Constrained economic policy in Italy’s dual-hybrid economy

ABSTRACT

This article examines recent developments in Italy’s economic and fiscal policymaking. It does so by contextualising the 2023 changes in the Italian National Recovery and Resilience Plan (NRRP) within three broader aspects which have characterised the Italian political economy: (1) the country’s conservative fiscal trajectory inside the monetary union (EMU); (2) the expansionary economic policies pursued in the face of both the pandemic and energy crises; (3) the peculiar characteristics of Italy’s ‘dual-hybrid economy’. The article posits that, since the EMU, Italy has continuously run primary budget surpluses higher than its EMU peers. Only since Covid-19, and with the relaxation of EMU constraints, has Italy’s fiscal stance turned expansionary. This has allowed space for various socioeconomic policies to partially shield households and firms from the crises’ fallout. However, with a return to fiscal conservatism, the NRRP now represents the only game in town to try and address Italy’s dual hybridity characterised by weak state capacity and supply-side institutional inconsistencies as well as two diametrically opposed regional growth regimes in the North and the South.

KEYWORDS:

• Italy
• economic policy
• energy crisis
• growth models
• varieties of capitalism

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. For a full description of the NRRP see Domorenok and Guardiancich (2022).

2. Bruegel’s dataset includes some measures prior to Russia’s invasion of Ukraine in February 2022.

3. For further details and a description of these cuts, see the article by Cavalieri et al. in this issue.

4. See Decree Law n.77, 21 May 2021, available at: https://www.normattiva.it/uri-res/N2Ls?urn:nir: stato:decreto.legge:2021-05-31;77.

5. See OECD Broadband Data Portal. Available at: https://www.oecd.org/digital/broadband/broadband-statistics/

6. Data retrieved from the report, Senza Dati non si Può Valutare il Nuovo Pnrr, 4 December 2023.

7. https://temi.camera.it/leg18/temi/il-mezzogiorno-nel-pnrr.html.

Additional information

Notes on contributors

Donato Di Carlo

Donato Di Carlo (PhD, Max Planck Institute for the Study of Societies, 2019) is a lecturer in political economy at Luiss University in Rome, Italy, and managing director of the Luiss Hub for New Industrial Policy (LUHNIP). His research focuses on comparative political economy, industrial policy, and industrial relations.

Marco Simoni

Marco Simoni (PhD, LSE 2007) is Adjunct Professor at Luiss University. Between 2014 and 2018 he was an Economic advisor to the Prime Minister of Italy. He has also been the founding President of the Human Technopole Foundation between 2018 and 2022.