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The adjustment following the crisis has been particularly painful in Southern European countries, including Italy. Several years of fiscal consolidation, adjustment in private sector balance sheets, low confidence and impaired credit supply have left Italy with a double-digit unemployment rate and no clear sign of a rapid and self-sustained turnaround. Addressing the job market legacy and restoring competitiveness remain key policy objectives.
Previous Going for Growth recommendations include:
- Rebalance protection from jobs to workers’ income by decreasing job protection of workers on some types of contracts and improving social safety net.
- In order to get more value for money out of the education system and to improve the chances of the low-skilled, improve equity and efficiency in education.
- Improve the efficiency of the tax structure by simplifying the tax code, fighting evasion and, when fiscal situation permits, reducing the tax wedge on low-wage labour.
- Reduce barriers to competition by strengthening enforcement of laws at all levels of government, reduction of public ownership and of delays in civil courts.
- Reduce the risk of unemployment persistence and accelerate return to work by enhancing active labour market policies.
Actions taken: Notable reforms in these areas over the past two years include:
- New regulators for network industries, increased powers for the competition authority and liberalisation of shop opening hours. However, further efforts are still required to ensure effective implementation.
- A mandatory conciliation for labour disputes as well as universal unemployment benefit (to be phased in by 2017).
The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, rebalancing current account and reducing income inequality). In the case of Italy, labour market reforms aimed at reducing duality, and in particular achieving full implementation of a universal social safety net, and better vocational education and support for apprenticeship programs can decrease income inequality.
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