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sector, with retail distribution, road freight, mobile telephony and railways being the most regulated industries. Other factors infl uencing Italy’s slow economic growth, related to the saving and capital formation process, are the precarious situation

of

public

fi nances

and

the

ineffi ciency of the judicial system. Since the ‘80s, Italy has been massively increasing its public debt, which has been mostly fi nanced by local savings. The huge debt build-up, coupled with a negative budget balance, has, and still is, crowding out a substantial amount of savings from the private sector and

hindering

Italy’s

capital

formation

capabilities. In addition to that, the worrying level of Italy’s public fi nances is also aff ecting

Italy’s economy is still only halfliberalized, with important service industries being heavily regulated.

expectations regarding future tax rate hikes, so as to discourage long-term investments. An important role in discouraging investments is also played by the ineffi cient judicial system which, with its abnormally lengthy trials, increases legal risk and the costs of doing

on maintaining the status quo rather then

business in the country.

implementing an aggressive policy of cost-

These well-known structural problems have

been

inadequately

addressed

by

cutting that would liberate resources for private investments.

governments of diff erent political parties. The

It is then evident how insufficient the

labour market has undergone a signifi cant

reforms of the last ten years have been.

reform in 2003 with the Biagi reforms, which

To solve

has deregulated the use of atypical work

necessary to address the market rigidities

arrangements

Italy’s “growth problem” it is

work,

created by the current regulatory framework

part-time work, on-call jobs and occasional

and remove the disincentives to private

work). But, despite

investment. These are pervasive reforms

(temporary

agency

adding fl exibility at

the “margin”, not having tackled the issues

which

of

even

collective

bargaining

and

excessive

would in

a

take

stable

time

to

political

implement

environment;

a

but an incremental approach is possible

“duality” in the labour market and had no

and needed, starting from administrative

signifi cant impact on labour productivity. The

simplification and the lowering of regulatory

product market regulatory framework, after

burdens for start-ups. Therefore, it is only

the wave of liberalizations of mid-90s, has

by addressing its structural inefficiencies

remained unchanged and state involvement

and by intervening on the two main drivers

remains high; Italy’s economy is still only

of long-term economic growth, productivity

half-liberalized,

of capital and labour, that Italy can solve its

employment

protections

with

has

created

important

service

industries being heavily regulated. Nothing

economic growth issues. iBR

has been done yet to solve the ineffi ciency of courts and present fi scal policy is focused

FA L L 2 0 1 0

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I N T E R N AT I O N A L B U S I N E S S R E V I E W

43

11/27/2010 3:13:14 PM

Profile for Daniel Hellwig

International Business Review - Fall 2015  

Fall edition of the IBR magazine at the Wharton School.

International Business Review - Fall 2015  

Fall edition of the IBR magazine at the Wharton School.

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