Key Challenges

Weaknesses must be addressed to attain stability
Italy suffered severely from a long period of economic and financial crises. However, Italy’s recent economic recovery can build on strong family bonds, high household savings rates, the resilience of small businesses, several strong manufacturing sectors and the quality of some public institutions, including the Presidency of the Republic and the central bank (Banca d’Italia). At the same, the economic and financial crises have exposed serious weaknesses across the public and private sectors, which must be addressed to ensure economic sustainability.
State institutions
need reform
State institutions need significant reform. After the failure of the 2016 referendum on the excessively broad constitutional reform and the strong personalization around the former prime minister, Matteo Renzi, the need to improve crucial mechanisms of governance remains. The recently approved electoral reform will further fragment parliament. To counterbalance this effect, the next government coalition (following the 2018 elections) should concentrate on defining a well-selected and clearly agreed government program. The government should also carefully define mechanisms for resolving internal conflicts. The parliament should improve its procedural rules to discourage the further fragmentation of parliamentary groups and make decision-making more efficient.
PMO should take on stronger coordinating role. Innovative policy approaches are needed
Special attention should be given to improving the organization of the Prime Minister’s Office (PMO). The PMO should become a more effective tool for steering and coordinating the decision-making process of the cabinet. The continuing accumulation of heterogeneous functions in this office should be discouraged, as it exacerbates the lack of coordination between ministries. The lack of coordination has meant that ordinary policies are inefficiently implemented and poorly resourced, and extraordinary policies are well endowed and often free from normal rules. Non-strategic functions should be transferred from the PMO to other government bodies, so that the PMO can focus on important policymaking issues. More opportunities for independent experts and open consultations to improve the quality of policymaking should be encouraged. Greater emphasis should be given to strategic and innovative policymaking approaches, rather than the traditional, conservative approaches.
Central-local relations must find new balance
The relationship between central and local governments has yet to find a satisfactory equilibrium. Central government has largely failed to control local and regional government spending. Yet, central government has simultaneously reduced the range of independent revenue sources available to local governments. This has increased local government dependency, while encouraging irresponsible behavior. The legislative role of regions, in the past excessively extended, must be more focused on regional issues. A more sustainable balance between local government autonomy and responsibility must be found.
Political parties must regain public trust
Further democratization and fresh leadership, complemented by tighter regulation of party organizations, is required to rebuild public trust in the established political parties. New legal rules should be adopted to promote internal democracy within political parties. In addition, a transition in political culture away from excessive personalization and competitive rhetoric toward pragmatism and internationalism is needed.
Civil service, judiciary reforms are necessary
Public administration requires a fundamental restructuring, clearly defined central and local government powers, and substantial reform of recruitment procedures, particularly for senior civil servants. Careful performance evaluation processes for all levels of public administration and greater accountability for senior civil servants should be a priority. The judiciary should be actively encouraged to accept reforms that increase its professional quality and ability to ensure timely justice. A less politicized judiciary should be enforced.
Liberalization would promote economic growth
Economic policymaking needs to promote a more dynamic and growth-oriented economy. This will require further economic liberalization, and the curtailing of monopolistic and oligopolistic power. In addition, business regulation should be simplified to enable traditional and emergent businesses to co-exist. Meanwhile, fiscal expansion, designed to ease pressure on production and employment, must be balanced against fiscal sustainability. Small businesses need more support in accessing credit, and should be encouraged to grow and diversify. Government, business associations and trade unions should share the responsibility for achieving these goals, which will require an economic culture of cooperation and pragmatism.
Citizenship is key
element of integration
As immigrants form an increasingly large proportion of the workforce, the management of immigration, and the effective integration and protection of immigrants’ rights must receive greater attention. Proposed legislation addressing the issue of access to citizenship for immigrants should define a realistic path toward citizenship for immigrants to facilitate integration.
Better cooperation between public authorities and private organizations is necessary for the improved management of natural resources and cultural heritage. Natural resources and cultural heritage are important to improving people’s quality of life, economic growth, the tourism industry, a sustainable agricultural sector and foreign investment.
Education is top priority even under austerity
The education system should be a higher priority, despite the austerity agenda. More flexibility and openness in the education system is necessary for the system to respond to changing societal needs. After years of severe budget cuts, universities and research centers need to be given the resources to recruit young people and qualified foreigners. A higher skilled workforce complemented by a knowledge-based, innovative economy would increase economic competitiveness.
More active EU role
would be beneficial
Italy should participate more actively in EU and international spaces. While already leading some EU operations, Italy should look to build closer and more cooperative relationships with neighboring countries, identifying common agendas rather than focusing on narrow national interests. This would allow Italy to more effectively exploit its geopolitical potential.
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