Opening Remarks by Angel Gurría, OECD Secretary-General, delivered at the International Conference on Structural Reforms in Italy
24 September 2012, Rome, Italy
(As prepared for delivery)
Dear Prime Minister, Dear Ministers, Ladies and Gentlemen:
It is a pleasure for me to open this international conference on structural reforms in Italy with Prime Minister Monti.
The gathering of Italian government officials, policy experts and the OECD, is a unique opportunity to take stock of the important steps that Italy has taken over the past year and to frame the priorities for future action. It is also the culmination of a very productive dialogue we have already been engaged in with the Italian authorities for some time; one that has allowed us to better target our expertise, our advice and the accumulated experience of OECD countries in support of Italy’s reforms.
Let me start by congratulating Prime Minister Monti and his government for the courageous decisions they have taken so far to address head-on several long-standing obstacles that have held back Italy’s performance, and we have among us here the Ministers who worked with us, and I would truly like to congratulate all members of the government.
Joint Italian Government-OECD conference on competitiveness, growth and jobs - 24/09/12
(Left/right) Angel Gurría, Secretary-General of the OECD; Mario Monti, Prime Minister of Italy and Dino Pesole, journalist from Il Sole 24 Ore, Rome, Italy.
Photo: laboratorio fotografico Chigi
Actually it’s only fair to acknowledge the tremendous effort that all Italians are making, as the Prime Minister has said. These efforts will help build a brighter future for new generations and open up opportunities for growth not only for the third largest economy in Europe, but for Europe as a whole. What is at stake here is not only the future of Italy but rather the future of the European construction itself. While Italy cannot ensure the successful construction of Europe on its own, its success, the success of Italy in addressing its own challenges, will make a decisive contribution.
If fully implemented, the benefits of reform are great
The structural reforms that Mr. Monti’s government has been putting in place – in terms of fiscal consolidation, liberalisation, simplification, labour market reform and anti-corruption – are laying the foundations for a stronger, more competitive and more inclusive Italy.
We estimate that the benefits of these measures could raise Italy’s GDP by some 4% over the next ten years, and could do this solely through the measures already announced. This means adding some 0.4 percentage points to Italy’s growth every year for the next ten years, based on the reforms announced so far. This is not just about greater prosperity in the future; it is about creating jobs now and, above all, improving confidence about the future today.
To bear fruit, reforms need to be fully implemented. Italy must act fast: to boost competition, to foster innovation, to deliver high-quality education, to enhance social cohesion, to modernise public administration. Italy needs to combat tax evasion, to fight corruption and to enhance public sector integrity.
Commitment to reform will be essential, now and in the years to come
I would like to highlight not only the historic importance of these structural changes, but also the need to stay on course, keep the pace and ensure continuity in the reform agenda going forward.
We must resist the temptation to turn the clock back by undoing the reforms that have been put in place.
International evidence shows that action is needed on several simultaneous fronts if structural reforms are to produce tangible results: fiscal, labour, product market reform, competitiveness, innovation, education, green growth: Italy is making progress in many of these sectors. But let me highlight just five – because the report mentions twelve or thirteen – “guiding stars” that Italy can follow while sailing this turbulent ocean of structural reforms:
- First, the need to improve competitiveness. In Italy we do not see tangible improvements in competitiveness. This must change! Improving Italian competitiveness requires action on three fronts: increasing productivity; keeping wage dynamics moderate to reflect productivity; and alleviating the tax burden on labour income – provided that this is done in a fiscally neutral manner.
- Second, strengthening public finances. As in many other OECD countries, while putting public finances back in order is a major challenge, we all agree that it has to be done. Structural reforms go hand in hand with the restoration of fiscal sustainability.. This will require further efforts going forward to reduce Italy’s large government debt to more sustainable levels. The target of structural balance by 2013 is welcome and we encourage the government to act decisively to achieve it.
- Third, strengthening social policy. At the OECD we say “Go Structural”, but at the same time we say “Go Social”. According to our latest labour market data, Italy’s unemployment rate now stands at close to 11%, while youth unemployment is three times as high and has already reached the 35% mark.[i] These are not just numbers; they are broken dreams, eroded trust, anguish and even desperation. Italy’s labour market reforms have set the basis to tackle the long‑standing problems of the Italian labour market. I am talking about the low participation of women and youth; about the high labour market segmentation which condemns many workers, especially the younger ones, to precarious employment with very little hope for a better future. What we want is a labour market that works well and for all workers, and the reform should be implemented swiftly but also supported by well-targeted employment policies, further investment in education and skills, and targeted social policies to help the weakest and most vulnerable.
- Fourth, structural and social changes that are also green, or what we call the need to “Go Green”. Structural reforms are a great opportunity to “green” our economies. Our structural changes cannot rely on the same highly polluting energies that are causing havoc to our planet. There is simply no way around it. Green growth policies are about fostering economic growth while ensuring that our natural assets continue to provide the resources needed to improve our well-being in the future. This is an intergenerational challenge.
- Fifth and lastly, the key role of implementation. Implementation, implementation, implementation. Implementation demands skilful and effective institutions, both to guide and to monitor progress. Further efforts to modernize public administration and continued progress in promoting integrity and transparency and fighting corruption will help sustain and improve policy implementation. The timing of implementation can also be critical. Increased competition and better regulation will produce faster and stronger results if a better functioning labour market and a more efficient training system facilitate the reallocation of resources across sectors and firms. Better targeted safety nets will also enhance the outcomes.
Structural reforms, Mr. Prime Minister, are a pivotal rung on the ladder to prosperity. OECD analysis shows that they can generate multiple, while concomitant, pay-offs in that they: unlock entrepreneurship; induce competition; improve labour conditions; raise productivity; promote innovation and boost competitiveness. They can help put people back to work as more productive and better skilled employees. And lastly, they can help tackle labour market dualities to reduce inequality and strengthen pension systems.
These reforms are important not only for Italy but also for Europe
The situations of Italy and of Europe are intertwined. The European economic climate, with the euro crisis still threatening, is an extremely challenging setting. Success at the European level is decisive for Italy’s fate, but, as we said before, the opposite is also true. The success of Italy will be the success of Europe.
Action at the European level is helping Italy and will continue to do so. With the series of measures announced by the European Central Bank two weeks ago, the euro area now has its much needed “bazooka” to deal with financial market distress – and here I would like to extend my congratulations to Prime Minister Monti in recognition of his role in this change of paramount importance not only for Italy, I must repeat, but above all, in this case, for the European Central Bank. Because the issue at stake was not only to convince our friend Mr. Draghi, who is a good Italian and who is naturally concerned about Italy; it was, of course, necessary to convince all European leaders. And the European institutions are already moving in the right direction – or at least in a better direction – so all we need now is practical action.
With the fiscal compact, the banking union, and other initiatives to strengthen the economic governance of the euro area, we now have a sounder blueprint for Europe’s future.
And, also crucial, is that, in turn, Italy’s reforms, by boosting Italy’s productivity and competitiveness, will help Europe by helping to resolve the internal imbalances that are at the core of the euro area crisis. By restoring Italy’s growth potential, reforms will bring back the confidence that markets need to continue to invest in the euro area at large. By addressing Italy’s social challenges, reforms will give citizens – in Italy and elsewhere in the euro area – the trust they need to overcome today’s hardships and believe in tomorrow’s prosperity.
Prime Minister Monti, Ladies and Gentlemen:
Italy is facing historically complex challenges by taking unprecedented, courageous and necessary decisions.
I am confident that the wide-ranging reforms that the Italian government is implementing will swiftly bear fruit. I trust in the immense capacity of Italians to overcome challenges. Some words attributed to Leonardo da Vinci say “I love those who can smile in trouble, who can gather strength from distress, and grow brave by reflection”. This is what drives the Italian spirit, and I am sure that the reforms and policies pursued by this government will make the most of this drive. You also have the benefit of Mario Monti himself, who is, as I have already said many times before, l’uomo giusto al posto giusto nel momento giusto.
Prime Minister Monti, you can count on the OECD to help you make this happen. We stand ready to continue to work with Italy and for Italy to design and implement better policies for better lives, to make the post-crisis Italy economy stronger, cleaner and fairer.
>> Read the report: Italy: Reviving growth and productivity - Better policies series
>> For the Italian version: Riforme strutturali dell’Italia: Sforzi coraggiosi e molto ancora da fare
Visit of the Secretary-General to Italy (Rome, 24th September 2012)
Economy: OECD’s Gurría urges Italy to maintain reform momentum
Italy’s Structural Reforms