MILAN (MNI) – The Italian economy is on a path to recovery, but the
pace remains uncertain, and overall output is not expected to return to
pre-crisis levels before 2013, the Organisation for Economic Cooperation
and Development said Monday.
“Although activity is recovering from the downturn of 2008-09, the
negative effects of the recession on potential output may persist for
some time,” the OECD said in its Economic Survey report on Italy.
“GDP will not return to its pre-crisis level before 2013-14, still
well below the level that would have prevailed under the pre-crisis
trend, even though this past trend was itself sluggish,” the report
continued.
The OECD commended fiscal policy for helping to keep the budget
deficit from widening as much as in many other countries. Still, the
government cannot afford to rest on its laurels, the organisation said.
“The public debt-to-GDP ratio ratio is nonetheless rising once
again from one of the highest levels in the OECD, against a positive
background of relatively low private debt,” the report noted. “With bond
markets having become more sensitive to sovereign risk, action to bring
the budget toward balance remains crucial.”
Regarding the government’s consolidation efforts, which include a
public sector wage freeze and reduced transfer payments, the OECD warned
that further improvements would be necessary.
“The pay freeze will expire in 2013, while the balance of regional
spending and revenue may be difficult to fully control during the coming
transition to extended fiscal federalism,” the OECD said. “If there is
slippage in these measures, further spending cuts will be needed, if
necessary supplemented by revenue-raising measures such as broadening
tax bases by eliminating many tax breaks and reduced rates.”
Another “key priority” is “to stimulate productivity growth and
labour supply,” the OECD said, calling for lower barriers to
competition, measures to expand employment and reforms to improve the
efficiency of the tax system.
The OECD said that policies on taxes were already moving in that
direction, noting that the bases of a number of taxes had been
broadened, which “would tend to improve efficiency by allowing for
revenue-neutral reductions in the tax rates.”
The report also noted that changes to bankruptcy laws had been
implemented, while the energy market was opening up and public-service
contracts were seeing an increase in public tendering. However, work
remains to be done, the OECD stressed.
“Previous plans to liberalise professional services have been
stalled for some time and should be speeded up,” the report said.
“And high on the agenda should be: less rigid, more
employment-oriented, labour market regulation; measures to encourage the
return to work, steps to increase activity rates, including among women
and youth; following up and completing reforms liberalising access to
and competition in professional services; an improved framework for
enterprise and innovation; and other competition-enhancing measures.”
— Frankfurt bureau: +49-69-720 142; email: frankfurt@marketnews.com —
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