di Carlo Calenda

Speaking in Venice, Prime Minister Matteo Renzi brought up the idea of a business plan that would transform Italy and enable it to catch up to countries like France and Germany. His idea would have the merit of crystallizing two internal debates, which until now have remained hazy: that of the degree of flexibility in European accords, and that of the realistic possibility of a recovery in Italy. We need to be clear, because recent economic data on industrial production and responses to it from our European partners seem to indicate that growth remains a phantasm, as does accommodating requests for more flexibility.

There’s no other way ahead, save for putting an industrial plan down in black and white, one that lays out basic norms and extraordinary initiatives that need to be undertaken, describes the precise margins of flexibility we need and quantifies the result that is expected.

We see then the outline of the “rungs” or steps of this program.

Today, Italy has an extraordinary occasion to expand internationally. That’s due to three fundamental tendencies: 1) the recovery of international trade and the return of developed markets, starting with the U.S., who are more accessible to our industrial production; 2) our sector specialization that benefits greatly from the dynamics of international demand; 3) easier access to international markets, determined in part by free trade agreements that the EU is negotiating.

Over the next 15 years there will be 800 million new consumers and tourists whom we can conquer if we move carefully. Today, Italy has a ratio of exports to GDP of 30 percent: we must push ourselves towards a goal of arriving at Germany’s level, near 50 percent. To get there, we need more export firms and a more favorable economic environment for them to operate in. The theory of these steps is that growth will continue to arrive mostly from abroad and that even internal demand could be helped by the international performance of Italian businesses, with more employment and investment, tourism, and new investors. A precise calculation of growth potential would be decisive in convincing investors and European partners to return to a plan that inevitably requires margins of flexibility.

To make the most of this opportunity, we must focus on initiatives to make our products competitive, rather than on stimulating internal demand. It’s the only way to do it and to act on the conditions that slow down business development, proceeding with more more focus in the three directions laid out in a recent competitivity decree.

The first is that of reform, starting with labor, which must have as a basic point the possibility of starting negotiations with individual companies, of rewarding productivity and of dramatically simplifying the thicket of rules currently in force, including moving beyond Article 18. Labor reform will be, as it has for previous governments, the key by which partners and investors will evaluate our executive’s ability to deliver. It’s fundamental that we speed up regulatory reviews, a process already started by Minister Federica Guidi, on all cases that impact economic activity, especially aspects of our law that keep investors at arms length, like the way bankruptcy law is set up.

The second rung is a big cut to IRAP (business tax) starting with companies that export (a solution that’s not easy from a technical point of view, but could be potentially decisive) and leading very quickly to it being completely eliminated.

Alongside these two paths must be the path of liberalization, examining the mechanisms that allow income inequality to continue: there’s much that can still be done with national and local utilities. The third prong is represented by public investment in strategic sectors that have an impact on the nation and on companies’ overall competitivity—in particular, digital, cultural and infrastructure.

To finance this program, it will be necessary to unchain European funds from the obligation of co-financing and to make proposals using specific figures and projects. Making this program credible requires an acceleration of privatization programs and a faster spending review process. On the second point, I maintain that we must change methods. The actual centralization of the spending review may not be the best method. We need to look closely at the operations of each single ministry to figure out how to reshape them, to make them more efficient and less expensive. Proceeding in this direction would make the political system more responsible in terms of how it manages the ministries; and it would and render transparent all the projects and funding for them that’s sometimes started but remain in the hands of top-level bureaucracy and disappears from sight.

Many of these initiatives are already on the government’s agenda. The point is to combine them into one organic design—transparent, precise and measurable. A design that asks Europe and asks investors for more room to maneuver quickly, stimulated by increased clarity of concrete growth objectives.

Today we’re talking about an objective that is realistic—thanks to the political will of the prime minister. After years of primary surpluses, with taxes and linear cuts to spending, spurring growth by investing in the competitive capacity of companies represents a clear “turning of the chapter” that Italy truly needs.

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