The OECD to Italy: “Press ahead with reforms”. On energy: more renewables better than lower excise duties

Brussels – Pursuing the reform programme to promote broad-based growth and reduce public debt: the Organisation for Economic Co-operation and Development (OECD) has issued a fresh call to Italy and the Meloni government. The
economic report, specifically focused on Italy, renews attention on what are now structural challenges: Italy’s medium-term growth prospects are “weighed down by the high public debt, the ageing population, and growing uncertainty linked to global trade policy, geopolitical tensions, and intensifying international competition,” notes the thematic report released today (23 April). 

Italy and its economy are recognised for having “demonstrated resilience in the face of recent global shocks,” and the support provided by the European Union is acknowledged: “The reforms and investments set out in the National Recovery and Resilience Plan (NRRP) are helping to address long-standing structural weaknesses and support fiscal consolidation,” continues the OECD, in what sounds like a note of commendation primarily for the EU and its Recovery Fund, which finances the NRRPs. It implicitly acknowledges the Meloni government’s achievement in implementing reforms thus far, and, for this very reason, in the Italian case, it is “essential to press ahead with the programme” of planned measures. 

Given that “uncertainty remains high” due to the conflict in Iran and the repercussions this is already having, the OECD believes that in the case of Italy “to ensure a lasting reduction in public debt, it will be necessary to improve the efficiency of spending, contain the pressures arising from pensions, strengthen tax compliance, and make the fiscal mix more growth-friendly.” Furthermore, demographic ageing increases the need to “improve labour market outcomes for young people, many of whom are neither in education nor employment, or choose to emigrate.”

 In essence, the calls are for labour market reform, pension reform, the fight against tax evasion and the correction of macroeconomic imbalances: the OECD is, in effect, writing the same things as two years ago, when it had carried out a study on Italy, and ends up recommending that the government in Rome follow the recommendations, always the same ones, that the European Commission has been making to the country for years, which specifically involves reform of pensions, the labour market and the tax system, as well as reform of the justice system, public administration and the updating of the land registry. 

The final blow concerns the cut in fuel excise duties and the decisions taken by the Meloni government in response to rising energy prices following the war in Iran: rather than the extension of the reduction in indirect taxes on petrol and diesel consumption, as sought by the majority parties, the Meloni government should work towards “reducing energy costs and volatility through a faster roll-out of renewable energy generation, transmission, and storage.” This, according to the OECD, “would strengthen competitiveness and improve household welfare” without negatively impacting the Treasury.