Remarks by Angel Gurría
02 April 2019 - Rome, Italy
(As prepared for delivery)
Honourable Rector and Vice-President Prencipe, Dear Ambassador, Dear Friends,
I am delighted to be at LUISS University, one of Italy’s most prestigious and renowned academic institutions. I would like to thank the organisers for inviting me to talk about the economic challenges of Italy drawing from our latest Economic Survey that I just presented with Minister Tria. Let me also add that this is a great opportunity to listen to your views – you are a generation that will no doubt be playing a key role in ensuring the future prosperity of this country.
In recent years, Italy has experienced a modest economic recovery resulting in an average growth of 1.1% between 2015 and 2018. Following important labour market reforms, it has also experienced a significant rise in the employment rate, by 3 percentage points since 2015. And there have also been other encouraging improvements, such as the shift of Italian export industries to higher value added products.
Despite these achievements, Italy continues to face important economic and social challenges. The economic recovery has decelerated more rapidly than elsewhere and is now stalling. At the same time, Italy’s material living standards, as measured by GDP per capita, are about the same as they were back in 2000. And poverty rates more than doubled in the last six years for the young and working-age adults, reaching 10%. Moreover, a lack of job opportunities forces an increasing number of young people to leave the country: emigration rates are at their highest of the past 40 years.
Disparities in income and well-being are also large and there are important gender disparities: Italy still has one of the lowest employment rates for women in the OECD, at 49.5% in 2018. The fourth lowest in the OECD after Mexico, Greece and Turkey.
On the economic front, high public debt (at 132% of GDP) is a burden, especially on younger generations. This limits the capacity of fiscal policy to tackle social and economic problems and poses severe risks to the hard-won stability of the banking system. Reducing Italy’s debt-to-GDP ratio must therefore be a central priority.
To tackle many of these challenges, our Economic Survey argues that Italy needs a multi-year reform package that promotes stronger inclusive growth. Let me highlight a few recommendations:
First, promoting inclusive growth while reducing public debt. How do we do this? We need to increase Italy’s employment and productivity growth. We need to move towards a people-centred growth, accompanying the structural transformation of the labor market and doing business with investment in human capital, a broad innovation strategy and programs that reinforce the dynamism of the labor market as well as its security by providing welfare guarantees for temporarily inactive workers.
This will also require enhancing competition in protected markets; raising inclusive innovation and business dynamics; completing the implementation of the new bankruptcy regime, removing obstacles hampering the growth of SMEs; and enhancing the efficiency of public administration by raising accountability and transparency.
Second, addressing the large social and regional divides. Italy has one of the highest public social spending in the OECD (28% of GDP) largely attributable to high spending on pensions, but it still faces multiple social challenges. The extra funds that the Citizen’s Income allocates to anti-poverty programmes are helping to address social and regional disparities, but to avoid creating poverty traps, work incentives need to be strengthened. Lowering the Citizen’s Income benefit, introducing in-work benefits for low-wage workers, and simplifying the tax system are important steps in this direction.
Third, the quality of public spending also needs to be improved. Public spending reviews should be incorporated into the annual budget. Closing the early retirement scheme introduced in 2019 would also free resources to boost employment and opportunities for young people.
Last but not least, Italy should also strengthen public investment and the effectiveness of regional development policies. The plan to create a central technical support unit to strengthen public investment planning is therefore timely. It is important that initiatives designed to accelerate the planning and execution of infrastructure projects, also preserve the power of the anti-corruption authority, so as not to undermine the effective work that it has achieved to-date.
Let me conclude with a crucial recommendation: the need to empower Italy’s youth. They are facing – you are facing – a very challenging environment. Youth unemployment remains at more than 30%, and a high share of the young, especially in lagging regions, is neither in employment, education or training, reducing human capital and damaging job prospects.
One way to boost youth employment is to lower social security contributions for firms hiring people with a first permanent contract. Italy can also do more to harness the entrepreneurial spirit of young Italians by supporting the birth and growth of innovative enterprises through pursuing and strengthening recent initiatives such as the Start-up Act and the development of venture capital. In addition, deepening industry-university collaboration and developing the venture capital industry can also unlock new opportunities for young people.
Ladies and Gentlemen, dear students,
We are facing a challenging moment. Our countries need to leave the post-crisis blues behind and accelerate through more inclusive and sustainable growth. To achieve this, we need to change, we need to transform, we need to reform. And we will need, more than ever, the drive and innovation of young people. We need your energy and creativity to make this change and improve. As Lorenzo Jovanotti wrote in one of the songs of a recent album: “Attratte verso il centro della terra le cose cadono / Qualcuno che alza gli occhi e si ribella / Le cose cambiano.”
That is why we must empower youth. That is why we must empower you. Because you can make things change! Count on the OECD! Thank you.