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The Italian Economy, 2001–03

Published online by Cambridge University Press:  07 January 2016

Michele Capriati
Michele Capriati*
Affiliation:
University of Bari, Dipartimento per lo studio delle società mediterranee, c/o Palazzo Facoltà di Giurisprudenza—P.zza Cesare Battisti, 70121 BARI, Italy. E-mail: m.capriati@scienzepolitiche.uniba.it
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Summary

The three years 2001–03 opened in an atmosphere of optimism with the expectation of a new Italian miracle but ended amid widespread disillusion owing to persistent signs of economic decline. This article offers a reconstruction of events in this period, focusing on government economic policy and changes in the labour market. Analysis of these reveals the period to have been characterized by three significant features. In the first place, a growing loss of credibility and authority of government economic policy itself, resulting from the gap between expectations and outcomes. Second, the persistence of a model of development based on low product competitiveness and low-skilled labour. And last, the excessive attention paid to resolving the issues of the moment contrasted with a lack of interest in the future, and consequently in research, innovation, training and infrastructure.

Type
Articles
Information
Modern Italy , Volume 10 , Issue 1: Special Issue: Italy under Berlusconi , May 2005 , pp. 37 - 57
Copyright
Copyright © Association for the study of Modern Italy 

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References

Notes

1. d'Italia, Banca, Relazione annuale , Rome, 2001, p. 35.Google Scholar

2. Ibid , p. 34.Google Scholar

3. d'Italia, Banca, Relazione annuale , Rome, 2004, p. 33.Google Scholar

4. Ibid , p. 33.Google Scholar

5. The Bank of Italy's competitiveness indicator is calculated on the basis of the prices of manufactured goods at the point of production. An increase indicates a decline in competitiveness. See Bank of Italy, Bollettino Economico , 40, March 2004.Google Scholar

6. According to the Bank of Italy, the share of world trade taken by Italian products declined, in price-constant terms, from 4.5 per cent in 1995, to 3.9 per cent in 1998 and 3.0 per cent in 2003.Google Scholar

7. The possible reasons for this phenomenon are discussed on pp. 51–53.Google Scholar

8. For a description of the electoral programmes presented by the centre-right and centre-left for the elections of 13 May 2001, see Capriati, Michele, ‘The Economic Context 1996–2001’, in Newell, James (ed.), The Italian General Election of 2001: Berlusconi's Victory , Manchester University Press, Manchester, 2002.Google Scholar

9. Ministry of the Economy and Finance, Documento di Programmazione Economico-Finanziaria per gli anni 2002-2006 , Rome, 2001, chapter IV, p. 2. A critical examination of this document is to be found in: Onofri, Paolo, ‘Dalle promesse alle scommesse’, Il Mulino, 4, 2002, pp. 697–704.Google Scholar

10. Economic and Finance Ministry, DPEF, 2001, chapter 3, pp. 1–2.Google Scholar

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12. The aim was to reduce the overall tax burden by 1 per cent per year for five years.Google Scholar

13. An outline of the activities of the centre-right government in this legislature is in Italia, Forza, Il Governo Berlusconi sta cambiando l'Italia. Giugno 2001—marzo 2004 , http://www.forza-italia.it/, 31 March 2004.Google Scholar

14. Existing legislation has rates of 18, 24, 32, 39 and 45 per cent applied to annual incomes ranging from 10,000 Euros (the lowest rate, 18 per cent) to the threshold for the highest rate of 70,000 Euros and above, at 45 per cent.Google Scholar

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17. See Baldini, Massimo and Bosi, Paolo, ‘Chi beneficia della riforma dell'Irpef per il 2003?’, http://www.lavoce.info/, 30 September 2002.Google Scholar

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22. Regarding which, it is enough to remember the convinced defence of the advantages of inheritance tax expressed by Mill, John Stuart in his Principi di Economia , UTET, Turin, 1983, pp. 366–67, and by one of the founding fathers of the Italian Republic, Einaudi, Luigi, in Lezioni di politica sociale, Einaudi, Turin, 2004, p. 187.Google Scholar

23. After the name of the Minister of the Economy who proposed it.Google Scholar

24. The Regional Tax on Productive Activity (IRAP) was introduced by the centre-left government to fund, via an autonomous income stream, the growing number of competences allocated to the regions in recent years. The current government envisages the complete abrogation of this tax.Google Scholar

25. A structural weakness of Italian capitalism is that ‘Italian firms are poor whilst the entrepreneurs are rich’, Targetti, , ‘La riforma’, p. 26.Google Scholar

26. This somewhat macabre expression derives from the idea that the state offers tax payers who have not paid their taxes correctly the opportunity definitively to close their past tax history for further consideration of irregularity.Google Scholar

27. It has been estimated that the impact of the unexpected income was the equivalent of 0.54 per cent of GDP, and that in its absence, and discounting extraordinary and one-off measures, the ratio of the deficit to the GDP in 2003 would have been 4.4 per cent.Google Scholar

28. Targetti, , ‘Due anni’, p. 286.Google Scholar

29. See Bordignon, Massimo, ‘Il circolo vizioso dei condoni’, http://www.lavoce.info, 20 January 2004. Some commentators judge the recent decline in revenue and of the tax base to expectations of both an amnesty and of a more tolerant attitude by the centre-right government towards those who do not fulfil their tax obligations. See pp. 47–48 below.Google Scholar

30. These monies may have been invested abroad unlawfully not only in terms of tax evasion, but also because they were intended to serve as company slush funds, derived from activities such as drug- and arms-trafficking or relating to the mafia.Google Scholar

31. The poor transparency of these operations and of the costs incurred have been lamented from this perspective. See Pisauro, Giuseppe, ‘Scip 2 strikes back’, http://lavoce.info/, 1 March 2004.Google Scholar

32. See Targetti, , ‘La riforma’, pp. 55–59; Giarda, Piero, ‘Dove andranno Patrimonio Spa e Infrastrutture Spa?’, http://lavoce.info/, 16 July 2002; Pisauro, Giuseppe, ‘La valorizzazione del patrimonio pubblico attraverso la Patrimonio Spa’, http://www.lavoce.info/, 18 July 2002.Google Scholar

33. This term refers to the ‘Italian economic miracle’ of the 1950s-1960s, years during which the expansion of incomes and employment was very rapid, especially in some areas of the north.Google Scholar

34. For example, the ‘spending freeze’ decree (see Pisaru, Giuseppe, ‘Conti pubblici’, http://www.lavoce.info/, 29 January 2002), the freeze on recruitment, the rationalization of acquisitions by the Public Administration and the reduction of transfers to the local authorities (see Cipolletta, Innocenzo, ‘L'aritmetica previsionale di Tremonti’, http://www.lavoce.info/, 3 October 2002).Google Scholar

35. The pension reform being discussed in parliament foresees a change to the rules having effect only from 2008.Google Scholar

36. In the spring of 2004 the European Commission considered the possibility of issuing an ‘early warning’ to the Italian government over its public accounts.Google Scholar

37. The only exception to this trend is 1997, a year in which a very tough budget was passed in order to enable adhesion to the single currency.Google Scholar

38. Compared to the Euro-area's weighted average of 70.5 per cent.Google Scholar

39. The Stability Pact of 2000 foresaw the reduction of the public debt to under 100 per cent in 2003—at the end of which year the actual debt was 106.2 per cent.Google Scholar

40. See Ministry of the Economy and Finance, Documento di Programmazione Economico-Finanziaria per gli anni 2005–2008 , Rome, 2004.Google Scholar

41. The unemployment rate also fell. See Figure 3 for comparative international figures.Google Scholar

42. The ‘Treu packet’ comprised a series of reforms relating to work contracts promoted by the then Minister of Labour, Tiziano Treu.Google Scholar

43. Diversification of contract forms has been significant in recent years. Since the 1970s, when the dominant contract was full-time and permanent, and could be deviated from only in accordance with very tight rules, ISTAT has identified an expansion to 38 different forms of contract.Google Scholar

44. The term ‘Workers’ Statute’ refers to Law 300 of 1970, which regulates rights and duties in labour relations. By ‘just cause’ are meant those reasons foreseen by the legislation—meaning, essentially, the economic crisis of the firm or the improper behaviour of the worker.Google Scholar

45. On the trilateral accords, see Capriati, , ‘The Economic Context’, 2002, pp. 56–57.Google Scholar

46. It is enough to know that in 2000, over half of workers employed in firms with over ten employees did not have a firm-level contract, while in smaller firms the proportion was nearly 100 per cent. See also Dotti, Davide, ‘Retribuzioni a crescita zero’, http://www.lavoce.info/, 14 April 2004.Google Scholar

47. Net income is that part of their pay that a worker can actually spend—that is, their gross income less social and tax contributions, plus family support (family allowances, etc.). These latter depend on the family's circumstances. See Paternoster, Anne, ‘Annual Net Earnings in Manufacturing 1996–2002’, in Statistics in Focus , Theme 3–4/2004, Eurostat.Google Scholar

48. See for example, Svimez, , Rapporto 2003 sull'economia del Mezzogiorno , Il Mulino, Bologna, 2003. See also Onofri, Paolo, ‘Un anno di politica economica del governo Berlusconi’, in Blondel, Jean and Segatti, Paolo (eds), Politica in Italia: I fatti dell'anno e le interpretazioni. Edizione 2003, Il Mulino, Bologna, 2003. The centre-right government has weakened this instrument since July 2002, heavily reducing the resources allocated to it.Google Scholar

49. It is estimated that the black market in Italy accounts for about 25 per cent of total employment.Google Scholar

50. The slow growth of the population is obviously not entirely extraneous to this limited increase, either.Google Scholar

51. When considering difficulties in the labour market, territorial differences must be taken into account, however. In January 2004, unemployment in northern Italy averaged 3.8 per cent compared to the national rate of 8.5 per cent and 6.2 per cent for the Centre. By contrast to these ‘American’ levels of unemployment in the centre-northern regions, the rate in the southern regions was 17.4 per cent, more than double the national rate.Google Scholar