Matteo Renzi Revives Italy
By Shlomo Maital
The attention of the business press has been almost entirely focused on the bad-news story of Greece. While Greece suffers, almost un-noticed Italian Prime Minister Matteo Renzi, who took over in 2014, has fulfilled his promise to revive the Italian economy. He has cut public spending, slashed deficits, modernized the judicial system, and reformed the sluggish labor market. (All these reforms are equally vital in France – but Hollande is neither able nor willing to undertake any of them).
Renzi’s Jobs Act, passed March 1, ends the system that gave some employees ‘jobs for life’. Companies that hire a previously unemployed worker in 2015 get a three-year grace period on social security contributions. This makes hiring much more worthwhile. As a result, consumer confidence in Italy is now, July 2015, at a 10 year high (the graph does not include the latest few months).
Car sales are up. Youth unemployment is way down. Demand for exports is strong. And debt payments are falling sharply, from the present high level of 5 per cent of GDP to a targeted 1 per cent by 2020.
Renzi’s reforms now enable insurance companies and securitization companies to lend directly to businesses, attracted by a tax break for firms that issue new equity.
Renzi has cut corporate taxes by 6.5 billion euros, and imposed electoral reform for Italy’s lower house. He is trying to slash the amount of pending litigation by half and reduce the length of trials from three years to one.
Renzi is only 40 years old. When appointed, he was 39, making him the youngest Prime Minister in Italy since 1861. His reforms deserve far more attention. (See The Financialist: Italy’s Reform Agenda). Few believed he could fulfill his promises when he took office. But he has. Perhaps France could take a few lessons from Renzi.