Key Challenges
Italy has recovered relatively well from the COVID-19 pandemic, thanks to strong family ties, high household savings rates, the resilience of small and medium-sized enterprises, and dynamic manufacturing and export-oriented sectors. Additionally, the expansionary macroeconomic policies pursued by the Conte and Draghi governments contributed significantly to this recovery. However, the process has not addressed the country’s persistent weaknesses, which remain a challenge in the current political climate marked by increased polarization and the new right-wing government that took office after the September 2023 general elections.
Italy faces two main types of challenges: policy and political.
Policy challenges:
Government and administrative reform: A comprehensive overhaul of government machinery and the relationship between central government and local authorities is necessary.
Economic and social reforms: Targeted economic reforms, sustainable social policies, and continued efforts to improve the quality of education and research are essential.
Policy Implementation: Designing policies that allow for effective implementation and using evaluation as a central pillar are crucial. This includes extensive use of ex ante, in itinere, and ex post evaluations.
Public administration: Improving recruitment procedures for senior civil servants and strengthening the analytical capacity of public administrations at all levels is vital. A strong achievement orientation should characterize public administration.
Policy advice: Emphasizing strategic and innovative approaches to policymaking is needed.
Economic Intervention: Addressing financial instability with policies that promote dynamic growth, enhance competition, increase enterprise size and innovation, boost productivity, and ensure skilled employment is critical.
Immigration: Reorienting public debate on immigration to focus on effective integration and protection of immigrants’ rights is necessary.
Research and education: Increased funding and strategic reorientation of research and education are required.
North-South divide: Addressing the widening North-South divide concretely is imperative.
The enormous NRRP (National Recovery and Resilience Plan) that Italy aims to implement by 2026 focuses on these challenges and more. Successful and effective implementation of the NRRP is crucial for overcoming the country’s structural socioeconomic weaknesses and achieving the SDGs. Monitoring the outcomes closely in the coming years is essential.
Political challenges:
The primary political challenge is to halt the trend toward polarization, which hinders commitment to sustainable policies. The current prime minister’s ability and willingness to steer her party toward more moderate positions are crucial. Similar moderation is required from other parties like the Northern League and M5Stars.
Another significant challenge is the government’s approach to two crucial institutional reforms: differentiated regionalism and the potential presidentialization of the political system, central to the prime minister’s party’s electoral manifesto. Poorly designed interventions could negatively impact Italy’s ability to address its structural problems.
Without a shift toward a more centripetal political system, Italy will struggle to play a constructive role in the EU and meet the requirements of the new Stability and Growth Pact.