In Italy there is at least one certainty: economic growth is low. There is now agreement on this analysis. There are only those who persist in saying that things aren't so bad because in Italy there isn't a social revolt like in Spain or in other countries. And this is how resignation is exchanged for satisfaction.
In reality, during the crisis Italy experienced a drop in income and production that was among the greatest in Europe, but the subsequent recovery was among the lowest. The industrial production index fell about 28% from its mid-2007 peak through early 2009, then rebounded only 12% (to early 2011), so it is still 19% below to previous highs.
Why these bad results and what can be done? Exports are recovering quite well, but by themselves they cannot make up for the hole of the past. It is internal demand that has collapsed and shows no signs of recovering. The decline in domestic demand is linked to consumption which is in hiding. And it could not be otherwise. According to the recent Istat report (Annual Report 2010) families lost 3,1% of real purchasing power in 2009 and recovered just 1% in 2010. Italian families are poorer and do not consume.
The impoverishment of Italian families derives essentially from the loss of work of young people and women on fixed-term contracts. These people have no social safety net (i.e. no unemployment benefits) and therefore their exit from work entails a net loss of income for the families. In recent years, Italy has proceeded to liberalize the labor market, which has become flexible, but has not changed the system of social safety nets. These remain anchored to the system of permanent work, through the redundancy fund. But companies now have a small core of permanent workers, while they expand and restrict their production capacity by resorting to fixed-term work. Other countries also have a similar labor market, but they also have social safety nets aimed at those with flexible work. This is how in 2010 recourse to the Redundancy Fund decreased, while youth unemployment exploded, proving that our system of social safety nets no longer works.
The government has launched a timid redundancy fund by way of derogation which was supposed to concern flexible employment figures, but these interventions have been limited and relegated to regional policies without major effects. It is time to set up real unemployment benefit, as exists in all European countries that have managed to recover income and demand after the crisis. Sure, unemployment benefits cost money. But the restoration of the ICI on the first house, which was abolished only to win the elections, would be enough to finance it. The reduction in taxes did not lead to support for domestic demand, while the absence of subsidies for those who lose their jobs depressed consumption. The proof also lies in the fact that in 2010 the propensity to consume of Italian families fell to 9,1% (it was 10,5% in 2009), while the percentage of families who were able to save increased from 18,3% in 2009 to 19,1% in 2010. A sign that having lowered taxes has made those who can save richer, while the absence of social safety nets for those who have lost their jobs has impoverished those who consume and spend a considerable part of his income.
If we want to get our country to grow again, we need a policy of support for those who lose their jobs, what is economically useful and socially just.
