Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Italy and delivering a Council opinion on the 2020 Stability Programme of Italy
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Italy, aid to undertakings, economic policy, economic recovery, economic reform, employment aid, epidemic, infectious disease, investment, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 512 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Italy and delivering a Council opinion on the 2020 Stability Programme of Italy  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Italy and delivering a Council opinion on 
the 2020 Stability Programme of Italy 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

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On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission also adopted the Alert Mechanism Report, in which it identified Italy as 
one of the Member States for which an in-depth review would be carried out. On the 
same  date,  the  Commission  also  adopted  a  recommendation  for  a  Council 
recommendation on the economic policy of the euro area. 
The  2020  country  report  for  Italy3  was  published  on  26  February  2020.  It  assessed 
Italy’s  progress  in  addressing  the  country-specific  recommendations  adopted  by  the 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
SWD(2020) 511 final. 

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(3) 

(4) 

(5) 

Council  on  9  July  20194,  the  follow-up  given  to  the  recommendations  adopted  in 
previous  years  and  Italy’s  progress  towards  its  national  Europe  2020  targets.  It  also 
included  an  in-depth  review  under  Article  5  of  Regulation  (EU)  No  1176/2011,  the 
results of which were also published on 26 February 2020. The Commission’s analysis 
led it to conclude that Italy is experiencing excessive macroeconomic imbalances. In 
particular,  high  government  debt  and  protracted  weak  productivity  dynamics  imply 
risks with cross-border relevance, in a context of high unemployment and a still high 
level of non-performing loans. 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 
societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication5 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several  Member States have declared a state of  emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact6. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation  (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from  the COVID-19 outbreak, the  current  conditions  permit  activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path  towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium-
term. For the corrective arm, the Council may also decide, on a recommendation from 
the Commission,  to  adopt  a revised  fiscal  trajectory. The  general  escape  clause does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

(6) 

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 

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OJ C 301, 5.9.2019, p. 117. 
COM(2020) 112 final. 
COM(2020) 123 final. 

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(8) 

(9) 

Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 
alia  the  green  transition  and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional  measures that prevent  the single market  from  functioning  normally must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the need for crisis preparedness plans in the health sector, which include in particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 
essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans. 
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks7  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Italy is encouraged to make full use of those possibilities to help the 
individuals and sectors most affected by the challenges. 

The  socio-economic  consequences  of  the  pandemic  are  likely  to  be  unevenly 
distributed  across  Italian  regions  and  territories  due  to  longstanding  economic  and 
social  disparities,  diverging  competitiveness  potential  and  the  degree  of  reliance  on 
tourism. This entails a risk of widening regional and territorial disparities within Italy, 
aggravating  diverging  trends  between  less  developed  regions  and  more  developed 
ones, between social peripheries and the rest of urban areas as well as between some 
urban areas and rural areas. Combined with the risk of a temporary unravelling of the 
convergence  process  between  Member  States,  the  current  situation  calls  for  targeted 
policy responses. 

(10)  On 30 April 2020, Italy submitted its 2020 Stability Programme. 

(11) 

(12) 

Italy is currently in the preventive arm of the Stability and Growth Pact and subject to 
the debt rule. 

In  its  2020  Stability  Programme,  the  government  plans  the  headline  balance  to 
deteriorate from a deficit of 1,6 % of GDP) in 2019 to a deficit of 10,4 % of GDP in 
2020.  The  deficit  is  projected  to  decline  to  5,7%  of  GDP  in  2021.  After  having 
stabilised at 134,8 % in 2019, the general government debt-to-GDP ratio is expected to 
increase  to  155,7  %  in  2020  according  to  the  2020  Stability  Programme.  The 
macroeconomic and fiscal outlook is affected by high uncertainty due to the COVID-

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013 as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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19  pandemic.  There  are  country-specific  risks  underlying  the  budgetary  projections, 
namely  the  considerable  size  of  public  guarantees  and  the  volatility  of  sovereign 
yields. 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Italy  has  adopted  budgetary  measures  to  increase  the  capacity  of  its  health  system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  According  to  the  2020  Stability  Programme,  those 
budgetary  measures  amount  to  4,5  %  of  GDP  in  2020.  The  measures  include 
strengthened healthcare and civil protection, extended wage supplementation schemes 
and  financial  support  to  self-employed  persons  and  firms.  In  addition,  Italy  has 
introduced measures that, while not having a direct budgetary impact, will contribute 
to support liquidity to businesses, including tax deferrals and loan guarantees. Overall, 
the measures taken by Italy are in line with the guidelines set out in the Commission 
Communication on a coordinated economic response to the COVID-19 outbreak. The 
full  implementation  of  those  measures,  followed  by  a  refocusing  of  fiscal  policies 
towards  achieving  prudent  medium-term  fiscal  positions  when  economic  conditions 
allow, will contribute to preserving fiscal sustainability in the medium-term. 

(14)  Based  on  the  Commission  2020  spring  forecast  under  unchanged  policies,  Italy’s 
general government balance is forecast at -11,1 % of GDP in 2020 and -5,6 % in 2021. 
The general government debt ratio is projected to reach 158,9 % of GDP in 2020 and 
153,6 % in 2021.  

(15)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3) of the Treaty due to Italy’s non-compliance with the debt rule in 2019 and the 
planned  breach  of  the  3%  of  GDP  deficit  threshold  in  2020.  Overall,  the  analysis 
suggests  that  there  is  no  sufficient  evidence  to  conclude  that  the  debt  criterion  as 
defined in the Treaty and in Regulation (EC) No 1467/1997 is or is not complied with, 
while the deficit criterion is not fulfilled. 

slowed  down 

regional  authorities 

(16)  The  COVID-19  pandemic  has  put  the  national  health  system  under  unprecedented 
strain,  evidencing  structural  weaknesses  and  the  need  to  increase  preparedness  in 
response to crisis events. Despite below EU average spending on health, Italy’s health 
system is characterised by highly specialised as well as good quality universal services 
and it has generally succeeded in providing accessible care. Nevertheless, especially at 
the  onset  of  the  pandemic,  the  health  system  governance  fragmentation,  and 
coordination  between  central  and 
the 
implementation  of  some  containment  measures.  The  response  of  regional  health 
systems  to  the  crisis  was  based  primarily  on  an  extraordinary  mobilisation,  in 
particular  of  the  health  workforce  and  local  social  services.  This  compensated  the 
limits of the physical infrastructure, numbers of health workers and investment in the 
past  years  aimed  at  improving  structures  and  services.  The  Italian  government  made 
great  efforts  to  mitigate  the  spread  of  the  virus,  relieve  pressure  on  hospitals  and 
generate  additional  care  capacity.  A  longer-term  containment  strategy  is  now  being 
developed  to  ensure  a  safe  return  to  productive  activity.  In  addition  to  improving 
governance  processes  and  crisis  preparedness  plans,  post-COVID-19  policies  should 
aim  at  alleviating  the  public  investment  gap  in  health  care.  In  the  medium-to-long 
term, developing a strategic investment plan will be key to improve the resilience of 
the Italian health system, and to guarantee the continued provision of accessible care. 
In  the  face  of  current  health  workforce  projections,  priority  should  be  given  to 
developing policies to resolve bottlenecks in the training, recruitment and retention of 
the health workforce. 

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(17)  The  lockdown  measures  adopted  in  response  to  the  health  crisis  are  having  a  strong 
negative  impact  on  the  labour  market  and  social  conditions.  Prior  to  the  crisis,  the 
social situation was slowly improving, even if the risk of poverty or social exclusion, 
in-work  poverty  and  income  inequality  remained  high  and  with  major  regional 
differences.  Given  the  impact  of  the  COVID-19  outbreak  and  its  aftermath,  social 
safety  nets  should  be  strengthened  to  ensure  adequate  income  replacement, 
irrespective of their employment status, including those facing gaps in access to social 
protection. Strengthening income replacement and support is particularly relevant for 
atypical  workers  and  people  in  vulnerable  situations.  Provision  of  services  aimed  at 
social  and  labour  market  inclusion  is  also  key.  The  new  minimum  income  scheme, 
which provided over the past year benefits to more than one million households (EUR 
513,  on  average),  may  mitigate  the  effects  of  the  crisis.  However,  its  reach  out  to 
vulnerable  groups  could  be  improved.  On  a  temporary  basis,  the  government 
introduced  an  additional  “emergency  income”  to  support  households  not  eligible  for 
the  minimum  income  so  far.  People  employed  in  the  shadow  economy,  notably  in 
sectors such as agriculture, food industry and housing, also risk facing gaps in access 
to social protection and income support. To respond to this challenge, the government 
recently  eased  the  rules  for  legalising  the  employment  status  of  undeclared  workers 
and  for  obtaining  or  extending  residence  permits  for  working  migrants.  Negative 
demographic trends and brain drain also risk hindering growth prospects. In addition 
to  more  difficult  labour  market  conditions,  lack  of  quality  services  is  a  driver  of 
depopulation  in  Southern  regions  and  rural  areas.  Enhancing  access  to  e-services  is 
key, especially in a context of limited mobility. 

(18)  Since  the  outbreak  of  the  crisis,  Italy  is  taking  steps  to  mitigate  the  employment 
impact. Short-time work schemes (Cassa integrazione), have played a major role and 
are expected to do so in the future. Eligibility has been extended to include small and 
micro  enterprises  and  all  economic  sectors  and  employees.  In  addition,  a  separate 
(temporary) scheme has been created for the self-employed. Prior to the crisis labour 
market  conditions  had  continued  to  improve.  In  2019,  the  employment  rate  reached 
64%,  the  highest  rate  ever  recorded.  However,  this  was  still  significantly  below  the 
Union average. The unemployment rate was persistently high, as were other indicators 
of labour market slack, and is expected to rise further to 11,8% in 2020 and recover to 
10,7%  in  2021,  according  to  the  Commission  forecast.  The  share  of  temporary 
contracts  was  also  high,  even  if  since  mid-2018  job  creation  had  been  driven  by 
permanent  jobs.  For  the  future,  in  order  to  promote  a  sustainable  and  inclusive 
recovery,  the  labour  market  integration  of  inactive  young  people  and  women  is  key. 
Some steps were taken to strengthen public employment services and better integrate 
them  with  social  services,  adult  learning  and  vocational  training.  However,  their 
placement capacity remains weak and varies widely across regions. The involvement 
of employers  also  remains  marginal. As lockdown measures  are progressively lifted, 
flexible  working  arrangements  and  teleworking  can  support  firms  and  workers.  In 
response  to  the  crisis,  the  government  adopted  temporary  measures  aiming  at 
conciliating  private  and  working  life,  such  as  fostering  smart  working  and  special 
leaves  and  providing  vouchers  for  baby-sitting.  Despite  recent  efforts,  measures  to 
promote  equal  opportunities  and  work-life  balance  policies,  as  well  as  the  supply  of 
affordable  early  childhood  education  and  care  and  long-term  care  services,  remain 
weak and poorly integrated. 

(19)  The  current  emergency  also  shows  the  need  to  improve  digital  learning  and  skills, 
including  for  working  age  adults  and  distance  learning.  Investing  in  education  and 
skills  is  key  to  promoting  a  smart  and  inclusive  recovery  and  to  staying  on  track  to 

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pursue the green and digital transition. In that regard, education and training outcomes 
continue to represent a major challenge for Italy. There are large regional gaps in basic 
skills attainment and the rate of early school leaving is well above the Union average 
(13,5% vs 10,3% in 2019), in particular for non-Union born pupils (33%). In a context 
of limitations to mobility, regional and territorial disparities risk being exacerbated. In 
that  light,  investing  in  distance  learning,  as  well  as  in  the  digital  infrastructure  and 
skills of educators and learners, is particularly important. Italy also has a lower share 
of graduates in  science and engineering compared to  the Union average,  and tertiary 
attainment remains very low (27,6% in 2019). Moreover, Italian enterprises invest less 
in 
their 
information  and  communication 
employees,  compared  to  peer  countries.  The  low  participation  rate  of  low-qualified 
adults  in  training  is  also  a  matter  of  concern,  given  the  declining  number  of  jobs 
requiring  low  qualifications.  Upskilling  and  reskilling  remain  as  crucial  as  ever  to 
equip  workers  with  labour  market  relevant  skills  and  to  promote  a  fair  transition 
towards a more digital and sustainable economy. 

training  regarding 

technologies  for 

(20)  The crisis has reinforced the need to support the access to finance for firms. Italy has 
adopted several schemes to support the flow of liquidity to firms, including under the 
Temporary  Framework  for State aid  measures to support the economy in  the current 
COVID-19  outbreak8.  Effective  implementation  of  such  schemes,  including  through 
guarantees  channelled  by  the  banking  system,  is  key  to  ensure  that  all  firms,  and  in 
particular small and medium-sized enterprises (SMEs) and those in the most affected 
sectors  and  geographic  areas  as  well  as  innovative  firms,  benefit  from  them.  In  the 
process  of  designing  and  implementing  those  measures  the  resilience  of  the  banking 
sector  needs  to  be  taken  into  account.  Direct  grants  and  incentives  to  market-based 
finance can also support the liquidity of SMEs and innovative firms. Innovative firms 
(often without collateral) have more difficulties to access credit, and the current crisis 
could  worsen  the  situation.  Deferral  of  tax  and  social  contributions  to  the  State  has 
helped  improve  the  cash  flows  of  firms.  However,  delays  in  approved  payments, 
whether  by  administrations-to-businesses  or  by  business-to-business,  should  be 
prevented, as they are a drag on the liquidity of all firms, particularly of smaller ones. 

(21)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms. Investment in support of the green transition will be particularly important to 
support recovery  and increase future resilience.  Italy is highly  vulnerable  to  extreme 
weather  and  hydrogeological  disasters,  including  droughts  and  forest  fires.  Italy’s 
transformation  to  a  climate  neutral  economy  will  require  sizeable  private  and  public 
investment,  over  a  sustained  period  of  time,  in  particular  on  new  renewable  energy 
production,  electricity  infrastructure,  energy  efficiency,  among  others.  Green  deal 
investments  to  tackle  climate  change  are  laid  out  in  in  Italy’s  National  Energy  and 
Climate Plan. They are essential to address the threat represented by climate change, 
while  playing  a  fundamental  role  in  Italy’s  recovery  and  to  strengthen  its  resilience. 
Green deal investments are also key for reducing the impact on human health from air 
pollution  in  Italian  cities,  especially  in  the  Po  Basin.  For  instance,  implementing 
sustainable  mobility  initiatives,  such  as  renewal  of  local  public  buses,  represents  an 
example to address both congestion and air pollution. Infrastructure deficits for water 
and waste management, notably in southern regions, lead to environmental and health 
impacts  with  considerable  costs  and  lost  revenues  for  the  Italian  economy.  More 
generally,  resilience  to  climate  change  is  relevant  for  all  infrastructure,  including 

8 

OJ C 91I , 20.3.2020, p. 1–9. 

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health  infrastructure.  This  requires  adaptation  strategies.  Addressing  environmental 
and climate change challenges, such as hydrological risks, sustainable urban mobility, 
energy  efficiency,  circular  economy  and  industrial  transformation,  represent  an 
opportunity  to  improve  productivity  while  avoiding  unsustainable  practices.  At  the 
same time, investing into such projects can contribute to creating jobs and sustaining 
the post-crisis recovery. The programming of the Just Transition Fund for the period 
2021-2027 could help Italy to address some of the challenges posed by the transition 
to a climate neutral economy, in particular in the territories covered by Annex D to the 
2020 country report9. This would allow Italy to make the best use of that fund. 

(22)  The COVID-19 outbreak lockdown has underlined the importance of investing in the 
economy’s digitalisation and shown the relevance of digital infrastructures. Low levels 
of digital intensity and digital knowledge of firms in Italy, especially SMEs and micro-
enterprises,  have  prevented  them  from  offering  e-commerce  and  teleworking 
arrangements  and  providing  and  using  digital  tools  during  confinement.  Investing  in 
digitisation  and  skills  through  a  continued  and  timely  implementation  of  targeted 
national  policies  is  essential  to  enhance  e-business  models  and  help  firms  adapt,  as 
well  as  to  boost  productivity  and  competitiveness.  Access  to  fast  and  reliable  digital 
infrastructure  has  shown  to  be  key  to  ensuring  essential  services  are  provided  in 
government,  education,  health  and  medicine,  and  key  to  monitoring  and  controlling 
the  epidemic.  Italy  is  still  lagging  behind  in  fiber-to-the-premises  coverage  in  rural 
areas. Specific measures should be adopted to  address  that  gap,  as  well  as  to  further 
encourage take-up.  

(23)  A  well-performing  research  and  innovation  system  is  the  result  of  continuous, 
coherent  and  evidence-based  policy  support,  together  with  investments  and  adequate 
human  capital.  The  current  crisis  has  clearly  shown  that  the  rapid  exchange  of  data 
between researchers, including access to results and evidence at no charge to the user 
together  with 
and  Open  Science,  need 
science/business  cooperation  are  clearly  instrumental  to  bring  research  results, 
including  those  needed  on  vaccines  and  therapies,  on  the  market,  building  on  the 
strength of Italy in the medical industrial and research sector. 

further  strengthening.  The 

latter, 

(24)  An  effective  public  administration  is  crucial  to  ensure  that  measures  adopted  to 
address  the  emergency  and  support  the  economic  recovery  are  not  slowed  down  in 
their implementation. The disbursement of social benefits, liquidity measures, and the 
front-loading  of  investments,  etc.  may  not  be  effective  if  hampered  by  public  sector 
bottlenecks.  Weaknesses include lengthy procedures,  including civil  justice ones,  the 
low  level  of  digitalisation  and  weak  administrative  capacity.  Procedures  and  checks 
need  to  be  dealt  with  swiftly,  in  a  context  where  public  resources  are  being 
significantly  increased  to  support  economic  activity.  Digitalisation  across  public 
administrations was uneven prior to the crisis. Online interaction between authorities 
and the  general  public  was low. The share of  administrative procedures managed by 
regions and municipalities that can be started and completed entirely digitally remains 
low. The crisis has also exposed the lack of interoperability of public digital services. 
To  facilitate  the  business  responsiveness  of  the  public  administration,  sectoral 
regulations  need  to  be  improved  and  simplified,  while  remaining  barriers  to 
competition  need  to  be  removed.  Finally,  an  effective  justice  system  is  key  for  an 
attractive  investment  and  business-friendly  economy  and  will  be  crucial  in  the 
recovery process, also by enabling effective rescue and recovery frameworks.  

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to  address  medium- 

(25)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
essential 
structural  challenges.  Those 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(26)  The measures adopted by the Italian government to support households and corporates 
are  also  beneficial  for  preserving  banking  sector  capitalisation  and  resilience  in  the 
current  difficult  operating  environment.  Despite  the  adopted  mitigating  measures, 
including  the  prudential  flexibility  granted  by  banking  supervisors,  the  COVID-19 
outbreak  is  also  straining  bank  asset  quality  across  the  Union,  and  is  expected  to 
continue to do so in the coming weeks and months, including in Italy. As a result, non-
performing loan (NPL) reduction efforts are being impacted, also due to the slowdown 
in the court and impaired asset workout activities. In that regard, fostering sustainable 
solutions  for  the  viable  borrowers  affected  by  the  crisis,  including  by  avoiding  legal 
automaticities, is an important pre-requisite for safeguarding asset quality. Meanwhile, 
ensuring accurate reporting of asset quality deterioration and prudent credit standards 
can also  help  support the functioning of the secondary market  for NPLs and contain 
adverse effects on existing NPLs disposal initiatives. 

(27)  Effective  prevention  and  sanctioning  of  corruption  can  play  an  important  role  in 
ensuring  Italy’s  recovery  after  the  crisis.  Transparency  in  the  public  sector  and 
reinforced  checks  against  corruption,  in  particular,  can  avoid  attempts  by  organised 
crime to infiltrate economic and financial life, distort public procurement procedures 
and, more broadly, divert  public resources needed for investment.  At the same time, 
public  procurement  procedures  should  remain  efficient,  balancing  the  need  for 
scrupulous  monitoring  with  the  need  for  timeliness.  Disposition  time  at  criminal 
appeal  courts  still  raises  concerns  but  comprehensive  reforms  to  streamline  criminal 
procedures  are  being  discussed  in  Parliament.  Italy’s  anti-corruption  framework  has 
recently been reinforced but needs to be completed, also by sanctioning elected public 
officials in case of conflicts of interest. 

(28)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy. . By ensuring the full implementation of the recommendations below, Italy 
will contribute to the progress towards the SDGs and to the common effort of ensuring 
competitive sustainability in the Union. 

(29)  Close coordination between economies in the economic and monetary union is key to 
achieve a swift recovery from the economic impact of the COVID-19. Italy should, as 
a  Member  State  whose  currency  is  the  euro  –  and  taking  into  account  political 
guidance by the Eurogroup – ensure its policies remain consistent with the  euro area 
recommendations and coordinated with those of the other euro area Member States. 

(30) 

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Italy’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Stability  Programme  and  the  follow-up 
given  to  the  recommendations  addressed  to  Italy  in  previous  years.  It  has  taken  into 

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(31) 

(32) 

account  not  only  their  relevance  for  sustainable  fiscal  and  socioeconomic  policy  in 
Italy,  but  also  their  compliance  with  Union  rules  and  guidance,  given  the  need  to 
strengthen  the  Union’s  overall  economic  governance  by  providing  Union-level  input 
into future national decisions.  

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Stability 
Programme and its opinion10 is reflected in particular in recommendation (1) below. 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined the [2020 National Reform Programme and] the 2020 Stability Programme. 
The present  recommendations take into account the need to  tackle the pandemic and 
facilitate  the  economic  recovery  as  a  first  necessary  step  to  permit  an  adjustment  of 
imbalances.  Recommendations  directly  addressing  the  macroeconomic  imbalances 
identified by the Commission  under Article 6 of  Regulation  (EU) No 1176/2011  are 
reflected in recommendations (1), (2), (3) and (4), 

HEREBY RECOMMENDS that Italy take action in 2020 and 2021 to: 

1. 

2. 

3. 

In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 
economic  conditions  allow,  pursue  fiscal  policies  aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability,  while  enhancing 
investment. Strengthen the resilience and capacity of the health system, in the areas 
of health workers, critical medical products and infrastructure. Enhance coordination 
between national and regional authorities. 

Provide  adequate  income  replacement  and  access  to  social  protection,  notably  for 
atypical  workers.  Mitigate  the  employment  impact  of  the  crisis,  including  through 
flexible  working  arrangements  and  active  support  to  employment.  Strengthen 
distance learning and skills, including digital ones. 

Ensure  effective  implementation  of  measures  to  provide  liquidity  to  the  real 
economy, including to small and medium-sized enterprises, innovative firms and the 
self-employed,  and  avoid  late  payments.  Front-load  mature  public  investment 
projects  and  promote  private  investment  to  foster  the  economic  recovery.  Focus 
investment  on  the  green  and  digital  transition,  in  particular  on  clean  and  efficient 
production and use of energy, research and innovation, sustainable public transport, 
waste and water management as well as reinforced digital infrastructure to ensure the 
provision of essential services.  

4. 

Improve  the  efficiency  of  the  judicial  system  and  the  effectiveness  of  public 
administration. 

Done at Brussels, 

For the Council 
The President 

10 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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