The potentials and the dangers of the Italian economy in a renewed euro area

Overcoming the political and institutional tensions that have characterized Italy in the last fourteen months opens up new prospects for economic growth and cooperative relations with the European institutions. In this regard, the recent appointment of former Italian Prime Minister Paolo Gentiloni as the European Commissioner of Economy is an important signal. However, these promising prospects will not automatically translate into actual progress. For example, the scope of the Economy portfolio assigned to Gentiloni as designated commissioner is different from the one of Economic Affairs, held in the old (and still operative) Commission by Pierre Moscovici; above all, Gentiloni’s scope is more limited than that attributed to Valdis Dombrovskis as designated executive Vice-President with responsibility for one of the three crucial areas of the new Commission (that is, Economy). In this perspective, the fact that Dombrovskis has a coordinating function also – but not only – in relation to Gentiloni’s range of activity shows how important it is that Italy does not force the European constraints and – at the same time – takes advantage of the many opportunities provided by the guidelines of the new Commission. These guidelines were clearly specified in the program presented by the new President of the Commission, Ursula von der Leyen, for her election by the European Parliament. Similar and complementary considerations apply to the action of the new Italian government. To increase Italy’s economic growth, the new coalition between the Five Star Movement (FSM) and the Democratic Party must: (i) overcome their latent internal conflict, thus avoiding the reappearance in new forms of the pre-existing climate of political uncertainty; (ii) launch an effective economic policy package that will encourage sustainable development in the short and medium-long term, one that is, at the same time, compatible with Italy’s commitments to the European institutions and with Italy regaining its central role in the European Union (EU). In this Policy Brief I will focus on point (ii), keeping the short-term problems separate from the medium to long-term ones, even if, in the actual way the Italian economy works, the two problems are strongly intertwined