Lack of competitiveness, political clientelism hamper Italian economy

GMT 19:57 2016 Saturday ,28 May

Arab Today, arab today Lack of competitiveness, political clientelism hamper Italian economy

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As Italy has seen a sign of growth, economists say Italy still lacks competitiveness and needs structural reforms in order to return to pre-crisis levels.

Compared to other European countries, recovery from the 2008 global financial crisis has been much slower in Italy, said Giulio Zanella, an economic policy professor at the University of Bologna.

"The Italian economy is still below the pre-crisis levels," he told Xinhua in a recent interview.

Pre-crisis structural problems, he noted, have remained essentially the same despite the attempts of different governments to carry out reforms. What is the reason for this?

"The economic structure of Italy lacks free competition in most strategic sectors," Zanella said.

"For example, the banking system is essentially governed by foundations which in fact are political bodies, thus do not reflect the interests of market," he said.

And foundations in his view are often ruled by disgraced politicians, "which does not add value to the banking system, as the recent troubles of Monte dei Paschi di Siena and other banks have shown."

"Rules in Italy are often set by political clientelism instead of the market," he said.

The same story happens in other strategic sectors, such as transportation, where the state is monopolist, Zanella noted.

For example, he said, it was extremely difficult for Italy's first private high speed train, Italo, to try to break state monopoly.

"And in the course of years, privatizations have transformed public monopolists into private monopolists so that nothing has really changed," he added.

Meanwhile professional orders, taxi drivers, notaries and lawyers just to mention some, have remained closed sectors in Italy as any attempt to reform them has failed, Zanella noted.

As a consequence, small- and medium-sized companies (SMEs), the backbone of Italy's productive economy, have a hard time competing in the market, and face record high taxes and heavy bureaucracy, he said.

Luigi Bonatti, an economic policy professor at the University of Trento, said Italy should give less emphasis to seeking a generous interpretation of the European Union (EU)'s three percent deficit threshold, and stay focused on long term policies of growth instead.

"Italy lacks productivity, and this is the dramatic hindrance to the country's growth," Bonatti said.

Lack of productivity resulted from pockets of inefficiency, interest groups and closed sectors which got ahead in the course of years in Italy, the professor observed.

Bonatti told Xinhua that following their country's economic boom between the end of World War II and late 1960s, Italian families gradually started to live off of their private income.

"It happened that the rapid accumulation of wealth became a stop rather than an asset for growth," he pointed out.

"For example, many Italians gave up their entrepreneurial activities in innovative sectors, considered to be more risky, to invest in fields like the real estate and just live off of rental income, forgetful of the fact that investments in innovative sectors are a fundamental engine of growth," he said.

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