary world this year was the death of novelist Alberto Moravia, the country's most famous contemporary novelist. For the last five years, deaths and funerals -- rather than publication dates -- have been the literary milestones in Italy: Italo Calvino (1985), Elsa Morante (1985), Primo Levi (1987), Leonardo Sciascia (1989). One by one, the entire generation of writers who came of age during the struggle against fascism has been dying off, with no genuine replacements in sight. "The death of that generation is a real disaster for Italian culture," says Antonio DeBenedetti, a prominent literary critic and novelist. "As long as those writers were alive, Italian fiction enjoyed a certain prestige, both at home and overseas, and that worked to the benefit of other writers. Now that they are gone, it seems like a desert. Italian novels are lucky to sell 4,000 or 5,000 copies and most of them sell much less."

DeBenedetti sees the problem as part of a larger cultural crisis. "It's a double crisis: both political and literary. Most of Italy's great writers of the postwar were politically to the left. They were people whose work was informed by a deep set of moral and political values. All those political certainties have collapsed. At the same time, the movement of avant-garde, experimental literature has exhausted itself. So the current generation of writers has no real direction."

Significantly, the contemporary writers who have been able to stir a similarly deep response in Italian readers, Eco and Fallaci, were both born in the 1930s and grew up breathing the cultural atmosphere of Italian anti-fascism. There are many other fine contemporary Italian novelists -- Luigi Malerba, Antonio Tabucchi, Rosetta Loy, Sebastiano Vassalli, Giuseppe Pontiggia, Vincenzo Console, Gesualdo Bufalino, to name only a few -- but none has yet acquired the stature of their predecessors. "The situation in fiction here is like that in many countries: there are a lot of good writers but no great ones," says Gianandrea Piccioli, of Milan's Garzanti. "Most of our novelists are rather narrow and self-referential and lack a real vision of the world." Of the Italian authors they do read, Italians seem to prefer the dead to the living. Luigi Pirandello and Italo Svevo -- both of whom have been dead more than 50 years -- routinely outsell most of Italy's highly touted younger writers. Since his death in late September, Moravia has begun to dominate the bestseller lists. His autobiography, in the form of an interview with novelist Alain Elkann, tops the nonfiction list, while his first novel, The Time of Indifference, is once again a best-selling paperback. Young Writers "BECAUSE of the high price of books, many readers don't want to take the risk of buying a new novel, they prefer the certainty of buying a classic," says Marco Polillo, editor-in-chief of Mondadori. Perhaps because of the fatigue of Italy's literary class, the most successful new books have come from completely unexpected directions. Last year's runaway bestseller was a first novel by an unknown Sicilian girl of 19, Lara Cardella. Her novel, I Wanted to Wear Pants, describes the plight of a teenager in a small Sicilian town, where any girl wearing pants (or otherwise straying from the norms expected of her) is immediately branded a whore. The novel has a lively, ironic style, a good eye and ear, and succeeds in giving a voice to a world from which one generally hears almost nothing.

This year's unexpected smash was a book by a Neapolitan schoolteacher who published a series of classroom assignments written by his elementary school students. The book's success has been breathtaking. "We {initially} printed only 8,000 copies," says Marco Polillo, editor-in-chief of Mondadori, "and we have sold 800,000 to date." Ungrammatical, funny and highly imaginative, mixing Italian with local dialect, these school papers provide a fascinating window onto the mental universe of children growing up in Naples. They are full of the earthy, irreverent humor of the city that produced them. For example, in trying to explain why the Pope lives in Rome, one child writes: "The Pope never comes to Naples because he's afraid they'll ask him for money." Publish and Flourish IN THE absence of exciting new novelists, publishers rather than writers have become Italy's new literary stars. Italian publishers are wonderful at scouring the neglected corners of literary history for unusual gems: forgotten classics, minor books of major authors, exotic travel journals and little-known volumes of literary correspondence.

Arguably the greatest master of this art is Adelphi of Milan, a small but highly prestigious publisher. "Of the 50 books we publish each year, half are old books being brought into print and they frequently outsell the books of contemporary authors," says publisher Roberto Calasso. "I think in many ways it's a good sign -- the sign that there is a sophisticated, discriminating public that buys books that it finds interesting rather than simply buying whatever is 'new.' "

There are numerous authors who have fallen into comparative oblivion in their own countries, but whom publishers here have succeeded in making into household names in Italy. Henry Roth's Call It Sleep, a novel of Jewish immigrant life in America written in 1934, has been an enormous success in Italy in the last few years. Because of the passionate interest in Roth's work here, his Italian publisher, Garzanti, was able to coax the elderly author into publishing his first new work in 50 years, which appeared first in Italian.

Almost singlehandedly, Adelphi created a boom in Italy for the literature of the old Hapsburg Empire. Austrian authors who are nearly unknown in the United States outside of university German departments, such as Arthur Schnitzler, Joseph Roth and Karl Kraus, sell in Italy at the clip of spy thrillers. "We sold more than 50,000 copies of several books by Joseph Roth and more than 250,000 copies of one of them," says Calasso. "In America, they had difficulty selling two or three thousand copies."

Adelphi's prestige (some would say snob appeal) is such that its faithful readers will buy texts of extreme difficulty -- on Presocratic philosophy or Zoroastrian mysticism -- purely on faith. Adelphi's latest bestselling author is none other than Benedetto Croce, Italy's most important philosopher in the 1920s and 1930s, whose work has gone out of favor in recent years. By shrewdly reintroducing a little-known side of Croce's work -- a book on Neapolitan legends and stories -- Adelphi has suddenly made dusty old Croce fashionable again.

Perhaps the creativity of Italy's publishers will stimulate its novelists and help them win back some of their lost audience. Alexander Stille, an editor and writer, is currently living in Rome where he is at work on a book about Italian Jews under fascism.