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Reforms and fiscal policy have already borne fruit for Italy – Minister Padoan's letter to the Financial Times

Sun Jun 26 09:15:00 CEST 2016

Sir, For at least two decades my country has postponed the process of structural adjustment to achieve national competitiveness improvements required by both the constant changes in the international economy and the decision to join the euro. As a result, we record disappointing positions in most common international rankings on competitiveness as mentioned by Satyajit Das (“Focus on Greek woes masks the rising risks in Italy and France”, Insight, June 25).
However, since 2011 Italy has embarked on a transformation path organised on two levels. First, a season of radical reforms (starting with the pension system, which the European Commission assessed as the most sustainable in the long term among European Union member states). Second, a major adjustment of public finances which put the deficit on a declining trajectory (although it should be remembered that Italy recorded a primary balance surplus for more than twenty years in a row with the sole exception of 2009, the best performance among other major European countries).
In particular, just over a year the Renzi government has made an impressive series of reforms. I’m aware that lists are boring but evidence is enlightening: a constitutional reform that assigns a single house of parliament the legislative process, the elimination of an intermediate level of government (provinces) for streamlined administration, an electoral law that ensures political stability, a radical labor market reform based on flexsecurity and on the eradication of dualism, a simplifie compliance-oriented tax system that better contrasts evasion, a banking sector more open and responsive, faster civil trials based on ICT, bankruptcy procedures intended to accelerate debt restructuring. That’s not a programme: it’s a list of achievements.
More reforms are in progress, in public administration, education and procurement procedures. The fruitful combination of reforms and fiscal policy is already delivering results, as recent figures about increasing employment point out.
The reforms will increase our competitiveness, but independent observers should not forget that Italy is still the second largest manufacturing country in Europe and is second in the ranking of those maintaining the share of world exports after China entered the WTO in 2001. In both cases, right behind Germany. According to the trade performance index, Italy ranks in top place in three sectors of world trade (out of 14), second in five more.
Reforming a country is difficult, even more so during a deep recession. Italians have endured the harsh financial cost of adjustment and at the same time are supporting the structural reforms that will confirm Italy as one of the leaders of the developed world.

Pier Carlo Padoan
Minister of Economy and Finance, Italy

Minister Padoan's letter to the Financial Times

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