The Country-specific Recommendations are documents prepared by the European Commission for each country, analysing its economic situation and providing recommendations on measures it should adopt over the coming 18 months. They are tailored to the particular issues the Member State is facing and cover a broad range of topics: the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, etc. The final adoption of Country-specific Recommendations prepared by the Commission is done at the highest level by national leaders in the European Council.
Italy’s capacity to withstand the impact of the crisis is hampered by long-standing structural weaknesses. The high government debt and loss of external competitiveness, driven by sluggish productivity growth, were identified in the second in-depth review presented by the Commission on 10 April as the main macroeconomic imbalances of the Italian economy, which require monitoring and determined policy action.
Over the past year Italy has adopted a range of relevant and ambitious measures with a view to safeguarding fiscal sustainability and spurring growth. Italy has undertaken action to correct the excessive government deficit, strengthen the budgetary framework, enhance tax compliance, improve the functioning of the labour market and the wage setting framework, foster competition in key sectors of the economy and improve the business environment, including the efficiency of the public administration. These measures go towards meeting the country-specific recommendations issued in 2012 and can contribute to addressing many of the economy’s challenges.
However, implementation of the measures taken remains challenging and the reform agenda needs to be taken forward. Delays in the adoption of enacting legislation or incomplete application of legislation are still holding back the potential benefits of several measures.
2013 European Commission's recommendations for Italy in brief
The Commission has issued six country specific recommendations (CSRs) to Italy to help it improve its economic performance. These are in the areas of:
- Sustainable public finances
Italy has taken significant action to bring its deficit in line with the 3% of GDP threshold by end 2012, allowing the abrogation of the excessive deficit procedure (EDP). It is essential that Italy maintains the consolidation effort in order to meet all budgetary commitments taken at EU level and in particular to put the very high public debt on a declining path. Efforts on fiscal consolidation should be accompanied by continued action to improve the efficiency and quality of public spending at all levels of government.
- Implementation of reforms and administrative and business environment
Italy has taken ambitious and wide-ranging policy action to improve its fiscal position and economic growth potential. However, to ensure that the reforms bear fruit, Italy should ensure their implementation at all levels of government by all relevant stakeholders. Also, Italy should improve its administrative capacity, including the judicial system and the management of EU funds, and simplify the business environment. Corruption remains a big challenge, which calls for action to strengthen the existing legal framework for its repression.
- The banking sector
The protracted recession has affected the resilience of Italian banks and their ability to support economic activity, which is critical bearing in mind the central role of banks for firms' financing. Italy should improve the profitability and efficiency of its banking sector and in particular address non-performing loans. Firms' access to finance and alternatives to bank instruments should also be fostered, as a key driver for innovation and business growth.
- The labour market, wage setting and social policies
Employment rates, in particular among young people and women, remain well below the EU average and the educational attainment in Italy is poor. Targeted action to improve the current situation is a priority. The labour market reform and the changes in the wage setting framework agreed upon by the social partners since 2011 have the potential to improve the performance of the labour market and foster productivity; therefore, they should be effectively implemented. Bearing in mind the social challenges at stake, the reform agenda should be informed by the principles of social fairness and the social protection system improved, notably through better targeting of benefits towards the most vulnerable.
- Taxation, shadow economy and undeclared work
The Italian tax system remains complex and suffers from high levels of tax evasion. Shifting the tax burden towards consumption, property and the environment, in order to reduce the fiscal pressure on labour and capital in a revenue-neutral way is essential to foster economic growth and competitiveness. Improving tax compliance and tackling the shadow economy and undeclared work would improve the overall efficiency of the system and make it fairer.
- Market opening in the services sector and network industries
Important measures have been taken to open up services markets and network industries and will help to stimulate the competitiveness of the Italian economy. There is, however, scope for further action. Italy should encourage further competition particularly as regards professional services and local public services. In addition, Italy needs to improve market access in network industries and upgrade infrastructure capacity across the country.
See how Italy compares with other EU Member States in key areas
European Semester Documents