Italy faces two major medium-term challenges at present: how to raise the underlying growth rate, and managing public finances so as to reduce high debt levels and keep the deficit under the 3 per cent of GDP Stability and Growth Pact obligation. These objectives do not conflict in the longer term: higher growth would both generate more tax revenue for given tax rates and automatically reduce the debt to GDP ratio more quickly. The main reforms to which the administration is committed in the fields of education, labour markets and tax are likely to have positive effects on growth, but implementing them will have significant up-front budgetary costs. It is therefore important that they be phased in over time, with priority being given at first to those aspects of the reforms that can be implemented with comparatively lower costs and that can provide higher returns in a relatively short time...