Debate at this ASL session focused on framing the complexities of Italy’s economic system within an international context widely held to be in a state of crisis. It was submitted that a closer look at the real economy reveals a need to bolster the international competitive ranking of Italian firms and sectors with reforms capable of shaping the future evolution of the country’s education and research sector, the functioning of the labor market, and the banking and financial system. On the one hand, the US experience would seem to confirm that successfully charting a way out of the crisis is predicated on the ability to instigate profound scientific, technological and organizational transformations. Yet on the other, the Italian industrial system is weighed down by conditions seemingly unconducive to offering a competitive edge, with increasing regulatory opacity and uncertainty, and the delivery of public goods and services of a standard not commensurate with the overall tax burden.
Turning to consider the country’s financial system, the participants highlighted the existing gap between the level of private savings and the ability to deploy them productively. It was felt that this gap could be bridged by providing more scope for new channels of investment, combined with efforts to improve financial literacy and the adoption of appropriate fiscal policies. On another front, growth was seen as hampered by excessive debt and the links between the banking system and sovereign debt – a point underscored by the difference in size between large banks and sovereign states, as well as by the heavy imbalance in favor of sovereign debt liabilities over the asset holdings of banking institutions.
It was suggested that a major factor in this situation is the state of Europe today. In a scenario marked by the predominance of the intergovernmental over the Community method of governance, the participants were of the view that it has become necessary to institute new European mechanisms to stimulate investment, drawing on the role of the European Investment Bank. In addition, as a European banking union would effect quite a substantial devolution of powers, the need arises to jointly put in place conditions that facilitate integration between financial markets, the establishment of a single oversight mechanism, and the restoration of macro-financial stability.
Finally, the discussions focused on the challenge that an aging population poses both to the fiscal consolidation process and the country’s potential for growth. In addition to increasing the size of the non-working-age population, this demographic trend also presents particular problems for Italy’s southern regions. It was acknowledged that pension and healthcare reforms already introduced have helped contain growth in public spending. Nevertheless, it was felt that the demographic shift needs to be offset by a strong increase in labor productivity and accompanied by an overhaul of the role played by the various welfare institutions, with a view to creating a framework that, over time, impacts positively on employment levels and demographic variables.