May 23, 2013 3:56 pm

Italian business lobby warns Rome to reform or face meagre growth

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Italy’s business lobby has warned that the country will not revive growth of its struggling economy if the newly formed government does not introduce “decisive and concrete” measures.

Confindustria, the employers’ federation, said on Thursday that recession-bound Italy would manage to eke out only 0.5 per cent growth “for a long time”, without reforms. Giorgio Squinzi, president of Confindustria, called for greater competition, lower labour costs and sweeping reform of the labour market, in order to stem unemployment, which he described as “the mother of all social evils”.

“The fiscal system is opaque, complicated and uncertain as well as being punitive . . . [it] seems to say to entrepreneurs that growth is not convenient,” he said, speaking at Confindustria’s annual assembly.

He urged the government to invest in the manufacturing sector, which accounts for an estimated 17 per cent of gross domestic product, and 80 per cent of exports. He also criticised the lack of credit to companies. Corporate lending has fallen €50bn in the past eighteen months, according to the lobby.

Prime minister Enrico Letta, attending the same gathering, reiterated in his introductory remarks: “Today one of Europe’s great objectives should be to create great industrial leadership.” However, he did not specify any measures to be taken to achieve this goal.

Flavio Zanonato, development minister, said that the revival of economic growth and job creation was a “race against time, needed to restore hope”.

He said that measures to open up the energy and insurance industries were vital to stimulate competition and innovation.

According to Confindustria, the Italian economy has shrunk more than 8 per cent in the past five years, returning to levels not seen since the beginning of the century. During the same period more than 70,000 manufacturing companies have been forced out of business, the association said. Growth in Italy has averaged 1 percentage point below the eurozone level.

Mr Squinzi said that the past year has been full of “anxiety and preoccupation” and criticised austerity measures for worsening the recession in Italy, which is now entering the eighth consecutive quarter. The association is expecting the economy to contract 1.1 per cent this year and return to growth in 2014, although forecasts are due to be revised down next June.

The coalition represented a “truce”, Mr Squinzi said, but it was not a “solid” government, adding that he would continue to pressure it to overhaul the electoral system.

“We are burning everything good that we have been able to build in the past decades,” he said, urging the main parties to reform the electoral law in order to create political stability.

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