THE IMPACT OF ANTI-CRISIS MEASURES, AND THE SOCIAL
AND EMPLOYMENT SITUATION: ITALY
Elisa Borghi, Università Carlo Cattaneo – LIUC
KITES- Università Bocconi
European Economic and Social Committee
Group II Extraordinary Meeting
Brussels, 28th February 2012
Contents
• Relevant measures 2008-2011
• Main effects
• The decree ‘Save Italy’: expected effects
• Conclusions
Introduction: the crisis
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
Q1-20
07
Q2-20
07
Q3-20
07
Q4-20
07
Q1-20
08
Q2-20
08
Q3-20
08
Q4-20
08
Q1-20
09
Q2-20
09
Q3-20
09
Q4-20
09
Q1-20
10
Q2-20
10
Q3-20
10
Q4-20
10
Q1-20
11
Q2-20
11
Q3-20
11
Var. Cong Var. Tend
Quarterly GDP (growth rate)
Relevant measures 2008-2011
• November 28th, 2008 Anti-crisis decree (35 articles providing for an economic recovery package amounting to €6.4 billion)– Extraordinary bonus to families– Fund for Employment and Training – Tax relief on productivity bonuses (extension)– Social Card
• Urgent measures approved in 2009– Decree 5/2009, 10th February 2009– Decree 1st July 2009 n.78– Law n.121/ 3rd August 2009
• Budget Law 2010 (December 2009)
Relevant measures 2008-2011
• May 2010 – “Urgent measures for financial stability and economic competitiveness”
• Budget Law 2011, December 2010• Measures for financial stability:
– July 2011, n. 98/2011 and 111/2011– August 2011, n. 138/2011 – December 2011 ‘Save Italy’ decree
(201/2011)
MAIN EFFECTS:GDP, PRIVATE CONSUMPTION, EMPLOYEES
-6,0%
-5,0%
-4,0%
-3,0%
-2,0%
-1,0%
0,0%
1,0%
2,0%
3,0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
GDP Employees Consumption
Fonte: ISTAT GDP, Private consumption: real percentage changes
Household confidence index.
85,0
90,0
95,0
100,0
105,0
110,0
115,0
07,01 07,02 07,03 07,04 08,01 08,02 08,03 08,04 09,01 09,02 09,03 09,04 10,01 10,02 10,03 10,04 11,01 11,02 11,03 11,04
Source: ISTAT
Estimated effect of a reduction of 10% of this index reduces consumption of 0.5% with an effect on GDP of -0.3%
Consumption• Poverty has increased• Disposable income and saving propensity
245.000
250.000
255.000
260.000
265.000
270.000
275.000
280.000
285.000
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
18,0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2006 2007 2008 2009 2010 2011
Gross disposable income (right scale) Saving rate (lef t scale)
Employment
0
500
1.000
1.500
2.000
2.500
I trim 08
II trim 08
III trim 08
IV trim 08
I trim 09
II trim 09
III trim 09
IV trim 09
I trim 10
II trim 10
III trim 10
IV trim 10
I trim 11
II trim 11
III trim 11
People seeking employment
Employment
OrdinaryExtraordina
ryIN
DEROGATotal
2005 142 90 13 246
2006 97 111 24 231
2007 71 88 25 184
2008 113 87 28 228
2009 576 216 122 914
2010 342 489 373 1.204
2011 226 411 316 954
Redundancy Fund – CIG (million of authorized hours)
Source: INPS
Unemployment rate Total and people 15-24 years old
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
45,0I Q
uart
er
II Q
uart
er
III Q
uart
er
IV Q
uart
er
I Qua
rter
II Q
uart
er
III Q
uart
er
IV Q
uart
er
I Qua
rter
II Q
uart
er
III Q
uart
er
IV Q
uart
er
I Qua
rter
II Q
uart
er
III Q
uart
er
2008 2009 2010 2011
Unemployment rate 15-24 years old Unemployment rate Total
Source: ISTAT
Wages and inflation rate. Percentage changes on previous quarter
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0Wages Inflation
Effects of the ‘Save Italy’ decree
2012 2013 2014
Reduction in the net public debt (million eur) -20243 -21318 -21431
- % of GDP -1.3 -1.3 -1.3
Effect on families -1.5 -1.5 -1.5
Of wich: reduction in disposable income -0.4 -0.6 -0.6
Of which: increase of indirect taxation -1.1 -0.9 -0.8
Effects on companies -0.1 0.0 0.0
Conclusion
• Italy has been severely hit by the crisis in terms of employment and social conditions
• Fiscal policy: mainly increases in taxation
• Spending cuts can worsen families’ economic conditions, particularly poorest ones.
• High indebtedness and contagion of the sovereign debt crisis makes the trade-off between stimulus and austerity more severe
Conclusions
• Urgent measures prevented the introduction of structural interventions fixing the weaknesses of the Italian economy.
• Increases in taxation contribute to the reduction of disposable income and consumption, leading to an increase in poverty.
• Spending cuts, in particular of health care expenditure and of transfers to regions, have a greater impact on poorest families.
• • Worse labor market conditions during the crisis and
structural weaknesses become more evident.
• To overcome the crisis, structural reforms are needed: the ‘grow Italy’ decree