Economic Sustainability
#26Key Findings
Italy performs relatively poorly (rank 26) in the area of economic sustainability.
It is a leader in the circular economy within the EU, but this largely applies to the country’s north. Infrastructure quality issues persist, but cybersecurity has become a top priority. Efforts to reach the current emissions-reduction goal are behind schedule. The Meloni government has sought to lower emissions-reduction and renewable energy targets.
Basic income and employment policies have been reformed numerous times in recent years. Active labor market policies remain weak. A well-structured system of unemployment benefits covers most types of workers.
The tax system is strained by high public spending and interest on the significant national debt. Tax evasion is a serious problem. Deficits have fallen, but slow growth has hampered attempts to reduce debt. Italy was the only eurozone country to oppose European Stability Mechanism reform in 2023.
It is a leader in the circular economy within the EU, but this largely applies to the country’s north. Infrastructure quality issues persist, but cybersecurity has become a top priority. Efforts to reach the current emissions-reduction goal are behind schedule. The Meloni government has sought to lower emissions-reduction and renewable energy targets.
Basic income and employment policies have been reformed numerous times in recent years. Active labor market policies remain weak. A well-structured system of unemployment benefits covers most types of workers.
The tax system is strained by high public spending and interest on the significant national debt. Tax evasion is a serious problem. Deficits have fallen, but slow growth has hampered attempts to reduce debt. Italy was the only eurozone country to oppose European Stability Mechanism reform in 2023.
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How committed is the government to driving the transition toward a circular economy?
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The government is clearly committed to transitioning to a circular economy.
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The government is largely committed to transitioning to a circular economy.
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3
The government is somewhat committed to transitioning to a circular economy.
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1
1
The government is not at all committed to transitioning to a circular economy.
Italy is one of the leading EU countries in the circular economy. However, the national average conceals a significant gap between Central-Northern Italy, which performs very well, and southern Italy, which has improved but still lags behind.
In 2022, following a public consultation under the Draghi government, the new National Strategy for the Circular Economy was published. This detailed document outlines sector-specific action plans, including consumer roles, green public procurement models, waste management, job creation, the establishment of new material supply chains, the circular use of natural resources, the role of digitalization, and environmental finance and taxation. The macro-objectives are well-defined and slated for achievement by 2035, with clear indicators and data sources monitored annually.
The National Recovery and Resilience Plan (NRRP) includes the “Green Revolution and Eco-transition” mission and the “Circular Economy and Sustainable Agriculture” mission. The latter allocates 1.5 billion euros to municipalities and local governments for constructing new treatment and recycling plants, upgrading existing ones, expanding separate waste collection, and innovatively treating and recycling absorbent materials, sewage sludge, and leather and textile waste. Additionally, 600 million euros are allocated to companies for innovative circular economy projects in strategic supply chains such as WEEE, paper, plastics, and textiles.
The governance of the strategy is based on the “Observatory on the Implementation of the National Strategy for Circular Economy,” chaired and coordinated by the Ministry of Environment with support from ISPRA and ENEA (two public research institutes). The observatory includes representatives from the Ministry of Economic Development, Ministry of Finance, Ministry of Agriculture, Ministry of Infrastructure, Ministry of Education, Ministry of Health, Regions and Autonomous Provinces, and the Association of Municipalities.
Italy’s performance in the circular economy strategy is among the best in the EU, though it ranks poorly in transitioning to fossil-free energy. The Draghi government demonstrated strong commitment by renaming the ministry to the “Ministry for Ecological Transition” and appointing a highly respected scientist to lead it. Conversely, the Meloni government reverted the name to the “Ministry for the Environment” and added “Energy Security,” reflecting a shift in policy objectives and potentially lower commitment to the circular economy strategy.
Citations:
Ministero per l’Ambiente e la Sicurezza Energetica. “La strategia nazionale per l’economia cirocolare.” https://www.mase.gov.it/sites/default/files/archivio/allegati/PNRR/SEC_21.06.22.pdf
- Circualr Economic Network. 2023. “5^ rapporto sull’economia circoalre in Italia.” https://circulareconomynetwork.it/wp-content/uploads/2023/05/Rapporto-sulleconomia-circolare-in-Italia-2023-2.pdf
In 2022, following a public consultation under the Draghi government, the new National Strategy for the Circular Economy was published. This detailed document outlines sector-specific action plans, including consumer roles, green public procurement models, waste management, job creation, the establishment of new material supply chains, the circular use of natural resources, the role of digitalization, and environmental finance and taxation. The macro-objectives are well-defined and slated for achievement by 2035, with clear indicators and data sources monitored annually.
The National Recovery and Resilience Plan (NRRP) includes the “Green Revolution and Eco-transition” mission and the “Circular Economy and Sustainable Agriculture” mission. The latter allocates 1.5 billion euros to municipalities and local governments for constructing new treatment and recycling plants, upgrading existing ones, expanding separate waste collection, and innovatively treating and recycling absorbent materials, sewage sludge, and leather and textile waste. Additionally, 600 million euros are allocated to companies for innovative circular economy projects in strategic supply chains such as WEEE, paper, plastics, and textiles.
The governance of the strategy is based on the “Observatory on the Implementation of the National Strategy for Circular Economy,” chaired and coordinated by the Ministry of Environment with support from ISPRA and ENEA (two public research institutes). The observatory includes representatives from the Ministry of Economic Development, Ministry of Finance, Ministry of Agriculture, Ministry of Infrastructure, Ministry of Education, Ministry of Health, Regions and Autonomous Provinces, and the Association of Municipalities.
Italy’s performance in the circular economy strategy is among the best in the EU, though it ranks poorly in transitioning to fossil-free energy. The Draghi government demonstrated strong commitment by renaming the ministry to the “Ministry for Ecological Transition” and appointing a highly respected scientist to lead it. Conversely, the Meloni government reverted the name to the “Ministry for the Environment” and added “Energy Security,” reflecting a shift in policy objectives and potentially lower commitment to the circular economy strategy.
Citations:
Ministero per l’Ambiente e la Sicurezza Energetica. “La strategia nazionale per l’economia cirocolare.” https://www.mase.gov.it/sites/default/files/archivio/allegati/PNRR/SEC_21.06.22.pdf
- Circualr Economic Network. 2023. “5^ rapporto sull’economia circoalre in Italia.” https://circulareconomynetwork.it/wp-content/uploads/2023/05/Rapporto-sulleconomia-circolare-in-Italia-2023-2.pdf
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How committed is the government to updating and protecting critical infrastructure?
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The government is clearly committed to updating basic technical infrastructure.
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The government is largely committed to updating basic technical infrastructure.
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The government is somewhat committed to updating basic technical infrastructure.
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The government is not at all committed to updating basic technical infrastructure.
Italy’s system for ensuring the viability of critical infrastructure is designed with a multilevel accountability structure. The national coordinator is the president of the Council, supported by the Office of the Military Adviser within the PMO. Additionally, there is the Interministerial Commission for National Defense. Legislation clearly outlines what critical infrastructure operators must do to maintain functionality during critical moments, with specific legal provisions for transport, energy, health, and banking. Each ministry is responsible for monitoring and controlling the implementation of these policies within their respective sectors.
Despite strong and consistent regulations, significant problems persist with the quality of some infrastructure, particularly railways, motorways, and water distribution networks. Cybersecurity has received particular attention, with the establishment of the national cybersecurity agency in 2021 and the launch of the national cybersecurity strategy for 2022–2026 under the Draghi government.
All governments, especially recent ones, have shown reasonable efforts in ensuring the viability of critical infrastructure. However, by the end of 2023, Italy had not yet adopted the EU directive on critical infrastructure protection (DIRECTIVE (EU) 2022/2557).
Citations:
National Cybersecurity Strategy. 2022. https://www.acn.gov.it/en/strategia/strategia-nazionale-cybersicurezza
Despite strong and consistent regulations, significant problems persist with the quality of some infrastructure, particularly railways, motorways, and water distribution networks. Cybersecurity has received particular attention, with the establishment of the national cybersecurity agency in 2021 and the launch of the national cybersecurity strategy for 2022–2026 under the Draghi government.
All governments, especially recent ones, have shown reasonable efforts in ensuring the viability of critical infrastructure. However, by the end of 2023, Italy had not yet adopted the EU directive on critical infrastructure protection (DIRECTIVE (EU) 2022/2557).
Citations:
National Cybersecurity Strategy. 2022. https://www.acn.gov.it/en/strategia/strategia-nazionale-cybersicurezza
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How committed is the government to fully decarbonizing the energy system by 2050?
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The government is clearly committed to transitioning to a decarbonized energy system.
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The government is largely committed to transitioning to a decarbonized energy system.
5
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3
The government is somewhat committed to transitioning to a decarbonized energy system.
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1
The government is not at all committed to transitioning to a decarbonized energy system.
Policy Efforts and Commitment to Achieving a Decarbonized Energy System by 2050
Decarbonization is a primary objective of the National Plan for the Ecological Transition, aiming to achieve net-zero greenhouse gas emissions by 2050. By 2030, the goal is to reduce emissions by 55%, aligning with the European “Fit for 55” target. The NRRP allocates substantial financial resources for environmental transition, including the decarbonization of industrial production and the shift to renewable energy sources.
However, critics argue that financial investment is overly focused on securing bonuses and incentives, even when they are not necessary. The “Zero Carbon Policy Agenda” report by the Politecnico di Milano indicates that Italy is progressing slowly toward decarbonization, with no chance of reaching the 2030 target. Implementation challenges have increased under the Meloni administration, with significant resistance from stakeholders and difficulty in government management. The National Integrated Energy and Climate Plan (Pniec) proposed by the Meloni government was unanimously rejected by all major environmental groups for setting lower emission reduction and renewable energy targets than those required by the EU and proposed by national energy producers.
Citations:
- Meloni government plan on energy and climate. 2023. https://www.mase.gov.it/sites/default/files/PNIEC_2023.pdf
Politecnico di Milano. 2023. “Zero Carbon Policy Agenda.” https://www.energystrategy.it/es-download/
Decarbonization is a primary objective of the National Plan for the Ecological Transition, aiming to achieve net-zero greenhouse gas emissions by 2050. By 2030, the goal is to reduce emissions by 55%, aligning with the European “Fit for 55” target. The NRRP allocates substantial financial resources for environmental transition, including the decarbonization of industrial production and the shift to renewable energy sources.
However, critics argue that financial investment is overly focused on securing bonuses and incentives, even when they are not necessary. The “Zero Carbon Policy Agenda” report by the Politecnico di Milano indicates that Italy is progressing slowly toward decarbonization, with no chance of reaching the 2030 target. Implementation challenges have increased under the Meloni administration, with significant resistance from stakeholders and difficulty in government management. The National Integrated Energy and Climate Plan (Pniec) proposed by the Meloni government was unanimously rejected by all major environmental groups for setting lower emission reduction and renewable energy targets than those required by the EU and proposed by national energy producers.
Citations:
- Meloni government plan on energy and climate. 2023. https://www.mase.gov.it/sites/default/files/PNIEC_2023.pdf
Politecnico di Milano. 2023. “Zero Carbon Policy Agenda.” https://www.energystrategy.it/es-download/
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To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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Labor market institutions are fully aligned with the goal of an adaptable labor market.
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Labor market institutions are largely aligned with the goal of an adaptable labor market.
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Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
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1
Labor market institutions are not at all aligned with the goal of an adaptable labor market.
The first Conte government approved the Reddito di Cittadinanza law, guaranteeing a basic income to approximately two million people and providing procedures to help these individuals find jobs. The Draghi government slightly redesigned the minimum requirements for receiving this basic income, reducing the number of beneficiaries. However, the law’s effectiveness in retraining the unemployed and helping them find jobs has been minimal.
The new Meloni government has drastically changed the Basic Income Law, making a key distinction between employable and unemployable individuals for entitlement to what is now called “income for inclusion.” The law also provides for retraining programs and imposes more restrictive rules regarding job offers. Additionally, Meloni’s reform offers financial incentives for those who employ recipients of the income for inclusion as well as NEETs (Not in Education, Employment, or Training). The effects of this reform can only be assessed in the coming years, but many observers doubt it will have the expected positive impact on worker activation.
The system of employment agencies in Italy, both public and private, remains inefficient in facilitating worker mobility.
Citations:
- https://lavoce.info/archives/102081/boom-degli-occupati-ma-non-e-tutto-oro-quel-che-luccica/
-https://lavoce.info/archives/98492/politiche-attive-del-lavoro-il-punto-sul-programma-gol/
- https://lavoce.info/archives/100807/politiche-attive-per-gli-occupabili-lezione-inglese-sugli-errori-da-evitare/
The new Meloni government has drastically changed the Basic Income Law, making a key distinction between employable and unemployable individuals for entitlement to what is now called “income for inclusion.” The law also provides for retraining programs and imposes more restrictive rules regarding job offers. Additionally, Meloni’s reform offers financial incentives for those who employ recipients of the income for inclusion as well as NEETs (Not in Education, Employment, or Training). The effects of this reform can only be assessed in the coming years, but many observers doubt it will have the expected positive impact on worker activation.
The system of employment agencies in Italy, both public and private, remains inefficient in facilitating worker mobility.
Citations:
- https://lavoce.info/archives/102081/boom-degli-occupati-ma-non-e-tutto-oro-quel-che-luccica/
-https://lavoce.info/archives/98492/politiche-attive-del-lavoro-il-punto-sul-programma-gol/
- https://lavoce.info/archives/100807/politiche-attive-per-gli-occupabili-lezione-inglese-sugli-errori-da-evitare/
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
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Labor market institutions are fully aligned with the goal of an inclusive labor market.
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Labor market institutions are largely aligned with the goal of an inclusive labor market.
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Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
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1
Labor market institutions are not at all aligned with the goal of an inclusive labor market.
Italian active labor market policies are weak. Despite having the highest number of NEETs among young people in the EU, second only to Romania, the policies to address this issue remain ineffective. National policies to incentivize hiring appear only partially effective, hindered by a structural mismatch between labor supply and demand that current government policies cannot address.
The NRRP aims to tackle this problem with approximately 124,000 projects expected to contribute to the social and economic development of younger generations. However, the impact of these projects is not yet measurable. As noted in the previous section, institutional arrangements in the labor market in Italy remain weak in improving job-finding opportunities.
Citations:
Ministero del Lavoro. 2023. “Guida agli incentivi.” https://www.lavoro.gov.it/documenti/incentivi-assunzione-set2023.pdf
iNAPP. 2023. “Rapporto annuale 2023.” https://oa.inapp.org/xmlui/bitstream/handle/20.500.12916/4117/INAPP_Rapporto_2023.pdf?sequence=1&isAllowed=y
The NRRP aims to tackle this problem with approximately 124,000 projects expected to contribute to the social and economic development of younger generations. However, the impact of these projects is not yet measurable. As noted in the previous section, institutional arrangements in the labor market in Italy remain weak in improving job-finding opportunities.
Citations:
Ministero del Lavoro. 2023. “Guida agli incentivi.” https://www.lavoro.gov.it/documenti/incentivi-assunzione-set2023.pdf
iNAPP. 2023. “Rapporto annuale 2023.” https://oa.inapp.org/xmlui/bitstream/handle/20.500.12916/4117/INAPP_Rapporto_2023.pdf?sequence=1&isAllowed=y
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
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Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
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1
Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
The traditional Italian system for protecting against unemployment risks (Cassa Integrazione Guadagni) was significantly improved and extended in 2015 and 2022 (Law decree of 18 August 2015 n.148 and Budgetary Law of 2022). Consequently, Italy has a well-structured system of unemployment benefits that covers all types of workers who lose their jobs: employees with and without permanent contracts, associates, and agricultural workers.
However, approximately 3 million irregular workers in Italy lack regular employment contracts and, therefore, insurance coverage and protection in the event of dismissal. For these workers, the only protection available is provided by social support programs against poverty (Reddito di Cittadinanza until 2023 and the new Inclusion Income or the Formation and Labor Support program since 2023) (Law 3 July 2023 n.85).
The portability of pensions is guaranteed by law, but the real problem for the future is that the fragmented careers of the younger generation will result in lower pensions compared to those of current pensioners.
Citations:
- Istituto NAzionale della Previdenza SOciale. 2023. XXI Rapporto annuale. https://www.inps.it/it/it/dati-e-bilanci/rapporti-annuali/xxi-rapporto-annuale.html
Inapp. 2023. “Il sostegno al reddito in caso di sospensione temporanea o disoccupazione involontaria.” https://pubblicazioni.inapp.org/handle/20.500.12916/4085
However, approximately 3 million irregular workers in Italy lack regular employment contracts and, therefore, insurance coverage and protection in the event of dismissal. For these workers, the only protection available is provided by social support programs against poverty (Reddito di Cittadinanza until 2023 and the new Inclusion Income or the Formation and Labor Support program since 2023) (Law 3 July 2023 n.85).
The portability of pensions is guaranteed by law, but the real problem for the future is that the fragmented careers of the younger generation will result in lower pensions compared to those of current pensioners.
Citations:
- Istituto NAzionale della Previdenza SOciale. 2023. XXI Rapporto annuale. https://www.inps.it/it/it/dati-e-bilanci/rapporti-annuali/xxi-rapporto-annuale.html
Inapp. 2023. “Il sostegno al reddito in caso di sospensione temporanea o disoccupazione involontaria.” https://pubblicazioni.inapp.org/handle/20.500.12916/4085
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To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
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The tax system is fully aligned with the goals of ensuring adequate tax revenues.
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The tax system is largely aligned with the goals of ensuring adequate tax revenues.
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The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
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1
The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
The Italian tax system is strained by the need to finance high public spending and interest on significant public debt. It also struggles to significantly reduce high levels of tax evasion and the size of the informal economy. Consequently, the level of fiscal pressure remains high (42.9% in 2022 according to the OECD), and the tax burden is unevenly distributed. Tax pressure is very high for households and companies that regularly pay taxes, while it is low for those who evade taxes (e.g., many companies and a large number of independent contractors and self-employed individuals). Families with children have limited exemptions, and labor and business are heavily taxed, resulting in fewer new businesses and employment opportunities.
The capacity of the tax administration has improved over the past year. One significant measure introduced by recent governments is the online system for filing income tax returns, the “730 precompilato,” which has seen increasing use each year. This system simplifies the tax filing process, replacing paper forms for most taxpayers. The general shift to electronic invoicing and the new VAT payment method have also enhanced tax control effectiveness.
The NRRP aims to reduce Italy’s tax evasion rate from 18.5% in 2019 to 15.8% in 2024, a challenging target given the current executive’s approach. Notably, the Meloni government has raised the threshold for the flat tax (15%) for the self-employed from €65,000 to €85,000 and plans to reduce the number of personal income tax rates from four to three in 2024, financed two-thirds by deficit spending.
The capacity of the tax administration has improved over the past year. One significant measure introduced by recent governments is the online system for filing income tax returns, the “730 precompilato,” which has seen increasing use each year. This system simplifies the tax filing process, replacing paper forms for most taxpayers. The general shift to electronic invoicing and the new VAT payment method have also enhanced tax control effectiveness.
The NRRP aims to reduce Italy’s tax evasion rate from 18.5% in 2019 to 15.8% in 2024, a challenging target given the current executive’s approach. Notably, the Meloni government has raised the threshold for the flat tax (15%) for the self-employed from €65,000 to €85,000 and plans to reduce the number of personal income tax rates from four to three in 2024, financed two-thirds by deficit spending.
To what extent do existing tax institutions and procedures consider equity aspects?
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The tax system is fully aligned with the goal of ensuring equity.
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The tax system is largely aligned with the goal of ensuring equity.
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The tax system is only somewhat aligned with the goal of ensuring equity.
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1
The tax system is not at all aligned with the goal of ensuring equity.
Italy’s tax system contains several distortions. There is a significant asymmetry between employees and the self-employed, with the latter being treated more favorably and responsible for a high proportion of tax evasion. Due to high evasion levels, revenues from value-added tax fall short of targets. Property and corporate profits are generally treated more favorably than personal income, with greater opportunities for tax evasion. Revenues from corporate profits taxation as a percentage of GDP are similar to those of other large European countries (Italy 2.1%; France 2.3%; Spain 1.97%; Germany 1.65% in 2020) (Openpolis).
Citations:
Oecd. 2023. “Revenue Statistics 2023.” https://www.oecd.org/tax/revenue-statistics-2522770x.htm
Liberati, P. 2020. “Alcune riflessioni sul sistema tributario italiano.” Economia italiana 1: 239-267.
REV: on corporate profits taxation see Open polis: https://www.openpolis.it/le-imposte-sui-profitti-dimpresa-in-europa/
Citations:
Oecd. 2023. “Revenue Statistics 2023.” https://www.oecd.org/tax/revenue-statistics-2522770x.htm
Liberati, P. 2020. “Alcune riflessioni sul sistema tributario italiano.” Economia italiana 1: 239-267.
REV: on corporate profits taxation see Open polis: https://www.openpolis.it/le-imposte-sui-profitti-dimpresa-in-europa/
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
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The tax system is fully aligned with the goal of minimizing compliance and collection costs.
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The tax system is largely aligned with the goal of minimizing compliance and collection costs.
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The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
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The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
According to the World Bank’s Doing Business indicator on the “ease of paying taxes,” Italy has a very complex tax system. There is approximately one accountant for every 510 people in the country. The system has improved with the introduction of the pre-completed personal income tax return, which works well for those with only salaries and little property to declare. Otherwise, the procedure and rules are so complex that people need to seek external advice.
Citations:
Senato della Repubblica. 2022. “Elementi essenziali della tassazione in Italia.” https://www.senato.it/service/PDF/PDFServer/BGT/01361079.pdf
Citations:
Senato della Repubblica. 2022. “Elementi essenziali della tassazione in Italia.” https://www.senato.it/service/PDF/PDFServer/BGT/01361079.pdf
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
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The tax system is fully aligned with the goal of internalizing externalities.
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The tax system is largely aligned with the goal of internalizing externalities.
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The tax system is only somewhat aligned with the goal of internalizing externalities.
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The tax system is not at all aligned with the goal of internalizing externalities.
Italy provides some subsidies for basic research, but aside from programs to attract foreign researchers or Italians conducting research abroad (e.g., individual tax credits), there are no significant subsidies or tax credits for research institutions or universities. Regarding taxes and subsidies to address environmentally harmful behavior, Italy is among the most demanding countries in the EU, although most revenues are not invested in environmental policy.
Citations:
https://www.openpolis.it/come-vengono-gestite-e-impiegate-le-tasse-ambientali
Istat. 2023. “GLI INCENTIVI ALLE IMPRESE PER LA RICERCA E SVILUPPO.” https://www.istat.it/it/files//2023/09/Focus_incentivi_RS_DEFINITIVO.pdf
Citations:
https://www.openpolis.it/come-vengono-gestite-e-impiegate-le-tasse-ambientali
Istat. 2023. “GLI INCENTIVI ALLE IMPRESE PER LA RICERCA E SVILUPPO.” https://www.istat.it/it/files//2023/09/Focus_incentivi_RS_DEFINITIVO.pdf
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To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
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Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
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Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
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Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
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1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
Italian governments have struggled in recent years to achieve fiscal stability and consolidate their budgets during a period of prolonged economic stagnation. Although fiscal policies have gradually reduced annual deficits and achieved a strong primary surplus, slow economic growth has hampered attempts to reduce the significant public debt. Efforts such as selling off public property or shares in state-owned companies have seen little success or have been postponed. Improved conditions in international markets and the European Central Bank’s policies led to a sharp fall in interest rates on long-term Italian government bonds, easing budgetary pressure before the pandemic crisis.
The acceleration of economic growth in 2017 and 2018 slowed the rise of public debt, but the need to support economic activity during the pandemic required a significant increase in deficit spending. The Draghi government, leveraging EU funds and the ECB’s supportive monetary policy, continued this public spending policy, redirecting spending toward infrastructure and digital investment to promote faster growth (though implementation is still in progress).
The Meloni government has tried to follow a similar approach to public debt control, though most budgetary interventions for both 2023 and 2024 were made in deficit. These decisions are temporary and subject to future confirmation.
The budgetary process in Italy is highly transparent and adheres to strict procedures, though the ability to use the budget in a counter-cyclical manner is limited. While targets are clearly linked to the country’s socioeconomic development, there are few references to the SDGs, sustainable development, and environmental sustainability. The Ministry of Treasury defends the long-term sustainability of the budget, while the government and other ministries focus on short-term expenditures. The Meloni government has attempted to respect financial limits according to EU regulations, but the content of the budget laws for 2023 and 2024 has been controversial regarding their effectiveness in stimulating the economy and ensuring the financing of key policies like healthcare.
The acceleration of economic growth in 2017 and 2018 slowed the rise of public debt, but the need to support economic activity during the pandemic required a significant increase in deficit spending. The Draghi government, leveraging EU funds and the ECB’s supportive monetary policy, continued this public spending policy, redirecting spending toward infrastructure and digital investment to promote faster growth (though implementation is still in progress).
The Meloni government has tried to follow a similar approach to public debt control, though most budgetary interventions for both 2023 and 2024 were made in deficit. These decisions are temporary and subject to future confirmation.
The budgetary process in Italy is highly transparent and adheres to strict procedures, though the ability to use the budget in a counter-cyclical manner is limited. While targets are clearly linked to the country’s socioeconomic development, there are few references to the SDGs, sustainable development, and environmental sustainability. The Ministry of Treasury defends the long-term sustainability of the budget, while the government and other ministries focus on short-term expenditures. The Meloni government has attempted to respect financial limits according to EU regulations, but the content of the budget laws for 2023 and 2024 has been controversial regarding their effectiveness in stimulating the economy and ensuring the financing of key policies like healthcare.
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
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The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
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The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
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The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
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1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
Italy has struggled with research and innovation policy due to low public funding and an economic structure based on small and medium-sized enterprises with a lower propensity to invest in research and innovation. Italy is a moderate innovator according to the latest European Innovation Scoreboard, which shows a decline in public and private funding indicators between 2022 and 2023, as well as a decrease in product innovators and innovative enterprises.
The governance of R&I in Italy is complex, involving multiple ministries, including the Ministry of Higher Education, the Ministry of University and Research, the Ministry of Economic Development (referred to by the Meloni government as the “Ministry of Made in Italy”), the Ministry of the Environment, and the Ministry of Transport and Infrastructure. Coordination of R&I has been poor, particularly regarding its links with other policy areas like industrial policy, development policy, and digitalization.
This logic posits that public research serves as a catalyst for private investment in research and innovation. By fostering conducive ecosystems, public research helps transform ideas into new products, processes, and services. The ultimate goal is to create high value-added jobs and engage the most dynamic and productive sectors in international markets.
The NRRP seeks to change this perspective by placing research policy within a broader transformation of the Italian economic system. It integrates public expenditure on research with experimental development, technology transfer, and private spending on research, aiming to create favorable ecosystems for innovation. The NRRP plans to invest over €16 billion in R&I activities, including direct transfers to companies, partnerships between companies and universities, “innovation ecosystems,” “territorial R&D leaders,” national R&I champions, and doctoral programs for innovation and industry.
This effort is part of a complex plan linking to the national research plan (2021–2027), the strategic plan for AI (2022–2024), and the plan for the ecological transition. Despite efforts to improve the quality and impact of R&D policy, there appears to be no significant and effective government monitoring of these policies’ results.
Citations:
Acciai, C. 2023. Policy Design for Research and Innovation Politics, Institutions and Interest Intermediation Practices. London: Palgrave.
European Innovation Scoreboard. 2023. “Italy.” https://ec.europa.eu/assets/rtd/eis/2023/ec_rtd_eis-country-profile-it.pdf
CNR. 2022. Relazione sull’innovazioen e la ricerca in Italia (2021). https://www.dsu.cnr.it/wp-content/uploads/2023/10/Relazione_sulla_ricerca_e_innovazione_in_Italia_2021.pdf
The governance of R&I in Italy is complex, involving multiple ministries, including the Ministry of Higher Education, the Ministry of University and Research, the Ministry of Economic Development (referred to by the Meloni government as the “Ministry of Made in Italy”), the Ministry of the Environment, and the Ministry of Transport and Infrastructure. Coordination of R&I has been poor, particularly regarding its links with other policy areas like industrial policy, development policy, and digitalization.
This logic posits that public research serves as a catalyst for private investment in research and innovation. By fostering conducive ecosystems, public research helps transform ideas into new products, processes, and services. The ultimate goal is to create high value-added jobs and engage the most dynamic and productive sectors in international markets.
The NRRP seeks to change this perspective by placing research policy within a broader transformation of the Italian economic system. It integrates public expenditure on research with experimental development, technology transfer, and private spending on research, aiming to create favorable ecosystems for innovation. The NRRP plans to invest over €16 billion in R&I activities, including direct transfers to companies, partnerships between companies and universities, “innovation ecosystems,” “territorial R&D leaders,” national R&I champions, and doctoral programs for innovation and industry.
This effort is part of a complex plan linking to the national research plan (2021–2027), the strategic plan for AI (2022–2024), and the plan for the ecological transition. Despite efforts to improve the quality and impact of R&D policy, there appears to be no significant and effective government monitoring of these policies’ results.
Citations:
Acciai, C. 2023. Policy Design for Research and Innovation Politics, Institutions and Interest Intermediation Practices. London: Palgrave.
European Innovation Scoreboard. 2023. “Italy.” https://ec.europa.eu/assets/rtd/eis/2023/ec_rtd_eis-country-profile-it.pdf
CNR. 2022. Relazione sull’innovazioen e la ricerca in Italia (2021). https://www.dsu.cnr.it/wp-content/uploads/2023/10/Relazione_sulla_ricerca_e_innovazione_in_Italia_2021.pdf
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
10
9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
7
6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
4
3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
The Italian government and public financial institutions, such as the Bank of Italy, generally support international and European policies aimed at improving financial market regulation and supervision. The Italian government and the Bank of Italy typically favor a collective approach within the framework of EU and G7 institutions.
The Draghi government reinforced this position, leveraging the prime minister’s international prestige to play a more active role in this arena, exemplified by the adoption of the global minimum tax at the G-20 meeting in Rome under the Italian presidency. All in all, the high international profile of the Italian prime minister and his background have been a catalyst for international negotiations.
The Meloni government has attempted to follow this path but faced serious problems within its coalition regarding the approval of the European Stability Mechanism (ESM) reform. The Northern League and Brothers of Italy have always opposed the ESM reform, and in December 2023, the Italian parliament voted against it, making Italy the only eurozone country to do so. Internal tensions between the more internationally open and nationalist factions have heightened, particularly with the upcoming European elections.
This decision may have undermined the Italian government’s credibility. During negotiations on the new Stability and Growth Pact approved in December 2023, the Meloni government managed to dilute corrective measures until 2027. However, from 2027, Italy must respect the new deficit-to-GDP threshold of 1.5%.
The Draghi government reinforced this position, leveraging the prime minister’s international prestige to play a more active role in this arena, exemplified by the adoption of the global minimum tax at the G-20 meeting in Rome under the Italian presidency. All in all, the high international profile of the Italian prime minister and his background have been a catalyst for international negotiations.
The Meloni government has attempted to follow this path but faced serious problems within its coalition regarding the approval of the European Stability Mechanism (ESM) reform. The Northern League and Brothers of Italy have always opposed the ESM reform, and in December 2023, the Italian parliament voted against it, making Italy the only eurozone country to do so. Internal tensions between the more internationally open and nationalist factions have heightened, particularly with the upcoming European elections.
This decision may have undermined the Italian government’s credibility. During negotiations on the new Stability and Growth Pact approved in December 2023, the Meloni government managed to dilute corrective measures until 2027. However, from 2027, Italy must respect the new deficit-to-GDP threshold of 1.5%.