Executive summary

After a modest recovery, the economy is weakeningIn recent years, supportive global economic conditions, expansionary monetary policy, structural reforms and prudent fiscal policy supported Italy’s gradual economic recovery.However, the recovery has slowed.Italy continues to suffer from long-standing social and economic problemsReal GDP per capita is roughly the same as in 2000 and well below its pre-crisis peak.Absolute poverty rates for young people rose sharply as a result of the crisis and remain high.The already large regional differences in GDP per capita and employment rates have widened over recent decades.Renewable energy capacity has expanded rapidly from 2000 to the mid-2010s but has since stalled.A comprehensive reform package holds the key to stronger growth and social inclusionItaly faces the double challenge of reviving growth and making it more inclusive while putting the public debt on a steady downward path.Increasing productivity growth is key to raising living standards and to offsetting the large negative effect of demographics and a shrinking labour force.A credible medium-term plan to reduce the debt-to-GDP ratio will improve fiscal credibility and help contain the risk premium on government debt.Public spending needs to become more efficient and better targeted with a fairer tax system.The health of the banking system has improved but challenges remain.In-work benefits and a moderate guaranteed income scheme would boost employment and reduce povertyA key part of making growth stronger and more inclusive involves increasing formal employment.The success of any guaranteed minimum income scheme will hinge on improving job-search and training programmes.More effective regional development policies and strengthening capacity at the local level would help to narrow the regional divideRationalising and improving coordination among the bodies involved in regional development policies by strengthening the role and expertise of central-government bodies would make regional policies more effective.