Italy – under new management

Last Wednesday was a “good day at the office” for new Italian PM Matteo Renzi. True to his nickname of “il Rottamatore” (The Scrapper), he has taken on the political establishment and delivered on two of his early promises: a new electoral law and a reduction of the tax burden. The start is promising, but this does not change the enormity of Renzi’s challenge. Electoral reform has just begun; The fiscal arithmetic of his budget plans take Italy very close to the excessive deficit limits of the EU Three Pack. Italy needs growth for this strategy to succeed. And even then long-term improvements will only come with structural reforms of government, business regulation and labour markets. These have yet to be touched.

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