2002 OECD Economic Surveys: Italy 2002

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This 2002 edition of OECD's periodic review of Italy's economy examines recent economic developments, policies and prospects and includes special features on reducing debt and the tax burden, making public spending more effective and on reforms to raise growth potential.

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Public Spending in Italy

Policies to Enhance its Effectiveness

The control of public spending has been an essential element in bringing the general government deficit down to levels consistent with Italy’s EMU obligations, which required one of the sharpest retrenchments in the OECD (Figure 16). However, though a significant proportion of the savings made were structural in nature, the consolidation process was assisted by a series of "one off" interventions – such as a freeze on wage contracts, ad hoc interventions in the health service and curbs on investment spending – which have created large compositional imbalances in public spending. Moreover, pressures from certain programmes – particularly those related to one of the fastest ageing populations in the OECD and to the Mezzogiorno – could intensify. At the same time, it is desirable on efficiency grounds to reduce the tax burden, but this is impossible without spending economies, on account of Italy’s large public debt. Priorities in public spending will need to be reset and control mechanisms for their effective implementation put in place.

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