Italy

Shifting policy directions over a series of short-lived governments have left Italy performing relatively poorly (rank 31) with regard to economic policies. Its score on this measure has improved by 1.1 point relative to 2014.

Italy’s economic policies shifted under two governments, with the second Conte administration viewed as unable to meet the pandemic’s challenges, and the Draghi government leading the country to economic recovery. GDP plummeted in mid-2020, only to bounce rapidly back and settle into modest growth through 2021.

The initial pandemic approach focused on full or partial furloughs, with salary subsidies preventing layoffs. This was later made time-limited, with a shift toward investment spending intended to boost the economy. This policy package also included a number of structural reforms such as administrative procedure changes, and digital and environmental transformations.

Debt has shot to dangerous levels, topping 150% of GDP in mid-2020. Draghi’s shift to investment spending also boosted growth rates more than expected, enabling initial reduction in the debt. A proposed fiscal reform would streamline tax rules. Some tax reductions have been passed for lower and middle-range incomes.

With concerns evident in several areas, Italy falls into the lower-middle ranks (rank 25) in the area of social policies. Its score on this measure has improved by 0.7 points relative to 2014.

The COVID-19 pandemic exposed some weaknesses in the healthcare system, including an overreliance on large hospitals with insufficient local services. The north of the country proved far better able to cope with online learning than the south. Considerable new resources are being devoted to education, and a new recruitment and career system for teachers is being developed.

The pandemic expanded the gap between the better-protected sector of the population and the rest. Poverty is a particular problem for young families with children. A basic minimum income program, conditional upon acceptance of a job proposed by an employment center, has reduced poverty. A new child support payment has filled in gaps left by this measure.

Family members very often provide critical services such as care for preschool age children. Public daycare facilities are limited. Workforce-participation rates among women are low but rising, but the birth rate has continued to decline. The Draghi government expanded immigration quotes, and took a more flexible attitude toward illegal immigrants reaching Italy.

With a good renewable-energy record, Italy falls into the upper-middle ranks (rank 14) with regard to environmental policies. Its score on this measure has improved by 1.6 points relative to 2014.

Significant hydroelectric-, wind- and solar-based power generation has driven the country to a renewable-energy share of nearly 35%. The country’s performance with regard to CO2 emissions per unit of GDP is above average, and strong incentives are provided for sustainable house construction and renovation.

Water efficiency and waste management remain serious problems, particularly in the south. However, recycling rates have increased significantly, most recently even in southern Italy, which has traditionally lagged. The country has among the highest number of cars per capita in the world, and smog, particulate matter, poor air quality and traffic jams increasingly undermine the quality of life.

The Draghi government significantly increased goals for the environmental transition, and earmarked a considerable share of EU COVID-19 recovery funds for environmental purposes. The government has recently played a strong role in promoting ambitious environmental goals internationally.

With a number of strengths and weaknesses, Italy falls into the middle ranks (rank 22) in terms of the quality of democracy. Its overall score on this measure has improved by 0.4 points relative to 2014.

A party-financing system based on citizens’ voluntary contributions to parties as a part of their income tax has proved largely unsuccessful. Private donations are not fully transparent, and cases of abuse or fraud have emerged in almost all parties. A recent reform opened the door to increased government influence over the public broadcaster, but recent appointments have been merit-based.

Immigrants are not accorded strong legal protections, particularly if they are illegal. A law imposing strict restrictions on demonstrations has been softened. During the pandemic, the government adopted only limited restrictions on the right to assemble.

Gender balance in the corporate sector is a concern. The pandemic led to introduction of many rules and regulations that are confusing for authorities and citizens. Anti-corruption efforts have been strengthened, but corruption remains a serious problem, in part due to opportunities opened by regulatory complexity.

Following the implementation of far-reaching management reforms, Italy falls into the middle ranks (rank 19) with regard to executive capacity. Its score on this measure has improved by 0.7 points relative to 2014.

The Draghi government significantly improved strategic planning mechanisms. PMO control over draft bill content rose, and coordination between ministries and the PMO improved. Informal meetings between coalition party leaders helped reduce conflicts. Considerable planning focus was centered around use of the EU COVID-19 recovery funds.

The Draghi government placed a strong emphasis on promoting digitalization within the public administration. Few ministries have the capacity to perform effective RIAs. Communication under the Conte governments was split between party leaders, but the Draghi administration streamlined and controlled public statements.

Disagreements under the Conte governments made it difficult to achieve an ambitious agenda. Draghi proved more effective in achieving a slimmed-down set of goals. Resources to local governments have been significantly increased. The COVID-19 crisis enhanced cooperation between the central and regional authorities.

With a varied mix of oversight capabilities, Italy falls into the lower-middle ranks (rank 26) in the area of executive accountability. Its score on this measure has improved by 0.5 points relative to 2014.

Parliamentarians have significant resources and executive-oversight powers. The audit court has demonstrated considerable independence from the government, while a Parliamentary Budget Office monitors compliance with European fiscal rules. The data-protection authority has extensive powers and enjoys a high degree of independence.

Media coverage of politics is substantial but often superficial, with newspapers providing the strongest policy information. A minority of citizens say they are interested in politics, but most watch TV news, which does feature political themes significantly. Popular interest in COVID-19 policies has been strong.

Political parties vary widely with regard to decision-making structures, but the Lega and Five Star Movements are dominated by their leaders. Employers’ associations and trade unions draw on expert resources, but are conservative in outlook. A growing number of single-issue movements provide policymaking contributions. Medical associations increased their visibility during the pandemic.