Local State-Owned Enterprises in Italy: Inefficiencies and Ways Forward

Summary:

This Economic Brief provides an overview of enterprises owned by regional and local authorities in Italy(local SOEs). Underperformance of several local SOEs may translate into a burden for public finances and the efficiency of the economy.

Local SOEs are numerous (around 8 000), employ a large number of workforce (about 500 000) and are active in all sectors of the economy. Evidence demonstrates that local SOEs are in many cases characterised by inefficiencies. Around 1/3 among them are loss-making. Total transfers from the state are estimated at EUR 16.5 billion (1% of GPD) per year, not always on a clear rationale.

Inefficiencies prove linked to a multiform state participation in the economy with no clear orientation. Local SOEs usually operate sheltered from competition, obtaining service contracts with no open tender. Uncertainty is caused by a complicated legal framework. The latter has resulted from various developments throughout the years replying short-sightedly to the needs of the moment.

How to deal with the "archipelago" of local SOEs in Italy? Overhauling the sector through multiple actions, such as clarifying the scope of state intervention and codifying its governance, reinforcing competition in and for the market, and streamlining the regulatory framework, appears indispensable. A recent reform proposed by the government in January 2016 sets out the basis for carrying out this challenging task.

Written by Vassilis Karantounias and Dino Pinelli

European Commission: DG Economic and Financial Affairs, Economic Briefs, No.10: Local State-Owned Enterprises in Italy: Inefficiencies and Ways Forward http://ec.europa.eu/economy_finance/publications/eeeb/pdf/eb010_en.pdf

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