Italy Needs a Major Industrial Revamp, Economist Tenconi Says
Italy Needs a Major Industrial Revamp, Economist Tenconi Says
(Bloomberg) --
The next Italian government needs to get “creative” to fix the country’s stalling economy, according to ADA Economics Ltd. Chief Economist Raffaella Tenconi.
Italy’s economy has failed to grow in four out of the last five quarters. While economists predict it will expand again in the second half of the year, gross domestic product is forecast to increase just 0.1% annually in 2019.
“You need to rethink the way you run industrial policy. We are structurally supporting very large companies and in Italy there’s just not enough of them. The whole economy is based on small companies and you need to readjust the services of the state and the taxes in a way that they can flourish.”
In an interview with Bloomberg Television’s Matt Miller, Tenconi also said that continuing to consolidate the budget deficit would be “detrimental to growth” on a “permanent and cyclical basis.”
“The economy has underinvested for almost two decades. It is plainly not competitive. This is actually the biggest problem of an alternative government to one led by the League: that it will run fiscal policy too tight.”
Matteo Salvini, leader of Italy’s League party, has been pushing for an early election so that he can gain control of country’s government, which he has run so far in coalition with the Five Star Movement. He has promised to implement a so-called flat tax if victorious and use fiscal policy to try to revive the euro area’s third largest economy.
His party currently polls close to 40%, which might be just about enough to win an outright majority in both branches of parliament. According to Tenconi, Salvini’s victory is inevitable.
“Salvini is going to win, it’s only a matter of when. He can win now relatively soon with an early election or he can win even more in a year from now.”
To contact the reporter on this story: Eddie Spence in London at espence11@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss, Alessandro Speciale
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