ENRICO LETTA PCM OF ITALY

HOW TO RETURN ITALY TO HEALTHY GROWTH ? : THE TEN OECD* COMMANDMENTS TO ENRICO LETTA – PRESIDENT OF THE COUNCIL OF MINISTERS OF ITALY -

HOW TO RETURN ITALY TO HEALTHY GROWTH  ? :  KEY
RECOMMENDATIONS  FROM OCDE* TO Mr. ENRICO
LETTA – PRESIDENT OF THE COUNCIL OF MINISTERS OF ITALY – AND Mr. FABRIZIO
SACCOMANI – ITALIAN MINISTER OF ECONOMY AND FINANCE -.

Since late 2011, Italy has been enacting a broad package of structural reforms and fiscal consolidation policies, together aimed at addressing a legacy of weak growth and high public debt.

This strategy has been rewarded by higher confidence in financia markets and improved medium – term prospects.

According to OECD, success ultimately depends on full implementation of structural reform legislation and commitment to debt reduction policies, which will hasten the return to healthy growth.

Actually, by embarking on a wide –ranging strategy to restore fiscal sustainability and improve long –term debt, Italy has been able
to reduce downside risks and combined with measures at the euro area level, the Italian economy should emerge from recession during 2013.

Speaking of the actions at the euro area level, Italy has benefited from the European Central Bank’s readiness to provide support if needed.

However, with the public debt – to- GDP ratio nearing 130% and a heavy debt redemption schedule, Italy remains exposed to sudden changes in financial market sentiment.

Again, large and sustained reductions in public debt are therefore the top fiscal priority.

Italy’s real GDP growth per capita has been the weakest of all OECD countries over the past decade.

This reflects very low underlying productivity growth and has resulted in long –standing fiscal difficulties and in stagnant, and recently declining, real income levels.

Some of the key recommendations from OECD just published  in a survey ** and presented in ROME on May 2nd  include :

1. Pursue efforts to halt and reverse the upward trend in the debt – GDP ratio. This could be achieved either with a balanced budget or a small fiscal surplus, supported by strong implementation of growth – enhancing reforms.

2. Focus budget consolidation on spending control, with a policy review process to select priorities, one of which is the more comprehensive unemployment insurance scheme, already legislated.

3. If macroeconomic conditions deteriorate once again, allow automatic stabilizers to work.

4. Establish the newly – legislated fiscal council, giving it full independence, well – qualified staff, guaranteed access to data, an adequate budget and freedom to investigate as it judges necessary.

5. Encourage banks to further increase provisions against losses, and continue to urge them to meet their capital needs with new equity or sales of non – core assets. Also, encourage competition in the financial sector.

6. Complete the implementation of the key reforms, including through ensuring that the Transport regulator is set up rapidly and that the Competition Authority uses its new powers actively.

7. Remove remaining regulations restricting capacity in retail and professional services.

8. Promote a more inclusive labor market, improving employability with more support for job search and training, linked with the broader social safety net, rather than preserving existing jobs and promote the widening of the current agreement among  the social partners so as to better align
wages compared with productivity, to help restore competitiveness.

9. Broaden the tax base by reducing tax expenditures comprehensively, allowing reductions in marginal tax rates on labor, especially on second earners.

10. Encourage use of the transparency provisions of public administration reform and the anti-corruption law by acting decisively on inefficiencies, conflicts of interest or corruption : Good public governance is important for economic growth.

 

 

According to OECD, the gains from recent structural reforms
based on better regulation, fiscal consolidation,  more competition and better flexibility in the labor market, must be consolidated and further measures to promote growth and improve competitiveness need to be implemented, to  return Italy to healthy growth.

SOURCE* : OECD
Economic Surveys – Italy 2013 -

 

ECONOMIC SURVEY 2013**  ON ITALY PRESENTED BY OECD SECRETARY -GENERAL ANGEL GURRIA AND ITALIAN MINISTER OF ECONOMY AND FINANCE FABRIZIO SACCOMANNI ON MAY 2 ND, CNEL, PARLIAMENTO ROME.

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