Domestic solidity is of great importance for Italy; so are political stability and predictability. In times of economic and political uncertainty following Brexit, the latter would come in handy to Great Britain too
The Independent has recently shown an interest in the future of Italy’s political and economic landscape. An article published earlier this month (“Why Italy’s economy is about to collapse”, Monday 20thJune) was rich in data yet the perception it created of the country was anachronistic to say the least, failing as it did to take account of the commitment to reforms of ordinary Italians and their Government. The article wrongly placed Italy in a doomsday scenario, which is actually more likely to happen elsewhere.
The fact is, Italy is recovering from the most dire global financial crisis in modern times. After several challenging years, confidence among consumers as well as businesses is rising. Growth in GDP and employment is finally on a clear upward trend. This happened through a parallel path of institutional and structural reforms to streamline governance in both the economic and political sphere, thus attacking the structural causes of traditional weaknesses.
We pushed even stronger for reforms when the European Central Bank’s Quantitative Easing and the fall of oil price could have done the job for us. According to the OECD, “progress on the structural reforms programme is contributing to strengthening long-term growth prospects”. In fact, the “Jobs Act”, new legislation to speed up civil justice and a new public procurement code for construction works, as well as scaling up the fight against corruption through the newly created National Anticorruption Agency, together with several other major reforms, are all boosting competiveness and supporting job-creation.
Italy has been running a primary surplus since 1995, with the sole exception of 2009. The reforms of the labour market and the banking system have consolidated investors’ confidence and the level of cross border mergers and acquisitions in Italy in 2015 reached a record high; as did the flow of foreign direct investment to the country.
Our deficit has contracted from 3 percent in 2014 to 2.6 in 2015 and it is estimated to further shrink to 2.4 in 2016 (just as a comparison, UK recorded a deficit-to-GDP ratio of 5.6 in 2014 and is expected to contract to 3.4 in the current year, even before the Brexit effect is considered). Public spending has been reduced and rationalized, thanks not least to a public administration efficiency drive.
Government debt is not “approaching 140 per cent of GDP”, as your recent item had it; rather it reached a peak of 132.7 per cent in 2015 and has started to decline since the beginning of this year. Moreover the latest European Commission Fiscal Sustainability Report argues that Italian public finances are the most stable over the long run in Europe thanks to the fully implemented reform of the pension system. With regard to infrastructure, which according to your article dates “back to the immediate post World War II era”, we warmly invite your readers to travel between Rome and Milan in less than three hours on one of the most comfortable trains in the World, running at 186 m.p.h.
Domestic macroeconomic solidity is of great importance for Italy. So are political stability and predictability. In times of economic and political uncertainty following Brexit, the latter would come in handy to Great Britain too.
Pasquale Q. Terracciano, Ambassador of Italy to the United Kingdom