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• Overview of the Economic Survey of Italy
• Speech Mr. Angel Gurría, OECD Secretary-General

Government net borrowing

As a percentage of GDP

1. Weighted average using 2008 GDP expressed in PPP.

Source: OECD, National Accounts and Economic Outlook database

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Fiscal policy must achieve short-term consolidation and long-term sustainability. Italy now has a satisfactory framework for planning overall spending and revenues over three years; it will be subjected to practical testing over the years 2011-13. The government’s objective is to reduce the overall deficit below 3% of GDP by 2012. Plans emphasise expenditure restraint, but the outcomes for some components – a public sector wage freeze, cuts in transfers to the regions and reduced tax evasion – are uncertain. If serious slippage occurs, further cuts in spending and possible action on taxation, starting with base-broadening measures, would need to be considered. Two decades of pension reforms have made a key contribution to long-term sustainability.

Structural policy should remain on the agenda. All the issues identified in the previous Survey remain important. Liberalisation that has begun in services should be completed and extended to other areas, for example transport and local services. Reform of the public administration has shown some initial success in improving transparency, but the deeper aspects of the plans to improve efficiency in public administration must be pursued too. The use of various audit mechanisms, such as regulatory impact analysis and public spending reviews, should become an integral part of public policy making.

University sector legislation has rightly concentrated on the governance of public universities. Universities, potential students and the government all suffer from a lack of clear information on university performance. Problems in individual institutions range from financial crisis to poor recruitment procedures, and overall links to the private sector in respect of both teaching and research are weak. With improved governance in place, tuition fees should be progressively increased to reflect a larger share of costs; this would increase university funding and provide better “price” signals to students and universities. A system of income-contingent-repayment loans would also be needed to support student access to university education. The new quality assurance agency will need to work to develop reliable indicators of performance to aid both students and universities in their planning. Further action to facilitate university-business research collaboration, especially through allowing contracts that permit an efficient share of costs and benefits between individual researchers, their institutions and the private sector, would help to improve university finances and would boost Italy’s weak showing on many measures of R&D and innovation performance.

Environmental policies should be better focused on developing economically efficient ways to achieve environmental objectives. Much of this can be characterised as “getting the prices right”, whether through more and better use of taxes and charges or with more use of cost-benefit analysis to select appropriate policies and assess existing ones. Economic incentives can be better used in water and waste management, but here reform of governance is also needed. Full privatisation of these local services together with the institution of strong national regulators would improve both outcomes and economic efficiency. Policies can be designed to encourage innovation in environmentally-friendly technologies, increasing the economy’s ability to deliver “green growth”, though governments must encourage innovation focused on environmental outcomes, rather than specific technologies. The integration of environment and climate change concerns in other policies, like energy and transport, remains crucial.

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