Mario Draghi winks at Italy. Speaking in Frankfurt at a conference on structural reforms, the President of the ECB commented positively on the effects of the Jobs Act passed by the Renzi government.
The Italian labor market reform has been cited by Draghi as an "example of structural reform whose effectiveness has been strengthened by the contextual tax breaks". "The Jobs Act was followed by an increase of almost half a million in the number of people employed on permanent contracts, largely as a result of the incentives for companies to hire on the new permanent contracts," he said.
Together with Italy, Draghi also had words of praise for the reforms carried out in recent years in Spain and Portugal. According to Eurotower number one, these "seem to have made unemployment more capable of responding to growth". "Structural policies are a crucial factor in explaining these positive developments - said Draghi - but certainly the supporting role of macroeconomic and financial policies was also vital".
However, Draghi was keen to clarify that today, unlike what happened before the crisis, reforms on the labor market must be preceded "or at least followed by reforms on the product market" because otherwise wage adjustments will not be fully transferred to prices. "Instead, profit margins will increase and the purchasing power of households will decrease, thus worsening the economic conditions of consumers and exacerbating any recession".
