Enrico Letta’s burden

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

A gigantic task awaits Italy's newly-appointed premier, Enrico Letta, and we may hope the young leader proves strong enough to sustain the country's emergence from political deadlock, since there is no alternative, writes Silvia Francescon.

Silvia Francescon is the Head of the Rome Office of the European Council on Foreign Relations (ECFR). Before joining ECFR, Silvia was Deputy Head of the G8-G20 Sherpa office at the Prime Minister’s Office. She was in charge of coordinating the Prime Minister and Sherpa’s G8 and G20 policy dossiers and bilaterals.

"He is young and experienced, but – most importantly – he is a truly European. Enrico Letta, 46, the new Italian Prime Minister, is probably the last chance Italy has to avoid new elections. In a country paralysed by stagnation and where enterprises shut down every day, his first address was significant: "austerity measures” he said “have reached their limits." He also quoted President Barroso where he pointed out the urgency to place stronger emphasis on growth, including in the short term.

My bet is that European partners, as well as international markets, will like him. Letta has an old connection to the Union: from 2004 to 2006 he was an MEP with the Group of the Alliance of Liberals and Democrats for Europe, sitting on the Committee on Economic and Monetary Affairs.

At the age of 32 he was Minister for European Affairs under the first D'Alema government, becoming the youngest minister in Italian history. He was then minister of industry under both the second D'Alema and the second Amato governments, and undersecretary of state in the second Prodi government. He works in close connection with think tanks – quite an exception for the Italian political sphere – and is a strong supporter of a roadmap towards the realisation of a more federal Europe.

The task he has ahead is enormous. Italian industries, a sector Letta knows well, are in a desperate situation. In 2012 alone 364,972 enterprises – a thousand each day – closed. Many connect this with an increased suicide rate, and between January and March this year 32 suicides were attributed to economic circumstances  – double the number in the same quarter of last year.

Italy's competitiveness has been declining over the past decade while internal labour costs have grown at a faster pace than productivity, and faster than in most of the rest of the world. Since the creation of the euro, Italy’s unit labour costs have risen by about 30% more than the currency area average.

According to the Global Competitiveness Index 2012–2013, Italy continues to be hampered by critical weaknesses both in its economy and administration.

Three factors are largely to blame for hindering investment in Italy: tax rates; inefficient government bureaucracy; and access to financing. The labour market also remains extremely rigid – ranked 127th for its efficiency, hindering job creation.

In addition, lobby groups, strongly represented in parliament, tend to delay structural reforms as long as possible. 11% of the population is unemployed, including more than one in three (35.3 %) of the youngest group.

Letta is determined to present his list of ministers to President Napolitano as soon as possible, despite warning that "a new government should not taken for granted". On Thursday [25 April] he started consultations with political parties, and on Friday [26 April] he may go back to Napolitano with the new government, which will then have to obtain a vote of confidence in both chambers of parliament. We know already that both the leftish Sinistra Ecologia and Libertà, and Grillo's Five Stars Movement, will not support the alliance that Letta is obliged to seek.

When and if the government is in place the young leader will have a very crowded European agenda: he will have to seek Parliament’s approval in order to present to the European Commission the Document on Economics and Finance, together with the National Reform Plan and the Stability Programme, on 30  April.

On 22 May EU leaders are due to discuss tax policy, with a particular focus on how to improve the efficiency of collection and tackle evasion and fraud with the aim of strengthening member states' fiscal stance and deepening the internal market.

This is a sensitive topic for Italy, given that it has one of the highest tax evasion rates of the continent: estimated at around €120 billion each year. The real looming deadline will be the 28 June European Council, where member states will discuss excessive deficits and the banking union. Thankfully Italy’s deficit has remained below the 3% threshold, even after the adoption of the decree that will unlock public administration debt to enterprises.

There is a gigantic weight on the shoulders of the young leader, and – as he admitted – he fears his shoulders will not be strong enough to sustain such responsibility. But we need to hope that he will, because as long as we trust him he will. There is no alternative for Italy."

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