THE IMPACT OF ANTI CRISIS MEASURES AND THE SOCIAL AND

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					 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
                                                                               Q




                                          -7.0
                                                 -6.0
                                                        -5.0
                                                               -4.0
                                                                      -3.0
                                                                             -2.0
                                                                                    -1.0
                                                                                           0.0
                                                                                                 1.0
                                                                                                       2.0
                                                                                                             3.0
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                                                                                     08
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Quarterly GDP (growth rate)
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                              Var. Cong
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                              Var. Tend

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                                                                                                                   Introduction: the crisis




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     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

                                GDP          Employees          Consumption
3,0%

2,0%

1,0%

0,0%
        2001   2002   2003   2004     2005      2006     2007       2008      2009   2010   2011
-1,0%

-2,0%

-3,0%

-4,0%

-5,0%

-6,0%

Fonte: ISTAT                          GDP, Private consumption: real percentage changes
              Household confidence index.
                 Estimated effect of a reduction of 10% of this index reduces
                 consumption of 0.5% with an effect on GDP of -0.3%
115,0



110,0



105,0



100,0



 95,0



 90,0



 85,0
    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
                                  Consumption
• Poverty has increased
• Disposable income and saving propensity

    18,0                                                                                        285.000
                     Gross disposable income (right scale)          Saving rate (lef t scale)
    16,0                                                                                        280.000
    14,0                                                                                        275.000
    12,0
                                                                                                270.000
    10,0
                                                                                                265.000
     8,0
                                                                                                260.000
     6,0
     4,0                                                                                        255.000

     2,0                                                                                        250.000

     0,0                                                                                        245.000
           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
                               Employment
People seeking employment
     2.500


     2.000


     1.500


     1.000


      500


         0
                I II III IV I II III IV I II III IV I II III
             trim trim trim trim trim trim trim trim trim trim trim trim trim trim trim
              08 08 08 08 09 09 09 09 10 10 10 10 11 11 11
                                   Employment
               Redundancy Fund – CIG (million of authorized hours)



                                                         IN
                         Ordinary Extraordinary                      Total
                                                       DEROGA
           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

Source: INPS
                                   Unemployment rate
                          Total and people 15-24 years old
 45,0
                                                  Unemployment rate 15-24 years old                                                             Unemployment rate Total
 40,0

 35,0

 30,0

 25,0

 20,0

 15,0

 10,0

  5,0

  0,0
                                                     IV Quarter




                                                                                                          IV Quarter




                                                                                                                                                                IV Quarter
                                    III Quarter




                                                                                            III Quarter




                                                                                                                                                  III Quarter




                                                                                                                                                                                                       III Quarter
                      II Quarter




                                                                              II Quarter




                                                                                                                                   II Quarter




                                                                                                                                                                                          II Quarter
          I Quarter




                                                                  I Quarter




                                                                                                                       I Quarter




                                                                                                                                                                             I Quarter
                             2008                                                    2009                                                 2010                                           2011


Source: ISTAT
       Wages and inflation rate.
       Percentage changes on previous quarter

2,0
                    Wages           Inflation

1,5


1,0


0,5


0,0


-0,5


-1,0
             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

				
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