Italy has started a slow recovery from its worst postwar recession but it will take years before the country's economy returns to pre-crisis levels, the head of analyses and forecasts for the Italian economy of the Bologna-based Prometeia think tank said on Friday.
Italy has shown gradual signals of improvement since the last quarter of 2013, Stefania Tomasini said in a press meeting with the Milan Foreign Press Association.
The Italian economy halted a two-year recession in the third quarter of last year. Industrial production data as well as exports also showed a good sign to the country, while annual inflation rate was steady at 0.7 percent in December.
In January the spread between the yields for Italian government bonds and the benchmark Deutsche bunds from Germany, seen as a measure of the economy's health, was below the psychologically important threshold of 200 points for the first time since 2011.
Italy's move to sell up to 12 billion euros in assets in 2014, the first round of privatizations including shares in publicly traded companies and oil giant Eni, was hoped to earn the country a green light from the European Union (EU) to boost public investment.
Do these signals mean that Italy is on the right path to recovery? Tomasini pointed out that "an improved economic situation at the international level will not be sufficient to assure Italy's recovery" because "some other conditions are necessary to be achieved."
Though the Italian gross domestic product (GDP) was still forecast to drop by 1.8 percent in 2013, estimates said the country's economy grew 0.4 percent in the third quarter of last year.
In Tomasini's view, "lack of liquidity has especially adversely affected investments in companies."
The central government has given the economy an immediate shot in the arm by paying more than 47 billion euros in state arrears to companies within the first half of this year, but according to Prometeia some 80 percent of companies up to now were using the state funds to reduce debt rather than invest.
A moderately expansionary fiscal stance was a second factor having negative repercussions on the recovery's potential, Tomasini also added.
She noted that the 2014 budget law's measures partially failed in fueling recovery as they focused on fragmented interventions instead of introducing major changes to foster growth such as reduction of the tax wedge on wages.
Since the outbreak of the global economic crisis, Italy has lost some 1.5 million jobs especially in the industrial and service sectors. More than 250,000 jobs were lost in the public sector, which she stressed had never happened in Italy's history before.
Significative drops of household consumption, financial wealth and savings between 2007 and 2013 were other weaknesses that have made the recovery path not easy, according to Prometeia.
Tomasini told Xinhua that in her view the Italian economy will not return to pre-crisis levels before 2020.
The analyst believed however that frequent political instability in Italy, whose current coalition government is also at risk of crisis due to disagreements between its center-left and center-right components, was not threatening the country's solid economic system.
Political dangers for the Italian economy were more likely to be observed at the European level if anti-EU parties emerge stronger in May's elections for effect of a crisis of confidence triggered by the economic crisis, she concluded. (1 euro = 1.35 U.S. dollars)