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Italy must step up reforms to tackle poverty and inequality: OECD

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Italy must step up reforms to tackle poverty and inequality: OECD
Piazza Cavour in central Rome. Photo: Miguel Medina/AFP
08:40 CET+01:00
Italy needs to step up reforms if it is to make a full recovery from an economic crisis that caused poverty and inequality to surge while investment collapsed, the OECD said on Wednesday.

The call for an acceleration of change came in a survey that highlighted a devastating investment crunch, serious disparities in income and education, a five-fold increase in child poverty and productivity levels that are still declining.

Although the economy emerged in 2015 from eight years of stagnation and recession, output per head remains ten percent lower than in 2007, and roughly the same as in 1997, the Organization for Economic Cooperation and Development said. Investment, after allowing for inflation, is running at 70 percent of 2007 levels.

The think tank of the world's most advanced economies did offer encouragement to the country's centre-left government, hailing its flagship Jobs Act as an ambitious labour market reform that was already generating  jobs - something which is disputed by trade unions and others in Italy.

"Reforms are producing results, that's the basic message I would like to give," Angel Gurria, the OECD's Secretary General, told a press conference.

And the Paris-based number crunchers also provided the government with some comforting words of support in its running battle with European Union officials over budget discipline.

Child poverty surges

The survey notes that a "broadly appropriate" and "mildly expansionary" fiscal policy was underpinning growth predicted to continue at a sickly rate of around one percent through this year and next.

It also states that investment in infrastructure, one of the government's sources of contention with Brussels, would be crucial to addressing the productivity problem.

But Gurria's list of the challenges faced by the Italian economy was a daunting one.

They included: reversing the interlinked slide in investment and productivity, cleaning up a banking sector saddled with more than 300 billion euros (dollars) worth of non-performing loans, addressing skill shortages much worse than in comparable countries and reducing poverty levels that have hit children hardest.

"In 2015, 11 percent of Italian residents under the age of 17 were living in what we consider absolute poverty. In 2006 it was only three percent," Gurria said.
"Those figures are a signal of a need for urgent action."

Finance Minister Pier Carlo Padoan said he agreed with the OECD's assessment of where Italy was, insisting the government was committed to reducing poverty.

"That's not only ethically the right thing to do, it is also economically efficient to promote inclusive growth," the veteran economist said.

The OECD highlighted Italy's notorious bureaucracy, its snail-paced legal system and chronic tax evasion as serious obstacles to economic progress.

'Dolce Vita' factor

"Public-administration inefficiencies, slow judicial processes, poorly designed regulation and weak competition still make it difficult to do business in Italy," the survey notes.

"Innovative start-ups and small/medium-sized companies continue to suffer from difficult access to bank and equity finance, curbing incomes for many."

Tax arrears stood at 750 billion euros in September 2015 - equivalent to nearly 1,250 euros for every person in the country.

And it is it is not only the fault of dodgers: the World Bank puts Italy 126 out of 190 countries in a ranking for ease of calculating and paying taxes.

The OECD also highlighted highly unequal access to education and appropriate training as being acute issues, noting that literacy levels were among the lowest of its 20 member states.

It was not all bad news however. The "dolce vita" (sweet life) factor still puts Italy above comparable countries for work-life balance, social connections and levels of health and longevity, albeit with considerable disparities across social classes and regions.

By Angus MacKinnon

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