Italy’s Return to Europe

The appointment of Mario Monti as head of the Italian government in November 2011, and that of Mario Draghi as the President of the European Central Bank bears witness to a kind of return by Italy to Europe. The new government's tough task whose goal it is to achieve financial consolidation and recover competitiveness has become a case study, as Europeans wonder about the path to take in terms of growth strategy. In this regard, and unlike Germany, which has served as a model, the means used by Italy to rise to these challenges will be observed as an example to think about by all of those who are facing similar problems. It is true that the scale of the work undertaken regarding public finances has been exceptional. Whilst soaring interest rates and the recession are threatening to throw Italy off course, over two austerity plans Mario Monti's government has managed to integrate more than 100 billion € of additional savings into the 155 billion already upon by his predecessor. Although the public debt, which is due to total 123% of the GDP at the end of 2012 represents a constraint that weighs heavily on the country's growth potential, Italy must also address its competitiveness that drifted off course in the 2000's. For want of being able to actuate inflation and devaluation to absorb its imbalances as it did before joining the euro, the adjustments to be made as a member of the single currency must be real. This is why the government intends also to act in this sense by deregulating the labour market, stimulating innovation and by addressing the inadequacies of its ageing infrastructures. In the face of this challenge Italy can count on a high yield productive network that has succeeded in maintaining respectable market shares internationally, together with a significant share of value added industry and honourable profit conditions. For the moment the government's efforts, which will benefit from the European Central Bank's (ECB) more active role on the public debt market, seems to have convinced the markets, as illustrated by the easing in interest rates. If this process continues it might produce a virtuous circle leading to major results mid-term. With the Italian example, has Europe found a way back to growth?