ITALY

Italian policy has been deeply marked by the world financial crisis in the last two years. However, Italy and its governance system displayed a better-than-expected ability to face this period’s most dramatic challenges. Thanks to the often-underestimated resources of Italian society (for instance, the low levels of private debt and the resilience of small enterprises), a relatively conservative banking system (less internationalized than other national banking and finance systems) and prudent budgetary policies on the part of the serving government, Italy has emerged from the crisis without suffering substantial economic damage. Italy’s situation is not comparable in its economic structure to that of the European Union’s other relatively weak economies of Portugal, Ireland, Greece and Spain (along with Italy, the so-called PIIGS group). With an economy still largely based on manufacturing rather than services, Italy faced GDP losses similar to those of Germany, but the overall economic and budgetary situation did not decline substantially, at least in comparison to other countries. The most important challenges are now ahead, as Italy – like the rest of Europe – must define its crisis exit strategy and seek to revitalize growth. As with any big crisis, this one has offered opportunities to address traditional problems Italy has thus far been unable to solve. Yet such opportunities can easily be missed by the lack of focused and determined political leadership.
Given the substantial public debt that Italy has carried since 1980s, the room for spending increases is limited, while spending cuts risk producing recessionary economic effects. Maneuvering room is thus tight. Only a disciplined and sustained effort to significantly improve the quality of public outlays (and thus their positive effects for the economy in general), and to reduce the most counterproductive impacts of high fiscal pressure , can enable the country to avoid the opposite dangers of a strangled economy or pushing public finances to a point of unsustainability.
If this challenge is to be successfully faced, significant improvements must be made in the quality and efficiency of the central and local public administration. Bold but nevertheless management will be necessary in reforming the institutional relationship between the central administration and the regions, which falls under the heading of fiscal federalism. Italy should not sacrifice this reasonable and perhaps also overall cost-efficient and fair political project as a result of political campaigning by coalition partner Northern League. This reform has so far been defined only in its guiding principles, but its practical implementation will determine whether it makes the Italian administrative system more effective or even more cumbersome and costly than it currently is. A profound reform of the tax system is needed, and policymakers should seek to make it simultaneously more equitable for the weaker strata of the population, more effective in preventing tax evasion, and less discouraging to entrepreneurial activities.
Reform efforts should not stop at the symptoms of a political crisis. A new electoral law should be discussed, looking beyond the next set of elections. The current system is neither equitable in the sense of political representation nor functional in the sense of producing stable governing majorities. All parties should try to offer a clear vision of how a future Italy can be constructed. This is particularly true of the political system; despite a federalist approach when it comes to institutions, little real reform in this direction has taken place. As has taken place in other European countries, a coherent discussion of the roles of the president, the prime minister, the Chamber of Deputies and the Senate, and of Italy’s territorial and administrative structure at the central, regional, provincial and municipal level is necessary. This should be bipartisan, and should obviously involve citizens and voters by means of a referendum.
Significant improvement of the school and university systems should be a high priority, in such a way as to make them more flexible and able to respond to the changing needs of society, while at the same time guaranteeing higher levels of quality and openness of access. Only in this way will the country attain the highly skilled workforce and the sophisticated knowledge and research capacities required to compete at the global level.
As an increasing share of the workforce will be composed of immigrants, policies devoted to a more careful management of legal immigration, as well as more effective integration and protection of the rights of immigrants, should receive continued attention. And finally, as some Italian politicians have in fact demanded, immigrant residents should have also be given a feasible path to Italian citizenship in order to make integration efforts complete.
To achieve some of these crucial goals at least partially, the strong leadership which has been achieved by the current government should be coupled with a less aggressive approach to the opposition and other institutions (such as the judiciary), and greater willingness to explore the possibility of consensus.
On the European, international and global scales too, Italy could perform better. The country should try not just to defend its national interests in institutions and organizations like the European Union, but rather take a more active role and ask for cooperation in achieving those interests. There are exceptions where Italy already is part of a vanguard, but the country should open itself more to cooperation with neighbors and partners with the same or similar interests or needs.
For Italy itself and for its subsystems (politics, economy, society, religion, culture, media and so on) the key idea for the next decade will be competition. Only in a system that produces a contest for ideas and concepts will citizens have the opportunity to choose and select offers which can modernize politics, society and the economy.
Last but not least, it should become the duty of the government and the rest of the nation to safeguard the country’s natural resources. Environmental challenges are not only a threat to the health of Italian citizens, but are literally taking Italian soil away. A real green revolution is necessary in Italy, perhaps even more so than in other OECD countries.