Italy’s reforms, old problems and new perspectives

When Matteo Renzi came into power in February 2014, he promised to change the country’s image through a tough schedule of reforms. “One per month” – this was the ambitious slogan for the new agenda of the Italian Prime Minister, who is also in charge of the Partito Democratico’s Secretariat. After the worst financial crisis ever, Italy appears to be hardly emerging from its longest depression on record. During these hard times, Renzi has always been as much optimistic as he could, underlining how the country needed drastic changes – such as the Senate reform or the JOBS Act, both highly criticized.

Anyhow, one of the obstacle of Renzi’s strict path of reforms has always been the internal resistance within the ruling Partito Democratico, rather than the oppositions inside the Italian Parliament itself. From the first days of his government, Renzi has been facing a double challenge: an external one, convincing the European Union of Italian accountability, and an internal one, struggling with the minorities/factions inside his own party and their different views of the Partito Democratico

At the core of Renzi’s activity there are three main reforms, all partially implemented: The electoral law, the JOBS Act and the abandon of the so-called ‘perfect bicameralism’ through the Senate reform. To begin with, the new electoral legislation, the so called ‘Italicum’ (which only takes effect in July 2016), is aimed to provide political stability and certainty to the country and it was voted with a wide consensus by Italian Parliament. How will the new bill provide more stability? According to the political forecasts, it will guarantee a majority of seats in Parliament to the party that gets the majority (40 percent of votes) through a winner’s premium that will see the top party or alliance of parties automatically taking 340 of the 630 seats in the Chamber of Deputies. If no party gets 40 percent on a first round, there is provision for a second ballot and little parties will have to get at least 3 percent of the vote to have any representation in parliament. The new law is strongly centered to guarantee a wide working majority to the winning party, but is also based on proportional representation, though it makes it really taught for small political actors who decide to run for elections without alliances. As Renzi defined it, “there will be a system in which our country will finally be a point of reference for political stability which is a precondition for economic and cultural development.”

Secondly, Renzi decided to start tackling the country’s youth dramatic situation , dealing with the high rate of unemployment, one of the highest in Europe. The Jumpstart Our Business Startups Act, also known JOBS Act, was the first real reform and the Italian government is still implementing it, not with few critics delivered by experts and lawyers but also shown by the data. The reforms focus on four key areas: rationalising employment protection, expanding active labour market policy, making social protection more effective, and boosting female labor force participation. Unfortunately, according to ISTAT, the national bureau of statistics, since the reform was phased in between January and March, the permanent jobs it aimed to promote have stagnated, while temporary ones it was supposed to avoid have boosted. However, common criticisms of the JOBS Act lays in the fact that does not touch Italy’s public sector which is huge and motionless, with non existing turnover.

In addition, the bill does not affect the employment contracts of anyone who already has a job and thus it would not bring about any real change to the current situation of employees. This may discourage workers from looking for diverse jobs, if they fear that a new position would be less secure than the one they are leaving, creating an even less fluid labor market and thus, a totally opposite result instead of the one desired by the JOBS Act – the so called ‘flexicurity.’ On the other side, the major labor experts say it will take years to evaluate the real impact of the changes. Renzi staked his credibility on a reform that he promised would create jobs and finally give young people the chance of stable rather than temporary employment. He continues to be an enthusiastic cheerleader for the changes. There is just one main problem, underlined while the reform was still implementing: the lack of growth. Without economic growth in the country even the best market labor reform would have failed and this is what is happening in Italy where, despite all the efforts, the GDP is estimated to reach less than 0.8%. Only economic recovery will create stable job growth.

Last but not least, the Italian Senate reform. The idea is to reduce the powers of the second chamber and concentrate most of the legislative process in the chamber of deputies. By doing this, Italy will abandon its so-called ‘perfect bicameralism,’ according to which the two chambers have equal powers. According to Renzi’s statements, implementing the reform will make the legislative system faster and simpler. Far from not being criticized, the reform will concretely see light only after referendum, which will take place next autumn.

After the analysis, is now time to focus on the results: to what extent did the last reforms on employment/labor boosted the Italian economic growth and the national employment rate? Of course we will only see the complete results after at least 5 years or more, but we can try to foresee the expected goals. According to OECD 2015 report, “the active labor market reforms will boost GDP by 0.6% in the first five years after the reform. In the following five years an effect of similar magnitude is expected, so that the total GDP effect after ten years amounts to around 1.2%. The majority of this effect comes through higher employment. The JOBS Act is estimated to create around 150,000 new jobs in the first five years after the reform and another 120,000 jobs in the following five years.”

In conclusion, despite Renzi’s reforms, Italy’s recovery seems still weak and precarious, unemployment remains high and the so called ‘lost generation’ of young people will pay the price. Moreover, popular support for the euro in Italy is among the lowest in the European Union, creating fertile ground for the emergence of Eurosceptic and extremist parties in the political arena. It is no surprise that, given the hard times the country is facing also because of the migration emergency, at least perceived as such, the right-wing Lega Nord is enhancing, challenging the political status quo. The road is even harder given the longstanding weaknesses of the country, above all the huge public debt plus the high level of dependency on energy imports, two features that make the Italian recovery a delicate and fragile process which still needs to be monitored step by step.

Federica Mastroforti

Master’s degree in International Relations (LUISS “Guido Carli”)


“How Meaningful Are Italy’s Political Reforms?,” Stratfor, 14 December 2015.

“Structural reforms in Italy: impact on growth and employment,” Organisation for Economic Co-operation and Development (OECD), February 2015.

“Working on it,” The Economist, 11 April 2015.

Balmer, Crispian. “Italy passes Renzi’s flagship reform, opening way for referendum,” Reuters, 12 April 2016.

Freund, Julien. “Matteo Renzi, Italy’s reformist Prime Minister,” Global Risk Insights, 7 April 2016.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More