Six Economic Challenges for Italy’s Next Government

Slow growth, high debt, youth unemployment… Italy’s next government has its work cut out for it.

A balloon hovers over Rome, Italy, June 12, 2005
A balloon hovers over Rome, Italy, June 12, 2005 (Stefano Corso)

Valentina Romei reports for the Financial Times that, despite economic improvements, Italy is still a laggard among its European peers.

She lists six economic challenges for the country’s next government.

  1. Slow growth: Italy is one of the few rich countries where output has not yet returned to pre-crisis levels.
  2. Low productivity: Means businesses need more and more workers to produce the same value of output as in other major economies.
  3. High public debt: Now 132 percent of GDP, making Italy’s the third-highest public debt in the developed world, after Japan and Greece.
  4. High bank debt: Italian banks make up the EU’s largest slice of non-performing loans, which curtail banks’ ability to lend.
  5. Youth unemployment: One in three Italians under the age of 25 are out of work. Italy also has second-lowest employment rate of recent graduates in the EU after Greece.
  6. Low foreign investment: Reforms have made it easier to start and run a business, but investment has yet to catch up.

Political implications

  • Parties are unlikely to make good on the generous spending promises they have made in their manifestos.
  • Discontent, especially among the young, is the reason the anti-establishment Five Star Movement is polling in first place for the election in March.