A patient Commission approves (also) Renzi’s plans, yet urges Italy to act

Brussels welcomed the measures approved by the Italian government on job market, anti-corruption, reforms, yet deficit-to-GDP ratio is still the biggest hurdle together with (still) undelivered results

For the third time in a row of about two years, the European Commission acknowledges the proposals of reforms and adjustment presented by the Italian government, and for the third time they reminded Rome to fulfil its commitments.

Today, perhaps, Simon O’Connor, spokesperson for Olli Rehn, wanted to show a bit more of enthusiasm for the promises Matteo Renzi made yesterday, yet the heart of the matter has not changed: you must act and, as seen in the latest ECB’s Monthly Bulletin, you are impressively late on delivering reforms.

Brussels has hence acknowledged “the long list of reforms announced by the Prime Minister,” considering them satisfactory: “the proposed reforms in term of institutional and structural reforms are welcome, yet we will be able to make an in-depth review only when they are translated into law.” We want them to be passed by the Parliament, O’Connor explained. The Commission approved the decision of “streamlining the decision making process, clearly separating responsibility among the various governmental levels,” as well as the decision of “appointing an anti-corruption authority; of accelerating the process of payments from the Public Administration to its creditors.” Of course, the “government’s intention of reducing tax wedge on jobs, mainly through the savings identified by the spending review process.”

On the other hand, O’Connor warned, “in the meantime, Italy needs to fulfil the requirements under the Growth and Stability Pact, especially with respect of its considerable deficit-to-GDP ratio. Italy, he reminded, “has to focus on its medium-term target of structural adjustments aiming at balancing budget, as well as on respecting the new rule on deficit.” According to the Commission, in fact, even though the Italian general government deficit remained under the 3 percent of GDP benchmark, it is not possible to deviate – even temporarily – from the path towards a structural balanced budget. The measures announced earlier this week, on the opposite, include the funding of part of the tax wedge reduction through a 0.4 percent rise of the deficit-to-GDP ratio, projected to decline to 2.6 percent in 2014 (getting it back to the 3 percent threshold then).

Dealing with job market, the choice of adopting a Decree seems “appropriate, given the high unemployment rate, especially the youth u-rate.” More is needed, though, given that “a further political effort to promote apprenticeship contracts as main key for youth to enter the job market is welcomed, yet this kind of contracts should preserve its educational features,” said O’Connor: they cannot be used as a way to exploit low-cost work. The Commission is waiting for the “next steps to be implemented” on the matter, hoping that they can lead to “a more efficient allocation of resources, favouring the creation of jobs.”

Within the half of April, moreover, Brussels expects to receive a detailed presentation of the adopted measures and of the implemented structural reforms, in order to issue the evaluation included in the “European semester” plan, determining whether they will be “appropriate for the challenges” Italy has to face, added O’Connor.