COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Italy and delivering a Council opinion on the Stability Programme of Italy
Date: 2022-05-23
Institutions: European Commission, Secretariat-General
Subjects: Italy, economic policy, economic recovery, economic reform, energy policy, public finance, stability pact, stability programme, sustainable mobility

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 23.5.2022  SWD(2022) 616 final  COMMISSION STAFF WORKING DOCUMENT 2022 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2022 National Reform Programme of Italy and delivering a Council opinion on the Stability Programme of Italy {COM(2022) 616 final} - {SWD(2022) 640 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

intangible  investment  intensity,  especially  in 
the  manufacturing  sector. (1)  A  shrinking  work 
force  coupled  with  an  ageing  population,  until 
recently  low  public  and  corporate  investment 
rates  (partly  due  to  problems  in  the  banking 
system)  and  weak  productivity  growth  (see 
Annex 10) have dragged down GDP growth for 
the past two decades. 

Graph 1.2: Contributions to GDP growth (1990-
2019) 

Italy’s economy is rebounding but 
long-standing challenges remain 

Italy’s  economy  had  not  yet  fully 
recovered from previous recessions when 
the  pandemic  hit.  Real  GDP  was  still  3% 
below  the  level  registered  before  the  global 
financial crisis when the pandemic plunged the 
economy into a sharp but short-lived recession 
(see  Graph  1.1). 
real  output 
plummeted  by  9%,  but  the  economy’s  strong 
industrial  base  and  competitive  export  sector, 
together  with  a  swift  policy  response  at  both 
national  and  EU  level,  paved  the  way  for  a 
quick and strong rebound.  

In  2020, 

Graph 1.1: Real GDP (2008Q1 - 2021Q4) 

Source: OECD 

Despite 
Italy’s 
sizeable  headwinds, 
economy  closed  2021  on  a  solid  footing. 
In  2021,  real  GDP  grew  by  6.6%  and  almost 
reached pre-pandemic levels. The jobs market 
improved  in  line  with  the  economic  rebound, 
with unemployment falling from 9.9% in 2019 
to  9.5%  in  2021.  However,  both  employment 
and  the  labour  force  were  still  below  pre-
pandemic levels. The new jobs created largely 
took the form of non-permanent contracts and 
labour  productivity  remained  subdued.  The 
rollout  of  the  recovery  and  resilience  plan 
(RRP) is expected to continue to boost growth, 
but  the  negative  repercussions  of  Russia’s 
the  economic 
invasion  of  Ukraine  cloud 

(1)  European Commission, JRC Country Factsheet on 

Productivity – Italy (2022) 

Source: European Commission 

Italy’s  subpar  growth  performance  since 
the  1990s  has  long-standing  structural 
roots. The declining trend in GDP growth since 
the  1990s  is  associated  with  falling  labour 
and  capital  inputs  used  in  production,  as  well 
as  waning  overall  efficiency  in  how  these 
inputs  are  used,  i.e.  multifactor  productivity 
(see graph 1.2). ICT capital is gradually making 
less  of  a  contribution  to  GDP  growth.  On 
average,  the  lack  of  non-ICT  capital  even 
reduced growth over the last decade. Italy lags 
in  terms  of 
behind  the  EU-15  average 

2 

7580859095100105110115120125080910111213141516171819202122Index (2008Q1=100)Series1EU ex ITEA ex IT-1.0-0.50.00.51.01.52.01990-992000-092010-19Percentage pointsContributions to GDP growth(1990-2019)Labour inputMultifactor productivityICT capitalNon-ICT capitalReal GDP growth (%) 
  
  
                                                 
 
outlook.  Real  GDP  growth  is  set  to  slow  to 
2.4% in 2022 and to 1.9% in 2023. 

Graph 1.3: Public finances indicators 

Pandemic-related  fiscal  support  and  the 
impact  of  measures  adopted  in  previous 
years  weigh  on  government  finances. 
After reaching a deficit of 1.5% of GDP and a 
primary  surplus  in  2019,  the  budget  deficit 
widened  considerably  in  2020  and  2021.  It  is 
expected to narrow but still exceed 3% of GDP 
in 2023, due also to the cost of non-temporary 
measures adopted in recent years, which have 
not  been  offset  by  equivalent  financing 
measures.  The  public  debt-to-GDP  ratio,  after 
remaining 
the 
pandemic, increased to 155.3% in 2020, but is 
projected  to  fall  to  146.8%  by  2023,  thanks 
also to GDP growth (see Graph 1.3).  

stable  before 

relatively 

Italy  has 
excessive  macroeconomic 
imbalances  that  are  not  expected  to 
unwind  in  the  short  term.  Italy  remains 
characterized  by  a  high  public  debt-to-GDP 
ratio,  low  productivity  growth,  as  well  as 
structural  weaknesses  in  labour  and  financial 
markets. The labour market recovered most of 
the  losses  incurred  by  the  pandemic  crisis, 
albeit largely due to an increase in temporary 
employment.  The  banking  sector  made 
significant  progress  in  reducing  legacy  non-
performing loans, although risks remain, linked 
impact  of  the 
to  the  potential  delayed 
pandemic  and  geopolitical 
tensions.  The 
sovereign-bank nexus intensified following the 
Covid  crisis.  The  reforms  and  investments  of 
the Recovery and Resilience Plan are expected 
to  mitigate  macroeconomic 
imbalances, 
provided their full implementation.  

Source: European Commission 

The repercussions from Russia’s 
invasion of Ukraine are likely to 
deal a sizeable blow to Italy’s 
economy 

Russia’s  invasion  of  Ukraine  is  putting 
firms  and 
additional  pressure  on 
households.  Rising  energy  prices,  especially 
for crude oil and natural gas, but also for other 
raw  materials  and  food  keep  hiking  up  firms’ 
operating  costs  and  eroding  households’ 
purchasing  power.  The  surge  in  energy  prices 
inflated  households’  utility  bills,  despite  the 
mitigating  measures 
the 
government.  This  risks  increasing  inequality 
and  energy  poverty,  which  is  already  higher 
than the EU average (see Annex 6). Consumer 
price  inflation  is  projected  to  increase  to 
almost 6% in 2022 and to moderate to 2.3% 
in 2023. 

adopted 

by 

is  dominated  by  
Italy’s  energy  mix 
natural  gas,  almost  half  of  it  imported 
from  Russia.  Despite  some  rise  in  the  share 
of  renewable  energy  and  biofuels  in  recent 
its 
years, 
electricity  from  natural  gas,  of  which  43%  is 
imported  from  Russia,  slightly  below  the  EU 
average (44%) (2), while it only produces 4.4% 

Italy  produces  almost  half  of 

(2)  Other major suppliers are Algeria (22.8%), Norway 
(11.1%), Qatar (10.5%) and Libya (6.7%). Major 
pipelines run from Russia (via Ukraine), Algeria (via 

3 

90.0100.0110.0120.0130.0140.0150.0160.0-10.0-9.0-8.0-7.0-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.06.0050607080910111213141516171819202122f23f% of GDP% of GDPGross public debt (rhs)Budget balance (lhs)Primary balance (lhs)Interest expenditure (lhs)forecast 
  
                                                 
the  natural  gas 

it  currently  uses 
of 
domestically. According to Gas Storage Europe 
(GSE),  Italy’s  gas  storage  level  stood  at  38% 
of  storage  capacity  in  early  May,  sizeably 
lower than at the same time in previous years, 
covering  18.5%  of 
final  natural  gas 
consumption  (as  of  2019).  It  is  noteworthy 
that 
faced 
considerable  input  shortages  already  before 
the Russian invasion of Ukraine due to supply 
chain  disruptions,  scarce  key  raw  materials 
and  challenging  logistics.  This  has  resulted  in 
producer  prices  rising  sharply  and  longer 
delivery times. (3)   

the  manufacturing 

sector 

Trade  exposure  to  Russia  and  Ukraine 
remains limited, except for energy. Goods 
exports  to  Russia  and  Ukraine  accounted  for 
1.9%  of  Italy’s  goods  exports  in  2021,  while 
Russian  tourists  contributed  just  1%  to  its 
overall  income  from  international  tourism. 
Overall, the share of imports from Russia and 
Ukraine  is  limited,  with  the  notable  exception 
from  Russia, 
of  energy 
especially natural gas. 

raw  materials 

Barriers to inclusive and 
sustainable growth remain 

business 

responsive 

Long-standing  structural  weaknesses  in 
the public sector remain one of the main 
barriers  to  investment  and  productivity 
growth.  Italy’s  public  administration  remains 
insufficiently 
and 
inefficient,  due  to  ineffective  management  of 
public employment, excessive red tape and low 
administrative  capacity,  particularly  at  local 
level  (see  Annex  11).  The  justice  system  still 
records among the highest disposition times in 
the  EU  and  a  large  backlog  of  cases,  with 
negative  effects  on  investment  decisions  and 
the fight against corruption.  

to 

the  European 

is  ample  margin 

to  boost 
There 
innovation and the digital performance of 
the  economy.  Italy  is  a  moderate  innovator 
according 
Innovation 
Scoreboard  (see  Annex  9).  It  spends  less  on 
research  and innovation  than  the  EU  average, 
particularly  for  businesses,  while  business-
science 
limited.  Non-banking 
financing,  such  as  equity  and  venture  capital, 
remains underdeveloped, limiting the ability of 
small  firms  to  scale  up. (4)  The  pandemic 
provided  an  opportunity  to  boost  the  use  of 
digital tools, but Italy still performs worse than 
its  EU  peers  on  a  number  of  digital 
dimensions (5)  (see  Annex  8).  Large  regional 
disparities in research and innovation remain. 

links  remain 

Low  employment  rates,  particularly  for 
women and in southern regions, and high 
youth unemployment persist. The pandemic 
had  only  a  modest  effect  on  employment  in 
persons thanks to various support measures at 
both national and EU level, while hours worked 
the  Social 
declined  drastically.  However, 
Scoreboard  accompanying  the  European  Pillar 
of Social  Rights flags a number of challenges 
across  several  areas  (see  Annex  12).  The 
employment  rate  in  2021  was  still  ten  points 
below  the  EU  average.  This  is  largely  a  result 
of  high  inactivity  rates  and  low  employment 
rates  among  women  and  young  people, 
particularly  in  southern  regions.  The  gender 
employment  gap  is  among  the  widest  in  the 
EU.  Relatively  more  women  work  part-time, 
due  to  insufficient  childcare  facilities  and 
ineffective  family  support  policies,  which 
widens  the  gap  further  and  perpetuates  the 
gender pay gap. Youth unemployment stood at 
29.7%  in  2021,  the  third  highest  in  the  EU. 
Italy’s  jobs  market  is  also  characterized  by 
substantial regional differences in terms of job 
prospects  and  earnings  (see  Annexes  12  and 
is 
15). 
estimated at 11.3% of GDP, despite significant 
recent  reductions  (by  4.3%  since  2014),  and 
undeclared work remains widespread. 

the  shadow  economy 

In  2019, 

Tunisia) and Libya. In addition, Italy has three large LNG 
terminals (in La Spezia, Livorno and Rovigo). 

(3)  Eurostat (2020), share of Russian imports over total 

imports of natural gas, crude oil and hard coal. For the 
EU27 average, the total imports are based on extra-
EU27 imports. For Italy, total imports include intra-EU 
trade. Crude oil does not include refined oil products. 

(4)  Amaral-Garcia, et al. (2022): HGE Demographics & 

Finance with a focus on venture capital: Factsheet – 
Italy, EC, JRC128693 

(5)  Digital Economy and Society Index 

4 

 
                                                                        
                                                 
and 

unemployment 

Providing more  up-skilling  and  re-skilling 
increasing  labour 
is  key  to  mitigate 
shortages 
and 
facilitate  a  fair  green  and  digital 
transition. The job vacancy rate in the private 
sector exceeded pre-crisis levels in 2021. 70% 
of  companies  reported  a  lack  of  skilled  staff 
as  an  obstacle  to  investment  in  2021 (6)  and 
low-skilled  individuals  record  a  higher  rate  of 
unemployment.  Despite  this,  participation  in 
adult 
the  EU 
average (7)  (see  Annex  12).  In  2021  less  than 
half  of  adults  had  at  least  basic  digital  skills 
and  in  2019  the  share  of  ICT  graduates  was 
among  the  lowest  in  the  EU  (see  Annex  8). 
These  conditions  hamper  the  effectiveness  of 
investment in digitalisation, and more broadly, 
productivity growth.  

remained  below 

learning 

by 

beset 

long-standing 

territorial  gaps 

Addressing  the  causes  of  Italy’s  low 
educational  outcomes  remains  a  priority. 
The primary and secondary education systems 
are 
structural 
problems,  which  have  been  worsened  by  the 
pandemic.  Social  and 
in 
achievement  have  also  widened.  Despite 
making  continued  improvements  in  recent 
Italy’s  education  system  performs 
years, 
below  the  EU  average  on  most  indicators, 
particularly,  in  tertiary  educational  attainment 
and 
fields.  The  pandemic 
contributed  to  a  further  increase  in  the  share 
of  young  people  (aged  15-29)  neither  in 
employment  nor 
in  education  or  training 
(NEET),  which  reached  23.3%  in  2020  and 
stagnated in 2021, and it is the highest in the 
EU. (8)  

in  scientific 

The  risk  of  poverty  and  social  exclusion 
remains high. Despite a declining trend up to 

(6)  European Investment Bank, 2022, Investment Report 
2021/2022: Recovery as a springboard for change.   

(7)  The indicator on adult learning participation over the 

previous four weeks is used in the country report, rather 
than the indicator on learning over the previous 12 
months, as Adult Education Survey (AES) data for the 
12-month indicator are only available for 2016 at the 
moment, while the new Labour Force Survey (LFS) 
indicator agreed for use in the social scoreboard and as 
2030 headline target on skills will only be available in 
2023. 

social 

spending 

the  South.  As 

the onset of the pandemic, the rate of people 
at  risk  of  poverty  or  social  exclusion  was  still 
very  high  (24.9%)  in  2020.Income  inequality 
remains above EU average (see Annex 12). The 
share  of  households  in  absolute  poverty  rose 
significantly in the course of 2020 (see Annex 
12). Social services are fragmented and do not 
always sufficiently meet the needs, especially 
is 
in 
concentrated  on  pensions (9),  the  poverty  risk 
for older people (65+) is much lower than it is 
for the average population. It is especially high 
for children, people with disabilities and people 
with  a  migrant  background.  Italy  has  among 
the  highest  share  in  the  EU  of  temporary 
workers,  especially  among  younger  workers. 
Access  to  adequate  social  protection  is  a 
challenge  for  some  of  them,  as  for  the  self-
employed.  Thus,  the  risk  of  in-work  poverty 
remains  much  higher  than  in  the  EU  on 
average. 

to 

Italy’s  high  public  debt  remains  a  major 
the 
source  of  vulnerability.  Following 
pandemic  crisis,  the  already  high  public  debt 
increased  even  further.  This  adds  to  pre-
existing  pressure  due 
Italy’s  ageing 
population. In the aftermath of the pandemic, 
Italian  banks'  holdings  of  Italian  sovereign 
bonds  remained  high  and  the  level  of  public 
guarantees  in  banks’  portfolio  significantly 
increased.  As  a  result,  challenges  related  to 
fiscal  sustainability  are  substantial  in  the 
medium  term,  with  a  banking  system  that  is 
now more exposed to the Italian sovereign. At 
the same time, banks continued to reduce the 
stock of legacy non-performing loans.  

tax 

The 
system  hinders  economic 
efficiency. It is prone to several longstanding 
weaknesses,  including  the  high  burden  on 
labour.  There  is  scope  to  shift  the  high  tax 
burden  away  from  labour  to  other  sources  of 
revenue  that  are  less  detrimental  to  growth 
and  which  are  underused.  The  complexity  of 
the system is exacerbated by the high number 
of tax expenditures, while energy taxes are not 
designed  so  to  support the  transition  to  clean 
technologies.  Finally,  despite  past  efforts,  tax 
evasion remains high. 

(8)  Di Pietro, et al., The likely impact of COVID-19 on 

(9)  https://ec.europa.eu/eurostat/statistics-

education: Reflections based on the existing literature 
and recent international datasets, 2020, EC, JRC 

explained/index.php?title=Government_expenditure_on_
social_protection 

5 

 
                                                 
                                                 
in terms of income, the urban/rural divide and 
inclusion of people with a migrant background 
increased. (11)  Further  effort  is  needed  to 
tackle structural challenges related to poverty, 
employment,  education,  gender  equality  and 
productivity (see Annex 1). Significant regional 
differences  persist  in  all  dimensions.  Civil 
society 
(notably  Forum  on  Sustainable 
Development),  ISTAT,  the  national  statistics 
agency,  and  the  Ministry  of  Economy  and 
Finance  play  a  key 
in 
disseminating  data  and  analysis  on  the  SDGs 
and the well-being indicators. 

Italy 

role 

in 

Italy’s 

The  RRP  includes  major  reforms  and 
investments  addressing 
long-
standing  challenges.  The  measures  aim  to 
overcome  structural  barriers  and  to  boost 
investment  and  productivity  growth,  including 
in  the  public  administration,  education  and 
skills,  justice  and  competition.  In  addition, 
these  measures  are  expected  to  reduce 
regional  disparities  and  to  accelerate  the 
green and digital transition. 

Achieving  the  transition  to  a  green 
economy  requires  an  increase  in  public 
and  private  investment,  with  a  view  to 
reducing  regional  disparities.  While  Italy 
key 
performs  well  on  a  number  of 
environmental  sustainability  parameters, 
it 
lags  behind  on  the  energy  efficiency  of 
buildings,  the  quality  of  infrastructure  and 
mass  transport.  Large-scale  projects  in  the 
energy  and  transport  sectors,  including  on 
renewables  and  sustainable 
smart  grids, 
transport, 
country’s 
the 
reduce 
environmental footprint and its dependency on 
energy 
imports.  Wide  regional  disparities 
remain in areas such as the circular economy, 
rail infrastructure, water and public transport. 

can 

the 

to  widening 

The  south  of  Italy  still  lags  behind  in 
terms  of 
institutional 
infrastructure, 
capacity  and  social  outcomes.  Cuts  in 
public  spending  following  the  2008  crisis  had 
contributed 
regional 
divides (10)  with  persistent  severe  economic 
and  social  challenges  magnified  in  the  south. 
There are significant regional disparities in the 
quality  of  and  access  to  services,  including  in 
healthcare.  The  demographic 
trends  of 
emigration and de-population in the south are 
particularly  worrisome.  The  performance  of 
the  public  administration 
is  also  weaker. 
According to Svimez, transport infrastructure is 
in  particular  high-speed 
underdeveloped, 
railways  and  sustainable  and  local  public 
transport.  Undeclared  work  and  the  shadow 
economy affect particularly the South. Despite 
targeted and temporary measures such as the 
cut  in  social  security  contributions  for  new 
hirings,  a  more  structural  and  strategic 
approach  is  needed  in  the  south  to  boost 
territorial cohesion in the country, for example 
by  closing 
infrastructure  gap.  The 
heterogeneity across regions, including in their 
important 
institutional  set-up  remains  an 
aspect (see Annex 3). 

the 

Italy  is  making  progress  on  most  of  the 
UN  Sustainable  Development  Goals 
(SDGs)  but  structural  challenges  remain. 
Over  the  period  2010-2020,  progress  was 
most  visible  on  environmental  sustainability, 
health  and  wellbeing.  By  contrast,  inequalities 

(10)  Country Report for Italy 2020 

(11)  For national analysis see ISTAT, 2021, “Rapporto SDGS 
2021. Informazioni Statistiche Per L'agenda 2030 In 
Italia”, https://www.istat.it/it/archivio/259898. 

6 

 
                                                 
 
                                                 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

The Recovery and Resilience Facility (RRF)  will 
finance EUR 191.5 billion of investment in Italy 
until  2026  (10.7%  GDP).  Italy’s  plan  includes 
190  measures,  with  132  investments  and  58 
reforms.  Italy is, in absolute terms, the largest 
beneficiary  of  the  RRF  and  one  of  four 
Member States to have requested loans.  

investments 

The  recovery  and  resilience  plan  (RRP) 
will  boost  public  investment  to  support 
Italy’s  green  and  digital  transition.  Italy’s 
RRP  envisages  significant 
in 
energy  efficiency  in  residential  and  public 
buildings  (EUR  15.3  billion),  in  sustainable 
(EUR  34  billion)  and  renewable 
mobility 
energy, 
in 
in  the  circular  economy  and 
improving waste and water management (EUR 
11.2 billion). It also sets out plans to invest of 
EUR  13.4  billion  to  digitalise  businesses,  EUR 
6.7  billion  for  5G  and  broadband  and  EUR  6 
the  digitalisation  of  public 
billion 
administration. 

for 

Major  reforms  included  in  the  RRP  are 
underway  and  Italy  has  begun  making 
several  key  investments.  The  RRP  aims  to 
address  the  structural  barriers  that  hold  back 
investment and productivity growth, notably in 
the public administration, education and skills, 
justice and competition. The Italian authorities 
are  also  publishing  calls  for  tenders  to  run 
several  RRP  investment  projects,  launching 
several  calls  for  grants  and  simplifying 
authorisation  procedures  in  a  wide  range  of 
areas.  

The RRP seeks to modernise Italy’s public 
administration.  The  public-sector  workforce 
is  one  of  the  oldest  in  the  EU  (35.1%  of 
workers  are  in  the  55-74  age  range)  (see 
Annex 11). The planned adoption in mid-2022 
of  the  public  employment  reform  will  enable 
an  update  of  job  profiles,  increase  mobility 
hiring 
between 
procedures, step up the commitment to gender 
balance,  streamline  appointment  procedures 

departments, 

reform 

life-long 

learning  and 

of  senior  officials,  and  strengthen  the  link 
reward 
between 
mechanisms.  The  RRP  will  also  boost  the 
digitalisation  of  the  public  administration  by 
developing  a  national  public  cloud-based 
infrastructure.  This  will  be  a  platform  to 
ensure the interoperability of public data, help 
build  up 
capabilities  and 
streamline the procurement of ICT services by 
public authorities.  

cybersecurity 

increase 

e-procurement, 

The  RRP  can  improve the  capacity of  the 
public  administration  and  cut  red  tape. 
Italy  has  recently  recruited  1  000  experts  to 
support  local  administrations  in  rolling  out 
these  investment  projects.  In  addition,  it  is 
reforming  public  procurement,  notably  to 
speed tendering procedures up, which are one 
of  the  longest  in  the  EU  (see  Annex  10), 
further 
and 
professionalise public buyers. These measures 
are also important to enable the roll-out of the 
RRP and Cohesion Funds.  Under the RRP, Italy 
aims to reduce the number of days it takes to 
set up a business under the 2021 Competition 
Law. It also seeks to simplify interactions with 
businesses  and  citizens  (using the “once-only” 
principle  in  Single  Digital  Gateway)  and  to 
reduce  the  time  for  payments  by  the  public 
administration  to  30  days (12)  by  the  end  of 
2023.  

Italy has also initiated an overdue reform 
of its civil justice system. According to the 
EU Justice Scoreboard, the country has among 
the  longest  civil  and  commercial  cases  in  the 
EU (13)  and  a  large  backlog  of  pending  cases. 
Under the RRP, Italy committed to reducing by 

(12)  60 days for health authorities. 

(13)  According to the EU Justice Scoreboard 2022 (CEPEJ 

(2021) Study on the functioning of the judicial system 
in the EU Member States), they last on average 674 
days in first instance, 1026 days in second instance and 
1526 days in third instance. Administrative cases last 
on average 862 days in first instance and 667 days in 
third instance. 

7 

 
 
                                                 
 
40% the disposition time at three instances of 
civil  justice  by  2026.  The  civil  justice  reform 
aims  to 
increase  the  use  of  mediation, 
alternative  dispute  resolution  and  to  review 
the  current  system  of  quantification  and 
recoverability  of  legal  fees.  It  also  aims  to 
improve  filtering  procedures  at  the  appeal 
level,  extending  the  cases  that  only  need  one 
judge  to  adjudicate,  and  to  simplify  existing 
procedures. The Italian justice system is hiring 
additional 
courts 
(remodelling  the  institute  of  the  office  of  the 
trial)  to  substantially  reduce  the  backlog  of 
cases.  The  insolvency  reform  was  partially 
postponed to 2022, while in 2021 a number of 
legislative initiatives introduced a new out-of-
court  settlement  arrangement  together  with 
early  warning  mechanisms  and  a  greater 
degree  of  specialisation  of  courts  and  pre-
court institutions. 

temporary 

staff 

for 

level. 

Index. 

International 

the  appeals 

Several  reforms  support  efforts  to  fight 
fraud  and  corruption.  Italy  still  ranks  42nd 
globally and 17th in the EU in the most recent 
Transparency 
Corruption 
Perception 
Italy  has  committed  to 
reducing by 25% the disposition time at three 
criminal instances by 2026. The 2021 criminal 
justice  reform  aims  to  reduce  the  excessive 
disposition  time,  which  has  a  negative  impact 
on 
the  prosecution  and  adjudication  of 
corruption  cases.  However,  the  effectiveness 
of  the  reform  will  require  close  monitoring, 
particularly  at 
To 
complement  the  reform,  a  robust  national 
anti-corruption  framework  and  its  effective 
enforcement will be crucial. Undergoing efforts 
to  protect  and  safeguard  the  EU’s  financial 
interests  are  particularly  welcome  in  Italy 
given  the  scale  of  the  plan.  Italy’s  RRP 
commits  to  defining  and  updating  ethics 
principles 
the  public  administration, 
strengthening  market  surveillance  authorities, 
the 
registering  all  public 
databases  of  the  National  Anti-Corruption 
Authority  and  building  up a  repository  system 
of all final recipients of funds and the names 
of contractors and sub-contractors. Reforms to 
reduce  illegal  landfills  and  professionalise 
waste  management  would  help 
reduce 
criminal  activities  in  this  area.  The  RRP  also 
proposes  measures  to  fight  tax  evasion  and 
tackle undeclared work (see below).  

contracts 

in 

in 

for 

investments 

tax  credits 

In  addition, 

internationalise 

The  RRP  gives  a  strong  push  to  support 
entrepreneurship  and  digitalise,  diversify 
and 
small-medium 
enterprises  (SMEs).  The  Annual  Competition 
Law  to  be  adopted  in  2022  will  reduce  the 
number  of  days  it  takes  to  open  a  business. 
The  programme  Transizione  4.0  is  set  to 
accelerate  the  digital  transition  of  firms 
in 
through 
technologically  advanced  goods,  research  and 
development  as  well  as  training  for  an 
estimated  cost  of  EUR  13.4  billion  under  the 
Italy  has  committed  to 
RRF. 
supporting  women-owned 
start-ups  and 
research projects of national interest. Italy will 
also  help  small  and  medium  firms  expand 
internationally.  Under  the  RRP,  Italy  will  also 
confer  additional  resources  to  a  fund  to 
support  the  participation  of  Italian  companies 
in  important  projects  of  common  European 
interest 
Italy  has 
launched  calls  for  expression  of  interest  to 
identify national projects to be included in this 
work,  notably  in  micro-electronics  and  cloud, 
that  will  help  better  integrate  Italian  firms  in 
EU  value  chains  and  strengthen  the  country’s 
position in advanced technologies. 

(IPCEIs).  To 

this  end, 

The  RRP  aims  to  remove  barriers  to 
competition  and  private 
investment 
especially  in  green  sectors.  The  2021 
Annual  Competition  Law  (to  be  adopted  in 
2022)  will  remove  barriers  to  competition  for 
public-service  contracts  in  waste  and  local 
public 
transport,  gas  distribution,  electric 
charging,  ports,  hydropower  and  highway 
concessions.  It  will  also  require  public  service 
contracts  to  be  properly  compensated.  These 
measures are expected to attract more private 
reduce  fragmentation,  ensure 
investment, 
proper 
and 
professionalise  the  management  of  public 
services.  In  addition,  the  Law  will  remove 
in  the 
several  barriers  to  new  entrants 
electricity  market, 
regulated 
prices. 

in  particular 

regulatory 

oversight 

Important  investments  and  reforms  in 
rail,  waste  and  water  are  envisaged.  The 
RRP  commits  to  introducing  incentives  to 
regions to tender their public service contracts 
for  regional  rail  services  and  support  other 
investment  in  sustainable  transport,  such  as, 

8 

 
It 

and 

paths 

cycling 

envisages 

charging 
metros, 
infrastructure. 
significant 
investment  to  link  all  southern  regions  to  the 
high-speed  rail  network  and  to  enhance  its 
performance.  Although  Italy  performs  well  on 
circular  economy,  there  are  major  regional 
disparities  and  effective  waste  management 
has been a longstanding challenge (see Annex 
7).  The  RRP  also  includes  investments  in 
sustainable irrigation agro-systems to improve 
the management of water resources. 

is 

to 

the 
removing  barriers 
Italy 
development  of  renewable  energy  and  it 
is  using  the  RRP  to  support  investments 
in energy efficiency. Italy needs to build up 
its capacity to generate renewable energy (see 
Annex 5). In 2021, Italy adopted a new law to 
increase 
the  production  of  bio-methane 
(simplification  of  authorisation  procedures, 
regulation  of  certificates  of  guarantee  of 
origin  and  a  feed-in  tariff).  In  parallel,  it  will 
adopt  a  new  law  with  environmental  tax 
incentives  to  support  the  production  and  use 
hydrogen, 
of 
remove 
hydrogen 
administrative 
barriers 
deployment 
and 
simplification  of  measures  to  install  small 
structures and re-charging stations). Under the 
RRP, EUR 13.95 billion is earmarked for energy 
efficiency and seismic renovation of 32 million 
square  metres  of  housing  under  the  flagship 
measure  “Superbonus”.  The  RRP  also  contains 
measures to renovate public buildings. Finally, 
Italian  authorities  are  awarding  in  2022  all 
tenders for smart grids. 

renewable 

provisions 

(security 

and 

to 

The  RRP  seeks  to  bridge  the  gender 
employment  gap,  notably  by  providing 
support for early childhood education and 
care,  contributing  to 
implement  the 
European  Pillar  of  Social  Rights.  Italy  has 
one  of  the  lowest  rate  of  children  under  the 
age of three in formal childcare and one of the 
highest  gender  employment  gaps  in  the  EU, 
especially in southern regions (see Annex 12). 
labour  market 
To 
participation,  the  RRP  includes  investment  to 
create  women-owned  companies  through  the 
fund  “impresa-donna”  and  a  new  "national 
gender  equality  certification  system"  for 
businesses. The plan also includes investments 
in childcare and long-term care, which will also 

support  women’s 

9 

contribute  to  tackling  the  high  child  poverty 
and  social  exclusion  rate,  in  line  with  the 
European Pillar of Social Rights. 

young 

improve 

To  promote  employment,  up-skilling  and 
re-skilling,  the  RRP  aims  to  improve  the 
effectiveness  of  public  employment 
services, 
people’s 
employability  prospects  and  step-up  the 
fight  against  undeclared  work.  The 
effectiveness  of  public  employment  services 
and adults’ participation in training remain low 
(see  Annex  12).  Investments  are  expected  to 
improve the capacity and infrastructure of the 
Public  Employment  Services  (PES).  In  2021,  a 
labour  market  policies 
reform  of  active 
introduced  a  national  programme  for  the 
guaranteed  employability  of  workers  (GOL) 
and  a  national  plan  for  new  skills,  which 
review  and  integrate  job  search  and  training 
services  and  puts  a  special  focus  on  digital 
skills. To reduce youth unemployment, the RRP 
expands the universal civil service programme 
in 
enabling  young  people 
volunteering  schemes  to  improve  their  skills 
and  employability  prospects.  Despite  recent 
improvements,  undeclared  work 
is  still  a 
significant  challenge,  notably  in  agriculture, 
construction  and  domestic  services.  The  RRP 
includes  a  national  plan  to  tackle  undeclared 
work, 
combining  deterrent  action  and 
incentives to take on formal work.   

to  participate 

remains 

retained 

Educational  outcomes  and  the  fight 
against  early  school  leaving  are  also 
expected  to  benefit  from  the  plan.  Early 
school  leaving  has  gone  down  steadily  over 
the  past  10  years,  but  the  gap  with  the  EU 
average  is  proving  hard  to  close  (see  Annex 
13). The way teachers are recruited, motivated 
is  not  efficient.  Full-time 
and 
schooling 
low  and  educational 
infrastructure  is  not  updated  to  meet  current 
needs, 
including  digital  needs.  The  plan 
includes  comprehensive  reforms  of  primary 
and  secondary  education,  including  the  long 
awaited teaching profession reform due to be 
adopted 
in  mid-2022.  These  will  be 
complemented  by  significant  investments  in 
expanding  vocational-oriented  education  and 
schooling  infrastructure,  to  train  teachers  and 
school  staff,  to  mentor  young  people  who 
have  dropped-out  or  are  at  risk  of  dropping-

 
In 

(STEM). 

out, and to foster skills in science, technology, 
engineering  and  maths 
Italy, 
although  educational  qualifications  generally 
improve job prospects, the employment rate of 
recent  university  graduates  is  among  the 
lowest  in  the  EU.  At  university  level,  the  RRP 
proposes  wide  reforms  of  tertiary  and  higher 
education,  including  PhD  programmes,  the 
grouping  of  university  degrees  and  degrees 
recognition  to  access  the  jobs  market  in 
regulated  professions.  These  reforms  were 
late  2021  and  will  be 
adopted 
in  student 
complemented  by 
housing and career guidance. 

investment 

in 

the 

The 

(including 

investments 

national 
resources 
complementary  plan)  in  the  south  of  the 
country. 
in 
planned 
infrastructure  are key.  Italian  authorities  have 
committed to award contracts to upgrade 680 
km of regional railway lines and to extend 5G 
coverage  to  15 000  km2  of  the  so-called 
“market failure areas” by 2022. The south will 
also  benefit  from  general  projects  to  boost 
administrative  capacity  and  improve  public 
services,  including  reforms  of  administrative 
procedures,  waste  and  water  management, 
and the justice system.  

Last,  the  RRP 
includes  measures  to 
reduce  tax  evasion  and  improve  the 
efficiency  of  public  spending.  Tax  evasion 
remains  very  high  despite  major  measures 
taken in recent years. The RRP includes several 
additional  measures  to  counter  tax  evasion, 
such  as  the  use  of  integrated  databases  and 
pseudonymised  big  data  to  better  target 
audits  and  controls,  and  the  introduction  of 
sanctions for businesses that refuse electronic 
payments. 
reduce 
compliance  costs  and  enhance  the  fulfilment 
of  obligations  via  the  introduction  of  pre-
populated VAT tax returns. On public spending, 
in 2022 Italy will set savings targets for yearly 
spending reviews to be conducted over 2023-
2025.  The  general  State  budget  will  be 
reclassified  to  better  monitor  environmental 
expenditure  and  expenditure  that  promotes 
gender equality.  

In  addition, 

it  will 

State of play in the 
implementation of reforms and 
investments under the RRP 

Italy has fulfilled 51 milestones as part of its 
first  payment  request  covering  investments 
and reforms in all areas: 

Audit  and  control:  As  part  of  its  audit  and 
control  mechanisms  to  protect  the  EU’s 
financial  interest,  Italy  has  put  in  place  a 
repository 
the 
implementation of the RRP.  

to  monitor 

system 

The  RRP  aims  to  strengthen  social 
inclusion and prevent marginalisation. The 
plan  includes  measures  to  strengthen  social 
services  and  their  territorial  coverage,  via 
reforms in the field of services for dependent 
people, expected in 2023, and for people with 
disabilities.  The  new  Framework  Law  on 
Disability,  adopted 
in  December  2021, 
changes  the  disability  assessment  to  take 
more  multidisciplinary  approach  and  aims  to 
strengthen 
promoting 
autonomy and de-institutionalization. In 2022, 
the  first  500  projects  are  expected  to  adapt 
homes to the needs of people with disabilities. 
Italy  also  plans  to  invest  to  support  families 
and  children,  fight  child  poverty,  improve 
access  to  early  childhood  education  and  care, 
and  support  older  people.  The  plan  also 
includes 
in 
the  most 
infrastructure 
to 
vulnerable  urban  areas  and  projects 
upgrade social and temporary housing.  

complementary 

investment 

redevelop 

services, 

social 

to 

Italy  will  also  use  the  RRP  to  boost  the 
resilience  of  its  health  system.  Although 
overall  the  Italian  health  system  performs 
well,  the  pandemic  highlighted  a  number  of 
weaknesses.  The  RRP  aims  to  reorganise  the 
“territorial  healthcare  assistance 
so-called 
network”  and  invest  in  telemedicine,  digital 
equipment,  in  rolling  out  an  interoperable 
electronic  health  record,  and  in  supporting 
biomedical  research  by  the  National  Health 
Service.  

The  RRP  is  expected  to  contribute  to 
improve  territorial  cohesion.  Italy  aims  to 
reach  an  indicative  share  of  40%  of  RRP 

10 

 
Productivity:  Italy  has  put  in  place  the 
programme  Transizione  4.0.  Investments  to 
enhance 
public 
administration  are  ongoing  and  Italy  has 
adopted the reforms of the justice system and 
public procurement framework.  

capacity 

the 

the 

of 

Green  transition: 
Italy  has  fulfilled  the 
milestone  on  the  entry  into  force  of  the 
Superbonus scheme. It has also introduced the 
legal  framework  for  sustainable  bio-methane 
and for investing in waste recycling plants.  

Digital  transition:  Two  key  reforms  for  the 
digitalisation  of  the public  administration,  ‘ICT 
Procurement’  and 
‘Cloud  First  and 
the 
Interoperability’  reforms  were  adopted.  Italy 
also  completed  two  key  milestones  that 
underpin  the  digitalisation  of  businesses, 
making  the  Transizione  4.0  funding  available 
for  the  digitalisation  of  SMEs  and  refinancing 
the 
the 
internationalisation  and  digitalisation  of  over 
4 000 SMEs.  

support 

SIMEST 

fund 

to 

Fairness:  Italy  completed  major  milestones 
regarding the framework law on disability, the 
labour  market  policies 
reform  of  active 
(including  a  focus  on  vulnerable  groups)  and 
the reform of university degrees. 

Macro-economic  stability:  Italy  completed 
the  first  milestones  related  to  insolvency 
framework, the reform of the spending review 
framework and  measures to fight tax evasion. 

11 

 
 
Box 1: 

Key deliverables expected under the RRP in 2022/2023 

- Justice reform: recruitment of temporary staff for civil, criminal and administrative 
courts  to  substantially  reduce  the  backlog  of  cases  in  2024-2026  and  the  length  of 
proceedings,  entry  into  force  of  implementing  legislation  for  the  civil  and  criminal 
justice reform. 

-  Public  administration  reform:  reform  of  public  employment,  rolling  out  cloud 
services for the local public administration. 

- Business environment: adoption of the Annual  Competition  Laws 2021 and 2022, 
completion  of  the  public  procurement  reform,  progress  on  the  Transizione  4.0  plan, 
reduction of late payments by the public sector. 

-    Green  transition:  adoption  of  the  national  strategy  for  circular  economy,  national 
waste  management  programme,  the  new  framework  for  the  integration  of  water 
services,  hydrogen,  tenders  for  key  railway  infrastructure  investments,  including  high-
speed rail services to the South, and simplification of administrative procedures 

- Digital transition: Cybersecurity,  National Digital Data Platform, School 4.0, launch 
of  tenders  for  smart  grids,  fast  internet  connections  (5G  and  ultra-broadband), 
important projects of common European interest (IPCEI), national ‘R&D leaders’ on key 
enabling  technologies,  and  tenders  for  European  Rail  Traffic  Management  System 
(ERTMS). 

-  Government  finances  and  taxation:  better  targeting  of  tax  audits  and  controls, 
launch of pre-filled VAT tax returns, enhanced spending reviews. 

- Jobs market, skills and social policies: adoption of regional plans to reform active 
labour  market  policies  and  training;  investment  to  strengthen  public  employment 
services  (PES),  the  universal  civil  service  programme  and  to  support  women-owned 
companies; adoption of measures to fight undeclared work; reform of services for non-
self-sufficient  elderly  people;  investment  in  projects  to  give  people  with  disabilities 
more autonomy. 

- Education: adoption of the reform of the teaching profession, investment in student 
housing, increase in university scholarships; 

- Health: reform of the organisation of healthcare to strengthen territorial healthcare 
assistance network. 

12 

 
 
 
 
FURTHER PRIORITIES AHEAD 
FURTHER PRIORITIES AHEAD 

to 

and 

fairness 

taxation, 

However, 

inclusion. 

expenditure, 

Beyond  the  challenges  addressed  by  the 
recovery and resilience plan (RRP), as outlined 
above,  Italy  faces  additional  challenges  not 
sufficiently  covered  in the  plan.  These  include 
pension 
adverse 
demographic  trends  and  energy  challenges. 
Addressing  these  challenges  will  also  help  to 
make  further  progress  in  achieving  the  SDG 
related 
productivity. 
Comprehensive  policy  options  could  help 
achieve  progress  on  both  sets  of  goals.  Over 
time,  the  measures  included  in  the  RRP  are 
expected  to  help  improve  productivity  and 
increasing 
social 
inequalities  remain  a  key  challenge  that  can 
also undermine growth  potential. At the same 
time,  Italy  has  limited  room  for  manoeuvre 
due  to  the  high  level  of  public  debt  and 
regional  disparities.  Policies  that  aimed  to 
increase 
can  be  mutually 
reinforcing  with  policies  to  tackle  inequality. 
Adjusting the tax policies and the composition 
inclusive 
of  public  spending  can  support 
growth.  For  example, 
in  skills, 
investing 
reducing  regional  disparities  or  reducing  the 
tax  burden  on  labour,  in  particular  for  people 
on  lower  wages,  could  benefit  low-income 
earners,  thereby  partly  addressing  current 
inequalities,  and  contribute  to  reaching  the 
2030  EU  headline  targets  on  employment, 
skills  and  poverty  reduction.  Policies  to  tackle 
demographic  challenges 
inclusive 
manner  could  help  mitigate  the  negative 
medium- 
on 
government 
finances  and  boost  growth 
potential, while promoting greater participation 
in the jobs market. 

longer-term 

productivity 

effects 

in  an 

and 

is 

to 

subject 

The  sustainability  of  Italian  government 
finances 
substantial 
challenges  in  the  medium  and  long  term 
(see  Annex  20).  Government 
finances 
deteriorated  sharply  in  2020,  due  both  to the 
necessary  policies  taken  in  response  to  the 
pandemic and to the drop in economic activity. 
Nevertheless,  the  government  deficit  and 

to 

costs 

fiscal 

Italy’s 

related 

debt-to-GDP ratios have already started to fall 
in 2021 and are expected to continue declining 
as  the  economy  recovers.  As  a  result,  fiscal 
sustainability  challenges  are  deemed  to  be 
limited  in  the  short  term.  However,  given  the 
level  of  government  debt  and  the 
high 
its  ageing 
projected 
population, 
sustainability 
challenges are substantial in the medium term 
and  significant  in  the  long  term.  Additional 
risks  may 
current 
accommodative  monetary  policy  stance  were 
to  be  reversed.  A  prudent  and  effective 
management of government finances, both on 
the  expenditure  and  on  the  revenue  side,  as 
well  as  an  effective  implementation  of  the 
investments  and  reforms  included  in  the  RRP 
to  foster  growth,  remains  crucial  to  better 
allocate  public  resources  and  achieve  a 
sustainable fiscal adjustment.  

emerge 

the 

if 

to 

unfavourable 

growth-enhancing 
the  ambitious  pension 

Spending  on  pension  is  set  to  increase 
due 
demographic 
developments.  Italy’s  pension  expenditure  is 
among  the  highest  in  the  EU  as  a  share  of 
GDP,  which  limits  the  resources  available  for 
expenditures. 
more 
Although 
reform 
in  2011  contributes  to  reducing 
adopted 
projected  pension  expenditure  over  the  long-
term,  the  latter  is  still  expected  to  increase 
substantially 
in  the  medium-term  due  to 
demographic  developments.  Recent  policy 
measures 
pension 
expenditure  over  the  short  to  medium  term. 
Those  include  the  early  retirement  scheme 
(“Quota 100”) for 2019-2021, its prolongation 
with  stricter  access  criteria  (“Quota  102”)  in 
2022  and  other  temporary  early  retirement 
schemes  for  women  and  vulnerable  workers, 
which  have  been  extended  every  year  since 
2015. Last, Italy has suspended until 2026 the 
indexation  of  the  relevant  parameters  to  life 
expectancy  for  the  structural  early  retirement 
age. 

increased 

further 

13 

 
 
 
unit of energy than other energy carriers such 
as  natural  gas  and  heating  oil.  Among  fossil 
fuels,  diesel  is  still  taxed  more  lightly  than 
petrol.  There  is  also  scope  to  extend  resource 
for  example  by 
and  pollution 
increasing  landfill  taxation.  However,  Italy  is 
quite  advanced  regarding  green  budgeting, 
natural  capital  accounting  and  in  providing 
harmful 
catalogues 
subsidies. 

environmentally 

taxation 

of 

Italy has further increased the number of 
tax  expenditures  which  adds  to  the 
complexity  and  inefficiency  of  the  tax 
system.  Despite  the  annual  review  of  tax 
expenditures,  no  action  has  been  taken  to 
streamline  them.  Tax  expenditures  have  been 
an  important  way  to  provide  relief  during  the 
pandemic,  with  69  new  measures  taken. 
Despite  the  economic  recovery,  they  are 
expected to decrease only marginally in 2023, 
based on current provisions. 

If properly implemented, the enabling law 
currently  under  discussion  could  help 
addressing 
longstanding 
several 
weaknesses  of  Italy’s  tax  system.  The 
draft  enabling  law,  tabled  by  the  government 
in  October  2021  and  still  under  discussion  in 
the  national  Parliament,  outlines  the  key 
principles  for  a  general  reform  of  the  tax 
system.  In  its  current  version,  it  provides  for 
several  structural  changes,  such  as:  a  review 
of personal and corporate taxes, including the 
gradual  elimination  of  the  tax  on  productive 
reform  of  cadastral  values 
activities;  a 
together  with  a  mechanism  for 
regular 
adjustments,  which  however,  according  to  the 
draft law, will not be used for determining the 
tax base; a rationalisation of VAT rates and tax 
bases;  and  a  revision  of  environmental  taxes 
in  line  with  the  principles  of  the  European 
Green  Deal.  It  also mandates  the  government 
to  simplify  the  tax  system  and  to  harmonise 
tax legislation in a single legal code. Following 
the  adoption  of  the  draft  law  by  Parliament, 
implementing decrees will need to be adopted 
within 18 months.  

Italy’s tax system could be better 
geared to growth 

Despite recent reforms, the tax burden on 
labour  remains  very  high.  At  the  end  of 
2021,  Italy  introduced  a  universal  family 
reduced  personal 
allowance  and  slightly 
income  taxes  by  reviewing  the  tax  brackets 
and  rates  (see  Annex  18).  Simulations  show 
that, 
increase 
disposable  income  for  all  households  and 
contribute  to  slightly  reduce  inequality  and 
poverty. Labour supply is expected to increase 
moderately,  especially  for  women  (see  Annex 
18).  However,  even  after  the  reforms,  the  tax 
wedge  on  labour  remains  high  compared  to 
other EU Member States. 

reforms 

overall, 

these 

from 

taxes 

value-added 

Other  sources  of  revenue  that  are  less 
detrimental  to  growth  are  underused. 
Revenue 
is 
comparatively  low  in  Italy,  also  due  to  the 
extended use of reduced rates. First residences 
are  exempted  from  recurrent  property  taxes 
for almost all properties, against the backdrop 
of  a  high  house  ownership  rate,  and  the 
corresponding  tax  base  is  outdated  (see  also 
below).  Relevant  data  on  real  estate  was 
collected  in  a  single  digital  platform  but  no 
updates  of  cadastral  values  have  been  made 
yet.  In  addition,  the  use  of  public  concessions 
for  public  goods,  such  as  beaches,  has  been 
suboptimal.  This  implies  a  significant  loss  of 
revenue  as  these  concessions  have  been 
automatically renewed for long periods and at 
rates  far  below  market  values.  In  February 
2022, 
introduced  major 
amendments  to  the  draft  annual  competition 
law  providing  for  open  competitions  in  beach 
concessions from 2024.   

the  government 

Revenues  from  environmental  taxes  in 
Italy  are  above  the  EU  average,  but  the 
design  of  energy  taxes  in  Italy  does  not 
promote sufficiently the green transition. 
Revenue  from  environmental  taxes  in  Italy  is 
above the EU average, largely driven by taxes 
on  energy.  However,  the  current  structure  of 
energy  taxes  does  not  encourage  sufficiently 
the  transition  to  cleaner  technologies.  For 
instance,  electricity  is  more  heavily  taxed  per 

14 

 
Additional policies to address the demographic challenge 

Policies to mitigate the negative demographic trends are needed also to address Italy’s 
macroeconomic  imbalances  and  to  boost  growth.  Migration  policies  can  already  help 
address the unfavourable demographic trends in the short term. These include the swift 
transposition  and  implementation  of  the  EU  Directive  on  the  Blue  Card,  taking  into 
account the competences and skills needed by businesses. Past measures to re-attract 
workers, such as “rientro dei cervelli” (14) and its extension “agevolazione impatriati” (15), 
could  be  extended  to  non-  Italian  citizens  and  better  targeted.  For  instance, 
“agevolazione impatriati” could target workers based on their skills, rather than simply 
providing  fiscal  benefits  for  workers  who  move  their  fiscal  residence  to  Italy. 
Complementary policies could further help attract and retain high-skilled workers. These 
could  include  easier  recognition  of  skills  for  non-EU  country  nationals  (for  which  Italy 
asked  for  support  under  the  Technical  Support  Instrument  and  under  the  EU  Skills 
Profile Tool), appropriate job market conditions, quality education and social services. To 
this end, the reform of  the career path of researchers would  also be important. Other 
policies  can  also  contribute  to  mitigating  the  negative  demographic  trends,  such  as 
ensuring equal access to quality and affordable childcare services, expanding long-term 
care, work-life balance policies and reducing the tax wedge on second earners. It would 
also be important to promote flexible working arrangements and easier entrance in the 
jobs  market.  The  new  family  allowance  may  have  a  positive  longer-term  effect,  but 
further  monitoring  is  required.  Italy  could  take  other  legislative  or  social  measures  to 
remove obstacles and make parenthood easier (such as in the areas of healthcare and 
adoption policies), including as to effectively benefit a larger number of individuals. This 
could have an impact on demographic developments over the medium term.  

Box 2 
econom
ic 
downtu
rn 
followi
ng the 
COVID-
19 
pande
mic furt
her 
worsen
ed the 
Italian 
demogr
aphic 
trends. 
In 2020 
Italy 
reached 
its all-
time 
lowest 
birth 
rate. On 
the one 
hand, 
Demographic challenges keep 
the 
worsening 
crisis ha
d a 
negativ
Italy  has  one  of  the  EU’s  lowest  birth 
e 
rates,  recording  a  negative  natural 
impact 
demographic  balance  for 
tenth 
on both 
consecutive  year.  The  Italian  demographic 
the 
balance  and  composition  is  beset  by  the 
birth 
following  challenges:  i)  low  birth  rate;  ii)  an 
rate 
increasing  ageing  population,  iii)  migration 
and 
trends,  including  the  brain  drain  (low  skill 
the infl
immigration and high skill emigration), and iv) 
ow-
regional  disparities  (see  Annexes  12,  13  and 
outflow
15).  The  low  birth  rate  is  due  to  several 
 ratio of 
factors, 
lack  of  access  to 
workers 
services,  late  entry  onto  the  jobs  market, 
(exacer
unfavourable working and social conditions for 
bating t
insufficient  work-life 
young  people,  and 
he brai
balance policies, in particular for mothers (e.g. 
n-drain 
flexible  working  arrangements,  leave  policies, 
toward 
child-  and 
recent 
foreign 
introduction  of  a  universal  child  allowance 
econom
might  support 
increasing  natality.  With 
ies and 
younger  generations  getting  progressively 
reducin
smaller 
life  expectancy 
g the 
inflow 
(14)  “Decreto Crescita”. 
of high-
(15)  Support for returning expats - Decree No. 124/2019. 
skilled 
workers
). On 
the 
other, 
the 
pande

long-term  care).  The 

in  number  and 

including  the 

the 

increasing  in  the  last  decades,  the  old-age 
dependency ratio (meaning the ratio of elderly 
people compared to people of working age) is 
high and increasing.   

High-skilled people are emigrating abroad 
and from the South to the North, but this 
is  not  offset  by 
immigration  flows. 
According  to  Istat,  in  2019,  one  in  four 
emigrated  Italians  had  at  least  a  degree.  The 
share of emigrants with at least a degree has 
increased  by  23%  over  the  past  five  years. 
Around  13%  of  Italian  PhD  students  (many 
with a STEM background) find jobs abroad due 
to  the  lack  of  jobs  opportunities  and  low 
salaries  in  Italy.  The  average  skills  level  of 
migrants  attracted  by  current  immigration 
policies  is  lower  than  that  of  the  native-born 
(among  non-EU  born  54.7%  are  low  skilled 
and  13.4%  are  high  skilled  (2020)).  The 
immigrant population also face a much higher 
risk  of  poverty  and  social  exclusion  than  the 
native-born  population  (38.6%  vs  24%),  even 
though  their  employment  rate 
is  slightly 
higher.  Italy’s  demographic  trends  are  also 
affected by domestic migration, which leads to 
a  further  brain  drain  from  Southern  regions 
with higher unemployment. In 2018, over 1.35 
million inhabitants relocated within Italy, which 
contributed to the overall loss of population in 
the  south  (see  Annex  15).  This  domestic 

15 

 
                                                 
 
migration is creating a substantial brain drain 
effect  and  is  driven  strongly  by  regional 
differences  in  the  jobs  market  performance 
and  the  availability  and  quality  of  education 
and  social  services.  These  trends  could  hinder 
the  short  and  long-term  economic  outlook, 
including  by  placing  a  higher  burden  on 
government  finances  and  adverse  effects  on 
skill levels, labour supply and productivity. 

immigration). 

The  economic  downturn  following  the 
COVID-19  pandemic  exacerbated  Italy’s 
demographic  trends.  In  2021,  Italy  reached 
its all-time lowest birth rate. On the one hand, 
the  crisis  had  a  negative  impact  on  the  birth 
rate  and  the  inflow-outflow  ratio  of  workers 
(exacerbating  the  brain  drain  and  reducing 
high-skilled 
Region-specific 
effects  of  the  pandemic  on  the  jobs  market, 
education,  health  and  social  systems  magnify 
regional  demographic  differences.  On  the 
new 
other, 
the 
opportunities, 
flexible 
working  arrangements.  It  brought  the  chance 
to  try  out  ways  to  mitigate  domestic  and 
international  migration  and  the  brain  drain, 
and  to  re-think  working  arrangements  to 
better  combine  family  and  working  life.  For 
instance, 
“South  working” 
phenomenon could  be  seen  as  a  new 
opportunity  to  (re)-attract  young  and  highly  
skilled people to southern regions. 

for  example  more 

pandemic 

brought 

new 

the 

Energy challenges resulting from 
Russia’s invasion of Ukraine  

Italy is highly dependent from imports of 
gas,  with  Russia  supplying  about  half  of 
all  imports.  Gas  imports  provide  93%  of 
Italy's  needs  and  have  been  growing  since 
2014  to  meet  the  higher  demand  from  the 
power  sector. (16)  Russia  is  Italy's  largest  gas 
supplier,  with  43%  of  all  imports  in  2020 
(indicatively 29 billion cubic metres of natural 

(16)  From 56 bcm to 71 bcm in 2019 (+5%/year). In 2020, 
gas imports contracted by nearly 7% to 65 bcm, in a 
context of economic downturn. LNG imports have tripled 
since 2014, despite a 4.4% drop in 2020, and supplied 
20% of total gas imports in 2020 (compared to 8% in 
2014).   

16 

gas), followed by Algeria (22.8%). The share of 
gas  in  the  energy  mix  in  Italy  (42%)  is 
significantly  higher  than  the  EU  average 
(24.4%).  Though  oil  accounts  for  around  one 
third  of  the  total  energy  mix,  Italy  is  less 
dependent on Russia for oil  than it is for gas. 
About  11%  of  oil  imports  come  from  Russia; 
the  main  suppliers  are  Azerbaijan,  Iraq  and 
Saudi Arabia. Coal  accounts for a much lower 
share  in  the  energy  mix  than  other  sources 
(below 4%).  

Italy  does  not  face  significant  problems 
in  the  supply  of  natural  gas  in  the  short 
term.  Italy  has  large  underground  storage, 
notably due to the strategic stocks and public 
service obligations. The current storage level in 
Italy is 38% (7.7 bcm of natural gas), which is 
significantly  higher  than  the  EU  average.  In 
addition,  Italian  liquefied  natural  gas  (LNG) 
facilities, with a capacity of 46.8 mcm/day, are 
currently  used  at  71%  of  their  capacity.  Italy 
also  has  significant  gas  pipeline  connections 
with  Algeria,  Libya  and  Azerbaijan.  Despite 
facing no short-term concerns with security of 
supply to cover its own needs, Italy remains an 
important country in ensuring a secure supply 
for  other  EU  Member  States  due  to  its 
significant  storage,  LNG  facilities  and  access 
to  a  range  of  natural  gas  suppliers.  Tapping 
the full potential of Italy’s role in this depends 
to 
on 
neighbouring  countries  and  possibly  also  new 
interconnections  within  the  country  and  with 
neighbouring  countries.  Future 
investments 
should  be  future-proof,  where  possible  to 
avoid  lock-in  effects  in  the  path  to  climate 
neutrality.  

flow  upstream  capacity 

reverse 

The  diversification  of  the  Italian  energy 
mix  needs  to  accelerate.  Over  75%  of 
energy  consumption  in  Italy  is  generated  by 
gas  and  oil.  Renewable  energies  and  biofuels 
provide around 20% of total needs. The share 
of  solids  fuel  is  already  limited  (below  5%) 
and  is  expected  to  fall  further  in  line  with 
decarbonisation  targets,  to  reach  1.3%  by 
2030.  In  line  with its  National  Energy  Climate 
Plan,  Italy  needs  to  make  significant  progress 
on both axes of diversifying its energy supplies 
and accelerating the roll-out renewable energy 
in  particular  in  heating  and  renewables.  Italy 
intends  to  increase  its  solar  and  wind  energy 

 
 
                                                 
on  top  of  its  hydropower  electricity.  By  2030, 
Italy intends to reach 22% of renewable share 
in heating through the roll out  of heat pumps 
and  34%  of  renewable  share  in  transport 
through renewable electricity in cars and trains 
and  through  sustainable  bio-methane  (see 
also the Italian National Energy Climate Plan). 
In  addition,  the  national  electricity  grid  will 
need to be upgraded and adapted to the sites 
where  the  new  renewable  energy  capacities 
will  be  installed.  Italy  needs  to  continue  the 
development  of  electricity  interconnections, 
which  because  of  geographical  constraints, 
remain below the target of 15% in 2030. Italy 
is  currently  planning  or  building  further 
interconnections  with  several  neighbouring 
countries and assessing additional ones.  Italy 
has  room  to  continue  taking  measures  to 
facilitate 
renewable 
the  authorisation  of 
energy  projects  (beyond  all  those  that  it  has 
already taken in the context of the RRP). 

Italy needs to progress in tackling energy 
poverty  and  reducing  the 
impact  on 
business  given  the  current  high  energy 
prices.  Since  2005, 
the  proportion  of 
households  in  energy  poverty  has  remained 
steady at approximately 8% of all households 
in  2020  (around  2.1  million)  (see  Annex  6). 
Italy  already  took  measures  to  reduce  in  the 
short term the energy bill for households and 
firms,  including  through  taxation,  as  well  as 
other  more  structural  measures  such  as 
simplified  procedures  for  installations  related 
to renewable energy. Further energy efficiency 
investments  and  buildings  renovation  need  to 
be  prioritised  both  for  households  and  for 
business to reduce energy costs and ease the 
macroeconomic  and  social  impact  of  high 
energy prices.  

to 

improving 

There  is  scope  to  accelerate  progress  on 
the  2030  targets  on  energy  efficiency 
and  sustainable  transport.  Italy’s  ambition 
to  improve  the  energy  performance  of  its 
building  stock  should  be  calibrated  to  extend 
beyond  the  time  frame  of  the  Superbonus 
scheme and funding under the RRF. This would 
also  provide  certainty  to  the  market  to  bring 
forward  energy  efficiency  solutions  and 
building  renovations.  Possible  new  funding 
schemes for energy renovation in buildings will 
need to be properly targeted to deeper energy 
renovations, 
the  worst-
performing  buildings  and  to  helping  low-
income  households.  There  is  also  room  to 
include stronger energy efficiency measures in 
businesses, 
industry.  More 
ambition  in  terms  of  roll  out  of  charging 
infrastructure is needed to reach the expected 
number  of  charging  points  and  power  output 
to  meet  the  need  of  the  electric  fleet  that  is 
projected to be on the road by 2025. Finalising 
some major cross-border rail projects such as 
the  Lyon-Turin  route  would  also  be  an 
important  step  towards  sustainable  mobility, 
as  well  as  continuing  major  investments  in 
public  transport  networks around  major  cities. 
Finally, 
the 
room 
proportion  of  revenues  from  ETS  devoted  to 
support the climate and energy transition.  

in  particular 

increase 

there 

to 

is 

17 

 
 
KEY FINDINGS 
KEY FINDINGS 

Italy’s  recovery  and  resilience  plan 
includes measures to address a series of 
its structural challenges through: 

  Reforms  and  investments  to  boost  the 
effectiveness,  efficiency  and  resilience  of 
the  public  sector.  They  include  the  justice 
the  public  administration, 
system  and 
particularly 
administrative 
regarding 
the  public  procurement 
capacity  and 
framework.  

  Reforms  of  the  tax  system,  with  a  focus 
on  reducing  the  tax  wedge  on  labour,  to 
make  the  system  more  supportive  of 
growth. 

  Reinforcing the sustainability of the pension 
system  by  avoiding  temporary  measures 
that ease early retirement and accelerating 
the  phasing  in  of  the  Notional  Defined 
Contribution regime. 

in  particular 

  Reforms  and  investments  to  promote  the 
green transition, with measures to promote 
energy  efficiency 
the 
building  sector,  to  foster  the  development 
of  renewable  energy,  support  the  shift  to 
cleaner 
the 
management  of  biodiversity  and  natural 
resources, including water and waste.  

transport,  and 

improve 

in 

  Support  for  the  digital  transition  of  Italy’s 
economy and society. This includes support 
to digitalise manufacturing, to upgrade the 
digital  skills  of  the  population  and  to 
improve the country’s digital infrastructure. 

  Measures  to  improve  active  labour  market 
policies,  fight  undeclared  work  and  tackle 
social challenges. They include investments 
in  social  housing  and  improvements  in  the 
resilience of the healthcare system. 

  Improvements  and  modernisation  of  the 
education system, from childcare to tertiary 
education and training, as well as systemic 
measures to boost research and innovation.  

  Reforms  and 
reduce 
infrastructural 
economic, 
territorial  disparities,  including  investing  in 
railways in regions that lag behind.  

investments 
and 

social 

to 

to 

In  addition 
investments 
benefit from the following: 

reforms  and 
in  the  RRP,  Italy  would 

the 

  Measures 

at 

aimed 

mitigating  
demographic challenges including to attract 
and retain high skilled workers as well as a 
comprehensive strategy to support families 
and young people.  

  Measures 

imports, 
to  diversify  energy 
tackling  energy  poverty,  and  additional 
investments and measures to speed up the 
roll  out  of  renewable  energies,  improve 
energy  efficiency  and  promote  sustainable 
transport.  

18 

 
 
 
 
ANNEXES 

 
 
 
LIST OF ANNEXES 

Cross-cutting progress indicators 

Annex 1: Sustainable Development Goals 

Annex 2: Recovery and Resilience Plan - implementation 

Annex 3: Other EU instruments for recovery and growth 

Annex 4: Progress in the implementation of country specific recommendations 

Environmental sustainability 

Annex 5: Green Deal 

Annex 6: Employment and social impact of the green transition 

Productivity 

Annex 7: Resource efficiency and productivity 

Annex 8: Digital transition 

Annex 9: Innovation 

Annex 10: Industry and single market 

Annex 11: Public administration 

Fairness 

Annex 12: Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

Annex 13: Education and skills 

Annex 14: Health and health systems 

Annex 15: Economic and social performance at regional level 

Macroeconomic Stability 

Annex 16: Key financial sector developments 

Annex 17: Macroeconomic Imbalance Procedure assessment matrix 

Annex 18: Taxation 

Annex 19: Key economic and financial indicators 

Annex 20: Debt sustainability analysis 

LIST OF TABLES 

Table A2.1: 
Table A4.1: 
Table A5.1: 
Table A7.1: 
Table A8.1: 

Key elements of the Italian RRP 
Summary table on 2019, 2020 and 2021 CSRs 
Indicators underpinning the progress on EU Green Deal from macroeconomic perspective 
Selected resource efficiency indicators 
Key Digital Economy and Society Index Indicators 

21 

23 

23 

25 

27 

29 

32 

32 

36 

38 

38 

40 

42 

44 

47 

49 

49 

51 

53 

55 

58 

58 

60 

62 

65 

66 

25 
30 
35 
39 
41 

 
 
 
Table A9.1: 
Table A10.1: 
Table A11.1: 
Table A12.1: 
Table A13.1: 
Table A14.1: 
Table A15.1: 
Table A16.1: 
Table A17.1: 
Table A18.1: 
Table A19.1: 
Table A20.1: 
Table A20.2: 

Key research, development and innovation indicators 
Key Single Market and Industry Indicators 
Public administration indicators 
Social Scoreboard for Italy 
EU-level targets and other contextual indicators under the European Education Area strategic framework 
Key health indicators 
Italy, selected indicators at regional level 
Financial soundness indicators 
Assessment of Macroeconomic Imbalances matrix 
Taxation indicators 
Key economic and financial indicators 
Debt sustainability analysis for Italy 
Heat map of fiscal sustainability risks for Italy 

LIST OF GRAPHS 

Graph 1.1: 

Progress towards SDGs in Italy in the last five years  

Graph A2.1: 

Share of RRF funds contributing to each policy pillar 

Graph A2.2: 

Total grants disbursed under the RRF 

Graph A2.3: 

Total loans disbursed under the RRF 

Graph A2.4: 

Fulfilment status of milestones and targets 

Graph A3.1: 

ESIF 2014-2020 Total budget by fund (EUR billion, %) 

Graph A3.2: 

Cohesion policy contribution to the SDGs (EUR billion) 

Graph A4.1: 

Italy's progress on the 2019-2020 CSRs (2022 European Semester cycle) 

Graph A5.1: 

Fiscal aspects of the green transition: taxation and government expenditure on environmental protection 

Graph A5.2: 

Energy: share in energy mix (solid, oil, gas, nuclear, renewables) 

Graph A5.3: 

Biodiversity: terrestrial protected areas and organic farming 

Graph A5.4: 

Mobility: share of zero emission vehicles (% of new registrations) 

Graph A6.1: 

Fair green transition challenges 

Graph A6.2: 

Energy poverty by income decile 

Graph A7.1: 

Economic importance and expansion of the circular economy 

Graph A11.1: 

E-government benchmark scores (lhs) and e-government users (rhs) 

Graph A11.2: 

Performance on the single market public procurement indicator 

Graph A13.1: 

Early leavers from education and training, 2015-2020 (%) 

Graph A14.1: 

Life expectancy at birth, years 

Graph A14.2: 

Projected increase in public spending on health care over 2019-2070 (reference scenario) 

Graph A15.1: 

Labour productivity, EU-27, Italy NUTS 2 regions, 2000-2019 

Graph A15.2: 

Areas most affected by the climate transition in Italy 

Graph A18.1: 

Tax wedge indicators 

43 
45 
48 
49 
52 
54 
57 
58 
61 
64 
65 
66 
67 

23 

25 

26 

26 

26 

27 

28 

29 

32 

32 

33 

34 

36 

37 

38 

47 

47 

51 

53 

53 

55 

56 

63 

22 

 
 
 
 
CROSS-CUTTING PROGRESS INDICATORS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS 

of 

four 

dimensions 

This  Annex  assesses  Italy’s  progress  on  the 
Sustainable Development Goals (SDGs) along 
the 
competitive 
sustainability.  The  17  SDGs  and  their  related 
indicators  provide  a  policy  framework  under  the 
UN’s  2030  Agenda  for  Sustainable  Development. 
The  aim  is  to  end  all  forms  of  poverty,  fight 
inequalities  and  tackle  climate  change,  while 
ensuring that no one is left behind. The EU and its 
Member  States  are  committed  to  this  historic 
global  framework  agreement  and  to  playing  an 
active  role  in  maximising  progress  on  the  SDGs. 
The graph below is based on the EU SDG indicator 
set  developed  to  monitor  progress  on  SDGs  in  an 
EU context. 

Italy  is  improving  on  all  SDG  indicators 
related  to  environmental  sustainability  and 
performs  well  on  most  of  them    (SDG  2,  7, 
11,  12,  13),  though  it  underperforms  on  a 
few  others  (SDG  9  and  15).  Italy  has  a 
moderate  level  of  primary  energy  consumption 
(2.2 compared to 2.8 in the EU in terms of tonnes 
of  oil  equivalent  per  head  in  2020)  and  it 

increased  the  share  of  renewable  energy  in  total 
energy consumption (from 17.5 in 2015 to 20.4 in 
2020)  (SDG  7).  Although  the  recycling  rate  at 
municipal  level  has  increased  above  the  EU 
average,  the  share  of  population  connected  to 
secondary wastewater treatment lags behind (SDG 
11)  and  soil  erosion  levels  are  above  EU  average 
(SDG  2  and  15).  Moreover,  any  average 
performance  in  each  dimension  masks  severe 
regional  differences  across  the  country.  The  RRP 
includes important measures that are expected to 
support  Italy  in  further  speeding  up  the  green 
transition,  such  as  in  the  field  of  renewable 
energy, 
resource 
circular  economy,  natural 
management,  hydrogeological  risks,  and  energy 
efficiency of private and public buildings.  

Italy  made  limited  progress  on  most  SDG 
indicators related to fairness (SDG 1, 2, 4, 5, 
8),  needs  to  catch  up  on  one  indicator  (SGD 
10)  and  performs  well  on  another  (SDG  3). 
Italy  has  seen  inequalities  (SDG  10)  increase  due 
to  worsened  equality  of  opportunities  for  non-EU 
citizens. In particular, the gap in early leavers from 
education  and  training  between  EU  and  non-EU 
citizens increased between 2016 and 2021 and is 
now  much  higher  than  the  gap  in  the  rest  of  the 

Graph 1.1: Progress towards SDGs in Italy in the last five years 

For detailed datasets on the various SDGs see the annual ESTAT report ‘Sustainable development in the European Union’, 
https://ec.europa.eu/eurostat/web/products-statistical-books/-/KS-03-21-096; Extensive country specific data on the short-term 
progress of Member States can be found here: Key findings - Sustainable development indicators - Eurostat (europa.eu). 
Source: Eurostat, latest update of 28 April 2022. Data mainly refer to 2015-2020 and 2016-2021 

23 

 
 
 
 
 
 
population)  (SDG  16).  Despite  progress,  Italy  still 
underperforms  in  terms  of  economic  growth  and 
investment levels (SDG 8) while it remained stable 
on  global  partnership  and  financial  governance 
indicators  (SDG  17).  Several  structural  cross-
sectoral reforms included in the RRP are expected 
to  make  significant  contribution 
Italy’s 
performance  on  macroeconomic  stability.  To  this 
end,  the  reform  of  the  public  administration,  the 
justice  system,  and  the  measures  to  fight  tax 
evasion, undeclared work and employment policies 
reforms are particularly relevant. 

to 

in  education  and 

employment  and 
rates, 

EU (24.9 against 17.6 for the EU average in 2021). 
The share of people in poverty and deprivation has 
substantially  declined  but  the  share  of  people  at 
risk of poverty and social exclusion remains higher 
than the EU average (24.9% in 2020 against 21.6 
Italy  recently 
in  the  EU)  (SGD  1).  Although 
improved 
long-term 
the 
unemployment 
it  still  underperforms 
compared  with  the  EU  average.  Italy  still  has  the 
highest share of young people not in employment 
nor 
training.  The  gender 
employment gap reduced slightly to 19.2 pps, but 
it’s  still  among  the  highest  in  the  EU  (SDG  5  and 
8).  .  Despite progress,  Italy  also  underperforms in 
terms  of  tertiary  educational  attainment, 
in 
preventing  early 
leaving  from  education  and 
training and spreading basic digital  skills (SDG 4). 
The RRP measures related to active labour market 
and training policies, social and territorial cohesion, 
social services and inclusion are expected to have 
a  significant  effect  on  Italy’s  performance  on  the 
SDGs  related  to  fairness.  These  measures  are 
complemented  by  others  to  improve  educational 
outcomes,  boosting  skills,  support 
targeting 
women and improve gender equality.  

Italy  is  improving  on  SDG  indicators  related 
to  productivity  (SDG  4,  8,  9),  although  at 
uneven  pace.  Italy’s  gross  domestic  expenditure 
on  R&D  (in  percentage  of  GDP,  SDG  9)  is  well 
below  the  EU  average  (respectively  1.53%  and 
2.32%  in  2020)  and  increased  only  moderately 
since 2015. In Italy, the share of households with 
high-speed internet connection in 2021 (44.2%) is 
well  below  the  EU  average  (70.2%),  despite 
significant  progress  on  this  indicator  since  2016 
(18.8% in 2016). Improving digital skills remains a 
challenge.  The  RRP  is  expected  to  make  a  major 
contribution  to  Italy’s  progress  on  the  digital 
transition  and  productivity:  it  plans  to  invest  in 
digitalising  the  public  administration,  the  justice 
and  education  systems,  and  the  tourism  and 
cultural sector. Measures under the heading on the 
the 
digitalisation 
manufacturing  industry  and  on  research  and 
innovation are also expected to boost productivity.  

competitiveness 

and 

of 

Italy  is  improving  on  some  SDG  indicators 
related  to  macroeconomic  stability  (8,  16) 
and  remained stable on  others  (17).  Italy  has 
made  substantial  progress  on  peace,  justice  and 
the  quality  of  its  institutions,  achieving  a  strong 
reduction  in  reported  crime  by  the  population  to 
below  the  EU  average  (from  19.4%  in  2015  to 
in  2020,  EU:  11%  as  share  of  total 
8.4% 

24 

 
ANNEX 2: RECOVERY AND RESILIENCE PLAN - IMPLEMENTATION 
ANNEX 2: RECOVERY AND RESILIENCE PLAN - IMPLEMENTATION 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the  centrepiece  of  the  EU’s  efforts  to 
support  the  its  recovery  from  the  COVID-19 
pandemic,  fast  forward  the  twin  transition 
and  strengthen  resilience  against  future 
shocks. Italy submitted its recovery and resilience 
plan  (RRP)  on  30  April  2021.  The  Commission’s 
positive  assessment  on  22  June  2021  and  the 
Council’s approval on 13 July 2021 paved the way 
for  disbursing  EUR  68.9  billion  in  grants  and  EUR 
122.6  billion  in  loans  under  the  RRF  over2021-
2026.  The  financing  and  loan  agreements  were 
signed  on  4  and  5  August  2021  respectively,  and 
the  operational  arrangements  on  22  December 
2021. The key elements of the Italian RRP are set 
out in Table A2.1. 

The  share  of  funds  contributing  to  each  of  the 
RRF’s six policy pillars is outlined in Graph A2.1. 

The 

to  13%  of 

Italy’s  plan 
Commission 

is  well 
Implementation  of 
underway. 
disbursed 
EUR 24.9 billion to Italy in pre-financing in August 
2021,  equivalent 
the  financial 
allocation,  to  support  crucial  investments  and 
reforms.  The  Commission  positively  assessed 
Italy’s  first  payment  request,  taking  on  board  the 
opinion of the Economic and Financial Committee, 
leading  to  a  disbursement  of  EUR  21  billion  in 
financial  support  (net  of  pre-financing)  in  April 

2022. 

Table A2.1:  Key elements of the Italian RRP 

(1) See Pfeiffer P., Varga J. and in ’t Veld J. (2021), 
“Quantifying Spillovers of NGEU investment”, European 
Economy Discussion Papers, No. 144 and Afman et al. (2021), 
“An overview of the economics of the Recovery and Resilience 
Facility”, Quarterly Report on the Euro Area (QREA), Vol. 20, 
No. 3 pp. 7-16 
Source: European Commission 2022 

The  related  51  milestones  cover  reforms  in  the 
areas of public administration, public procurement, 
justice,  active  labour  market  policies,  tertiary 
education  and  the  audit  and  control  system. 
Meeting  these  milestones  will  help  address  the 
related 
recommendations 
addressed  to  Italy  in  2019  and  2020  (see  Annex 
4).  Overall,  Italy  reports  a  prompt implementation 
of  the  milestones  and  targets  due  by  the  end  of 

country-specific 

Graph A2.1: Share of RRF funds contributing to each policy pillar 

(1) Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed on 
this chart amounts to 200% of the estimated cost of the Italian RRP. The bottom part represents the amount of the primary pillar, 
the top part the amount of the secondary pillar. 
Source: RRF Scoreboard https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/country_overview.html 

25 

Total allocation EUR 68.9 billion in grants (3.9% of 2019 GDP) and EUR 122.6 billion in loansInvestments and Reforms 133 investments and 59 reforms Total number of Milestones and Targets527Estimated macroeconomic impact (1) Raise GDP by 1.5-2.5% by 2026 (0.3% in spillover effects)Pre-financing disbursed EUR 24.9 billion (August 2021) First instalment EUR 10 billion in grants and EUR 11 billion in loans (April 2022)0%10%20%30%40%50%60%GreentransitionDigitaltransformationSmart,sustainableand inclusivegrowthSocial andterritorialcohesionHealth, andeconomic,social andinstitutionalresiliencePolicies for thenext generation 
 
 
  
 
 
  
Q1  2022,  which  however  does  not  prejudge  the 
timing  of  submission  of  subsequent  payment 
requests  nor  the  formal  assessment  of  the 
fulfilment of the relevant milestones and targets. 

The  progress  made  by  Italy  in  implementing 
its  plan  is  published  in  the  Recovery  and 
Resilience  Scoreboard.  The  Scoreboard  also 
gives a clear overview of the progress made in the 
implementing  the  RRF  as  a  whole.  The  graphs 
below  show  the  current  state  of  play  of  the 
milestones  and  targets  fulfilled,  as  completed  by 
the  Commission  subsequently 
Italy  and  as 
assessed as having satisfactorily been fulfilled. 

Graph A2.2: Total grants disbursed under the RRF 

(1) This graph displays the amount of grants disbursed so far 
under the RRF. Grants are non-repayable financial 
contributions. The total amount of grants given to each 
Member State is determined by an allocation key and total 
estimated cost of the respective recovery and resilience plan. 
Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html 

Graph A2.3: Total loans disbursed under the RRF 

(1) This graph displays the amount of loans disbursed so far 
under the RRF. Loans are repayable financial contributions. 
The total amount of loans given to each Member State is 
determined by the assessment of its loan request and cannot 
exceed 6.8% of its 2019 GNI. 
Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html 

Graph A2.4: Fulfilment status of milestones and 
targets 

(1) This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided the evidence to 
the Commission that it has completed the milestone or target 
and the Commission has assessed it positively in an 
implementing decision. 
Source: Source: RRF Scoreboard 
https://ec.europa.eu/economy_finance/recovery-and-resilience-
scoreboard/country_overview.html 

26 

€ 18.95 billion€ 26.94 billionSatisfactorily fulfilledNot fulfilled 
  
 
  
 
  
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The EU’s budget of more than EUR 1.2 trillion 
for  2021-2027  is  the  investment  lever  to 
help  implement  EU  priorities.  Underpinned  by 
an  additional  amount  of  about  EUR  800  billion 
largest 
through  NextGenerationEU  and 
instrument, the Recovery and Resilience Facility, it 
represents  significant  firepower  to  support  the 
recovery and sustainable growth. 

its 

Graph A3.1: ESIF 2014-2020 Total budget by fund 
(EUR billion, %) 

(1) The data for the EAFRD and REACT-EU refer to the period 
2014-2022 
Source: European Commission 

funds 

support 

agreement 

partnership 

In  2021-2027,  EU  cohesion  policy  funds (17) 
development 
long-term 
will 
objectives  in  Italy  by  investing  EUR  43.13 
billion (18) including EUR 1 029.6 million from the 
Just  Transition  Fund  to  alleviate  the  socio-
economic  impacts  of  the  green  transition  in  the 
most vulnerable regions. The 2021-2027 cohesion 
policy 
and 
programmes  take  into  account  the  2019-2020 
country-specific recommendations and investment 
guidance  provided  as  part  of  the  European 
Semester  process,  ensuring  this  money  fully 
complements  other  EU  funding.  In  addition,  Italy 
will  benefit  from  EUR  26.7  billion  support  for  the 
2023-27  period  from  the  Common  Agricultural 
Policy,  which  supports  social,  environmental,  and 
in 
economic 
agriculture  and  rural  areas,  contributing  to  the 
European Green Deal, and ensuring long-term food 
security. 

sustainability  and 

innovation 

In  2014-2020,  the  European  Structural  and 
Investment  Funds  (ESIF)  for  Italy  are  set  to 

of 

and 

28.25% 

2014-2020 

invest  EUR  59.70  billion (19)  from  the  EU 
budget.  Total  investment  including  national 
financing  amounts  to  EUR  90.69  billion  (see  
Graph  A3.1),  representing  around  0.75%  of  GDP 
public 
for 
investment. (20) By 31 December 2021, 86% of the 
total  was  allocated  to  specific  projects  and  49% 
was reported as spent, leaving EUR 45.95 billion to 
be  spent  by  the  end  of  2023. (21)  Among  the  11 
objectives  the  most  relevant  ones  for  cohesion 
policy funding in Italy are competitiveness of SMEs 
and research and innovation, with EUR 21 and 6.2 
billion  respectively.  This  is  followed  by  green 
investments in the field of environment protection 
and  resource  efficiency (EUR  9.15  billion),  climate 
change  and  risk  prevention  (EUR  6.2  billion)  and 
the  low  carbon  economy  (EUR  5  billion),  plus 
investments  for  social  and  employment  policies 
for sustainable and quality employment, EUR 8.56 
billion, social inclusion, EUR 7.9 billion, educational 
and vocational training, EUR 6.6 billion. By the end 
of  2020,  cohesion  policy  funding  had  supported 
562 073  companies,  provided  broadband  access 
of  at  least  30  Mbps  to  an  additional  1 477 854 
households, reconstruction of 203 km of railways, 
118  of  which  are  part  of  the  TEN-T  network,  
improved  wastewater  treatment  for  823 445 
population  equivalent,  and  renovated  schools  and 
serving  17 601 699 
education 
people. Over 8 million participants have benefitted 
from  an  ESF-funded  measure.  87.5%  of  young 
people  not  in  employment  nor  in  education  and 
training who completed a Youth Guarantee project 
had at least one work experience. 

infrastructure 

(19)  ESIF includes cohesion policy funds (ERDF, ESF+, CF, Interreg) 
and European Agricultural Fund for Rural Development 
(EAFRD) and European Maritime and Fisheries Fund (EMFF). 
According to the ‘N+3 rule’, the funds committed for the 
years 2014-2020 must be spent by 2023 at latest (by 2025 
for EAFRD). Data source: Cohesion Open data, cut-off date 
31.12.2021 for ERDF, ESF+, CF, Interreg; cut-off date 
31.12.2020 for EAFRD and EMFF 

(17)  European Regional Development Fund (ERDF), European 

(20)  Public investment is gross fixed capital formation plus 

Social Fund+ (ESF+), Cohesion Fund (CF), Just Transition Fund 
(JTF), Interreg. 

(18)  Current prices, source: Cohesion Open Data  

capital transfers, general government. 

(21)  Including REACT-EU. ESIF data on 

https://cohesiondata.ec.europa.eu/countries/IT 

27 

27.9031%0.981%35.9940%23.4526%2.362%EAFRDEMFFERDFESFYEI 
 
  
                                                 
                                                 
 
Graph A3.2: Cohesion policy contribution to the 
SDGs (EUR billion) 

basic  services,  job maintenance  measures  as  well 
as  support  for  education,  training  and  skills 
development. 

for 

risks 

temporary 

unemployment 

support 
in 

Italy  received  support  under  the  European 
to 
instrument 
mitigate 
an 
emergency  (SURE)  to  finance  short-time 
work  schemes,  similar  measures  and  as  an 
ancillary,  health-related  measures. 
The 
Council  granted  Italy  financial  assistance  under 
SURE  in  September  2020  for  a  maximum  of  EUR 
27.438  billion,  which  was  disbursed  by  25  May 
2021.  SURE  is  estimated  to  have  supported 
approximately  40%  of  workers  and  50%  of  firms 
for  at  least  one  month  in  2020,  primarily  in 
manufacturing, accommodation and food services, 
and  wholesale  and  retail  trade.  Italy  is  estimated 
to  have  saved  a  total  of  EUR  3.76  billion  on 
interest payments as a result of the lower interest 
rates under the SURE. 

including 

The  Commission  currently  provide  tailor-
made  expertise  via  the  Technical  Support 
Instrument  to  help  Italy  design  and  implement 
growth-enhancing 
for 
reforms, 
implementing  its  RRP.  Since  2017,  Italy  has 
received  assistance  via  60  technical  support 
projects.  Projects  completed  in  2021  aimed  for 
example  to  boost  consumer  protection  and  active 
labour  market  policies,  promote  electronic 
payments,  and  support  Sardinia  and  Apulia  in 
preparing 
transition  plans.  The 
Commission  also  assisted  Italy  in  implementing 
specific  reforms  and  investments  in  the  RRP,  for 
instance by taking data-driven approaches for risk 
analysis  of  tax  evasion  or  for  developing  green 
principles in transport infrastructure. In 2022, new 
projects  will  start  to  support  work  on  gender 
mainstreaming  and  on  building  IT  skills  for  the 
health workforce, amongst other projects.  

their 

just 

Italy  benefits  also  from  other  EU  programmes, 
such  as  the  Connecting  Europe  Facility,  which 
allocated EU funding of EUR 1.7 billion for specific 
projects  on  strategic  transport  networks,  and 
Horizon 2020, which allocated EU funding of EUR 
5.62 billion. 

Source: European Commission 

Cohesion  policy  funds  already  substantially 
contribute  to  the  Sustainable  Development 
Goal  (SDGs)  objectives  (see  Graph  A3.2).  In  Italy, 
cohesion  policy  funds  support  11  of  the  17  SDGs 
with up to 94 % of the expenditure contributing to 
the attainment of the goals.  

to 

to 

tackle 

Italy  after 

The  Coronavirus  Response 
Investment 
Initiative (22) provided the first EU emergency 
support 
the  COVID-19 
pandemic.  It  brought  in  extraordinary  flexibility 
enabling  Italy  to  re-allocate  resources  to  a  wide 
the 
range  of  measures  needed 
immediate  effects  of  the  COVID-19  crisis.  For 
instance, Italy has so far implemented schemes to 
provide  SMEs  with  working  capital  with  grants 
(EUR 447 136 362), financial support for SMEs for 
working  capital:  (EUR  2 251 507 651),  personal 
and  medical 
(EUR 
837 553 839),  and  support  to  digitalise  the 
education  system  and  the  public  administration. 
Italy also benefited from the temporary 100 % EU 
financing of incurred measures in cohesion policy, 
allocating  approximately  EUR  3 399  million  in 
2021 through 100 % co-financing. 

equipment 

protective 

Next 

under 

Europe) 

REACT-EU 

instrument 

The 
(Recovery 
Assistance  for  Cohesion  and  the  Territories 
of 
generation 
supplemented  the  CRII/CRII+  initiatives  with 
additional  EU  resources  for  Italy  (EUR  11.3 
billion for 2021 and EUR 3.1 billion for 2022) 
under  2014-20  cohesion  policy  allocation. 
REACT-EU  provides  support  to  extend  the  crisis 
response  and  crisis 
repair  measures,  while 
preparing a green, digital and resilient recovery of 
the  economy.  This  covered  investment  in  health, 
business  support,  the  digital  and  green  economy, 

(22)  Re-allocating ESIF resources under Regulation (EU) 

2020/460 of the European Parliament and of the Council of 
30 March 2020, and Regulation (EU) 2020/558 of the 
European Parliament and of the Council of 23 April 2020. 

28 

0.470.500.781.031.302.273.433.625.957.9519.5901020SDG 12 Responsible consumption and productionSDG 15 Life on landSDG 11 Sustainable cities and communitiesSDG 13 Climate actionSDG 6 Clean water and sanitationSDG 7 Affordable and clean energySDG 3 Good health and well beingSDG 1 No povertySDG 4 Quality educationSDG 9 Industry, innovation, infrastructureSDG 8 Decent work and economic growth 
  
                                                 
 
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY SPECIFIC 
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY SPECIFIC 
RECOMMENDATIONS 
RECOMMENDATIONS 

Graph A4.1: Italy's progress on the 2019-2020 
CSRs (2022 European Semester cycle) 

The  Commission  assessed  the  2019-2021 
country-specific 
recommendations 
(CSRs) (23)   addressed  to  Italy  in  the  context 
of  the  European  Semester.  The  assessment 
takes into account the policy action taken by Italy 
to  date (24),  as  well  as  the  commitments  in  the 
Recovery  and  Resilience  Plan  (RRP) (25).  At  this 
early  stage  of  the  RRP  implementation,  overall 
83%  of  the  CSRs  focusing  on  structural  issues  in 
2019  and  2020  have  recorded  at  least  “some 
progress”,  while  17%  recorded  “limited”  or  “no 
Considerable 
progress” 
additional  progress  in  addressing  structural  CSRs 
is  expected  in  the  years  to  come  with  the  further 
implementation of the RRP. 

(see  Graph  A4.1). 

Source: European Commission 

(23)  2021 CSRs: https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A32021H0729%2812%29&qi
d=1627675454457 ;  
2020 CSRs: EUR-Lex - 32020H0826(12) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(12) - EN - EUR-Lex 
(europa.eu) 

(24)  Incl. policy action reported in the National Reform 

Programme, as well as in the RRF reporting (bi-annual 
reporting on the progress with implementation of milestones 
and targets and resulting from the payment request 
assessment). 

(25)  Member States were asked to effectively address all or a 

significant subset of the relevant country-specific 
recommendations issued by the Council in 2019 and 2020 in 
their RRPs. The CSR assessment presented here takes into 
account the degree of implementation of the measures 
included in the RRP and of those done outside of the RRP at 
the time of assessment.  Measures foreseen in the annex of 
the adopted Council Implementing Decision on the approval 
of the assessment of the RRP which are not yet adopted nor 
implemented but considered as credibly announced, in line 
with the CSR assessment methodology, warrant “limited 
progress”. Once implemented, these measures can lead to 
“some/substantial progress” or “full implementation”, 
depending on their relevance. 

29 

No Progress3%Limited Progress14%Some Progress70%Substantial Progress13% 
 
                                                 
  
 
 
 
Table A4.1:  Summary table on 2019, 2020 and 2021 CSRs 

(Continued on the next page) 

30 

ItalyAssessment in May 2022*RRP coverage of CSRs until 2026**2019 CSR1Limited progressEnsure a nominal reduction of net primary government expenditure of 0.1% in 2020, corresponding to an annual structural adjustment of 0.6% of GDP. Use windfall gains to accelerate the reduction of the general government debt ratio.Not relevant anymoreNot applicableShifttaxationawayfromlabour,includingbyreducingtaxexpenditure and reforming the outdated cadastral values.Some progressFight tax evasion, especially in the form of omitted invoicing, including by strengthening the compulsory use of e-payments including through lower legal thresholds for cash payments.Substantial progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023Implementfullypastpensionreformstoreducetheshareofold-agepensionsinpublicspendingandcreatespaceforothersocialandgrowth-enhancing spending.No progress2019 CSR 2Some progressStep up efforts to tackle undeclared work. Limited progressRelevant RRP measures planned as of 2022 Ensure that active labour market and social policies are effectively integrated and reach out notably to young people and vulnerable groups.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022Support women’s participation in the labour market through a comprehensive strategy, including through access to quality childcare and long-term care.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023Improve educational outcomes, also through adequate and targeted investment, and foster upskilling, including by strengthening digital skills.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 20232019 CSR 3Some progressFocus investment-related economic policy on research and innovation, and the quality of infrastructure, taking into account regional disparities.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023Improve the effectiveness of public administration, including by investing in the skills of public employees, by accelerating digitalisation, and by increasing the efficiency and quality of local public services.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023Address restrictions to competition, particularly in the retail sector and in business services, also through a new annual competition law.Limited progressRelevant RRP measures planned as of 20222019 CSR4Substantial progressReduce the length of civil trials at all instances by enforcing and streamlining procedural rules, including those under consideration by the legislator and with a special focus on insolvency regimes.Substantial progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023Improvetheeffectivenessofthefightagainstcorruptionbyreformingprocedural rules to reduce the length of criminal trials.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 20232019 CSR5Some progressFoster bank balance sheet restructuring, in particular for small and medium-sized banks, by improving efficiency and asset quality, continuing the reduction of non-performing loans, and diversifying funding.Some progressImprove non-bank financing for smaller and innovative firms.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 20242020 CSR1Some progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuringdebtsustainability,whileenhancinginvestment.Not relevant anymoreNot applicableStrengthentheresilienceandcapacityofthehealthsystem,intheareas of health workers, critical medical products and infrastructure.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022Enhance coordination between national and regional authorities.Some progressRelevant RRP measures planned as of 2022 
 
 
 
  
 
Table (continued) 

* See footnote 25  
** Measures indicated as “being implemented as of 2021” are only those included in the first RRF payment request submitted by 
Italy and positively assessed by the European Commission.  
Source: European Commission 

31 

2020 CSR2Some progressProvide adequate income replacement and access to social protection, notably for atypical workers.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022Mitigate the employment impact of the crisis, including through flexible working arrangements andSome progressactive support to employment.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022Strengthen distance learning and skills, including digital ones.Limited progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 20232020 CSR 3Some progressEnsure 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.Substantial progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023Front-load mature public investment projectsSome progressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023, 2025 and 2026and promote private investment to foster the economic recovery.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022Focusinvestmentonthegreenanddigitaltransition,inparticularonclean and efficient production and use of energy,Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023 and 2024research and innovation,Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023sustainable public transport,Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2023 and 2024waste and water managementLimited progressRelevant RRP measures being implemented as of 2021 and planned as of 2022, 2023 and 2025aswellasreinforceddigitalinfrastructuretoensuretheprovisionofessential services.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 20222020 CSR 4Some progressImprove the efficiency of the judicial system andSubstantial progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023the effectiveness of public administration.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 20222021 CSR1Some progressIn2022,usetheRecoveryandResilienceFacilitytofinanceadditionalinvestmentinsupportoftherecoverywhilepursuingaprudentfiscalpolicy.Preservenationallyfinancedinvestment.Limitthe growth of nationally financed current expenditure.Limited progressNot applicableWheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Some progressNot applicableAtthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupportingthegreenanddigitaltransition. Some progressNot applicableGiveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthand social protection systems for all.Some progressNot applicable 
 
  
 
ENVIRONMENTAL SUSTAINABILITY 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 5: GREEN DEAL 
ANNEX 5: GREEN DEAL 

intends 

The  European  Green  Deal 
to 
transform the  EU  into a  fair and prosperous 
society,  with  a  modern,  resource-efficient 
and competitive economy where there are no 
net  emissions  of  greenhouse  gases  in  2050 
and  where  economic  growth  is  decoupled 
from resource use. This Annex offers a snapshot 
of  the  most  significant  and  economically  relevant 
developments  in  Italy  in  the  respective  building 
blocks  of 
is 
complemented  by  Annex  6  on  the  fair  transition 
and  Annex  7  for  circular  economy  aspects  of  the 
Green Deal.  

the  European  Green  Deal. 

It 

reduction 

Italy  has  so  far  met  its  EU  and  domestic 
greenhouse  gas 
targets,  but 
further  efforts  will  be  needed  to  match  the 
increased  ambition  of  the  European  Green 
Deal.  In  line  with  its  long-term  strategy,  Italy  is 
committed to reaching climate neutrality by 2050. 
By  2020,  the  country’s  overall  greenhouse  gas 
emissions had fallen by 25 % compared  to 1990, 
also due to the COVID-19 pandemic. Italy is by and 
large  on  track  to  meet  its  current  2030  emission 
reduction  target  under  the  EU  Effort  Sharing 
Regulation  (covering  sectors  such  as  transport, 
buildings,  agriculture,  small  industry  and  waste), 
but  will  need  to  redouble  efforts  to  achieve  the 
more  ambitious  Effort  Sharing  Regulation  target 
proposed  by  the  European  Commission  as  part  of 
its  Fit for 55  package.  The  transport  sector  is  one 
area of concern (+25% GHG emission since 2005, 
with  a  high  share  of  road  transport  and  a  low 
share of electric vehicles). The sectors covered by 
the EU Emissions Trading System are expected to 
improve  their  performance  as  coal  is  phased  out 
by  2025  and  the  support  for  renewable  energy 
planned  in  the  RRP  is  rolled  out.  Italy  is  yet  to 
adopt  a  climate  adaptation  plan.  In  its  recovery 
and resilience plan (RRP), Italy allocates 37.5 % of 
available  funds  to  climate  and  energy  objectives 
and  outlines  crucial  reforms  and  investments  to 
further  the  transition  to  a  more  sustainable,  low-
carbon and climate-resilient economy. 

Italy  records  high  levels  of  revenue  from 
environmental taxation, both as a share of total 
taxation  and  compared  to  GDP.  Out  of  the 
categories comprising environmental taxation, only 
tax  collections  on  resources  and  pollution  are 
the  EU  average. (26)  Likewise, 
smaller 

than 

(26)  For more information on taxation see Annex 18. 

environmental 
government 
expenditure 
protection  covers  a  higher  share  of 
total 
government  expenditure  in  Italy  than  the  EU 
average (see Graph A5.1). 

on 

Graph A5.1: Fiscal aspects of the green transition: 
taxation and government expenditure on 
environmental protection 

Source: Eurostat 

Graph A5.2: Energy: share in energy mix (solid, oil, 
gas, nuclear, renewables) 

(1) The energy mix is based on gross inland consumption, and 
excludes heat and electricity. The share of renewables 
includes biofuels and non-renewable waste 
Source: Eurostat 

In terms of energy, Italy needs to reduce its 
energy  dependency  on  fossil  fuel  imports 
that  accounted  for  78 %  of  gross  inland 
energy  consumption  in  2020  (see Graph  A5.2). 
It  needs  to  step  up  its  capacity  to  generate 
renewable energy (22 % in 2020)  and to improve 
energy efficiency, also given the plan to phase out 
the residual share of coal (3.7% in 2020) in power 
generation,  scheduled  for  2025.  Italy  has  no 
nuclear  power  but  imports  11%  of  its  electricity, 
mostly from French nuclear power plants. In order 
to install new renewable energy production plants, 
it will be key to fully implement the measures on 
renewable  energy  permitting  included  in  the  plan. 
These measures have the potential to resolve the 

32 

0.01.02.03.04.05.06.07.08.0Environmental taxes (% of GDP)Environmental taxes (% of totaltaxation)Government expenditure onenvironmental protection (% oftotal expenditure)IT (2020)EU27 (2020)0102030405060708090100200520102015201820192020ITSolid fossil fuels, peat and oil shaleOilGasNuclearRenewables 
 
 
                                                 
  
 
  
 
 
administrative  and  procedural  issues  that  risk 
jeopardising  the  achievement  of  Italy’s  climate 
and energy objectives. Though the transport sector 
consumes the largest share of energy, the highest 
energy savings potential is in the building stock. If 
Italy  is  to  meet  its  2030  objectives  under  the 
European  Green  Deal  and  fulfil  the  long-term 
strategy,  it  is  essential  that  the  country  improves 
transport energy efficiency and energy renovations 
in  buildings  through  modal  transfer,  modernises 
and  decarbonises  heating  and  cooling  systems, 
renovate  the  worst-performing  buildings  and 
achieve cross-sector electrification. 

quality  zones, 
the  target  values  for  ozone 
concentration  have  not  been  met.  Emissions  from 
road transport and biomass burning are significant 
sources  of  pollution.  The European  Commission  is 
following  up  on  persistent  breaches  of  air  quality 
requirements,  which  have  severe  negative  effects 
on  public  health  and  the  environment  through 
infringement  procedures  (mainly  over  PM10  and 
NO2  levels,  but  with  new  concerns  over  PM2.5 
too).  A  specific  plant,  Ilva  Taranto  steel  and  iron 
plant,  raises  serious  concerns  about  its impact  on 
air  quality  in  the  province  and  needs  careful 
follow-up. 

On  water  management,  Italy  has  made  only 
limited progress in reducing the number of non-
the  Urban 
compliant  agglomerations  under 
Wastewater  Treatment  Directive.  This  has  led  to 
fines  being  levied  by  the  Court  of  Justice  of  the 
EU.  Nitrates  hotspots  need  to  be  cleaned-up  in 
northern  Italy (27),  and  for  drinking  water in  Lazio. 
Italy  continues  to  be  subject  to  hydrological  risks 
(flooding  and  landslides)  from  the  land  and  sea 
and  from  seismic  events.  Italy  is  also  one  of  the 
EU countries with the highest use of irrigation for 
agricultural purposes. 

In  terms  of  biodiversity  and  ecosystem 
health,  Italy’s  performance  is  mixed  (see 
Graph A5.3). Including both Natura 2000 and other 
nationally  designated  protected  areas,  Italy  gives 
legal protection to 21.3 % of its land (EU average 
26 %) and about 2 % of marine areas (EU average 
8 %)  in  2019.  However,  the  share  of  habitats  in 
bad  or  poor  conservation  status  has  increased  to 
86 % and the share of assessments for species in 
bad  or  poor  conservation  status  has  remained 
stable  at  around  50 %.Agriculture  remains  the 
main  source  of 
to  natural  habitats. 
Nevertheless,  organic  farming  is  estimated  to 
account  for  16 %,  well  above  the  EU  average  of 
9.7 % (2020), increasing from 11.8 % in 2015.  

threat 

Graph A5.3: Biodiversity: terrestrial protected 
areas and organic farming 

(1) For terrestrial protected areas data for 2018 and data for 
the EU average (2016, 2017) is lacking 
Source: EEA (terrestrial protected areas) and Eurostat 
(organic farming) 

In  terms  of  pollution,  air  quality  in  Italy 
remains a source of serious concern. In 2020, 
10  air  quality  zones  exceeded  the  EU  limit  for 
nitrogen dioxide (NO2) and 33 zones exceeded the 
limit  for  particulate  matter  (PM10).  In  several  air 

(27)  No data from ESTAT on nitrates for Italy, but according to the 
last report on the implementation of the Nitrates Directive 
(SWD/2021/1001 final, 11.10.2021) referring to the change 
between the periods 2008-11 and 2016-19, groundwater 
quality has slightly improved as compared to the previous 
reporting period, with the percentage of stations reaching or 
exceeding 40 or 50 mg nitrate per L that decreased from 
5.8% to 5.6% and from 12.7% to 12.6%, respectively. 

33 

0510152025302016201720192020ITTerrestrial protected areas (% total area)Area under organic farming (% total utilised agricultural area)EU27 (terrestrial)EU27 (organic) 
 
  
                                                 
Graph A5.4: Mobility: share of zero emission 
vehicles (% of new registrations) 

(1) Zero emission vehicles (passenger cars) include battery 
and fuel cell electric vehicles (BEV, FCEV) 
Source: European Alternative Fuels Observatory. Zero 
emission vehicles include battery and fuel cell electric vehicles 
(BEV, FCEV) 

In  terms  of  transport,  Italy  is  showing  some 
positive developments. Although it is increasing, 
Italy’s  share  of  zero-emission  passenger  cars  is 
still  below  the  EU  average  (see  Graph  A5.4).  In 
order  to  encourage  citizens’  shift  to  sustainable 
mobility,  while  at  the  same  time  sustaining 
industry,  Italy  could  make  the  existing  financial 
incentives  to purchase clean vehicles more stable 
and  predictable  for  both  vehicle  producers  and 
customers.  Italy’s  share  of  electrified  railroads  is 
one of the highest in the EU. 

34 

0.01.02.03.04.05.06.07.08.09.010.0201620172018201920202021% of new registrationsITEU27 
  
Table A5.1:  Indicators underpinning the progress on EU Green Deal from macroeconomic perspective 

(1) The 2030 non-ETS GHG target is based on the Effort Sharing Regulation. The FF55 targets are based on the COM proposal to 
increase EU's climate ambition by 2030. Renewables and Energy Efficiency targets and national contributions under the 
Governance Regulation (Regulation (EU) 2018/1999). (2) Distance to target is the gap between Member States’ 2030 target under 
the Effort Sharing Regulation and projected emissions, with existing measures (WEM) and with additional measures (WAM) 
respectively, as a percentage of 2005 base year emissions. (3) Percentage of total revenues from taxes and social contributions 
(excluding imputed social contributions). Revenues from the ETS are included in environmental tax revenues (in 2017 they 
amounted to 1.5% of total environmental tax revenues at the EU level). (4) Covers expenditure on gross fixed capital formation to 
be used for the production of environmental protection services (i.e. abatement and prevention of pollution) covering all sectors, 
i.e. government, industry and specialised providers. (5) The climate protection gap indicator is part of the European adaptation 
strategy (February 2021), and is defined as the share of non-insured economic losses caused by climate-related disasters. 
(6) Sulphur oxides (SO2 equivalent), Ammonia, Particulates < 10µm, Nitrogen oxides in total economy (divided by GDP). 
(7) Transportation and storage (NACE Section H). (8) Zero emission vehicles include battery electric vehicles (BEV) and fuel cell 
electric vehicles (FCEV). (9) European Commission Report (2019) 'Benchmarking smart metering deployment in the EU-28'. 
(10) European Commission (2021). Each year the DESI is re-calculated for all countries for previous years to reflect any possible 
change in the choice of indicators and corrections to the underlying data. Country scores and rankings may thus differ compared 
with previous publications. 

Source: Eurostat, JRC, European Commission, EEA, EAFO 

35 

TargetTarget2005201920202030WEMWAM2030WEMWAMNon-ETS GHG emission reduction target (1)MTCO2 eq; %; pp (2)343.1-18%-24%-33%-56-44%-15-5200520162017201820192020Share of energy from renewable sources in gross final consumption of energy (1)%8%17%18%18%18%20%30%Energy efficiency: primary energy consumption (1)Mtoe180.8148.0148.9147.2145.9132.3125.1Energy efficiency: final energy consumption (1)Mtoe137.2115.9115.2116.3115.4102.7103.8201520162017201820192020201820192020Environmental taxes (% of GDP)% of GDP3.43.53.33.33.33.02.42.42.2Environmental taxes (% of total taxation)% of taxation (3)7.98.38.07.97.77.16.05.95.6Government expenditure on environmental protection% of total exp.1.791.841.791.781.831.701.661.701.61Investment in environmental protection% of GDP (4) 0.330.320.310.30--0.420.380.41Fossil fuel subsidiesEUR2020bn5.795.665.385.255.55-56.8755.70-Climate protection gap (5)score 1-4Net GHG emissions1990 = 100838385848274797669GHG emissions intensity of the economykg/EUR'100.290.290.280.270.270.270.320.310.30Energy intensity of the economykgoe/EUR'100.100.100.100.100.090.090.120.110.11Final energy consumption (FEC)2015=100100.099.799.1100.199.388.4103.5102.994.6FEC in residential building sector2015=100100.099.0101.298.295.894.3101.9101.3101.3FEC in services building sector2015=100100.0100.3118.5123.5118.2107.6102.4100.194.4Smog-precursor emission intensity (to GDP) (4)tonne/EUR'10 (6)0.710.700.740.690.71-0.990.93-Years of life lost caused due to air pollution by PM2.5per 100.000 inh.977908982920843-863762-Years of life lost due to air pollution by NO2per 100.000 inh.330227258183180-12099-Nitrate in ground watermg NO3/litre------21.720.7-Terrestrial protected areas% of total-20.221.4-21.321.3-25.725.7Marine protected areas% of total-5.2--5.4--10.7-Organic farming% of total utilised agricultural area11.814.014.715.215.216.08.08.59.100-0606-1212-18Net land takeper 10,000 km213.011.05.0201520162017201820192020201820192020GHG emissions intensity of transport (to GVA) (7)kg/EUR'100.550.530.570.570.590.590.890.870.83Share of zero emission vehicles (8)% in new registrations0.10.10.10.30.62.41.01.95.45668588812Share of electrified railways%71.271.571.471.671.6-55.656.0-35.437.537.437.337.2-28.928.8-YearITEUShare of smart meters in total metering points (9) - electricity% of total201898.535.8Share of smart meters in total metering points (9) - gas% of total201834.713.1ICT used for environmental sustainability (10)%202160.365.9DigitalFiscal and financialindicators2.4 out of 4 (slight increase from historical level of 2). This is a low/medium risk category (4 being a high risk).ClimateEnergyPollutionBiodiversity2000-20062006-20122012-201816.011.23.3MobilityNumber of plug-in electric vehicles per charging pointCongestion (average number of hours spent in road congestion per year by a representative commuting driver)Progress to policy targetsNational contribution to 2030 EU targetITALYEU'Fit for 55'DistanceDistance 
 
  
 
 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION 

The  green  transition  not  only  encompasses 
environmental 
to 
improvements 
sustainability, but also includes a significant 
social  dimension. While  measures  in this  regard 
include the opportunity for sustainable growth and 
job creation, it must also be ensured that no one is 
left  behind  and  all groups  in  society  benefit  from 
the transition. Italy’s green economy is still limited 
and  its  development,  supported  by  investments 
and  reforms  included  in  the  RRP,  can  foster 
sustainable growth and quality job creation; at the 
same  time,  the  green  transition  is  expected  to 
affect  low  to  middle-income  groups  to  a  larger 
extent. 

Investments 

Italy’s  recovery  and  resilience  plan  (RRP) 
outlines crucial reforms and investments for 
a  fair  green 
in 
transition. 
renewable energy in municipalities with fewer than 
5 000  inhabitants  are  expected  to  support  their 
the  green  economy, 
local  communities  and 
strengthen  social  cohesion  and  reduce  the  risk  of 
depopulation  in  rural  areas.  Italy’s  plan  include 
also investment in sustainable local transport such 
as  cycle  paths,  fast  public  transport,  electric 
charging  infrastructure,  the  renewal  of  the  bus 
fleet,  and  electric  trains, which  will  all  make  local 
transport  more  sustainable.  The  RRP  will  also 
improve social  and economic cohesion at national 
level.  Extending  high-speed  trains  will  improve 
connections  between  northern  and  southern 
regions,  urban  and  rural  areas  while  contributing 
to  the  green  transition.  In  synergy  with  the  RRF, 
the  European  Social  Fund  Plus  (ESF+)  will  help 
unlock  the  potential  for  green  jobs  and  foster 
adaptation of workers in Italy. The Just Transition 
Fund  (EUR 1.03  billion;  current  prices)  will  help 
mitigate the social  impact  of  the  transition in the 
provinces of Taranto and Carbonia-Iglesias. Italy’s 
national  energy  and  climate  plan  of  December 
the  expected  socio-economic 
2019  analyses 
impact  of 
including  on 
just 
the 
employment  and  skills,  though  it  only  partially 
Commission’s 
takes 
recommendations. (28)  Specifically  on  energy 
poverty,  though  it  reports  on  the  number  of 
households  affected  and  projects  reduction  by 
2030, the energy and climate plan does not set a 
specific target.  

transition, 

board 

the 

on 

The  Italian  economy  has  reduced  its  carbon 
footprint,  which  remains  below  the  EU 

(28)  SWD(2020) 911 final 

36 

sector 

iron  and 

average. The size of the green economy is in line 
with the EU average, and it holds great potential to 
create  quality  jobs.  The  greenhouse  gas  (GHG) 
emissions  intensity  (by  gross  value  added)  of  the 
Italian  economy  fell  by  more  than  12 %  between 
2015  and  2020  and  stands  at  87 %  of  the  EU 
average,  with  an  average  carbon  footprint  per 
worker at 11.81 tonnes of GHG emissions (against 
13.61  in  the  EU)  (see  Graph  A6.1).  Fossil  fuel-
based  energy  production,  coal  and  lignite  have 
been  identified  as  sectors  in  decline,  while  the 
steel) 
(mostly 
metal 
is 
pose  major 
These 
transforming. 
challenges,  especially 
the  Taranto  and 
Carbonia-Iglesias  provinces,  for  which  Italy  plans 
schemes  to  invest  in  rolling  out  technology  and 
infrastructure  to  provide  affordable  clean  energy 
and  to  upskill  and  reskill  the  workforce.  Energy-
intensive  industries  provide  jobs  for  less  than 
2.4 %  of  the  employed  workforce,  which  is  below 
the  EU  average.  There  will  be  a  strong  need  to 
upskill  and reskill  workers in these industries (see 
Annex  15).  The  environmental  goods  and  services 
sector  provides  1.7%  of  jobs,  in  line  with  the  EU 
average,  while  wind  and  solar  energy  as  well  as 
energy  efficiency  improvements  hold  potential  to 
create green jobs. 

sectors 
for 

Graph A6.1: Fair green transition challenges 

(1) Numbers are the normalised indicator performance, 
signifying factors relative to the EU27 average. 
Carbon inequality: average emissions per capita top 10% vs 
bottom 50% (2019) 
Source: Eurostat, World Inequality Database 

As  for  the  social  dimension  of  the  green 
transition,  ensuring  access  to  essential 
transport and energy services is a significant 
challenge  for  Italy,  especially  given  the 
situation  of  energy  poverty  in  low-income 
households.  A  slightly  higher  and  increasing 
share of the population in rural areas who lives at 
risk  of  poverty  in  Italy  than  the  EU  average 

0.000.501.001.502.002.50GHG tonnes per Euroof gross added value(MS/EU)GHG tonnes perworker (MS/EU)Employment share inenergy-intensiveindustries (MS/EU)Share of populationin rural areas at riskof poverty (MS/EU)Energy poverty(MS/EU)Carbon inequality(MS/EU)ItalyEU 2020Italy 2015 
 
                                                 
  
 
improve  disposable  income  of  households  earning  the 
lowest income. (31) 

(23.7 %  vs  18.7 %,  compared  to  about  20 %  for 
both in 2015).  The share of the population unable 
to  keep  their  homes  adequately  warm  has  fallen 
significantly, from 17 % in 2015 to 8.3 % in 2020, 
but  it  remains  above  the  EU  average  (8.2 %). 
Recent price increases have worsened the situation 
(as  the  price  of  electricity  and  gas  increased  by 
119 % and 94 % respectively year-on-year to Q1-
2022),  despite  the  government  cancelling  of 
general  charges  and  reducing  VAT.  Lower-income 
groups are affected the most, and Italy has among 
the  worst  results  in  the  EU  for  the  lowest  decile 
(see  Graph  A6.2).  Consumption  patterns  vary 
across  the  population  but  remain  lower  than  the 
EU  average.  The  average  carbon  footprint  of  the 
top 10% of emitters is about 4.6 times higher than 
that of the bottom 50% of the population (against 
the EU average of 5.3 times). 

Graph A6.2: Energy poverty by income decile 

HH050: Ability to keep home adequately warm; 
HY020: Total disposable household income 
Source: Eurostat EU-SILC survey (2020; 2019 for IT and DE) 

The  tax  system  is  key  to  ensuring  a  fair  transition 
to  climate  neutrality (29).  Italy’s  revenues  from  all 
environmental  taxes  fell  from  3.4 %  of  GDP  in  2015  to 
3.25 %  2019,  and  again  to  3.04 %  in  2020  (against 
2.24 %  in  the  EU).  The  tax  wedge  on  labour  for  low-
income earners (30) increased only marginally from 36.3% 
to 36.4% from 2015 to 2019 (36.6% in 2021), compared 
to  the  EU  average  of  31.9%  in  2021  -  (see  Annex  18). 
Redistributive  measures  accompanying  environmental 
taxation have the potential to foster progressivity and to 

(29)  COM(2021) 801 final. 

(30)  Tax wedge for a single earner at 50% of the national 
average wage (Tax and benefits database, European 
Commission/OECD). 

(31)  SWD(2021) 641 final PART 3/3 on distributional effects of 

energy taxation revision, based on the European Commission 
Joint Research Centre GEM-E3 and Euromod models. 

37 

0%5%10%15%20%25%30%35%12345678910Unable to keep home adequately warm (per income decile)Income decileItalyEuropean Union 
  
                                                 
 
                                                 
PRODUCTIVITY 
PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY 

while 

minimising 

The  efficient  use  of  resources  is  key  to 
ensuring  competitiveness  and open strategic 
autonomy, 
the 
environmental impact. The green transition is a 
major  opportunity  for  European 
industry  by 
creating  markets  for  clean  technologies  and 
products. It will have an impact across entire value 
chain  in  sectors  such  as  energy  and  transport, 
construction  and  renovation,  food  and  electronics, 
helping create sustainable, local and well-paid jobs 
across Europe. 

to 

Attention 

Italy  performs  above 
patents  deposited, 
in  the  circular 
average  on  employment 
economy. 
environmental 
sustainability  increases  with  firm’s  size  in  Italy, 
with,  for instance  91 %  of  firms  with  50  or more 
employees  separating  their  waste  collection  and 
71 %  monitoring  energy  use  and  56 %  water 
use. (32)  The  ”Transition  4.0“  initiative  included  in 
Italy’s RRP offers incentives, including risk capital, 
to  support  company  investments  in  the  circular 
economy. 

Graph A7.1: Economic importance and expansion of 
the circular economy 

(1) Employment and value added in the Circular Economy 
sectors 
Source: Eurostat 

On the circular economy, Italy is making good 
progress  at  national  and  regional  level.  The 
rate of circular (secondary) use of material in Italy 
was  18.4 %  in  2017  and  21.6 %  in  2020,  way 
above  the  EU  average  of  12.8 %.  Italy  has  also 
seen  a  steady increase  in  secondary material  use 
in  recent  years.  Italy’s  RRP  envisages  a  circular 
economy strategy to further boost progress. 

Resource  productivity  in  Italy  is  well  above 
the  EU  average  of  EUR  2.23  purchasing 
power  standards 
(PPS)/kg.  This  positive 
performance is underpinned by continuous gains in 
resource productivity that Italy has made over the 
past decade.  Resource  productivity  expresses  how 
efficiently the economy uses material resources to 
produce  wealth.  Improving  resource  productivity 
impacts  on  the 
can  help  minimise  negative 
environment  and  reduce  dependency  on  volatile 
raw material markets. 

to  pay 

Effective  waste  management  has  been  a 
challenge  for  Italy  for  many  decades.  At 
national  level,  after  falling  for  a  while,  municipal 
waste generation in Italy has started to increase in 
recent  years.  Landfilling  is  also  declining.  The 
centre and south of the country perform less well 
in waste management than the North. Campania is 
continuing 
for  poor  waste 
management,  after  the  European  Court  of  Justice 
ruling on its previous waste-management policies, 
though  there  are  improvements.  Italy  is  also 
paying  fines  for  irregular  landfills,  75 %  of  which 
are  located  in  southern  Italy.  The  RRP  includes  a 
national  waste  management  programme  and  the 
Council  Implementing Decision sets milestones on 
irregular  landfills,  recycling  and  separate  waste 
collection at both national and regional level. 

fines 

Though  not  a 
in  environmental 
technology,  as  shown  by  the  low  level  of 

leader 

(32)  ISTAT, 2020, Statistica sperimentale. Comportamenti 

d'impresa e sviluppo sostenibile 

38 

2.05%2.05%2.06%2.05%1.07%1.06%1.07%1.10%1.72%1.73%1.75%1.71%0.94%0.94%0.96%0.97%0.0%0.5%1.0%1.5%2.0%2.5%2015201620172018Persons employed in the circular economy, IT (% of total employment)Value added at factor cost, IT (% of GDP )Persons employed in the circular economy, EU27 (% of total employment)Value added at factor cost, EU27 (% of GDP ) 
 
 
  
 
                                                 
 
 
Table A7.1:  Selected resource efficiency indicators 

Source: Eurostat 

39 

SUB-POLICY AREA201520162017201820192020EU27 CircularityResource Productivity (Purchasing power standard (PPS) per kilogram)3.33.53.63.63.63.62.22020Material Intensity (kg/EUR)0.30.30.30.30.30.30.42020Circular Material Use Rate (%)17.217.818.418.819.521.612.82020Material footprint (Tones/capita)9.49.49.39.39.3-14.62019Waste Waste generation (kg/capita, total waste)-2702-2855--52342018Landfilling (% of total waste treated)-14.2-12.4--38.52018Recycling rate (% of municipal waste)44.345.947.849.851.4-47.82020Hazardous waste (% of municipal waste)-5.9-5.9--4.32018CompetitivenessGross value added in environmental goods and services sector (% of GDP)1.91.91.81.91.9-2.32019Private investment in circular economy (% of GDP)0.10.10.10.1--0.12018Key indicators - ItalyLatest year EU 27 
 
  
 
ANNEX 8: DIGITAL TRANSITION 
ANNEX 8: DIGITAL TRANSITION 

integration  of  digital 

The Digital Economy and Society Index (DESI) 
monitors EU Member States’ digital progress. 
The  areas  of  human  capital,  digital  connectivity, 
the 
technologies  by 
businesses  and  digital  public  services  reflect  the 
Digital  Decade’s  four  cardinal  points (33).  This 
Annex  describes  Italy’s  DESI  performance.  25.1% 
of  the  Italian  Recovery  and  Resilience  Plan  is 
devoted  to  the  digital  transition  and  covers 
measures relevant to all DESI dimensions. 

Stepping  up  the  efforts  to  improve  digital 
skills remains a key priority for the country, 
as condition to boost an inclusive and robust 
digital  transformation.  Italy  records  very  low 
levels  of  basic  digital  skills  and  has  the  lowest 
share  of  ICT  graduates  in  the  EU  (1.3%  of  all 
Italian  graduates  in  2019  studies  ICT,  against  an 
EU average of 3.9%).  The share of ICT specialists 
is also below the EU average.  

On 
Italy 
internet  connections,  although 
recorded progress on 5G, it needs to increase 
coverage  of  very  high  capacity  networks 
(VHCN),  including  in  remote/rural  areas.  In 
2021,  the  percentage  of  households  covered  by 
VHCN, 
including  fibre  to  the  premises,  was 
considerably  below  the  EU  average  (44 %  vs 
70 %).  Conversely  there  was  an  increase  in  5G 
coverage, 
in  principle  99.7 %  of 
populated areas.  

reaching 

Most Italian companies have a basic level of 
digital  intensity,  but  performance  on  the 
uptake  of  advanced  digital  technologies  is 
mixed.  Most  Italian  SMEs  have  at  least  a  basic 
level  of  digital 
intensity  and  the  share  of 
enterprises  using  cloud  services  is  particularly 
high.  However,  Italy’s  performance  remains  weak 
in other areas, namely the use of big data and of 
technologies based on artificial intelligence. 

Italy  is  making  progress  in  implementing 
major e-government projects, but results are 
still  not  fully  reflected  in  the  indicators.  The 
provision  of  digital  public  services  to  citizens  and 
businesses  is  still  below  EU  average.  The  use  of 
digital public services remained low in 2021 (40 % 
of  internet  users  vs  the  EU  average  of  65 %), 
although  it  achieved  a  notable  increase  (by  10 
percentage points) between 2019 and 2021. 

(33)  2030 Digital Compass: the European Way for the Digital 

Decade Communication, COM (2021) 118 final 

40 

 
 
                                                 
 
 
Table A8.1:  Key Digital Economy and Society Index Indicators 

(*) The 5G coverage indicator does not measure users’ experience, which may be affected by a variety of factors such as the type 
of device used, environmental conditions, number of concurrent users and network capacity. 5G coverage refers to the percentage 
of populated areas as reported by operators and national regulatory authorities 
Source: Digital Economy and Society Index 

41 

EUEU top-performanceHuman capitalDESI 2020DESI 2021DESI 2022DESI 2022DESI 2022At least basic digital skillsNANA46%54%79%% individuals202120212021ICT specialists3.5%3.6%3.8%4.5%8.0%% individuals in employment aged 15-7420192020202120212021Female ICT specialists15%16%16%19%28%% ICT specialists20192020202120212021ConnectivityFixed Very High Capacity Network (VHCN) coverage30%34%44%70%100%% households201920202021202120215G coverage (*)NA8%99.7%66%99.7%% populated areas2020202120212021Integration of digital technologySMEs with at least a basic level of digital intensityNANA60%55%86%% SMEs202120212021Big data7%9%9%14%31%% enterprises20182020202020202020CloudNANA52%34%69%% enterprises202120212021Artificial IntelligenceNANA6%8%24%% enterprises202120212021Digital public servicesDigital public services for citizensNANA6775100Score (0 to 100)202120212021Digital public services for businessesNANA7982100Score (0 to 100)202120212021Italy 
 
 
   
 
ANNEX 9: INNOVATION 
ANNEX 9: INNOVATION 

although 

Scoreboard (34), 

This  Annex  provides  a  general  overview  on 
the  performance  of  Italy’s  research  and 
innovation system. Italy is a moderate innovator 
according  to  the  2021  edition  of  the  European 
its 
Innovation 
performance,  relative  to  the  EU,  has  slightly 
improved over time. R&D intensity reached 1.53% 
of GDP in 2020, improving but still lagging behind 
the  EU  average  of  2.32%  of  GDP  in  2020.  Young 
and  innovative  firms  still  face  bottlenecks  in 
investing. In 2020, venture capital investment as a 
share of GDP stood at 0.015%, ranking below the 
EU  average.  Large  regional  disparities  remain  in 
the research and innovation performance. 

publications.  The  discontinuity  of  policies  to 
support  science-business  collaboration  over  the 
past  decade  has  constrained  efforts  to  address 
this  challenge.  The  investment  planned  under  the 
recovery  and  resilience  plan 
in  collaborative 
research  projects  together  with  the  competence 
centres  for  knowledge  exchanges  and  the  reform 
to  increase  researcher  mobility,  are  expected  to 
enhance  collaboration  and  knowledge  flows  in 
Italy’s research and innovation system. 

Italy’s 

hampers 

levels  of  public  and  private  R&D 
Low 
overall 
investment 
performance  on  innovation,  despite  some 
improvements on scientific excellence. Scarce 
job  opportunities  for  researchers  in  the  business 
and  public  sector  is  one  of  the  effects  of  low 
overall  R&D  investment.  Around  13%  of  Italian 
PhD students (many with a STEM background) find 
jobs  abroad  due  to  the  lack  of  jobs  and  low 
salaries  in  Italy. (35)  Consequently,  the  number  of 
in  science,  engineering  and 
new  graduates 
computing 
the  EU  average, 
increasing  problem  of  skills 
compounding  an 
shortages  for  innovation.  To  tackle  this  challenge 
and 
Italy’s  overall  performance,  the 
recovery  and  resilience  plan  includes  a  large 
budget for research, for skills development and for 
extending 
career 
opportunities,  targeting  also  young  researchers. 
Furthermore,  the  reform  of  researchers’  career 
path is expected  to  increase  the  attractiveness  of 
research  careers,  while  the  plan  to  simplify 
research funding is likely reduce red tape.  

the  number  and  PhDs’ 

remains  below 

improve 

The  low  level  of  collaboration  between  the 
public  science  base  and  the  business  sector 
is  a  major  bottleneck  in  Italy’s  R&I  system. 
Despite above-average public support for business 
R&D,  private  R&D  intensity  remains  low.  The 
quality  of  the  R&I  system  (estimated  by  the 
number of patents) has also remained well below 
the  EU  average.  This  altogether  suggests  weak 
business-science links, as evidenced by the below-
EU-average  share  of  public-private  scientific  co-

(34)  2021 European Innovation Scoreboard, Country profile: Italy 

https://ec.europa.eu/docsroom/documents/45921 

(35)  CNR - RELAZIONE SULLA RICERCA E L'INNOVAZIONE Terza 

edizione - 15 febbraio 2022 

42 

 
 
                                                 
 
 
Table A9.1:  Key research, development and innovation indicators 

Source: DG Research and Innovation - Common R&I Strategy and Foresight Service - Chief Economist Unit 
Data: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

43 

CompoundEUannual growthaverage2010-20R&D Intensity (GERD as % of GDP)1.221.341.421.461.532.42.32Public expenditure on R&D as % of GDP0.520.520.500.510.570.90.78Business enterprise expenditure on R&D (BERD) as % of GDP0.660.780.900.920.933.21.53Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 1010.811.1::1.39.9PCT patent applications per billion GDP (in PPS)1.92.22.0::0.73.5Public-private scientific co-publications as % of total publications7.088.218.408.267.730.889.05New graduates in science & engineering per thousand pop. aged 25-346.5:13.814.8:3.516.3Graduates in the field of computing per thousand population aged 25-340.4:0.80.9:8.92.9Total public sector support for BERD as % of GDP0.0510.1050.246::21.60.196R&D tax incentives: foregone revenues as % of GDP0.0040.0510.2000.162:49.70.100Share of environment-related patents in total patent applications filed under PCT (%)11.8  10.1 9.5: :  -2.7 12.8Venture Capital (market statistics) as % of GDP0.0070.0040.0070.0100.0157.00.054Employment in fast-growing enterprises in 50% most innovative sectors2.93.14.33.7:2.75.5Finance for innovation and Economic renewalKey indicators Quality of the R&I systemAcademia-business cooperationHuman capital and skills availabilityPublic support for business enterprise expenditure on R&D (BERD)Green innovation 2020ITALY2010201520182019 
 
  
 
ANNEX 10: INDUSTRY AND SINGLE MARKET 
ANNEX 10: INDUSTRY AND SINGLE MARKET 

Rising productivity growth is a critical driver 
of  economic  prosperity,  well-being  and 
economic  convergence  over  the  long  run. A 
major source of productivity for the EU economy is 
a  well-functioning  single  market  that  enables  fair 
and  effective  competition  and  a  business-friendly 
environment, 
in  which  small  and  medium 
enterprises  (SMEs)  can  operate  and  innovate 
without  difficulty.  Businesses  and  industry  rely 
heavily  on  robust  supply  chains  and  are  facing 
bottlenecks that bear a negative impact on firms’ 
productivity 
levels,  employment,  turnover  and 
entry/exit rates. This may affect Italy’s capacity to 
deliver on EU’s green and digital transformation. 

productivity 

performance 

Italy’s 
has 
stagnated  in  the  past  two  decades.  However, 
the poor performance of Italian productivity masks 
wide  sectoral,  firm-level  and  regional  differences, 
with  the  manufacturing  sector  overall  performing 
better  than  services,  and  less-developed  regions, 
particularly in the south, lagging behind. Italy’s RRP 
includes  a  number  of  measures  that  have  the 
potential  to  spur  increases  in  productivity  growth, 
in  capital 
including  incentives  for 
goods, R&D and innovation. 

investment 

set  of  safeguards  introduced  by  the  government. 
On public procurement, Italy’s overall performance 
remains  low,  performing  particularly  badly  in 
decision  speed  (217  days  vs  EU  average  of  120, 
Single  Market  Scoreboard).  The 
Italian  RRP 
includes  a  number  of  actions  that  aimed  to 
improve  the  business  environment  and  make  it 
more  business-friendly,  e.g.:  a  set  of  targets  to 
reduce of late payments by public administrations, 
support  firms  and  SMEs,  simplify  procedures  and 
cut red tape, as well as a comprehensive reform of 
the public procurement framework. 

In  2020  and  2021,  the  Italian  economy  has 
also  been  affect  by  a  number  of  global 
trends ensuing the pandemic, such as supply 
chain disruptions and the steep rise in energy 
prices.  Despite  higher-than-average  reliance  on 
domestic 
in 
retrieving  key  materials  and  skills  shortages 
increased  for  Italian  firms  in  2021.  Similarly, 
increases  in  industrial  energy  prices  were  among 
the highest in the EU which put an additional drag 
on the competitiveness of the Italian economy. 

inputs,  constraints 

intermediate 

to 

which 

instance, 

featuring 

the 
persist 

reflects 
Poor  productivity  growth  also 
business 
challenges 
related 
environment, 
despite 
improvements over the past decade. The level 
of  restrictiveness  in  the  regulation  of  professions, 
is  comparatively  high,  with  six 
for 
professions 
above-median 
restrictiveness  levels  in  2021  (against  the.  EU 
average  of  3.37) (36).  Firms’  access  to  finance 
remains constrained by an over-reliance on bank-
finance  and  by 
the  underdevelopment  of 
alternative sources of finance (e.g. venture capital, 
in  both 
business  angels).  Late  payments 
government-to-business  and  business-to-business 
transactions 
liquidity 
impair 
management  –  despite  improvements  in  recent 
years. Regarding business demographics, although 
the  number  of  new  companies  registered  has 
fallen  in  recent  years,  and  particularly  during  the 
pandemic,  bankruptcies 
remained 
significantly  below  the  EU  average,  reflecting  the 

in  2020 

firms’ 

still 

(36)  SWD(2021) 185 final “Commission Staff Working Document, 
accompanying the document Communication from the 
Commission to the European Parliament, the Council, the 
European Economic and Social Committee and the 
Committee of the Regions, on taking stock of and updating 
the reform recommendations for regulation in professional 
services of 2017”, p. 118 

44 

 
 
                                                 
 
Table A10.1:Key Single Market and Industry Indicators 

(Continued on the next page) 

45 

SUB-POLICY AREAINDICATOR NAMEDESCRIPTION20212020201920182017Growth ratesEU27 average*Value added by source (domestic)VA that depends on domestic intermediate inputs, % [source: OECD (TiVA), 2018]76.9162.6%Value added by source (EU)VA imported from the rest of the EU, % [source: OECD (TiVA), 2018]11.3319.7%Value added by source (extra-EU)% VA imported from the rest of the world, % [source: OECD (TiVA), 2018]11.817.6%Cost competitivenessProducer energy price (industry)Index (2015=100) [source: Eurostat, sts_inppd_a]12291.4106.1107.698.324.1%127.3Material Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]81122300%26%Labour Shortage using survey dataAverage (across sectors) of firms facing constraints, % [source: ECFIN CBS]21211100%14%Sectoral producer pricesAverage (across sectors), 2021 compared to 2020 and 2019, index [source:Eurostat]5.1%5.4%Concentration in selected raw materialsImport concentration a basket of critical raw materials, index [source: COMEXT]0.160.140.160.180.21-24%17%Installed renewables electricity capacity Share of renewable electricity to total capacity, % [source:Eurostat, nrg_inf_epc]50.3049.3048.8048.105%Net Private investmentsChange in private capital stock, net of depreciation, % GDP [source: Ameco]-1.10.70.90.5-320.0%2.6%Net Public investmentsChange in public capital stock, net of depreciation, % GDP [source: Ameco]-0.4-0.4-0.6-0.6-33%0.4%Investment dynamicsHEADLINE INDICATORSEconomic structureRESILIENCEShortages/supply chain disruptionsStrategic dependencies 
 
 
  
 
Table (continued) 

(*) latest available 
Source: See above in the table the respective source for each indicator in the column "description". 

46 

Single Market integrationIntra-EU tradeRatio of Intra-EU trade to Extra-EU trade, index [source: Ameco]1.201.191.171.161.163%1.59Professional services restrictivenessRegulatory restrictiveness indicatorRestrictiveness of access to and exercise of regulated professions (professions with above median restrictiveness, out of the 7 professions analysed in SWD (2021)185 [source: SWD (2021)185; SWD(2016)436 final])6   60%3.37Professional qualifications recognitionRecognition decisions w/o compensationProfessionals qualified in another EU MS applying to host MS, % over total decisions taken by host MS [source: Regulated professions database]9.645%Transposition - overall5 sub-indicators, sum of scores [source: Single Market Scoreboard]On averageAboveBelow averageOn averageInfringements - overall4 sub-indicators, sum of scores [source: Single Market Scoreboard]Below averageBelow averageBelow averageOn averageInvestment protectionConfidence in investment protectionCompanies confident that their investment is protected by the law and courts of MS if something goes wrong, % of all firms surveyed [source: Flash Eurobarometer 504]5756%BankruptciesIndex (2015=100) [source: Eurostat, sts_rb_a]51.575.575.881-36.4%70.1 (2020)Business registrationsIndex (2015=100) [source: Eurostat, sts_rb_a]77.794.790.891.7-15.3%105.6Late paymentsShare of SMEs experiencing late payments in past 6 months, % [source: SAFE]46.658.256.9n.a.n.a.-18%4500%EIF Access to finance index - LoanComposite: SME external financing over last 6 months, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.920.850.80.7424.0%0.56 (2020)EIF Access to finance index - EquityComposite: VC/GDP, IPO/GDP, SMEs using equity, index from 0 to 1 (the higher the better) [source: EIF SME Access to Finance Index]0.090.120.10.12-21.2%0.18 (2020)% of rejected or refused loansSMEs whose bank loans’ applications were refused or rejected, % [source: SAFE]3.24.66.65.23.3-3.8%12.4%SME contractorsContractors which are SMEs, % of total [source: Single Market Scoreboard]7364726414.1%63%SME bidsBids from SMEs, % of total [source: Single Market Scoreboard]62666367-7%70.8%Public procurement SINGLE MARKETCompliance - cooperation EC and MSBUSINESS ENVIRONMENT - SMEsBusiness demographyAccess to finance 
 
  
 
ANNEX 11: PUBLIC ADMINISTRATION 
ANNEX 11: PUBLIC ADMINISTRATION 

capacity 

administrative 

Good 
enables 
economic  prosperity,  social  progress  and 
fairness. Public administrations at all government 
levels deliver crisis response, ensure the provision 
of  public  services  and  contribute  to  building 
resilience  for  the  sustainable  development  of  the 
EU economy.  

Graph A11.1: E-government benchmark scores (lhs) 
and e-government users (rhs) 

Source: Eurostat (ICT use survey) and E-government 
benchmark report 

of 

the 

Italy ranks below the EU average in terms of  
effectiveness 
public 
administration. (37)    Italy  ranks  in  the  bottom 
third  for  the  provision  of  digital  public  services 
(60.9  score  in  the  e-government  benchmark  vs 
70.9  EU  average,  Graph  A11.1).  Factors  that  slow 
down  the  effectiveness  of  e-government  include 
complex  governance  of  the  digitalisation  process, 
low digital skills, low quality of ICT equipment and 
limited  usage.  Consequently,  Italy's  recovery  and 
resilience plan provides for significant reforms and 
investments  to  boost  the  digitalisation  of  public 
administrations 
administrative 
procedures.  

simplify 

and 

Italy’s  administrative  capacity  remains  a 
challenge especially at local level. Italy has a 
lower  share  of  civil  servants  with 
tertiary 
limited 
education  than  the  EU  average.  The 
investment  in  training  hinders  upskilling.  With 
about half of the staff set to retire in the next 15 
years, the Italian public sector workforce is one of 
the  oldest  (34.1 %  of  workers  are  in  the  55-74 
age range). The recovery and resilience plan aims 

(37)  Worldwide Governance Indicators, 2020. 

47 

to  boost  the  skills  of  civil service  and its  capacity 
by  revising  the  selection  procedures  and  career 
paths as part of a comprehensive reform of public 
employment,  and  through  upskilling  and  reskilling 
measures.  

Market 

Scoreboard’s 

Despite  some  improvement  in  recent  years, 
Italy  keeps  ranking  at  the  bottom  on  the 
public 
Single 
procurement  indicator.  This  is  due  to  broad 
underperformance  across  multiple  measures 
tracking the transparency, competition and quality 
of  information  in  procurement  (see  Graph  A11.2). 
The recovery and resilience plan contains reforms 
of public procurement and late payments by public 
administrations.   

Graph A11.2: Performance on the single market 
public procurement indicator 

(1) The competition and transparency indicators are triple-
weighted, whereas the efficiency and quality indicators have 
unitary weights. All others receive a 1/3 weighting in the SMS 
composite indicator.  
Source: Single market scoreboard 2020 data 

Italy  scores  highly  on  selected  indicators 
measuring  government  transparency  and 
oversight  institutions.  Italy  ranks  mid-third  of 
the  EU-27  for  open  data.  Public  information  is 
freely available at no charge under the Freedom of 
Information Act. 

However, there are challenges concerning the 
efficiency  and  quality  of  the  justice  system. 
The  time  needed  to  resolve  civil  and  commercial 
legal cases showed an increase at all instances in 
2020  and  is  well  above  the  EU-27  average.  The 
temporary  slowdown  of  judicial  activity  due  to 
severe restrictive measures to address the COVID-
19 pandemic in 2020 impacted on both incoming 
and  resolved  cases  with  a  strong  influence  on 

01020304050607080ITEU27averageITEU27averageUser centricityTo obtain informationTransparencyTo download official formsKey EnablersTo submit completed formsCross-border servicesE-governmentbenchnark scoreE-government users 
 
  
 
                                                 
 
 
Table A11.1:Public administration indicators 

(1) High values stand for good performance barring indicators # 7 and 8. 
(2) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the 
existence of key enablers for the provision of those services. 
(3) Break in the series in 2021. 
(4) Defined as the absolute value of the difference between the share of men and women in senior civil service positions. 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Fiscal Governance 
Database (# 4, 9, 10); Labour Force Survey, Eurostat (# 5, 6, 8), European Institute for Gender Equality (# 7), Single Market 
Scoreboard public procurement composite indicator (# 11); OECD Indicators of Regulatory Policy and Governance (# 12).  

to 

the 

reduce  substantially 

disposition  time.  However,  the  upcoming  reforms 
aim 
length  of 
proceedings  and  the  backlog  of  cases.  Although 
overall  the  quality  of  the  justice  system  is  good, 
the  use  of digital  tools in  courts  remains  an  area 
for  improvement.  Projects  are  planned  to  boost 
digitalisation  under  the  recovery  and  resilience 
judicial 
plan.  No  systemic  deficiencies  on 
independence have been reported. (38) 

(38)  For more detailed analysis of the performance of the justice 

system in Italy, see the 2022 EU Justice Scoreboard (forthcoming) 
and the country chapter for Italy of the Commission’s 2022 Rule of 
Law Report (forthcoming) 

48 

IT20172018201920202021EU27133.032.030.036.036.070.72nananana60.970.93nananana92.081.1474.374.374.374.3na56.8526.828.429.330.232.155.369.810.29.88.814.818.670.60.40.40.40.50.3831.633.134.935.134.121.390.780.780.780.82na0.72102.52.52.52.5na1.511-6.3-3.3-3.3-3.3na-0.7122.45nana2.55na1.7E-government Public Financial Management Evidence-based policy makingIndicator (1)Medium term budgetary framework indexStrength of fiscal rules indexPublic procurement composite indicatorShare of individuals who used internet within the last year to interact with public authorities (%)2021 e-government benchmark´s overall score (2) 2021 open data maturity indexScope Index of Fiscal InstitutionsShare of public administration employees with tertiary education, levels 5-8  (3)Index of regulatory policy and governance practices in the areas of stakeholder engagement, Regulatory Impact Assessment (RIA) and ex post evaluation of legislation Educational attainment level, adult learning, gender parity and ageingOpen government and independent fiscal institutionsParticipation rate of public administration employees in adult learning (3)Gender parity in senior civil service positions (4)Share of public sector workers between 55 and 74 years (3) 
                                                 
 
  
 
FAIRNESS 
FAIRNESS 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

Table A12.1:Social Scoreboard for Italy 

(1) Update of 29 April 2022. Members States are classified on 
the Social Scoreboard according to a statistical methodology 
agreed with the EMCO and SPC Committees. It looks jointly at 
levels and changes of the indicators in comparison with the 
respective EU averages and classifies Member States in seven 
categories. For methodological details, please consult the 
Joint Employment Report 2022. Due to changes in the 
definition of the individuals' level of digital skills in 2021, 
exceptionally only levels are used in the assessment of this 
indicator; NEET: neither in employment nor in education and 
training; GDHI: gross disposable household income. 
Source: Eurostat 

The European Pillar of Social Rights provides 
for  upward  convergence 
the  compass 
towards better working and living conditions 
in the EU. The implementation of its 20 principles 
on  equal  opportunities  and  access  to  the  labour 
market,  fair  working  conditions,  social  protection 
and inclusion, supported by the 2030 EU headline 
targets  on  employment,  skills  and  poverty 
reduction, will strengthen the EU’s drive towards a 
digital,  green  and  fair  transition.  This  Annex 
provides  an  overview  of 
in 
achieving  the  goals  under  the  European  Pillar  of 
Social Rights. 

Italy’s  progress 

in 

labour  market 

The 
Italy  has  been 
recovering strongly, while the labour market 
participation of women, youth and vulnerable 
groups remains a challenge. At 62.7% in 2021, 
Italy’s  employment  rate  of  people  aged  20-64  is 
below  the  EU  average  (73.1%).  The  employment 
rate  of  women  in  the  same  age  group  is  low 
(53.2%  in  2021),  creating  a  gender  employment 
gap that is among the highest in the EU (19.2 pps 
against the average of 10.8 pps), though with wide 
regional  differences.  The  provision  of  formal 
childcare  for  children  under  the  age  of  three  is 
significantly  below  the  EU  average  (26.3%  vs 
35.3% in the EU in 2019), which undermines equal 
opportunities  and  work-life  balance.  The  share  of 
young  people  not  in  employment,  education  or 
training  (NEET)  aged  15-29  (23.1%)  was  the 
highest in the  EU in  2021  (EU  average  is  13.7%). 
The labour market conditions worsened for people 
with a non-EU migrant background: between 2019 
and 2021, the employment rate of non-EU citizens 
aged  20-64  fell  from  63.7%  to  60.3%  (against  a 
more  limited  decrease  from  63.4%  to  62.9%  for 
nationals). 
job  market  also  differs 
substantially  by  region,  with  employment  rates 
varying  between  72.3%  in  the  north-east,  48.9% 
in  the  south  and  47.7%  in  the  islands.  The 
recovery  and 
includes 
resilience  plan 
measures to help women, young people and other 
under-represented  groups  find  jobs.  Based  on  the 
Commission’s analysis, the 2022 personal  income 
tax  reform  is  expected  to  increase  labour  supply, 
with  women  estimated  to  experience  the  highest 
increase  in  working  hours.  The  effectiveness  of 
public  employment  services  remains  a  concern. 
Italy  had  one  of  the  lowest  shares  in  the  EU  of 
unemployed  people  using  the  public  employment 
services to find a job (18.7% compared to 42.5%), 
as well as one of the lowest rates of coverage of 
the  NEET  population  by  the  Youth  Guarantee 
(11.2%).    Undeclared  work  remains  a  significant 
challenge, despite some recent improvements.  

Italy’s 

(RRP) 

The  high  school  drop-out  rate  and  the  low 
level of digital skills and of adults enrolled in 
learning  pose  major  challenges  to  Italy.  The 
proportion  of  early  leavers  from  education  and 
training  remains  well  above  the  EU  average 
(12.7% vs 9.7% in the EU in 2021, see Annex 13). 
Challenges remain as regards inclusiveness of and 
access  to  education  for  persons  with  disabilities. 
recent  vocational 
rate  of 
The  employment 

49 

12.746.023.119.25.862.79.55.492.224.928.921.014.97.2Critical situationTo watchWeak but improvingGood but to monitorOn averageSocial Scoreboard for ITALYEqual opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24) (2021)Youth NEET(% of total population aged 15-29) (2021)Gender employment gap (percentage points) (2021)Income quintile ratio (S80/S20) (2020)Individuals' level of digital skills (% of population 16-74) (2021)Dynamic labour markets and fair working conditionsSocial protection and inclusionAt risk of poverty or social exclusion for children (in %) (2020)Disability employment gap (ratio) (2020)Better than averageAt risk of poverty or social exclusion (in %) (2020)Employment rate(% population aged 20-64) (2021)Unemployment rate(% population aged 15-74) (2021)Long term unemployment(% population aged 15-74) (2021)GDHI per capita growth (2008=100) (2020)Best performersImpact of social transfers (other than pensions) on poverty reduction (% reduction of AROP) (2020)Children aged less than 3 years in formal childcare (% of under 3-years-olds) (2020)Self-reported unmet need for medical care (2020)Housing cost overburden (% of population) (2020) 
 
 
 
 
  
 
 
 
 
To 

foster 

non-standard  workers. 
equal 
opportunities and social inclusion, measures in the 
RRP  will  be  complemented  by  other  measures 
under  the  European  Social  Fund  Plus  (ESF+). 
Strengthening  social  safety  nets  and  access  to 
social services across all regions is key for Italy to 
reach the EU’s headline target for 2030 on poverty 
reduction.  

education and training graduates (53.9%) remains 
below  the  pre-crisis  levels  and  is  among  the 
lowest  in  the  EU  in  2021  (EU  average  is  76.4%).  
With    support  from  the  recovery  and  resilience 
facility,  the  government  is  expanding  the  offer  of 
tertiary  vocational  education  and  is  simplifying 
access for graduates to a range of professions. In 
2021, 46% of Italy’s population had at least basic 
digital skills (54% in the EU, see Annex 8) and only 
23% had more advanced digital skills (26% in the 
EU).    To  increase  the  level  digital  skills  the  RRP 
supports  ‘digital  civic  service  projects’  and  tax 
breaks  for  digital  skills  for  companies,  while  the 
RRP-supported  Guaranteed  Employability  of 
Workers  and  the  National  Plan  for  New  Skills 
consider  digital  skills  as  a  cross-cutting  priority. 
Participation  in  adult  learning  over  the  past  four 
weeks  increased  strongly  (from  8.1%  in  2019  to 
9.9%  in  2021),  but  remained  below  the  EU 
average  of  10.8%.  It  is  essential  for  Italy  to 
improve  the  quality,  inclusiveness  and  labour 
market  relevance  of  education  and  training  at  all 
levels for it to reach the EU’s headline targets for 
2030 on skills and employment. 

Though  the  poverty  rate  had  started  to  fall, 
the  pandemic  may  hinder  the  gains  made. 
Despite improvements, in 2020 the rate of people 
at  risk  of  poverty  or  social  exclusion  was  still 
above the EU average (24.9% vs 21.6% in the EU). 
It is among the highest in the EU for children and 
also  relatively  high  for  people  with  disabilities. 
According  to  national  data,  poverty  measured  in 
absolute  terms  rose  in  2020. (39)  The  introduction 
of  a  universal  child  allowance  that  substitutes 
previous  measures  is  expected  to  improve  the 
functioning  of 
the  social  safety  net  while 
supporting  parenting  and,  possibly,  increasing  the 
birth 
scheme 
in  2019  (Reddito  di  Cittadinanza) 
introduced 
increased the adequacy of minimum income from 
21.9% of the poverty threshold in 2018 to 90.7% 
in  2019.  However, 
in 
purchasing  power  and  the  lack  of  outreach  to 
vulnerable  groups,  including  non-Italian  residents 
and larger households, could reduce the scheme’s 
impact on poverty reduction. The poverty-reduction 
impact  of  social  benefits  (excluding  pensions),  is 
one  of  the  lowest  in  the  EU  (21%  versus  EU 
average  of  33.2%).  There  are  gaps  in  access  to 
social  protection  for  the  self-employed  and  some 

rate.  The  minimum 

regional  differences 

income 

(39)  Source: ISTAT, 2020, 

https://www.istat.it/it/files/2021/06/REPORT_POVERTA_2020.
pdf. 

50 

 
                                                 
 
ANNEX 13: EDUCATION AND SKILLS 
ANNEX 13: EDUCATION AND SKILLS 

This Annex outlines the main challenges for Italy’s 
education  and  training  system  in  light  of  the  EU-
level  targets  of  the  European  Education  Area 
strategic 
contextual 
framework  and  other 
indicators,  based  on  the  analysis  from  the  2021 
Italian 
Education  and  Training  Monitor.  The 
education system struggles to overcome a number 
of  structural  challenges  and  marked  regional 
differences. Italy  lags well behind the EU average 
and the EU-level targets in terms of early leavers 
from  education  and 
tertiary 
educational  attainment,  resulting  in  low  levels  of 
human capital. 

training,  and 

Graph A13.1: Early leavers from education and 
training, 2015-2020 (%) 

Source: Eurostat, edat_lfse_14 

Despite  continued  improvements  over  the 
past  10  years,  the  proportion  of  early 
leavers from education and training remains 
well  above  the  EU  average.  In  2020  the  rate 
among  18-24  year-olds  was  13.1%,  down  0.4  pp 
since  the  previous  year  but  still  well  above  both 
the  EU  average  of  10.1%  and  the  new  EU-level 
target of 9% or less by 2030 (Graph A13.1).  

Making up for learning losses incurred during 
the  COVID-19  pandemic  could  pose  a 
significant  challenge.  The  2021  round  of 
standardised  national  student  testing  (INVALSI) 
showed  an  average  drop  in  performance  among 
thirteenth-grade students of 10 pps in Italian and 
maths.  In  addition,  the  proportion  of  thirteenth-
graders who completed upper secondary education 
with  below-grade-ten  skills  (dispersione  implicita, 
or  ‘implicit’  school  drop-out)  rose  from  7.5%  in 

2019  to  9.5%  in  2021,  with  peaks  of  between 
15% and 22.4% in southern regions. (40) 

The  gaps  in  student  achievement  between 
regions  and  between  socio-economic  groups 
have widened. Disadvantaged students lost twice 
as much learning as their more advantaged peers. 
In  many  regions,  over  half  the  students  fail  to 
reach  the  minimum  competence  level  in  Italian 
and maths.  

Italy  reports  both  teacher  shortages  and 
oversupply,  depending  on  the  subject  and 
geographical  area,  suggesting  inefficiencies 
in the selection and recruitment mechanisms. 
Bottlenecks  in  recruitment  result  in  an  ageing 
teacher workforce, with a particularly low share of 
teachers under 35 and a high share of teachers on 
temporary,  short-term  contracts.  The  government 
plans  to  adapt  teacher  selection  and  recruitment 
systems  by  redesigning  competition  procedures 
and  strengthening  the  initial  one-year  on-the  job 
training.  

Though  it  has  risen  steadily,  Italy’s  tertiary 
educational attainment rate continues to lag 
significantly  behind  the  rest  of  the  EU.  In 
2021  the  share  of  25-34  year-olds  with  tertiary 
educational  attainment  was  the  second-lowest  in 
the EU, at 28.3%, well below both the EU average 
of 41.2% and the new EU-level  target  of at least 
45%  by  2030.  Tertiary  attainment  is  particularly 
low  among  the  foreign-born  population,  at  12.6% 
against  the  EU  average  of  34.7%.  Women  are 
more  likely  to  hold  a  tertiary  qualification  than 
men  with  a  larger-than-average  gender  gap  in 
their  favour  (12.1  pps  vs  EU  11.1  pps).  Women 
also made up 38.9% of total STEM graduates, well 
above the  32.3%  EU  average.  Disadvantaged  and 
vocational  education  students  are  increasingly 
under-represented  in  higher  education,  as  family 
background exerts a growing influence on tertiary 
educational attainment. 

Effective  implementation  of  Italy’s  national 
recovery  and  resilience  plan  could  help 

(40)  For a discussion of the broad impacts of Covid-19 on 

education see Di Pietro, G., Biagi, F., Dinis Mota Da Costa, P., 
Karpinski, Z. and Mazza, J., The likely impact of COVID-19 on 
education: Reflections based on the existing literature and 
recent international datasets, EUR 30275 EN, Publications 
Office of the European Union, Luxembourg, 2020, ISBN 978-
92-76-19937-3, doi:10.2760/126686, JRC121071. 
https://publications.jrc.ec.europa.eu/repository/handle/JRC121
071 

51 

57911131517201520162017201820192020%EUItaly 
 
  
                                                 
 
these 

address  several  of 
longstanding 
structural  challenges.  Italy’s  plan  envisages  a 
series  of  substantial  reforms  and  investments  to 
strengthen  the  education  and  training  offer  and 
improve quality at all levels,  from early childhood 
education  and  care  to  higher  education,  and  to 
reduce regional disparities. 

Table A13.1:EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

(1) The 2018 EU average on PISA reading performance does not include ES; Data are not yet available for the remaining EU-level 
targets under the European Education Area strategic framework, covering underachievement in digital skills, exposure of 
vocational education and training graduates to work based learning and participation of adults in learning 
Source: Eurostat (UOE, LFS) 

52 

96%94.9%91.9%93.6%201992.8%2019Reading< 15%21.0% 20.4%23.3%201822.5%2018Mathematics< 15%23.3% 22.2%23.8%201822.9%2018Science< 15%23.2% 21.1%25.9%201822.3%2018< 9 %14.7%11.0%12.7%9.7%Men17.5%12.5%14.8%11.4%Women11.8%9.4%10.5% 7.9%Cities14.8%9.6%13.8% 8.7%Rural areas15.2%12.2%11.0%10.0%Native12.7%10.0%10.7%8.5%EU-born26.4%20.7%21.5% 21.4%Non EU-born33.0%23.4%34.7% 21.6%45%25.2%36.5%28.3%41.2%Men19.4%31.2%22.3%35.7%Women31.0%41.8%34.4%46.8%Cities30.0%46.2%34.1%51.4%Rural areas21.3%26.9%23.2%29.6%Native28.0%37.7%31.5%42.1%EU-born13.0%32.7%13.2%40.7%Non EU-born12.7%27.0%12.6%34.7%57.2% 38.3%53.3%201938.9%201920152021IndicatorTargetItalyEU27ItalyEU27Participation in early childhood education (age 3+)Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)TotalBy genderBy degree of urbanisationBy country of birthTertiary educational attainment (age 25-34)TotalBy genderBy degree of urbanisationBy country of birthShare of school teachers (ISCED 1-3) who are 50 years or over 
 
  
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

Especially  relevant  in  light  of  the  ongoing 
COVID-19 pandemic, resilient healthcare is a 
prerequisite  for  a  sustainable  economy  and 
society.  This  Annex  provides  a  snapshot  of  the 
healthcare sector in Italy.  

related to disparities in access to and in the quality 
of care across regions. Residents in poorer regions 
in the south are more than twice as likely to report 
unmet  medical  care  needs  as  those  living  in 
wealthier regions in the north of the country. 

As set out in its recovery and resilience plan, 
Italy  plans  to  invest  EUR  16  293  million 
(8.51%  of  the  total  RRP)  to  upgrade  the  national 
healthcare  service,  address  geographical  health 
coverage  and  bolster  the  research  sector,  notably 
to  promote  digitalisation.  A  significant  share  of 
investments  is  also  planned  for  upskilling  health 
staff.  

Graph A14.2: Projected increase in public spending 
on health care over 2019-2070 (reference 
scenario) 

Source: European Commission (Directorate-General for 
Economic and Financial Affairs) and Ageing Working Group 
(Economic Policy Committee), The 2021 Ageing Report: 
Economic & Budgetary Projections for the EU Member States 
(2019-2070) 

Graph A14.1: Life expectancy at birth, years 

Source: Eurostat database 

Life  expectancy  at  birth  in  Italy  is  higher 
than in the EU as a whole, but fell in 2020 by 
almost  16  months  due  to  COVID-19  (Graph 
A14.1).  As  of  17  April  2022,  Italy  has  reported 
2.71  cumulative  COVID-19  deaths  per  1  000 
inhabitants and confirmed 263 cumulative COVID-
19  cases  per  1  000  inhabitants.  Italy  fares 
comparatively  very  well  in  avoiding  deaths  from 
treatable causes, which is also reflected in its low 
cancer mortality. 

Health spending relative to GDP in Italy was 
below  the  EU  average  in  2019.  Despite  being 
lower  than  the  EU  average,  the  share  of  public 
spending  on  health  ensures  good  universal  public 
primary  care.  Italy  spends  more  than  the  EU 
average  on  prevention  measures,  but  is  also  a 
relatively  high  spender  on  pharmaceuticals  and 
inpatients  (unweighted  average).  With  an  ageing 
population,  the  public  spending  on  health  is 
projected  to  increase  by  1.2  percentage  points 
(pps) of GDP by 2070 (compared to 0.9 pps for the 
EU) (41), raising concerns about the long-term fiscal 
sustainability  of  its  healthcare  system  (Graph 
A14.2). 

Italy  has  significant  regional  inequalities  in 
life expectancy with a gap between northern 
and  southern  regions  of  almost  three  years 
(before  the  pandemic).  This  can  be  closely 

(41)  “The 2021 Ageing Report: Economic and Budgetary 

Projections for the EU Member States (2019-2070)”, 
European Commission (ECFIN) and Ageing Working Group 
(EPC). 

53 

80.980.981.81.380.483.483.183.483.682.320162017201820192020EUItaly6.65.90.91.202468EUItaly% of GDP20192070increase 
 
  
                                                 
  
 
 
Table A14.1:Key health indicators 

(1)  Doctors' density data refer to practising doctors in all countries except FI, EL, PT (licensed to practice) and SK (professionally 
active). Nurses' density data refer to practising nurses in all countries (data from 2014 for FI) except IE, FR, PT, SK (professionally 
active) and EL (nurses working in hospitals only). 
Source: Eurostat Database; except: * Eurostat Database and OECD, ** ECDC 

54 

20162017201820192020EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)66.766.564.963.792.1 (2017)Cancer mortality per 100 000 population241.0237.9234.7230.9252.5 (2017)Current expenditure on health, % GDP 8.78.78.78.79.9 (2019)Public share of health expenditure, % of current health expenditure74.473.773.873.979.5 (2018)Spending on prevention, % of current health expenditure 4.24.44.64.72.8 (2018)Acute care beds per 100 000 population262.1262.5258.5259.8387.4 (2019)Doctors per 1 000 population *4.04.04.04.13.8 (2018)Nurses per 1 000 population *5.65.85.76.28.2 (2018)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day **21.819.019.519.816.514.5 (2020) 
 
 
  
 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

is  an 

The  regional  dimension 
important 
factor  when  assessing  economic  and  social 
developments  in  Member  States.  Taking  into 
account  this  dimension  enables  a  well-calibrated 
and targeted policy response that fosters cohesion 
and  ensures  sustainable  and  resilient  economic 
Regional 
development 
disparities  remain  significant 
Italy  with  a 
noticeable  difference  between  northern  and 
southern regions.  

regions. 
in 

across 

all 

Graph A15.1: Labour productivity, EU-27, Italy 
NUTS 2 regions, 2000-2019 

Unit: real GVA in MM EUR (2015 prices) by employment in 
thousands of persons 
Source: European Commission 

In  Italy,  the  process  of  convergence  is 
stalling  and  strong  regional  disparities 
persist. Over the last two decades, GDP per capita 
compared  to  the  EU  average  decreased  and 
productivity stagnated in all Italian regions, except 
the  autonomous  province  of  Bolzano,  and  the 
Italian  GDP  per  head  (PPS)  by  now  is  lower  than 
the  EU  average.  The  gaps  between  southern 
regions and average EU levels in terms of GDP per 
capita  and  productivity  are  widening.  Within  the 
country, 
to  be 
regional  disparities  continue 
significant  and  there  is  a clear  downward  drift  of 
transition 
more  developed 
regions  (Umbria,  Marche)  and  transition  regions 
becoming 
(Sardinia, 
Molise).  Stagnation  in  the  southern  regions  is 
driven by loss of human capital, poor performance 
of  the  business  system,  limited  quality  of  public 
services  and,  in  some  cases,  low  infrastructure 
endowments (water, waste, and regional railways). 

regions  becoming 

less  developed 

regions 

The  country  as  a  whole  is  losing  ground 
compared  to  the  EU  average  in  terms  of 
disparities 
development, 
spanning  the  North-South  divide  are  deep 
and growing. Between 2010 and 2019, Italy has 
steadily  lost  ground  in terms  of GDP per  head  (in 

regional 

and 

PPS)  compared  to  the  EU27  average,  decreasing 
from 106% to 95%, continuing the trend observed 
during  the  previous  decade.  In  2019,  a  third  of 
Italian regions (seven out of 21) had GDP per head 
lower  than  75%  of  EU  average.  They  are  all 
located  in  the  southern  and  island  areas  of  the 
country.  Calabria  and  Sicily  are  the  poorest 
regions, with GDP per head below 60% of the EU 
average, closely followed by Campania and Apulia 
just  slightly  above  60%.  In  2010,  those  four 
poorest  regions  were  below  75%  of  EU  average, 
while  in  2000  only  Calabria  was.  This  reveals  a 
of 
long-standing, 
development in the southern regions in particular, 
but also extending to central regions in transition. 

deterioration 

progressive 

In 2021, the economic recovery was stronger 
in  northern  regions  than  in  the  rest  of  the 
country (42),  confirming  a  phenomenon  visible 
also  after  the  2008/09  financial  crisis.  Each  cycle 
of downturn and recovery leaves the south lagging 
further  behind.  The  economy  in  the  industrial 
sector,  localised  largely  in  northern  Italy,  surged 
back  in  2021,  while  many  small  businesses, 
especially in the south, saw a fall in value added. 
The 
in  2021, 
especially in the south, but had returned to normal 
levels by August 2021. 

layoff  rate  rose  only  slightly 

(42)  Bank of Italy, quarterly indicator of the regional economy 

(ITER) 

55 

 
 
 
                                                 
 
intercept  growth  trends  in  dynamic  and  advanced 
sectors. All Italian areas lag behind the EU average 
in terms of digitisation, especially on digital skills, 
with 
and 
communication technology specialists and a lower 
use of digital technologies in production processes, 
especially in the south. 

information 

shares 

lower 

of 

The  administrative  and  technical  capacity  of 
the  public  administration  remains  a  challenge, 
especially  in the  south.  This is  shown by  the  poor 
performance  of  public  investments  in  sectors 
the 
competence 
under 
environment, energy and local public transport. 

such  as 

regional 

Labour  market  conditions  differ  greatly 
between  the  more  and  less  developed  areas 
of the country with a persistent North-South 
divide.  The  unemployment  rate  in  2020  was  on 
average two and half times higher in southern and 
island  regions  than in  the  north,  with  double-digit 
figures  in  Calabria,  Campania,  Sicily,  Apulia  and 
Sardinia. 
face 
developed 
depopulation,  due  to  lower  birth  rates  and  the 
migration of young and skilled people to northern 
Italy  and  the  rest  of  Europe,  creating  structural 
growth  bottlenecks.  The  employment  rate  (ages 
20-64)  is  aligned  with  the  EU  average  at  around 
72%  in  the  north  of  the  country  but  over  20 
percentage  points 
in  the  south,  with 
Campania, Calabria and Sicily below 50%. 

regions 

lower 

Less 

The  COVID-19  pandemic  affected  all  regions 
in  socio-economic  terms,  but  to  a  different 
degree.  Although  the  unemployment  rate  fell  in 
most  regions  as  well  as  nationwide  in  2020 
compared to 2019, mostly linked to the rise in the 
number  of  inactive  people,  the  employment  rate 
(ages  20-64)  decreased  on  average  by  2.5 
percentage  points  compared  to  what  would  be 
expected  based  on  the  2015-2019  trend  in  the 
four  regions  with  the  highest  rate  of  excess 
mortality (Piedmont, the Autonomous Provinces of 
Trento  and  Bolzano  and  Lombardy).  In  the  four 
regions  with  the  lowest  rate  of  excess  mortality, 
the  employment  rate  fell  by  only  around  one 
percentage point. 

Graph A15.2: Areas most affected by the climate 
transition in Italy 

Source: European Commission 

Some  Italian  areas  stand  out  in  terms  of 
their greenhouse gas (GHG) intensity in their 
industry, or their dependence on fossil fuels, 
even though at country level Italy performs well in 
relative  terms  on  GHG  emissions  intensity  (222g 
per euro, compared to the EU average of 282g per 
euro).  The  climate  transition  challenges  in  the 
Taranto  area  and  in  the  mining  area  of  Sulcis,  in 
Sardinia,  and  especially 
their  employment 
dimension  are  particularly  acute  (Graph  A15.1). 
During  the  pandemic,  many  businesses  in  Italy 
slowed down or even suspended green investment. 
Postponed  investment  was  mainly  in  the  south, 
while  in  the  north  it  was  more  a  question  of 
scaling back the planned green investment.  

There  are  several  factors  explaining  the 
trends  of  widening  regional  disparities.  In 
recent  years,  at  national  level,  the  share  of  the 
population aged 30-34 with a tertiary degree is 12 
percentage  points  lower  than  the  EU-27  average 
(at 27.4% against 39.4%). The regional gap within 
the  country  is  also  marked,  with  less  developed 
regions  at  22.6%,  and  more  developed  regions  in 
the  north  at  around  30%.  Employment  in  high 
technology sectors, as well as spending on R&D in 
the  business  sector  are  both  significantly  lower 
than  the  EU27  average  nationwide.  In  southern 
regions,  they  are  between  50%  and  40%  of  the 
levels reached in the north. All those factors point 
consistently  to  the  country’s  limited  capacity, 
less  developed  regions,  to 
particularly  in 

its 

56 

 
 
Table A15.1:Italy, selected indicators at regional level 

Source: Eurostat, EDGAR database 

57 

NUTS 2 RegionGDP per head (PPS)GDP (mln of PPS)Productivity (GVA (PPS) per person employed)Population growthNet migrationPopulation with high educational attainmentR&D expenditureGross Fixed Capital FormationRegional Competitiveness IndexEU27=100, 20192019EU27=100, 2018Total % change, 2011-2019Total % change, 2011-2019% of population aged 30-34, 2017-2019% of GDP, 2018% of GDP, 2018Range 0-100, 2019European Union10013 963 897.26       1001.82.239.42.1922.0257.3Italia961 798 039.56         1071.43.427.41.4317.8342.1Piemonte102138 420.26            111-0.63.328.12.1820.9950.7Valle d'Aosta/Vallée d'Aoste1254 890.60                 120-1.41.126.80.4817.9539.4Liguria10449 971.19              113-2.04.627.71.3517.4648.6Lombardia127400 626.78            1244.35.333.21.3417.3157.0Abruzzo8233 284.46              97-0.23.025.50.9118.6534.2Molise696 519.64                 91-3.80.526.31.2619.8633.8Campania61110 138.63            890.10.520.91.3016.3225.9Puglia6277 834.29              85-1.20.221.30.7816.0522.7Basilicata7513 150.50              98-3.8-0.527.30.6320.3726.0Calabria5633 775.19              83-1.7-0.220.30.5414.4518.4Sicilia5889 779.10              90-0.80.720.10.8214.8819.1Sardegna6935 419.03              88-0.82.022.20.8015.6923.8Provincia Autonoma di Bolzano/Bozen15525 634.13              1266.34.327.90.8425.3546.7Provincia Autonoma di Trento12521 064.41              1203.94.134.11.5720.6054.6Veneto108165 624.01            1091.02.529.61.3919.7750.1Friuli-Venezia Giulia10338 951.23              108-0.83.332.01.6719.2149.2Emilia-Romagna118164 509.81            1143.05.932.82.0319.4853.2Toscana103119 277.41            1061.45.228.91.5516.5147.8Umbria8523 374.89              95-0.63.128.81.0318.4843.5Marche9042 588.26              96-1.61.729.81.0615.7941.7Lazio110201 770.11            1126.88.231.51.7516.6853.1 
 
  
 
MACROECONOMIC STABILITY 
MACROECONOMIC STABILITY 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS 

2021.  The  reduction  of  non-performing  loans, 
including unlikely-to-pay-loans, has also continued. 
Nevertheless,  the  full  impact  of  the  pandemic  on 
asset  quality  may  come  with  a  lag,  after  the  full 
phasing  out  of  support  measures.  Meanwhile, 
unlikely-to-pay  loans,  which  account  for  the  half 
of  the  stock  of  non-performing  loans,  warrant 
close  monitoring  and  appropriate  management. 
Despite  pressures  on  the  net  interest  income, 
profitability  recovered,  in  particular  due  to  the 
decline  in  loan-loss  provisions,  with  the  return  on 
equity  reaching  7.7%  in  Q3-2021.  The  cost-to-
income-ratio  declined  to  59.4%  in  Q3-2021,  on 
the back of the action taken by banks to increase 
efficiency. All banks have maintained comfortable 
liquidity  coverage  ratios  and  benefited  from 
abundant  central  bank  liquidity,  which  stood  at 
roughly 13.4% of total liabilities in Q3-2021. 

Credit  activity  expanded  in  2020,  but  lost 
momentum in 2021 on the back of the lower 
lending  to  non-financial  corporations. 
In 
2021,  lending  to  non-financial  corporations  has 
slowed  down  across  all  sectors,  due  to  lower 
demand,  in  particular  from  larger  companies. 
Lending  to  households  has  remained  robust, 
fuelled  mainly  by  lending  for  house  purchases, 
which  has  gained  momentum  since  2020. 
However, real estate prices have risen more slowly 
than  in  other  EU  Member  States.  Housing  market 
developments  do  not  raise  concerns  from  a 
financial  stability  perspective.  However,  after 

in 

efforts 

improve 

This  Annex  provides  an  overview  of  key 
Italy’s  financial  sector. 
developments 
Despite 
non-bank 
to 
intermediation,  Italy’s  financial  sector  remains 
predominantly  bank-based.  Banking  sector  assets 
stood  at  224%  of  GDP  at  the  end  of  Q3-2021, 
with the five largest banks holding a share of 49% 
of total banking sector assets at the end of 2020, 
slightly higher than in 2019. Foreign ownership  is 
low, the banking sector being mainly domestically 
owned  (92%  of  total  assets  in  Q3-2021).  Due  to 
the  increase  in  deposits  and  sluggish  lending 
activity,  the  loan-to-deposit  ratio  has  fallen  since 
2015.  The  market-funding  ratio  has  remained 
rather low at 35.4% in 2020, as bank loans remain 
the  main  form  of  external  financing  for  most 
companies.  Nevertheless,  bond  funding  (including 
through  mini-bonds  issued  by  small  companies) 
has been resilient since the onset of the pandemic 
and  has  played  a  complementary  role  to  bank 
lending. 

The  public  support  measures  granted  since 
the  onset  of  the  pandemic  have  supported 
resilience  in  the  banking  sector.  The  solvency 
ratio  stood  at  18.7%  in  Q3-2021,  slightly  lower 
than  in  2020,  due  to  the  gradual  phasing  in  of 
IFRS9 and to a lesser extent due to the resumption 
of  dividend  payments.  Benefitting  from 
the 
support  of  state  guarantees  and  loan  moratoria, 
asset  quality  has  improved  further,  with  the  non-
performing  loans  ratio  declining  to  4%  in  Q3-

Table A16.1:Financial soundness indicators 

(1) Last data: Q3-2021 
Source: ECB, Eurostat, Refinitiv 

58 

20172018201920202021Total assets of the banking sector (% of GDP)214.0207.1207.4232.7224.3Share (total assets) of the five largest bank (%)43.445.647.949.3-Share (total assets) of domestic credit institutions (%)192.091.893.192.591.7Financial soundness indicators:1- non-performing loans (% of total loans)11.28.46.74.54.0- capital adequacy ratio (%)16.816.117.219.318.7- return on equity (%)7.15.84.91.07.7NFC credit growth (year-on-year % change)0.41.5-1.88.31.8HH credit growth (year-on-year % change)2.82.82.62.43.6Cost-to-income ratio (%)165.165.965.568.359.4Loan-to-deposit ratio (%)1102.197.194.477.072.9Central bank liquidity as % of liabilities8.48.17.211.713.4Private sector debt (% of GDP)109.4107.8106.1118.9-Long-term interest rate spread versus Bund (basis points)179.4221.3220.3167.8118.5Market funding ratio (%)31.734.134.835.4-Green bond issuance (bn EUR)1.72.05.95.822.2 
 
 
 
 
 
  
 
several  years  of  gradual  decrease,  private  sector 
debt  increased  markedly  in  2020,  reaching  119% 
of GDP, the highest level since 2015.  

59 

 
 
ANNEX 17: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX 
ANNEX 17: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX 

deterioration  of  the  economic  outlook  and  of  the 
gradual  phasing-out  of  support  measures.  The 
sovereign-bank  nexus 
increased  following  the 
COVID crisis. 

to 

on 

is  set 

investments 

reforms  and 

investments  of 

the 
The 
Recovery and Resilience Plan are expected to 
reducing  macroeconomic 
contribute 
full 
contingent 
imbalances, 
implementation.  The implementation of reforms 
and 
to  gradually  boost 
productivity and growth. Major steps were already 
taken in 2021, including the adoption of reforms in 
the judicial and education system, as well as major 
investments,  such  as  to  support  the  digitalisation 
of  firms.  The  government  strengthened  the 
taking 
spending 
additional measures with a view to addressing tax 
evasion.  It  also  enhanced  and  extended  active 
labour  market 
public 
policies. 
employment  services  continue  to  face  challenges 
and  implementation  of  the  measures  included  in 
the  plan  will  be  key.  The  entry  into  force  of  the 
new insolvency framework in 2022 is expected to 
reduce further accumulation.  

framework  and 

However, 

review 

is 

For  those  reasons,  and  more  generally  on  the 
basis  of  the  elements  of  the  in-depth  review 
undertaken  for  Italy  under  Regulation  (EU)  No 
1176/2011  on  the  prevention  and  correction  of 
macroeconomic imbalances as summarised in the 
Staff  Working  Document  (SWD  (2022)635  final), 
the  Commission  has  considered 
its 
Communication  “European  Semester  –  2022 
Spring  Package”  (COM(2022)600  final)  that 
Italy  continues  to  experience  excessive 
macroeconomic imbalances.. 

in 

Italy 

The  Macroeconomic 
Imbalance  Procedure 
the  main 
Assessment  matrix  presents 
elements  of  the  in-depth  review  undertaken 
for 
in  accordance  with  Article  5  of 
Regulation  (EU)  No  1176/2011  on  the  prevention 
and  correction  of  macroeconomic  imbalances,  as 
summarized  in  the  SWD  (2022)635  final. (43)  For 
Member  States  selected 
in  the  2022  Alert 
Mechanism Report it presents, separately for each 
source  of  imbalance  and  adjustment  issue,  the 
main  findings  regarding  the  gravity  and  the 
evolution  of  the  identified  challenges,  as  well  as 
policy response and gaps. 

Italy’s  economy 
is  facing  vulnerabilities 
relating  to  high  government  debt  and  weak 
productivity  growth,  as  well  as  fragilities  in 
the  labour  market  and  some  weaknesses  in 
the  financial  market.  Low  productivity  growth 
was  the  main  factor  behind  of  Italy’s  weak  GDP 
growth  performance  in  the  decade  prior  to  the 
COVID-19  pandemic. 
Italy’s  public  debt  ratio 
remains high, in part due to persistently weak GDP 
growth, and remains a risk for fiscal sustainability 
some 
and 
improvements 
low 
participation rates, particularly of women, and high 
Significant 
youth 
improvements have been made in the reduction of 
NPLs, although the sovereign-bank nexus remains 
a challenge. 

financial 
in 

sector.  Despite 

labour  market, 

unemployment 

persist. 

the 

the 

in 

RRP 

Italy’s 

Italy’s 

included 

forward, 

Going 
long-standing 
vulnerabilities are not expected to unwind in 
the near term. Productivity is expected to slowly 
increase  in  the  next  years,  as  reforms  and 
investment 
are 
implemented. The public debt-to-GDP ratio started 
to  decline  in  2021  on  the  back  of  a  strong 
economic rebound, albeit from a high level, and is 
forecast to further decline the next two years. The 
labour  market  recovered  most  of  the  losses 
incurred by the pandemic crisis, albeit largely due 
to  an  increase  in  temporary  employment  and 
further  reductions  in  joblessness  are  expected  to 
be  limited.  The  banking  sector  made  significant 
progress in reducing legacy non-performing loans, 
although  risks  remain,  linked  to  the  uncertainty 
possible 
due 

geopolitical 

tensions, 

to 

a 

(43)  European Commission (2022), COMMISSION STAFF 
WORKING DOCUMENT In-Depth Review for Italy in 
accordance with Article 5 of Regulation (EU) No 1176/2011 
on the prevention and correction of macroeconomic 
imbalances. 

60 

 
 
                                                 
 
Table A17.1:Assessment of Macroeconomic Imbalances matrix 

Source: European Commission 

61 

  Gravity of the challenge Evolution and prospects Policy response Imbalances (unsustainable trends, vulnerabilities and associated risks) Productivity and competitiveness Weak productivity growth is a long-standing challenge. Growth in real labour productivity (per hour worked) averaged 0.6% during 2010-2020 (EU: 1.2%). Weak productivity growth is largely due to low investment and innovation, barriers to competition, weaknesses in the public administration paired with a non-supportive business environment and skill gaps in the labour force. Productivity growth is necessary to sustain real GDP growth, which in turn will be crucial to substantially reduce the public debt ratio. Labour productivity in 2020 grew sizeably (2.3%), as the drop in hours worked largely exceeded the fall in economic output. With the rise in hours worked productivity dropped by 1.3% in 2021, compared to a small increase (0.2%) in the EU on average. Reforms improving the business environment and investments, in particular in digitalisation, are expected to lift productivity in the medium term. In 2021, as part of the RRP, public schemes supporting innovative investment (notably Transizione 4.0) have been increased and a major step in the reform of justice has been implemented to improve the productivity of courts. The measures on public procurement reform adopted in 2021 and those envisaged by 2022, as well as the competition law set to be adopted by the end of 2022, are expected to simplify and fasten bureaucratic procedures, including for awarding public contracts, and contribute to the improvement of the business environment. The first steps of the public administration reform envisaged for 2022 is expected to improve administrative capacity and the efficiency of public employment. Public debt Italy’s public debt ratio of 150.8% of GDP in 2021 is high in a euro area comparison.  The high public debt is a major source of vulnerability for the economy. High debt servicing costs crowd out productive public expenditure. High rollover needs entail refinancing risks. Prolonged increases in sovereign yields may have adverse economic effects also through the exposure of domestic financial institutions to public debt and their lending activity.  Following the increase of the public debt ratio from 134.1% of GDP in 2019 to 155.3% in 2020, due to the policy response to the Covid crisis and the drop in economic activity, it declined to 150.8% in 2021 thanks to the economic recovery. It is projected to further decline to 146.8% by 2023. After a marked decline in 2020, sovereign yields increased gradually in 2021 and accelerated in early 2022. Still, they remain low in a historical perspective.  Debt sustainability analysis suggests that fiscal sustainability risks are low in the short term, but high in the medium term. Sustained real GDP growth along with gradual fiscal consolidation will be crucial to substantially reduce the public debt ratio. New measures of almost 2% of GDP are expected to weigh on the 2022 deficit, including the permanent reduction of personal income taxes and temporary measures for energy prices.  The temporary provisions effective until end-2021 for early retirement, will imply slightly higher pension expenditure in the medium term and were extended to some extent in 2022.  Previous policies taken against tax evasion are starting to bear fruit. The measures in the RRP, to be implemented in 2022, are expected to further improve these results. The reinforced role of the Finance Ministry following the RRP measures is expected to improve the effectiveness of spending reviews.  Adjustment issues Labour market participation and unemployment The labour market continues to face low participation rates, particularly for women and high youth unemployment  The youth unemployment rate and the share of young people not in employment, education or training are among the highest in the EU.  The unemployment rate averaged 9.5 % in 2021, slightly up by 0.2pp. from 2020 but down from 9.9% in 2019. Activity rates have been recovering only gradually. With the continuing economic expansion, joblessness is expected to decline in 2022. Long-term and youth unemployment register similar levels as before the crisis. The female participation rate has not fully recovered to the pre-crisis level.  The reform of active labour market policies adopted in 2021 and the strengthening of work-based learning and skill formation under the RRP are set to help job matching and will allow for an easier transition between jobs. The coverage of the social safety net (Ammortizzatori sociali) has been extended, but short-time work schemes are still closely tied to employment with a specific firm. The extension of care facilities benefits female labour market participation. Financial Sector  The sovereign exposure of the Italian banking sector remains high, and increased since the pandemic. The gross NPL ratio declined from 8.1% in Q2 2019 to 4% by Q3 2021. Despite a slight decline in 2021 due to the phasing out of the transitional prudential arrangements, Italian banks are highly capitalized with a CET1 ratio of 15.1% in Q3-2021. Profitability of Italian banks rose considerably to 5.8% in Q3 2021, although it is mainly due to the drop in loan-loss provisions. Despite considerable improvements in NPLs, the full impact of the pandemic has not yet materialised, and risks remain in view of a possible deterioration of the economic outlook and of the gradual phasing-out of support measures. A slight decline in CET1 ratio can be expected also in 2022 due to the exposure of the largest banking groups to Russia. Finally, a weaker than expected recovery weighs on borrowers’ ability to repay loans, which may negatively affect the asset quality and profitability of Italian banks.  The prolongation of COVID-19 support measures allows banks to convert deferred tax assets into tax credits against NPL sales and by the state-backed NPL securitisation scheme. Banks have benefitted from government measures to support the provision of liquidity to companies, the regulatory relief of Capital Requirement Regulation II amendments and the flexibility allowed for the classification of loans.  The insolvency reform is expected to enter into force in July 2022. A new out-of-court settlement was adopted in 2021 to facilitate an earlier restructuring of companies under distress.  
 
  
 
ANNEX 18: TAXATION 
ANNEX 18: TAXATION 

This  Annex  provides  an 
indicator-based 
overview  of  Italy’s  tax  system.  It  includes 
information  on  the  tax  structure,  i.e.  the  types  of 
tax  that  Italy  derives  most  revenue  from,  the  tax 
burden  for  workers,  and  the  progressivity  and 
redistributive effect of the system. It also provides 
information  on  tax  collection  and  compliance  and 
on the risks of aggressive tax planning activity. 

latest  data, 

Based  on  the 
Italy’s  tax 
revenues  are  high  in  relation  to  GDP  and 
more  than  half  of  total  tax  revenue  comes 
from  labour  taxation.  Italy’s  tax-to-GDP  ratio 
was above the EU aggregate in 2020, with labour 
tax  revenue  as  a  percentage  of  GDP  among  the 
highest in the EU. The labour tax wedge for Italy in 
2021  was  higher  than  the  EU  average  at  several 
income levels, i.e. for single people at the average 
wage (100%)  as well as at 50%, 67% and 167% 
of  the  average  wage.  Second  earners  at  a  wage 
level of 67% of the average wage, whose spouse 
earned the average wage, also faced a higher tax 
wedge  than  the  EU  average  (Graph  A18.1).  In 
addition, the profile of marginal effective personal 
income  tax  rates  presents  sharp  discontinuities. 
The  tax-benefit  system  helped  reduce  inequality 
as  measured  by  the  GINI  coefficient  in  2019,  but 
by  less  than  the  EU  aggregate  reduction.  At  the 
same  time,  consumption  tax  revenues  as  a 
percentage  of  GDP  were  slightly  below  the  EU 
aggregate,  also  due  to  the  wide  use  of  reduced 
VAT  rates.  Environmental  tax  revenues  as  a 
percentage of GDP were among the highest in the 
EU,  although  pollution  and  resource  taxes  were 
below the EU aggregate. Revenues from recurrent 
taxes  on  property  as  a  percentage  of  GDP  were 
above  the  EU  aggregate,  but  first  residences  are 
exempt for almost all properties and the land and 
the property values used for property taxation are 
largely  outdated.  The  cadastral  reform  drafted 
following  the  enabling  law  of  2014,  was  never 
adopted.  A  new  enabling  law,  currently  under 
discussion in the Parliament, provides for a reform 
of    cadastral  values,  which  however  will  not  be 
used for taxation purposes. 

Recent  reforms  of  the  tax-benefit  system 
are positive steps, but challenges remain. To 
reduce the high tax burden on labour, in December 
2021  Italy  reformed  personal  income  taxes  by 
reducing  the  tax  rates  for  the  second  and  third 
bracket (from  27%  and  38%  respectively  to 25% 
and  35%)  and  reducing  the  lower  bound  for  the 
top  tax bracket from EUR 75 000 to EUR 50 000. 
The  previously  existing  tax  credit  (so-called  ‘100-

by 

the 

performed 
Joint  Research  Centre 

euro  bonus’),  which  increased  the  complexity  of 
the tax system and caused high effective marginal 
tax  rates  at  medium-high  income  levels,  was 
merged 
in  the  already  existing  general  tax 
deduction  for  employees.  The  regional  tax  on 
productive activities (IRAP) was also abolished for 
self-employed  workers.  In  addition,  since  March 
2022  a  streamlined  family  allowance  replaced 
previous  child-support  schemes  as  well  as  tax 
deductions  for  dependent  children.  This  measure 
helped  simplify  the  tax  system  and  increase 
fairness,  as  it  benefits  both  employees  and  the 
into  account  both 
takes 
self-employed  and 
income  and  wealth.  Based  on 
household 
European 
simulations 
Commission 
through 
Euromod (44), overall these reforms have increased 
households’  annual  mean  equivalised  disposable 
income by 2.3%, with the main increase for poorer 
households  (+11.0%  and  +4.1%  in  the  first  and 
second  income  deciles  respectively,  and  1.0%  in 
the top decile). Inequality as measured by the GINI 
coefficient fell slightly, by around 2%. Similarly, a 
mild  decline  in  the  at-risk-of-poverty  rate  was 
recorded  (-1.4  pps,  with  reference  to  50%  of 
median  income).  Labour  supply  is  estimated  to 
increase (45),  with  participation  rates  and  hours 
worked rising by 0.34% and 0.25% respectively for 
women and by 0.13% and 0.07% for men. The tax 
wedge  is  expected  to  decline  by  1.6  pps  for 
earners  at  50%  of  the  average  wage  and  by  0.7 
pps  at  the  average  wage,  while  still  remaining 
above the EU average. 

Despite major measures taken, tax evasion in 
Italy  remains  very  high.  In  2019,  electronic 
invoicing  became  compulsory  for  all  transactions 
with  the  exception  of  self-employed  workers  in 
simplified  regimes.  As  a  result,  the  estimated 
revenue-loss  caused  by  evasion  of  tax  and  social 
security  contributions  declined  overall  by  EUR  3.1 
billion, following a EUR 5 billion reduction in 2018 
(estimates from yearly government reports on the 
shadow  economy).  However,  at  5.5%  of  GDP  in 
2019 (EUR 99.3 billion), foregone revenue remains 
very  high.  Similarly,  the  VAT  gap  (an  indicator  of 

(44)  Euromod is the tax-benefit microsimulation model for the EU. 
For more details on Euromod, see Sutherland, H. and Figari, 
F., “EUROMOD: the European Union tax-benefit 
microsimulation model”, International Journal of 
Microsimulation, 2013, vol. 1, issue 6, 4-26. 

(45)  Labour supply reactions are estimated through Eurolab (for 
details, see Narazani, E., Colombino, U. and Bianey P., 
“EUROLAB: A Multidimensional Labour Supply-Demand 
Model for EU Countries”, European Commission, 2021. 

62 

 
 
                                                 
 
Graph A18.1: Tax wedge indicators 

The tax wedge is defined as the sum of personal income taxes and employee and employer social contributions net of family 
allowances, expressed as a percentage of total labour costs (the sum of the gross wage and social contributions paid by the 
employer). It is calculated for specific types of tax payers in terms of household composition and income level expressed as a % 
of the average wage. Data on tax wedges can be consulted in the ‘Tax and benefit database’ by ECFIN 
https://europa.eu/economy_finance/db_indicators/tab/  
(1) The second earner average tax wedge measures how much extra personal income tax plus employee and employer social 
contributions (SSCs) the family will have to pay as a result of the second earner entering employment, as a proportion of the 
second earner’s gross earnings plus the employer SSCs due on the second earner’s income. For a more detailed discussion see 
OECD (2016), “Taxing Wages 2016”, OECD Publishing, Paris. http://dx.doi.org/10.1787/tax_wages-2016-en  
(*) EU-27 simple average as there is no aggregated EU-27 value. 
Source: European Commission 

income  tax  rates  were  above  the  EU  average  in 
2020. However, EATR computed for technologically 
advanced  investments  are  extremely  low  in  Italy, 
thanks to “Transition 4.0” tax credits, with possible 
positive spillover effects on the economy. 

has 

likely 

incentives, 

the  effectiveness  of  VAT  enforcement  and 
compliance),  has  followed  a  downward  sloping 
trend, reaching 21.3% of the VAT total tax liability 
in  2019 in  Italy,  but it  remains more than  double 
the EU-wide gap of 10.5%. In 2020, the higher use 
of  electronic  payments,  also  encouraged  by 
government 
further 
supported  tax  compliance.  At  the  same  time,  the 
2021  cancellation  of  past  tax  liabilities  for  the 
period  2000-2010,  which  concerned  liabilities  up 
to  EUR  5 000  for  taxpayers  earning  less  than 
EUR 30 000, 
rewarding  non-compliant 
behaviours. Several measures included in the RRP, 
including  the  launch  of  pre-filled  VAT  tax  returns, 
are 
the 
digitalisation  of  the  tax  administration,  which  can 
help reduce tax arrears as well as cut compliance 
costs.  Recent  studies  highlight  the  scope  to 
improve the efficiency of VAT collection (46). Lastly, 
corporate 
forward-looking  effective 
average 

improving 

expected 

continue 

risked 

to 

(46)  The collection efficiency increased to 39.28 per cent in Italy. 
European Commission, Directorate-General for Taxation and 
Customs Union, Poniatowski, G., Bonch-Osmolovskiy, M., 
Śmietanka, A., VAT gap in the EU : report 2021, Publications 
Office, 2021, https://data.europa.eu/doi/10.2778/447556 

63 

36.641.246.554.743.6At 50% of Average Wage (Singleperson)At 67% of Average Wage (Singleperson)At 100% of Average Wage (Singleperson)At 167% of Average Wage (Singleperson)For second earner at 67% of AverageWage (Two earner couple, 1st earner100% of AW) (1)Tax wedge 2021 (%)ITEU-27 (*) 
                                                 
 
  
Table A18.1:Taxation indicators 

(1) Forward-looking effective tax rate (OECD). 
(*) EU-27 simple average as there is no aggregated EU-27 value. 
Source: European Commission and OECD 

64 

2010201820192020202120102018201920202021Total taxes (including compulsory actual social contributions) (% of GDP)43.644.843.543.637.940.139.940.1Labour taxes (as % of GDP)23.722.221.722.720.020.720.721.5Consumption taxes (as % of GDP)10.911.010.810.510.811.111.110.8Capital taxes (as % of GDP)8.811.510.810.37.18.28.17.9Total property taxes (as % of GDP)3.13.53.53.51.92.22.22.3Recurrent taxes on immovable property (as % of GDP)1.31.21.31.31.11.21.21.2Environmental taxes as % of GDP2.42.72.62.52.42.42.42.2Tax wedge at 50% of Average Wage (Single person) (*)41.834.133.132.834.633.932.432.031.531.9Tax wedge at 100% of Average Wage (Single person) (*)55.952.752.352.252.641.040.240.139.939.7Corporate Income Tax - Effective Average Tax rates (1) (*)23.823.820.319.819.519.3Difference in GINI coefficient before and after taxes and cash social transfers (pensions excluded from social transfers)11.010.312.912.48.47.97.48.3Outstanding tax arrears: Total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)15.215.531.931.8VAT Gap (% of VTTL)11.412.311.210.5Dividends, Interests and Royalties (paid and received) as a share of GDP (%)9.615.09.810.710.5FDI flows through SPEs (Special Purpose Entities), % of total FDI flows (in and out)1.96.713.647.846.236.7BelgiumEU-27Tax structureProgressivity & fairnessTax administration & complianceFinancial Activity Risk 
 
  
 
ANNEX 19: KEY ECONOMIC AND FINANCIAL INDICATORS 
ANNEX 19: KEY ECONOMIC AND FINANCIAL INDICATORS 

Table A19.1:Key economic and financial indicators 

(1) NIIP excluding direct investment and portfolio equity shares         
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
Source: Eurostat and ECB as of 2022-05-02, where available; European Commission for forecast figures (2022 Spring Forecast) 

65 

2004-072008-122013-1820192020202120222023Real GDP (y-o-y)1.4-1.40.50.5-9.06.62.41.9Potential growth (y-o-y)0.8-0.2-0.10.0-0.10.20.51.0Private consumption (y-o-y)1.2-1.10.50.2-10.65.22.21.4Public consumption (y-o-y)0.3-0.4-0.3-0.50.50.60.90.9Gross fixed capital formation (y-o-y)1.8-4.90.51.2-9.117.06.24.1Exports of goods and services (y-o-y)5.9-0.92.81.6-13.413.34.94.3Imports of goods and services (y-o-y) 5.3-2.93.4-0.7-12.114.26.14.2Contribution to GDP growth:Domestic demand (y-o-y)1.2-1.70.30.2-7.96.22.71.8Inventories (y-o-y)0.1-0.20.2-0.4-0.30.20.00.0Net exports (y-o-y)0.10.6-0.10.7-0.80.2-0.20.0Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.3-0.30.0-0.4-0.3-0.2-0.10.4Capital accumulation (y-o-y)0.60.3-0.10.0-0.10.10.30.3Total factor productivity (y-o-y)-0.2-0.10.00.30.30.30.30.3Output gap2.0-1.3-2.60.7-8.3-2.4-0.50.3Unemployment rate7.38.511.89.99.39.59.58.9GDP deflator (y-o-y)2.31.51.00.91.40.53.12.4Harmonised index of consumer prices (HICP, y-o-y)2.22.40.70.6-0.11.95.92.3Nominal compensation per employee (y-o-y)2.61.10.81.3-5.16.03.61.7Labour productivity (real, hours worked, y-o-y)0.20.00.20.52.3-1.30.60.0Unit labour costs (ULC, whole economy, y-o-y)2.32.10.71.32.1-0.11.80.9Real unit labour costs (y-o-y)0.00.5-0.30.40.8-0.5-1.2-1.4Real effective exchange rate (ULC, y-o-y)1.4-0.1-0.1-2.3....Real effective exchange rate (HICP, y-o-y)0.1-0.80.2-2.20.9-0.3..Net savings rate of households (net saving as percentage of net disposable income)8.64.63.02.410.27.5..Private credit flow, consolidated (% of GDP)9.92.9-0.20.34.1...Private sector debt, consolidated (% of GDP)99.7121.3114.5106.0118.7...of which household debt, consolidated (% of GDP)34.142.441.741.145.0...of which non-financial corporate debt, consolidated (% of GDP)65.578.972.864.973.7...Gross non-performing debt (% of total debt instruments and total loans and advances) (2)4.48.311.55.43.5...Corporations, net lending (+) or net borrowing (-) (% of GDP)-0.20.62.93.36.15.24.85.1Corporations, gross operating surplus (% of GDP)23.021.321.321.921.921.521.521.3Households, net lending (+) or net borrowing (-) (% of GDP)2.40.91.81.47.24.41.80.7Deflated house price index (y-o-y)3.7-1.6-3.4-0.72.1...Residential investment (% of GDP)5.55.44.24.04.04.9..Current account balance (% of GDP), balance of payments-1.1-2.22.03.23.72.51.21.6Trade balance (% of GDP), balance of payments-0.2-0.72.83.43.72.4..Terms of trade of goods and services (y-o-y)-1.4-1.01.30.93.7-4.6-5.51.4Capital account balance (% of GDP)0.10.10.1-0.10.0-0.1..Net international investment position (% of GDP)-17.9-21.0-14.7-1.12.07.4..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-9.4-22.4-14.3-0.11.16.7..IIP liabilities excluding non-defaultable instruments (% of GDP) (1)94.5113.9122.3122.4139.2135.5..Export performance vs. advanced countries (% change over 5 years)0.5-12.5-7.7-3.9-2.4...Export market share, goods and services (y-o-y)-2.6-5.80.0-1.3-2.93.00.20.0Net FDI flows (% of GDP)0.81.0-0.10.11.20.2..General government balance (% of GDP)-3.1-3.7-2.6-1.5-9.6-7.2-5.5-4.3Structural budget balance (% of GDP)-4.6-3.3-1.2-2.0-5.2-6.3-5.8-4.8General government gross debt (% of GDP)105.6117.6134.4134.1155.3150.8147.9146.8forecast 
 
 
 
 
  
 
ANNEX 20: DEBT SUSTAINABILITY ANALYSIS 
ANNEX 20: DEBT SUSTAINABILITY ANALYSIS 

baseline.  In  the  ‘financial  stress’  scenario,  the 
country  temporarily  faces  higher  market  interest 
rates in 2022.  

Graph  1  shows  four  alternative  scenarios 
around  the  baseline, to  illustrate the  impact 
of changes in assumptions. The ‘historical SPB’ 
scenario  assumes  that  the  structural  primary 
balance (SPB) gradually returns to its past average 
level.  In  the  ‘lower  SPB’  scenario,  the  SPB  is 
permanently  weaker  than  in  the  baseline.  The 
‘adverse interest-growth rate’ scenario assumes a 
in  the 
less  favourable  snowball  effect  than 
baseline.  In  the  ‘financial  stress’  scenario,  the 
country  temporarily  faces  higher  market  interest 
rates in 2022.  

Graph 2 shows the outcome of the stochastic 
projections.  These  projections  show  the  impact 
on  debt  of  2  000  different  shocks  affecting  the 
economic 
government’s 
growth,  interest  rates  and  exchange  rates.  The 
cone covers 80% of all the simulated debt paths, 
therefore excluding tail events. 

budgetary 

position, 

Table  2  shows  the  S1  and  S2  fiscal 
indicators  and  their  main 
sustainability 

This  annex  assesses  fiscal  sustainability 
risks  for  Italy  over  the  short,  medium  and 
long term. It follows the same multi-dimensional 
approach as the 2021 Fiscal Sustainability Report, 
updated  on  the  basis  of  the  Commission  2022 
spring forecast. 

Table  1  presents 
the  baseline  debt 
projections.  It  shows  the  projected  government 
debt  and  its  breakdown  into  the  primary  balance, 
the  snowball  effect  (the  combined  impact  of 
interest payments and nominal GDP growth on the 
debt  dynamics)  and  the  stock-flow  adjustment. 
These projections assume that no new fiscal policy 
measures  are  taken  after  2023,  and  include  the 
expected  positive  impact  of  investments  under 
Next Generation EU.  

Graph  1  shows  four  alternative  scenarios 
around  the  baseline, to  illustrate the  impact 
of changes in assumptions.  The ‘historical SPB’ 
scenario  assumes  that  the  structural  primary 
balance (SPB) gradually returns to its past average 
level.  In  the  ‘lower  SPB’  scenario,  the  SPB  is 
permanently  weaker  than  in  the  baseline.  The 
‘adverse interest-growth rate’ scenario assumes a 
in  the 
less  favourable  snowball  effect  than 

Table A20.1:Debt sustainability analysis for Italy 

Source: European Commission 

66 

Table 1. Baseline debt projections20192020202120222023202420252026202720282029203020312032Gross debt ratio (% of GDP)134.1155.3150.8147.9146.8146.4145.0144.7146.7147.5148.7150.7152.9155.2Change in debt-0.321.1-4.4-3.0-1.1-0.4-1.4-0.32.00.81.12.02.22.4of whichPrimary deficit-1.86.13.72.01.11.31.01.22.02.22.42.72.93.1Snowball effect1.514.8-6.8-4.5-2.9-1.7-2.5-1.50.1-1.4-1.3-0.7-0.6-0.7Stock-flow adjustment0.00.2-1.3-0.50.70.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)19.830.126.225.024.824.323.924.025.025.425.826.427.027.6S1S2Overall index (pps. of GDP)9.61.6of whichInitial budgetary position2.32.1Debt requirement6.1Ageing costs1.1-0.5of whichPensions0.9-1.8Health care0.30.8Long-term care0.20.9Others-0.2-0.3                                                                       Table 2. Breakdown of the S1 and S2 sustainability gap indicators1151251351451551651752019202120232025202720292031BaselineHistorical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioGraph 1. Deterministic debt projections (% of GDP)p10-p20p20-p40p40-p60p60-p80p80-p9011512513514515516517520192020202120222023202420252026Graph 2. Stochastic debt projections(% of GDP)MedianBaseline 
 
 
 
  
 
Table A20.2:Heat map of fiscal sustainability risks for Italy 

(1) Debt level in 2032: green: below 60% of GDP, yellow: between 60% and 90%, red: above 90%. (2) The debt peak year 
indicates whether debt is projected to increase overall over the next decade. Green: debt peaks early; yellow: peak towards the 
middle of the projection period; red: late peak. (3) Fiscal consolidation space measures the share of past fiscal positions in the 
country that were more stringent than the one assumed in the baseline. Green: high value, i.e. the assumed fiscal position is 
plausible by historical standards and leaves room for corrective measures if needed; yellow: intermediate; red: low. (4) Probability 
of the debt ratio exceeding in 2026 its 2021 level: green: low probability, yellow: intermediate, red: high (also reflecting the initial 
debt level). (5) The difference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under 
2000 different shocks. Green, yellow and red cells indicate increasing uncertainty. 
Source: European Commission (for further details on the Commission’s multi-dimensional approach, see the 2021 Fiscal 
Sustainability Report). 

Medium-term  risks  to  fiscal  sustainability 
are  high.  The  two  elements  of  the  Commission’s 
medium-term  analysis  lead  to  this  conclusion. 
First,  the  debt  sustainability  analysis  (DSA)  shows 
that  government  debt  is  projected  to  rise  from 
around  148%  of  GDP  in  2022  to  about  155%  of 
GDP  in  2032  in  the  baseline  (Table 1).  This  debt 
path  is  also  sensitive  to  possible  shocks  to  fiscal, 
macroeconomic  and 
financial  variables,  as 
illustrated  by  alternative  scenarios  and  stochastic 
simulations, all pointing to high risks (Tables A20.1 
and  A20.2).  Moreover,  the  sustainability  gap 
indicator  S1  signals  that  an  adjustment  of  the 
structural  primary  balance  of  9.6  pps.  of  GDP 
would be needed to reduce debt to 60% of GDP in 
15  years’  time  (Table 2).  Overall,  the  high  risk 
reflects the current large deficit and high debt, the 
high  sensitivity  to  adverse  shocks,  as  well  as  the 
projected increase in public pension expenditure.  

the 

long 

term,  while 

Long-term  risks  to  fiscal  sustainability  are 
the 
medium.  Over 
sustainability gap indicator S2 (at 1.6 pps. of GDP) 
points  to  low  risks,  the  DSA  points  to  substantial 
vulnerabilities,  leading  to  the  medium  risk  overall 
assessment.  The  S2  indicator  is  driven  by  the 
initial  budgetary  position  and  health  care 
expenditure, but slightly mitigated by the projected 
decline in ageing costs (Table 2). 

drivers.  S1  measures  the  consolidation  effort 
needed to bring debt to 60% of GDP in 15 years. 
S2  measures  the  consolidation  effort  required  to 
stabilise  debt  over  an  infinite  horizon.  The  initial 
budgetary position measures the effort required to 
cover  future  interest  payments,  the  ageing  costs 
component  accounts  for  the  need  to  absorb  the 
projected 
public 
expenditure  such  as  pensions,  health  care  and 
requirement 
long-term  care,  and 
measures  the  additional  adjustment  needed  to 
reach the 60% of GDP debt target. 

in  ageing-related 

the  debt 

change 

risk 

sustainability 

Finally,  the  heat  map  presents  the  overall 
fiscal 
classification 
(Table A20.2).  The  short-term  risk  category  is 
based  on  the  S0  indicator,  an  early-detection 
indicator of fiscal stress in the upcoming year. The 
medium-term  risk  category  is  derived  from  the 
debt  sustainability  analysis  (DSA)  and  the  S1 
indicator.  The  DSA  assesses  risks to  sustainability 
based  on  several  criteria: the  projected  debt level 
in 10 years’ time, the debt trajectory (‘peak year’), 
the plausibility of fiscal assumptions and room for 
tighter  positions  if  needed  (‘fiscal  consolidation 
space’),  the  probability  of  debt  not  stabilising  in 
the  next  5  years  and  the  size  of  uncertainty.  The 
long-term  risk  category  is  based  on  the  S2 
indicator and the DSA.  

short-term 

Overall, 
fiscal 
sustainability are low. The Commission’s early-
detection  indicator  (S0)  does  not  signal  major 
short-term fiscal risks (Table A20.2).  

risks 

to 

67 

BaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallHIGHHIGHHIGHHIGHHIGHHIGHDebt level (2032), % GDP155134161168160Debt peak year20322021203220322032Fiscal consolidation space73%44%74%73%73%Probability of debt ratio exceeding in 2026 its 2021 level36%Difference between 90th and 10th percentiles (pps. GDP)42LOWMEDIUMDeterministic scenariosStochastic projectionsLOWHIGHHIGHHIGHShort termMedium termLong termOverall                               (S0)Overall     (S1+DSA)S1Debt sustainability analysis (DSA)S2Overall     (S2+DSA)Overall