Italy’s last chance

There will be grave concern for Italy’s future if its potential growth remains so low (zero when not negative): political and social tensions may rise , while public debt sustainability requires an unsustainable primary fiscal surplus. Italy’s productivity gains and employment rate must therefore improve if a severe crisis in Italy, potentially leading to a break-up of the euro, is to be avoided. It is more or less known why Italy’s productivity gains and the employment rate are abnormally low: Corporate investment is insufficient, due to low profitability as a result of weak productivity, which generates a vicious low - productivity circle ; Labour force skills are very low and education system performance is very weak, driving down the employment rate and leading to deindustrialisation; The research and innovation effort is weak; Public investment (infrastructure, digitalisation, etc.) is too low. If the reforms being implemented (competition, legal system, pensions, land registry, taxation, etc.) and the massive investments (digitalisation, innovation, energy transition) do not lift productivity, then one must be pessimistic about Italy’s future. Of course, the education system and skills cannot be improved in a short time.