Country system appeal has always been an issue for Italy, the recipient of between 2% and 3% of all direct foreign investments in Europe and the twelfth-ranked nation on the continent. The difficulty in attracting investments is paramount among the concerns to be addressed in ensuring support for and the development of the country’s fabric of small and medium-sized enterprises. Yet, the country presents a marked dualism, not only between north and south, but also between levels of competitiveness and productivity.
There are some signs of a reverse trend owing to a decisive improvement in the country’s reputation and strong economic growth. With investment flows in the double digits, Italy saw a 5% upswing in 2020; the trend appears to have continued through 2021 if the stock exchange, likely to be credited with the best performance in Europe this year, is any indication.
Among Italy’s strong points is quality of human capital and lifestyle appeal; while the main obstacles it faces have to do with bureaucracy and a cumbersome public administration, along with a high level of fiscal pressure. While there has been progress from the fiscal standpoint, it remains essential to continue to invest in human capital, creating the conditions for keeping Italian talent in the country and attracting foreign talent to Italy.
The National Recovery and Resilience Plan offers a unique opportunity to strengthen weak points and confront difficulties by pushing through some of the reforms that foreign investors are calling to facilitate the allocation of funds and eliminate barriers to incoming capital. Italy’s biggest investors remain those countries with which it has historically had the closest relations, the United States in first place followed by France and Germany. Geopolitical problems in other areas of the world call for the use of golden power-based defense mechanisms. This is not solely an Italian but a European issue as well, which calls for a continental approach to the protection of techno-scientific competences and of strategic sectors.
What’s more, Europe as a whole needs to find a model for protecting its industry as well as the resources with which to sustain a post-Covid recovery marked by two major transitions: energy and digital. The basis for the Union’s massive Next Gen EU plan is strong innovation, a good example of which are Eurobonds capable of offering not public resources but government guarantees on private investments. Italy must be prepared to take the helm in this challenge, putting its vast pool of private savings to work, using a competitive advantage, combined with foreign investments, to mobilize recovery resources and modernize the economy.