Italy entered the crisis with long-standing structural weaknesses. During the decade leading up to the crisis, deeply rooted structural weaknesses significantly constrained Italy’s growth potential; Italy’s annual real GDP growth averaged 1.5 %, around 2/3 percentage points below the euro area average, due primarily to sluggish total factor productivity. The high public debt ratio and the negative and worsening current account balance further limited the Italian economy’s capacity to withstand the negative economic shock.
Italy is experiencing excessive macroeconomic imbalances. High government debt and protracted weak productivity dynamics imply risks looking forward, with cross-border relevance. Despite moderate wage growth, competitiveness remains weak as productivity dynamics have been deteriorating, which limits unit labour cost adjustment. The slow resolution of non-performing loans weighs on banks’ balance sheets. High long-term unemployment weighs on growth prospects. Public debt reduction would require higher primary surpluses and sustained nominal growth looking forward. Policy action has been taken to reform labour market institutions, address non-performing loans, public administration, justice and education. Policy gaps remain, especially regarding privatisations, the collective bargaining framework, the spending review, market opening measures, taxation and the fight against corruption.
Read a complete analysis of Italy's economy in the country report 2016 [2 MB]
2015 recommendations in brief
The Commission has made six country specific recommendations to Italy to help it improve its economic performance. These are in the areas of: public finances and taxation; infrastructure investment and EU funds; public administration and justice system; financial sector; labour market, wage-setting and education; simplification and competition.