Roundup: Italy eyes deeper economic reform after positive signs of growth

Italian President Sergio Mattarella in his New Year speech hailed all positive economic signs the country has seen in 2015 and stressed urgent need in deeper reforms for Italy to go on track in the future.

Noting too many young Italians are still without a job and the opportunities contribute to their own future and the country's growth, Mattarella said employment is the priority. He pointed out that the employment has returned to growth, and this will help build confidence.

"The end of the economic recession and the recovery are further positive signs, but still have not been enough to put an end to the suffering of many families," he said.

The president said job market and society were experiencing a major process of change. At the same time, "innovation is a challenge that concerns all of us, and competition requires quality, creativity, and investments," he said.

Italy saw its first signs of economic recovery in 2015, after its longest post-war recession. The latest International Monetary Fund (IMF) models showed the Italian economy grew a modest 0.8 percent in 2015. If that holds, it means 2015 will be the first year Italy's economy showed positive growth since advancing 0.6 percent in 2011, and the first time it grew in every quarter since 2007.

The economy has been through painful austerity measures since 2011, and is still struggling with an overall jobless rate at some 11 percent and over 39 percent among people under the age of 25.

"A return to modest growth, an improvement of employment levels and a stabilization of public finance are the results achieved by Italy in recent months," Mariano Bella, director of the research department of Confcommercio, Italy's largest confederation of enterprises, told Xinhua.

The Italian economy has registered positive signals in the first three quarters of 2015, he noted, with a 4.5-percent growth of exports, a 1.0-percent increase of household consumption and a 0.3-percent rise of investments. A labor reform and related tax advantages have pushed job increase.

All the improvements benefitted from a fall in oil prices, a weak dollar, an expected growth of global trade by around 3 percent in 2015 and the expansionary monetary policy of the European Central Bank, Bella said.

Those factors have decreased production costs for manufacturing, helped exporters to gain market shares in non-euro markets and encouraged companies to make investments and households to purchases durable goods. However, there is still a long way to go for Italy to leave years of economic crisis behind, Bella told Xinhua.

A very high fiscal pressure on families and enterprises as well as the country's slow-moving legal system, bureaucracy and logistics are among the factors hampering economic growth, he said.

Francesco Daveri, an economics professor at the Catholic University's Piacenza campus, said the approval of the so-called Jobs Act and an ongoing reform of the banking industry have been "appropriate steps to signal foreign investors that Italy was ready and eager to open up and receive foreign capital," Daveri told Xinhua.

The government has contributed to accelerating domestic growth by starting a much needed program of tax cuts, Daveri said. "In 2014-2015 the tax rebate of 80 euros (more than 87 U.S. dollars) monthly has encouraged households to consume," he added.

"The taxes paid by Italians will not fall in 2016 compared to 2015, as they will simply be cut their upward trend of the last few years. If the process of curbing spending and cutting tax rates continues, we will probably see a genuine tax reduction only in 2017," Daveri said.

Andrea Goldstein, an economist and managing director at the Bologna-based think tank Nomisma, said Italy's growth perspectives are certainly modest compared to some other European countries, but also mark "a trend reversal after many years of crisis."

In his view, the improved global situation, an accumulated demand after years of crisis and the labor measures and tax advantages will fuel domestic consumption and investments.

But there are structural problems in Italy such as growing precariousness and widespread poverty that have been fostered by the global economic crisis of recent years and can't be solved in the short or medium term, but need to be addressed though more far-sighted policies, Goldstein stressed.

There is also a significant gap between developed north and the relatively poor south in this country, Goldstein noted. He said among the most urgent steps to be made, Italy needs to introduce more liberalizations on public services and private practices, and work on improving its school system.

Prime Minister Matteo Renzi was also excited that the country's economy is showing "on a path of clear recovery" with official prediction of GDP (gross domestic product) increase by 1.5 percent in 2016 and by 1.7 percent in 2017. "We are moving again, because when Italy does what Italy can do, nobody can beat us," he said.

At the end of 2015, Italy also saw parliament approval of the 2016 budget plan, which abolishes an unpopular tax on homes, provides tax breaks to farmers and companies that invest in infrastructure, and a monthly financial bonus for soldiers and law enforcement officials.

Renzi expressed hope that the European Union (EU) executive in Brussels will ignore the fact that Italy's massive public debt -- at 133 percent of the country's GDP, the second highest in the 28 EU nations behind only Greece -- in order to see the slow growing Italian economy pick up steam. However, the EU has warned Italy over debt and budget problems under the EU rules.

"Over the long haul, Italy can only make significant progress on lowering debt if the economy starts growing at a healthy clip," Javier Noriega, chief economist with Hildebrandt and Ferrar investment bankers, told Xinhua in an interview. "There's a calculated risk that the right combination of incentives can spark growth before the debt problem worsens too much."

The economists told Xinhua that the economy probably needs to grow more than the IMF's prediction of 1.3 percent in 2016 in order to justify the budget plan.

"The primary surplus will be smaller in 2016 than in 2017 and 2018 unless there is an increase in economic activity and tax revenue," Giampaolo Arachi, a professor of public finance from the University of Salento, said in an interview.

Arachi said what Italy's economy needs most is an increase in investment. That is something the new budget plan seeks to address, with incentives for companies and farmers to invest in new equipment or machinery. Enditem