A succession of Italian governments have tried to reassure voters for the past three years that the record-length recession in the eurozone’s third-largest economy was almost over, that recovery was just around the corner.
The promise was finally fulfilled on Wednesday: official data showed quarter-on-quarter growth of 0.3% in the first three months of 2015 - the first uptick since mid-2011, and 0.1 percentage points above analysts’ predictions.
“The figures signal in a significant and comprehensive way that the country is switching back on. We are convinced that government action has contributed to the relaunch of our economy,” Matteo Colanninno, a lawmaker from the ruling Democratic Party, commented.
When he took office 15 months ago promising bold reform, Prime Minister Matteo Renzi faced the uphill challenge of not just ending the slump, but also making up for the ground Italy lost in recent years.
Compared to pre-crisis levels, industrial production is down by a quarter, and per capita incomes have fallen to the lowest level since 1997. Unemployment has doubled, and the size of the economy has shrunk to 2000 levels.
Renzi’s record is mixed, at best. At 0.6%, Italy’s 2015 GDP growth prospect stands among the weakest in the eurozone, the European Commission said last week. Only Greece, Cyprus and Finland are expected to fare worse.
“The surprising fact is not that Italy is growing again, but how slow it is growing,” says Luigi Zingales, an Italian professor at the University of Chicago Booth School of Business.
The Bank of Italy has estimated that the country’s limping recovery is being driven almost entirely by stimulus action from the European Central Bank rather than by any government policies.
Renzi’s signature reform to date has been the Jobs Act, a package comprising labour market deregulation, new welfare payments for the unemployed and generous tax breaks for companies hiring workers on full-time contracts.
The package won praise from the European Union and foreign investors, including German ones.
“It’s been useful to us, we have done a dozen of new hirings using the new Jobs Act rules,” says Stefan Neuhaus, chief executive of the Castelfalfi resort in Tuscany, owned by Hanover-based German tour operator TUI.
But overall jobless numbers have failed to budge. Latest Istat data showed two weeks ago that the unemployment rate rose to 13% in March, and that 70,000 jobs were lost over the previous 12 months.
“The economic policies of the Renzi government are not inducing any growth and are leading us towards a jobless recovery,” says Riccardo Sanna, an economics researcher at CGIL, Italy’s biggest trade union.
CGIL blames Renzi for not abandoning the austerity policies followed by his predecessors and calls on the government to boost growth through public investment, financed by tax hikes on the rich and the reduction of corruption and government waste.
Zingales - whose political preferences lie to the right of the CGIL - says an economy coming out of a deep recession like Italy’s should grow by at least 2-3% a year.
Italy’s economic ills are “so deep that we cannot blame Renzi for not having fixed them right away,” Zingales says, but he adds that the “government seems to lack a broader vision of what Italy needs to start growing again.”