Padoan, GDP has now grown for 10 quartes in a row also thanks to government policies
Rome, August 16, 2017 – "This morning Istat (Italy's National Statistical Institute) informed us that in the second quarter of the year GDP increased over the previous quarter for the tenth time in a row. A 0.4 % increase is equivalent to a 1.5 per cent growth rate over the level reached in the second quarter of 2016, which is the highest rate of economic growth since the beginning of the economic crisis.
These results were achieved thanks to an economic policy which, since 2014, has consistently followed a narrow but clearly traced path: tax reduction, incentives for private investment, social measures to counter poverty and inequality, prudent fiscal policy with a view to improving the government budget balance to stabilize the debt-to-GDP ratio and remove the causes for concern and instability in the markets, which could lead to rate increases and therefore divert resources away from economic recovery.
The whole gamut of taxes on households and corporations has been cut: personal income tax (Irpef) of low-income workers has been cut through a € 80 tax benefit per month, the Irap (Regional business tax) component calculated on employee income, IMU (municipal property tax) on the so-called 'imbullonati' (literally bolted items i.e. system components such as equipment, machinery, etc.) and on agricultural land have been scrapped and so has TASI (Indivisible Services Tax) which is levied on the value of houses owned by residents, while IRES (corporate income tax) has gone down from 27.5 to 24%,. We expect that in 2017 Italian taxpayers will be paying over € 20 billion less in taxes than in 2013.
Private investment has picked up also thanks to tax incentives: superdepreciation, hyperdepreciation, R&D tax credit and other incentives have caused companies to take advantage of a more growth-friendly international climate to invest to improve their production capacity. There is still a lot that needs to be done with regard to public investment: after years of shrinking capital expenditure, appropriations have been increased and the internal stability pact, which imposed spending constraints on local authorities, has been abolished. A much-needed reform of the public Procurement Code, which was carried out in 2016 and reviewed in 2017, will contribute to more transparent and efficient public procurement management. All the necessary conditions are being created to ensure a sustained recovery through infrastructure construction, as can already be seen in the railway sector. In addition, the effort to ensure adequate earthquake and flooding safety will be made a priority.
In the meantime the labour market reform has abolished an invisible barrier separating 'insiders' from 'outsiders' in the labour market, thereby removing one of the causes of inequality between workers. At the same time the market has become more dynamic, its performance can be measured in terms of increase in the number of employees: 782,000 additional employees in June 2017 as against June 2014. Almost half of them are on permanent employment contracts.
These policies, together with a carefully crafted strategy to balance the budget and the action taken in the banking sector which has rendered it more resilient and better equipped to grant loans to households and businesses, helped to boost confidence in the future both among Italian businessmen and foreign ones interested in Italy.
The previous and incumbent governments, with the support of Parliament, have combined these structural measures designed to boost growth with a similarly 'structural' social policy that has introduced a minimum income scheme, to which increasing resources have been allocated. An allowance has also been granted to the economically underprivileged sections of the population, but not enough has been done for young people. Widespread economic growth will start having a positive impact on them as well, favouring their entry into a more dynamic and an employment-friendly labour market, however the specific measures that have been taken to help young people find their first job should accelerate this impact. In the next few months we will have the opportunity to take an additional step along that path. The available resources to ensure sound management of public finances and reduce the debt burden on future generations are few. We should therefore concentrate them on measures to create incentives for businesses that employ young people seeking work, to continue to grant tax incentives for private investment, to continue to support public investment and to strengthen measures to combat poverty. Investing in the country's social and material capital will increase its potential and productivity and will help to reinforce this virtuous circle, where more confidence leads to more investment, that is supporting the recovery."