Italy COVID-19
Italy has been among the European countries hardesthit by COVID-19, having suffered a particularly harsh first wave in spring 2020. A nationwide lockdown was introduced on March 9th. Between mid-March and midMay 2020, the government implemented a range of fiscal packages amounting to over €860 billion, covering support for businesses to freeze layoffs, deferred tax payments as well as additional funds for healthcare.47 The economy contracted by 8.9 per cent in 2020.48 The OECD foresees 4.5 per cent GDP growth in 2021.49 While both existing and emergency employment protections stopped most workers from being laid off during lockdowns, temporary workers and the self-employed have been particularly badly hit by the economic fallout of the pandemic. These workers are often young and female, and these groups are both priorities in Italy’s recovery plan. Partly due to disagreements on how to spend RRF funds, the government led by the populist Five Star party’s Giuseppe Conte collapsed in January 2021. It was replaced by a government including politicians from across the spectrum and technocrats, led by former
European Central Bank president Mario Draghi. Draghi’s government has now been tasked by parliament to design and oversee the roll-out of the recovery plan and implement the much-needed, if unpopular, reforms that will be required to unlock access to EU funds.
Long-term economic performance
Italy’s long-term economic stagnation is partly explained by enduring structural weaknesses, which the Recovery Plan aims to address. The country is also highly geographically unequal, with the Mezzogiorno, or South of the country, being much less developed than the North. As illustrated in Chart 12, productivity growth has been flat for about two decades – a trend that coincides with a slowdown in public and private investment since 1999.50 Female employment is low, which can be linked to patchy childcare provision. Vocational education levels are below OECD averages.51 The economy has still not fully recovered from the financial crisis and ensuing austerity policies, with GDP per capita still below precrisis levels.52 While the unemployment rate has been falling since 2014, in 2019 it was still 10 per cent, with 18 per cent of young people not in education, employment or training.53
Chart 12: GDP per hour worked, 2000-2020 France
125
Germany
Spain
Italy
UK
120
2000 = 100
115
110
105
100
95
90 2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Source: CER calculations based on OECD data.
47: Bruegel, ‘The fiscal response to the economic fallout from the coronavirus’, dataset last updated on November 24th 2020. 48: Bank of Italy, ‘Relazione annuale sul 2020 in sintesi’, May 31st 2021. 49: OECD, ‘Italy Economic Snapshot’, consulted in May 2021. 50: ‘Piano nazionale di ripresa e resilienza’, Italy’s recovery plan, 2021.
51: OECD, ‘Economic policy reforms 2021: Going for growth’, 2021. 52: World Bank national accounts data, and OECD National Accounts data files. 53: International Labour Organisation, ILOSTAT database.
WHY THE EU’S RECOVERY FUND SHOULD BE PERMANENT November 2021
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