This article is part of New Europe’s: Our World in 2017  

ITALY – ROME – The current economic situation, especially in Italy, is not bright. If we look at the annual growth rate of GDP since 2000, data are alarming: in the period 2000-2007 before the crisis, GDP in Italy grew 8.5% in cumulative rates. In the same period, the Eurozone grew by 14.8%, Germany by 10.2%, France by 13.8% and Spain by 27.7%, more than three times higher than Italy. GDP growth was slow, but its fall was very fast: during the international crisis (2007-2014), the Eurozone decreased by 0.9%, while Italy fell by 9%, much more than Spain (6.3%); France and Germany had a positive growth instead.

Hence, saying that the Italian economy is flat, is not a cliché but a fact. Despite noting a slight improvement in the Global Competitiveness Index by the World Economic Forum, Italy ranks 43rd out of 140 countries overall and 135th as regards efficiency of the government.

It is clear that a radical change is needed in the current Italian set-up in order to prevent, or at the very least to address, turbulent changes in the international scenario. Enterprises need harmonised, stable and standardised regulatory and administrative systems to invest. Every entrepreneur has had first-hand experience of negative situations colliding against muddled decision-making systems and mutual vetoes.

For example, in 2006, as a consequence of the CAP reform, my company had to close six of its seven sugar factories. Then, with other entrepreneurs, we decided to convert five of the six sites into biomass power plants. This was 2007.

Today, after almost 10 years, only two projects are being born. The others are blocked by local vetoes and changes in local political majorities. So, €480m worth of investments have been blocked for 10 years. Obviously, a businessman can decide to do something else and to go somewhere else.

We all know how the Italian referendum ended up. This referendum should have allowed Italy to change the situation. It’s a pity because, in this period, Confindustria asked a lot of questions about the current international context and, on the one hand, the slowdown of rising power of emerging countries, in terms of growth rate of the manufacturing value added (that remains still high) and in terms of consolidation of Chinese primacy that reached 26.5% in 2015, in contrast to 2012 (22.8%) and 2000 (6.8%).

On the other hand, there was the recovery of industrial activity of advanced countries, particularly the United States and Germany. But Italy is still trudging. However, the annual ranking elaborated by Centro Studi – Confindustria highlights that Italy is the second country in Europe and the seventh in the world in terms of manufacturing output with 2.3%, albeit half the level of the 2007. But there is a strong and growing demand for “Made in Italy” products.

The brand “Italia” keeps its attractiveness intact thanks to every aspect of international promotion: export promotion, interception of new tourists, investment and enhancement of culture. These are the factors we have to focus on to fill the gaps caused by the crisis, wherever possible.

In addition, there are two obstacles: challenges relating to the credit availability and low profitability. The latter is catching up after the 2012 all-time low but is penalised by the increasing labour cost (+24.6 from 2007 to 2015), three times greater than productivity (+9.5%).

Over the past couple of years, Confindustria has pointed out the necessity to design and implement an industrial policy as a comprehensive instrument of economic policy, as is the case with most industrialised and non-industrialised countries with the dual objective of restoring growth and enabling companies to hook drivers of economic development.

Drivers arise from the continuous and intense technological innovation, the evolution of demographic dynamics and the need of fighting climate change. Everywhere, drivers have been identified in environmental sustainability, green economy, digitalisation, welfare, urban regeneration and creativity based on cultural heritage and security. Properly understanding the characteristics of the drivers enables them to create business opportunities and to intercept the new demand for goods and services, leveraging quality and adaptability of the Italian production. Among Italian companies, the most careful with international trends are already moving in this direction.

The new industrial policy can catalyse and accelerate this movement, outlining specific guidelines.

First of all, by strengthening the system for innovation and technological transfer that connects research findings with activities of companies and the creation of new markets. So, it is therefore necessary to have a coherent public intervention, from research to incentives, which uses public demand and technical regulation and enhances different levels of government, starting with the European level.

For instance, the EU allocates €50bn for projects for these sectors and innovation. The “Piano nazionale Industria 4.0”, submitted by the government last September and concretised by the incentives in Stability Law, is consistent with this idea and demonstrates the willingness to design an overall growth strategy of productive system and the Country.

This is a first important step towards establishing an industrial policy that includes all great paths of development. It is not easy, we have to make a leap forward, which is primarily cultural and requires a higher quality of human capital. It is necessary that institutions and main associations create conditions ensuring that development involves the largest number of actors. It is also important that companies can move in a modern, simple and fast country that is able to implement that “unlocked democracy” we all need, not only companies.