News Analysis: Italy's unemployment problem proving immune to gov't policies

During his 25-month mandate as Italy's prime minister, Matteo Renzi has passed a highly touted labor reform initiative and seen industrial production rise and the country's moribund economy show signs of recovery.

But despite all that, the unemployment rate has remained stubbornly high, something experts say dramatically reduces any chances for sustained economic growth while acting as a drag on the prime minister's approval levels.

In the figures released earlier this month from ISTAT, Italy's National Statistics Institute, the unemployment rate rose to 11.7 percent in February, from 11.6 percent the month before. That was despite a small 0.1-percent increase in gross domestic product for the same month. This decoupling of unemployment levels and growth -- when the two figures do not move in step with each other -- is worrying in economic circles.

Even more worrying is the fact that youth unemployment now stands at a staggering 40 percent -- meaning more than 2 out of 5 Italians between the ages of 15 and 24 who are looking for work cannot find a job. That figure is twice the rate for the European Union as a whole. And that is despite the fact that workers beneath the age of 40 are leaving Italy for greener pastures abroad at a rate of nearly 100,000 a year.

"The youth unemployment problem is particularly problematic," Olivieri Fiorini, a Milan-based political affairs analyst with ABS Securities, told Xinhua. "Many of the best and brightest young Italians are taking jobs in New York or London or elsewhere, which is a big cost for Italy, which pays to educate and prepare these people who end up contributing to the economies of other countries."

Fiorini continued: "So far, the government hasn't been able to do anything to reduce the problem."

The Jobs Act Renzi championed was supposed to help improve the problem, by giving employers more flexibility to hire and fire workers. So far, the impact of the labor reform has been muted. And while industrial production has improved slightly -- for the most part due to cheap oil production that have brought down prices -- most companies have carried extra capacity that allowed them to step up production without taking on many new workers.

Even tax incentives aimed at creating incentives for hiring new workers or changing part-time worker contracts to full time have sometimes had the opposite impact: many economists say the fact that many of the incentives from early in Renzi's mandate ran out this year is one of the factors pushing unemployment levels higher.

"I've always been skeptical of the idea that you can legislate improved employment levels," Andrea Lassandari, a labor rights expert at the University of Bologna, said in an interview. "The focus should be on making companies better and more efficient, not on making them take on new workers as the companies are now. But it's a hard thing for a government to do."

Rocchina Staiano, a labor policy authority with the University of Teramo, in central Italy, said that until Italy's unemployment situation improves, sustained economic growth will be almost impossible: "How can an economy grow strongly with so many people unemployed?" she asked during an interview. "Those people don't have money to make purchase that can help fuel growth."

The problem could spell bad news for Renzi, who has seen his approval levels drop in recent months. The 41-year-old leader will face a referendum on his signature constitutional reform in October and could face a national vote a few months later. Pollsters say that if the employment situation worsens between now and then, it would spell trouble for the government.

"There are dozens of economic indicators, but no matter what they say it won't make a difference for the average voter if he or she, or a brother or friend of parent, is out of a job," Maria Rossi from the polling firm Opinioni told Xinhua. Enditem