COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Italy and delivering a Council opinion on the 2023 Stability Programme of Italy
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Italy, economic policy, economic recovery, economic reform, energy policy, fiscal policy, improvement of housing, stability pact, stability programme, sustainable mobility

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.5.2023  SWD(2023) 612 final  COMMISSION STAFF WORKING DOCUMENT 2023 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Italy and delivering a Council opinion on the 2023 Stability Programme of Italy {COM(2023) 612 final}  
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

prices  of  energy  and  other  commodities  had 
an  impact  on  Italy’s  current  account,  which 
turned slightly negative in 2022. 

followed 

suit,  while 

Inflation  has  largely  been  driven  by 
energy prices, and low-income households 
have  been  hardest  hit.  The  price  of  energy 
products  and  industrial  commodities  started 
soaring already in 2021, on the back of post-
pandemic  supply  bottlenecks  and  higher 
transport  costs.  They  rose  even  faster  in  the 
first  half  of  2022,  after  Russia’s  invasion  of 
Ukraine.  Prices  of  imported  unprocessed  food 
quickly 
those  of 
domestically produced goods and services rose 
more slowly. Thanks to the measures taken by 
the  government,  retail  energy  prices  did  not 
increase as much as wholesale prices. By end-
2022,  energy  prices  began  to  fall,  particularly 
for  gas,  followed  in  early  2023  by  other 
to 
commodity  prices.  This 
gradually  bring  down  the  price  of  food  and 
services,  with 
rate 
the  overall 
expected  to  fall  to  2.9% in  2024  (see  Box  1). 
Low-income  households  have  been  hit  the 
hardest  by  the  increase  in  energy  and  food 
prices, as they spend a relatively high share of 
their income on food and energy for housing. 

is  expected 

inflation 

Financial  conditions  are  tightening  but 
remain  favourable  in  real  terms.  Lending 
to  corporates  continued  to  grow  in  the  first 
half  of  2022  but  contracted  in  Q4-2022. 
Tighter  financial  conditions  resulting  from  the 
normalisation  in  monetary  policy  are  quickly 
being channelled to the real economy. The cost 
of borrowing for new loans more than doubled 
over  the  course  of  a  year  to  3.7%  for 
households  and  3.8%  for  firms  (Q1-2023). 
repayment 
Nevertheless, 
capacity  remained  strong,  thanks  to  higher 
profits  and  sounder  balance  sheet  structures 
than  in  the  past.  The  current  low  level  of 
indebtedness  and  abundant  liquidity  enable 
firms to maintain their investment plans in the 
tighter 
term.  However,  protracted 
short 

business 

debt 

Russia’s invasion of Ukraine has 
slowed the pace of Italy’s 
economic recovery 

Economic  output  has  returned to  its pre-
pandemic  level  but  was  held  back  by 
trade  disruptions  and  the  surge 
in 
commodity prices. After the sharp recession 
caused  by  the  COVID-19  pandemic,  real  GDP 
The 
swiftly 
prospects  for  further  robust  growth  were 
curtailed,  however,  by  the  fallout  of  Russia’s 
war  of  aggression  against  Ukraine.  The  two 
main  factors  affecting  growth  were  trade 
flows (both direct and indirect) and prices. 

rebounded  over  2021-22. 

Demand  for  exports  fell  only  moderately 
due to the war. The direct impact was limited 
as Russia and Ukraine account for only a small 
share  of  Italy’s  export  markets  (combined, 
around  1%  of  goods  export  value  and  of 
foreign  tourist  income  in  2022).  However, 
demand  also  slowed  for  goods  produced 
elsewhere  in  the  EU  with  Italian-made  inputs 
and  components.  This,  together  with  adverse 
international trade developments, led to a drop 
in net exports that dragged down GDP growth 
in 2022. Over 2023-24, annual GDP growth is 
forecast to slow down to just above 1%.  

Italy  has  reduced  its  dependence  on 
Russian  gas  but 
import  prices  have 
soared.  Until  2021,  Russia  provided  43%  of 
Italy’s  imported  gas,  which  is  widely  used  to 
produce electricity as well as for industrial and 
domestic  uses.  Italy  rapidly  diversified  its 
energy  sources  by  ramping  up imports  of  gas 
from  other  suppliers,  by  increasing  renewable 
electricity  output  and  by  using  alternative 
fuels.  It  has  reduced  both  industrial  and 
domestic consumption, cutting demand for gas 
while  containing  the  impact  on  energy  bills. 
However,  the  sharp  increase  in  international 

2 

 
 
financing  conditions  could  lead  businesses  to 
focus  on  projects  offering  the  best  risk  and 
return  prospects.  The  higher  cost  of  lending 
coupled  with  the  erosion  of  real  disposable 
income due to higher inflation is also likely to 
reduce  households'  capacity  to  service  their 
debts,  particularly 
for  more  vulnerable 
borrowers. 

The  cost  of  government  measures  to 
support the  economy  in  recent  years  has 
put  public  finances  under  pressure. 
Several  measures  have  caused  the  general 
government  deficit  to  rise  in  recent  years, 
including measures to support the economy in 
response  to  the  COVID-19  pandemic  and  the 
increase  in  energy  prices.  The  higher-than-
expected  uptake  of  tax  credits  supporting 
energy  efficiency 
residential  buildings, 
together  with  the  change  in  their  statistical 
treatment (1),  led  to  a  significant  upward 
revision  to  the  general  government  deficit  in 
recent  years,  which  reached  8.0%  of  GDP  in 
2022. Nonetheless, the economic rebound has 
brought down the public debt-to-GDP ratio by 
about  10  percentage  points  over  2020-2022, 
to 144.4% of GDP in 2022.  

in 

In 

term, 

the  short 

Government  finances  are  expected  to 
improve  as  fiscal  support  measures  are 
phased out, although debt is projected to 
the 
remain  high. 
withdrawal  of  energy  support  measures  is 
expected  to  support  Italy’s  public  finances. 
Nevertheless, the ratio of public expenditure to 
is  expected  to  remain  above  pre-
GDP 
pandemic  levels,  partly  due  to  the  permanent 
policy measures adopted in recent years. As a 
result,  the  deficit  is  projected  to  fall  but 
remain  above  3%  of  GDP  in  2024.  The  public 
debt-to-GDP  ratio  is  also falling but  projected 
to remain high, reaching 140.3% by 2024. 

(1)  On 1 March, Eurostat published advice clarifying the 
statistical treatment of Italian tax credits for housing 
efficiency. This led to a revision of the deficit by +0.2 
and +1.8 pps of GDP in 2020 and 2021 respectively. 

3 

Graph 1.1: Decomposition of debt by sector 

Source: Eurostat (nasa_10_f_bs) 

The labour market situation has 
improved, but significant slack 
remains 

Labour demand increased in 2021-22 but 
weaknesses  remain  in  the  labour  supply. 
The  unemployment  rate  fell  for  the  eighth 
consecutive  year  to  8.1%.  The  unemployment 
rate  of  young  people  (15-24)  is  also  falling, 
but  at  nearly  24%  it  remains  one  of  the 
highest  in  the  EU.  The  implementation  of  the 
European  Pillar  of  Social  Rights  would  require 
further  progress  on  a  number  of  aspects.  The 
activity  rate  rose  to  70.4%,  i.e.  back  to  2019 
levels,  but  still  below  Italy's  EU  peers.  The 
employment rate is also 10 pps below the EU 
average, with even wider gaps for women and 
young  people.  The  gender  employment  gap 
was 19.3 pps in 2022 (EU: 10.6). The share of 
in 
young  people 
employment, education or training fell to 19% 
in  2022,  still  7  pps  above  the  EU  average. 
There are also substantial differences between 
northern  and  southern  regions  in  terms  of 
employment and participation (see Annex 12). 
Overcoming  these  long-standing  challenges 
and  improving  active  labour  market  policies 
its  national 
Italy  achieve 
would  help 
employment  rate  target  by  2030  (see  Annex 
14).  

(15-29)  who  are  not 

Action  is  needed  to  better  match  labour 
supply  to  demand.  The  job  vacancy  rate  in 
the  private  sector  has  steadily  increased  with 

050100150200250300350080910111213141516171819202122*% of GDPFinancial corporations (MFI)GovernmentHouseholdNon financial corporationsPrivate sectorPrivate sector EA 
                                                 
  
rose 

fastest 

level.  Vacancies 

the post-pandemic recovery, reaching 2.3% at 
the  end  of  2022,  more  than  double  the  pre-
2020 
in 
construction  and  in  some  service  sectors, 
where  there  has  been  the  strongest  recovery 
in  output.  Employers 
increasing 
difficulties  in  finding  available  workers  at  the 
prevailing wages, which may  add to the long-
standing  mismatch  between  demand  and 
supply of more qualified workers. In fact, low-
skilled  individuals  have  high  inactivity  and 
unemployment  rates.  The  main  cause  of  the 
mismatch  appears  to  be  the  insufficient  or 
ineffective provision of education and training. 

signal 

Educational outcomes in Italy remain low 
and  there  is  scope  to  expand  firm-level 
training.  The  education  system  is  beset  by 
long-standing  structural  problems,  which  the 
pandemic  exacerbated.  Social  and  regional 
in  achievement  have  also  widened. 
gaps 
Despite recent improvements, Italy’s education 
system  performs  below  the  EU  average  on 
most  indicators.  The  share  of  people  with 
higher  education  qualifications  remains  very 
low,  particularly  in  the  scientific  fields.  In 
2021,  less  than  half  of  the  adult  population 
had  at  least  basic  digital  skills  and  in  2019, 
the  share  of  ICT  graduates  was  among  the 
lowest in the EU (see Annex 8). Participation in 
adult  learning  also  remained  below  the  EU 
average (2)  (see  Annex  14).  A  national  survey 
of firms with at least 10 employees (3) reports 
that  in  2020,  around  two-thirds  of  firms 
organised  training,  involving  only  45%  of 
employees.  This share  will  have  to increase if 
Italy  is  to  reach  its  2030  target  of  60%  of 
adults participating in training every year.  

The  risk  of  poverty  and  social  exclusion 
remains  high.  Italy  has  had  negative  real 

(2)  The indicator on adult learning participation over the 
previous four weeks is used here, 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, 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. 

(3)  https://www.istat.it/it/archivio/279433  

The share of companies offering training opportunities 
increases with firm size; the large majority of Italian 
firms employing less than 10 people were not part of 
the survey. 

wage  growth,  on  average,  between  2005  and 
2019 (-0.2% per year). While this boosted the 
competitiveness  of  Italian  firms,  it  affected 
the  living  standards  of  lower  income  earners. 
In  2022,  nominal  wages  rose  by  4.5%. 
However, due to high inflation, real wages fell 
by  2.8%  in  2022  and  are  not  expected  to 
increase again this year. In parallel,  the share 
of people at risk of poverty or social exclusion 
rose slightly to 25.2% in 2021, from 24.9% in 
2020, after falling steadily between 2015 and 
2019.  

social 

Income inequality remained above the EU 
average in 2021. The share of households in 
absolute  poverty  has  been  rising  since  2005 
(see Annex 14). Social services are fragmented 
and do not always sufficiently meet the needs, 
especially in the  south. More action is needed 
to reach the 2030 poverty  reduction target. It 
remains unclear what will replace the citizens’ 
income scheme, due to be suspended in 2024. 
With 
on 
pensions (4),  the  poverty  risk  for  older  people 
(over  65  years)  is  lower  than  for  the  average 
population.  The  risk  of  poverty  and  social 
exclusion is especially high for children, people 
with  disabilities  and  people  with  a  migrant 
background.  Italy  has  among  the  highest 
shares  in  the  EU  of  temporary  workers  and 
self-employed  workers,  who  have  less  access 
to  adequate  social  protection.  This  means  the 
risk  of  in-work  poverty  is  higher  than  the  EU 
average. 

concentrated 

spending 

a 

in 

rising 

macroeconomic 

vulnerabilities 
The 
identified in the In-depth Review for Italy 
are  slowly  improving.  (5)  Italy's  high  public 
debt-to-GDP  ratio  constrains  fiscal  policy, 
rate 
particularly 
environment.  Persistent 
low  productivity 
growth  has  also  been  a  key  factor  behind 
Italy’s  protracted  weak  economic  growth  (see 
Annex  12).  Despite  making  some  progress, 
Italy  has  persistently  low  participation  rates, 
wide  regional  and  gender  disparities,  and  a 
high rate of youth unemployment.  

interest 

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

explained/index.php?title=Government_expenditure_on_
social_protection 

(5) European Commission (2023), In-Depth Review for Italy, 
Commission staff working document (COM(2023) 634 
final).   

4 

 
                                                 
                                                 
in 

The  banking  sector  has  made  significant 
progress 
legacy  non-
reducing 
performing  loans.  However,  contained  risks 
remain  as  the  energy  crisis  may  have  a 
impact  on  asset  quality.  The 
delayed 
corporate-sovereign-bank  nexus 
intensified 
following  the  pandemic  and  the  energy  crisis. 
The  reforms  and  investments  planned  under 
resilience  plan  are 
Italy's 
expected  to  mitigate  these  macroeconomic 
vulnerabilities,  provided 
fully 
implemented (see Annex 22 and the 2023 In-
Depth Review for Italy). 

recovery  and 

they  are 

Barriers remain to inclusive and 
sustainable growth  

Structural  inefficiencies  in  the  public 
sector  discourage  investment  and  slow 
down  productivity  growth.  The  public 
administration  remains  prone  to  ineffective 
management  and  excessive  red  tape.  Local 
bodies, especially in the south, have difficulties 
in  absorbing  EU  funds  and  in  adapting  to 
change due to limited administrative capacity. 
The  justice  system  still  records  among  the 
longest  times  in  the  EU  to  reach  decisions.  It 
has  a 
large  backlog  of  cases,  which 
undermines  the  overall  effectiveness  of  rules 
and  curbs 
(see  Annex  11). 
Government-to-business  payment  times  are 
often  long,  despite  recent  progress,  and  this 
has  negative  effects especially  on  SMEs.  Italy 
plans 
recovery  and 
resilience  plan  that  have  the  potential  to 
improve  the  situation.  The  above-EU-average 
regulated 
level 
professions is  a  drag  on competitiveness (see 
Annex 12).  

reforms  under 

restrictiveness 

investment 

the 

of 

of 

Italy's  research  and  innovation  system 
still  has  untapped  potential.  Italy  is  a 
moderate  performer  on  innovation,  according 
to  the  European  Innovation  Scoreboard.  Both 
businesses  and  the  public  sector  spend  less 
than 
research  and 
innovation.  The  framework  conditions  are  not 
Italy 
fully 
for 
underperforms  on  human 

the  EU  average  on 

innovation  as 

conducive 

resources 

to 

research  and  innovation  and  on  business-
science links, despite recent improvements.  

The  high  public  debt  remains  a  major 
source  of  vulnerability  for  the  Italian 
economy. Though it has started to fall, public 
debt  remains  above  the  pre-pandemic  levels. 
Pressures  related  to  an  ageing  population 
compounds  the  debt  sustainability  challenge. 
The  guaranteed  loans  granted  during  the 
pandemic  increase  fiscal  risks.  As  a  result, 
Italy's  risks  related  to  fiscal  sustainability  are 
high in the medium term.  

tax 

The 
system  hinders  economic 
efficiency  and  growth.  Italy's  tax  system  is 
prone  to  longstanding  weaknesses.  Shifting 
the current high tax burden on labour to other 
underused  sources  of  revenue  would  be  less 
detrimental  to  growth.  The  complexity  of  the 
system  is  exacerbated  by  widespread  tax 
expenditures.  Taxes  on  energy  are  not 
designed  to  support  the  transition  to  clean 
remains  high, 
technologies.  Tax  evasion 
although the countermeasures taken in recent 
years are starting to bear fruit. 

Achieving the green transition requires an 
increase in public and private investment. 
Though  Italy  performs  well  on  some  key 
sustainability  parameters  and  private  firms 
increasingly  taking  actions  promoting 
are 
environmental  sustainability (6),  it  lags  behind 
on  energy  efficiency,  renewable  energy  roll-
out,  the  quality  of  energy  infrastructure  (in 
particular internal electricity transmission) and 
on  investment  in  green  skills.  Large-scale 
projects  in  the  energy  sector,  a  more  agile 
national  and  subnational  governance  of 
energy policy, as well as a more innovative use 
of  financing  schemes  (especially  targeted  to 
the  most  vulnerable  stakeholders)  can  help 
reduce  the  country’s  environmental  footprint 
and its dependency on energy imports.  

Italy’s  southern  regions  still  lag  behind 
institutional  capacity  and  social 
on 
outcomes. Regional disparities are significant 
in  service  quality  and  access,  including  in 
healthcare.  The  public  administration  is  also 

(6)  ISTAT 2023 - Pratiche sostenibili delle imprese - Anno 

2022 e 2023-2024 (istat.it)  

5 

 
                                                 
The recovery and resilience plan includes 
major reforms and investments to tackle 
Italy’s 
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,  competition  and 
the  business  environment.  These  measures, 
combined  with  the  EU  Cohesion  Funds,  are 
expected  to  help  reduce  regional  disparities 
and accelerate the green and digital transition. 

(see 

Annex 

outcomes 

the  south 

weaker,  both  on  locally  provided  services (e.g. 
transport,  water,  waste  and  risk  prevention) 
and  on  services  managed  by  the  central 
government  (e.g.  education  and  justice).  For 
instance,  public  procurement  procedures  take 
longer  in  the  south.  Undeclared  work  and  the 
shadow  economy  affect 
in 
particular,  as  do  low  employment  rates  and 
14). 
education 
Depopulation  in  the  south  of  the  country, 
including through internal migration, continues 
to  drain  the  south  of  human  resources  that 
could  benefit  business  and  social  services. 
Along  with  narrow  and  temporary  measures 
such as the cut in social security contributions 
for new hires, a more structural  and strategic 
approach  to  boost  territorial  cohesion  could, 
for  example,  target  administrative  capacity 
and  the  infrastructure  gap.  It  could  include 
developing the internal electricity transmission 
grid  to  support  the  roll-out  of  renewable 
generation capacity in the south (see Annexes 
7, 12 and 17). 

Despite progress on most UN Sustainable 
Development  Goals  (SDGs),  structural 
challenges  remain.  Italy  made  progress  on 
almost all indicators between 2016 and 2021. 
It  performs  better  than  the  EU  average  on 
some  sustainability  dimensions  and  on  health 
and  wellbeing,  but  there  is  room  for  further 
improvement,  notably  on  renewable  energy 
and  sustainable  transport.  On  fairness  and 
inclusion, Italy has not made enough progress 
to close the gaps with its EU peers. Inequalities 
by  gender  and  for  people  with  a  migrant 
background have even widened. More action is 
needed  to  tackle  structural  challenges  related 
to  poverty,  employment,  education  and 
productivity (see Annex 1). Significant regional 
differences  persist  in  all  policy  areas.  Civil 
society 
Italian  Alliance  for 
Sustainable Development - ASviS), the national 
statistics  agency  ISTAT,  and  the  Ministry  of 
Economy and Finance play a key role in Italy in 
disseminating  data  and  analysis  on  the  SDGs 
and on well-being indicators (7). 

(notably 

the 

(7)  For national analysis see ISTAT, 2022, Rapporto SDGS 
2022. Informazioni statistiche per l'agenda 2030 In 
Italia, https://www.istat.it/storage/rapporti-temati-
ci/sdgs/2022/Rapporto-SDGs-2022.pdf; ASviS, 2022, 
L’Italia e gli obiettivi di sviluppo sostenibile, Rapporto 
AsviS 2022, https://asvis.it/rapporto-asvis-2022/.  

6 

 
                                                 
Box 1: 

Energy policy response in Italy 

Italy adopted  several  support  measures to cushion the impact of higher energy prices 
on  households  and  businesses.  The  Commission's  2023  spring  forecast  projects  their 
gross budgetary costs to amount to  1.2% of GDP in 2023 (8). Most measures in 2023 
are targeted to the most vulnerable households or firms, although the majority of the 
energy  support  measures  do  not  fully  preserve  the  price  signal  to  reduce  energy 
demand and increase energy efficiency. Italy is expected to fully phase out the support 
measures by the end of 2023.  
Notable  measures  include  subsidies,  in  the  form  of  a  tax  credit  for  the  extra  cost 
incurred,  to  energy  and  gas-intensive  companies,  measures  to  control  general  system 
charges in the electricity and gas sectors and a reduced VAT rate (5%) on the supply of 
methane  gas.  The  government  extended  the  eligibility  criteria  for  the  social  tariff  for 
electricity  and  gas,  enabling  a  larger  group  of  vulnerable  households  to  benefit  from 
lower electricity and gas prices. It increased the cut in social security contributions for 
workers below a certain income threshold in 2023, with a further 1 percentage point cut 
for workers with an annual income below EUR 25 000 in addition to the 2 percentage-
point cut for workers with an annual income below EUR 35 000.  
Italy adopted  a national measure to apply Council Regulation (EU) 2022/1854 (9). This 
meant that, in 2023, a 50% contribution is levied on corporate profits made by energy 
companies in 2022 that are at least 10% higher than the average income reported in 
the  2018-2021  reference  period (10).  The  measure  applies  to  companies  operating  in 
the wholesale gas and electricity markets, including renewable electricity generators, to 
companies producing and distributing oil and gas and to importers of electricity, natural 
gas and petroleum products. The authorities estimate this measure to yield around EUR 
2.5 billion. 
Gas still plays a role in Italy's energy mix. The country has taken action to improve its 
overall  security  of  energy  supply  in  view  of  decreasing  its  reliance  on  fossil  fuels. 
Specifically,  Italy  took  measures  to  accelerate  the  roll-out  of  renewable  energy, 
especially  photovoltaic  and  wind  installations.  The  Italian  government  also  promoted 
energy efficiency programmes, e.g. setting a 25 degree Celsius floor on air conditioning 
during the summer and extending the Superbonus scheme until the end of 2025, albeit 
with  diminishing  incentives.  To  reduce  demand,  the  Italian  Transmission  System 
Operator defined special measures to maximise the use of coal and oil power plants to 
reduce the share of gas used to generate thermoelectric power. Italy  also updated its 
gas  shedding plans  by  considering  restrictions  for  civil  consumption  and  introducing  a 
legal  obligation  for  retailers  to  deliver  gas  to  protected  customers.  Lastly,  Italy 
temporarily  increased  storage  obligations  for  the  Energy  Services  Managing  Authority 
(GSE) in order to reach the 90% storage capacity target. 

(8)  For 2022, the gross budgetary cost of measures 

amounted to 2.8% of GDP. All of the measures outlined 
in this box were already in place in 2022. 

(9)  EUR-Lex - 32022R1854 - EN - EUR-Lex (europa.eu) 

(10)  Member States can keep national measures that are 
equivalent to the solidarity contribution specified in 
Council Regulation (EU) 2022/1854 provided they are 
compatible with the objectives of the regulation and 
generate higher or comparable proceeds. These 
measures must also cover the extraordinary and 
unexpected profits of businesses active in the 
extraction of crude petroleum, natural gas, coal, and 
refinery sectors. 

7 

 
                                                 
 
 
 
 
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY 

The Recovery and Resilience Facility (RRF)  will 
finance EUR 191.6 billion of investment in Italy 
over  the  period  2022-2026  (10.7%  of  GDP). 
Italy’s  recovery  and  resilience  plan  (RRP) 
includes 190 measures, with 132 investments 
and 58 reforms. Italy is the largest beneficiary 
of the Recovery and Resilience Facility (RRF) in 
absolute  terms  and  one  of  four  Member 
States that have requested loans.  

The  implementation  of  Italy’s  recovery 
and resilience plan is underway, however 
Italy 
increasing  risk  of  delays. 
with 
submitted  3  payment  requests,  corresponding 
to 151 milestones and targets in the plan and 
resulting in an overall disbursement of EUR 42 
billion  (referring  to  the  first  two  payment 
requests  submitted).  Proceeding  swiftly  with 
the  implementation  of  the  plan  and  the 
negotiation of its amendment is essential due 
to  the  temporary  nature  of  the  Recovery  and 
Resilience  Facility  in  place  until  2026.  The 
negotiation on the addendum and REPowerEU 
chapter is ongoing but Italy has not submitted 
Italy  has  formally 
any  official  proposal. 
expressed  interest  in  requesting  additional 
loans. 

review  of 
The  following,  more  detailed 
measures  being  implemented  under  the  RRP 
does  not  constitute  a  formal  Commission 
approval  or 
rejection  of  any  payment 
requests.  

holding 

Italy  has  achieved  important  milestones 
included 
in  the  RRP,  and  continuous 
remains 
implementation 
effective 
pivotal.  The  RRP  aims  to  address  structural 
barriers 
and 
back 
productivity  growth.  Reforms  have  started, 
notably 
justice, 
in  public  administration, 
competition, education and labour policies. The 
authorities  are  running  investment  projects 
that are feeding through to final beneficiaries. 
However,  numerous  steps 
to 
implement  the  reforms  and  investments  and 

investment 

lie  ahead 

they  are  key  to  achieve  the  ultimate  policy 
objectives  set  out  in  the  RRP,  including  in 
terms  of  territorial  cohesion  objectives.  In 
early  2023,  the  government  amended  the 
governance  framework  for  the  coordination 
and  monitoring  of  the  RRP.  An  effective  and 
fully operational framework remains key for a 
smooth  and  timely  implementation  of  the 
plan.  Moreover,  it  continues  to  be  crucial  to 
identify  potential  delays  and  implementation 
issues  early  on  and  to  take  timely  action  to 
address them. 

to 

the 

is  key 

The  RRP  seeks  to  boost  administrative 
capacity,  which 
raising 
productivity  and  to  implementing  all  RRP 
recruitment  of 
measures.  Following 
1  000  experts  and  the  roll-out  of  technical 
assistance,  in  2022  Italy  adopted  a  public 
employment  reform.  It  updates  job  profiles, 
increases  mobility  between  departments, 
improves  hiring  and  appointment  procedures, 
improves  the  gender  balance,  modernises 
performance  evaluation  and  strengthens  the 
link  between  lifelong  learning  and  reward 
mechanisms.  Full  implementation  will  be  key 
to  ensure  the  reform  has  a  positive  and 
structural impact. 

in 

reform  aims 

Measures  under  the  RRP  are  expected  to 
cut  red  tape  and  benefit  the  business 
environment 
Italy,  provided  their 
timely and full implementation. The public 
procurement 
to  speed  up 
tendering  procedures,  increase  e-procurement 
and  professionalise  public  buyers.  These 
measures are also important to enable Italy to 
absorb the RRF and Cohesion Funds available. 
The  RRP  also  seeks  to  simplify  interactions 
with  businesses  and  citizens  (following  the 
‘once-only’  principle 
in  the  Single  Digital 
Gateway)  and  to  speed  up  the  average 
payment  time  by  the  public  administration  to 
30 days  (1) by end 2023. 

8 

 
 
The  RRP  aims  to  remove  barriers  to 
competition  and  private  investment.  The 
2021 Annual Competition Law (adopted in late 
2022)  will  remove  barriers  to  competition  in 
local public services, local public transport, gas 
distribution,  hydropower,  electric  charging  and 
waste.  The  package  includes  measures  to 
accelerate  the  liberalisation  of  electricity  and 
gas  retail  markets.  It  brings  merger  control  in 
line  with  EU  rules. Under the  RRP  and  as  part 
of  the  Annual  Competition  Law  2023,  Italy 
aims  to  improve  competition  in  the  road 
the 
transport  on  highways  by  making 
tendering  of  concession  contracts  mandatory 
and  by  reducing  in-house  provision.  These 
measures  are  expected  to  attract  private 
investment,  reduce  fragmentation,  achieve 
proper 
and 
professionalise public-service management. 

regulatory 

oversight 

the  RRP, 

Italy has continued the reform of its civil 
justice  system.  Under 
Italy 
committed  to  reduce  by  40%  the  disposition 
time at three instances of civil justice by 2026. 
In  2022,  the  government  complemented  the 
civil  justice  reform  initiated  in  2021  with  the 
delegated  acts  to  reduce  the 
length  of 
proceedings  by  simplifying  procedures  and 
increasing the productivity of courts. Italy has 
also  taken  further  steps  to  implement  the 
insolvency reform by adding more detail to the 
2021  legislative  initiatives.  Lastly,  Italy  has 
carried out a comprehensive tax justice reform 
by  creating  a  new  category  for  professional 
tax judges and by adopting new rules that aim 
to  make  the  enforcement  of  tax  law  more 
effective and reduce the inflow of tax cases to 
the Court of Cassation. 

instances  by  2026. 

Several  reforms  support  efforts  to  fight 
fraud and corruption. Italy has committed to 
reducing by 25% the disposition time at three 
criminal 
Italy  has 
continued  to  pursue the  2021  criminal  justice 
reform by adopting delegated acts. The aim of 
the  reform  is  still  to  reduce  the  excessive 
disposition  time,  given  the  negative  impact 
this  has  on  prosecution  and  on 
the 
adjudication of corruption cases. It will require 
continued  monitoring  of 
its  effectiveness, 
particularly  at  the  appeals  level.  On  waste 
management, Italy has adopted an action plan 
local  authorities  on  waste 
to  support 

including  assistance  to  run 
management, 
tender procedures, to ensure that concessions 
are  granted 
in  a  transparent  and  non-
discriminatory  manner,  thus  reducing  the  risk 
of criminal activities and improving the quality 
of  public  service.  The  RRP  also  proposes 
measures  to  fight  tax  evasion  and  tackle 
undeclared work (see below). 

A  reform  to  combat  undeclared  work 
started  in  2022.  The  government  approved 
the  national  plan  and  roadmap  at  the  end  of 
2022. With full implementation in 2025/2026, 
inspections  are  expected  to  increase  by  20% 
and  undeclared  work  to  decrease  by  2 
percentage points. 

RRP measures are expected to reduce tax 
evasion  and  improve  the  efficiency  of 
public spending. The plan includes measures 
to  counter  tax  evasion  and  encourage  tax 
compliance, such as integrated databases and 
pseudonymised  big  data  to  better  target 
audits  and  checks.  In  addition,  it  will  reduce 
compliance  costs  and  improve  the  fulfilment 
of  obligations  by  bringing  in  prefilled  VAT  tax 
returns.  On public  spending,  Italy  sets  savings 
targets  to  be  achieved  and  yearly  spending 
reviews over 2023-2025 under the reinforced 
spending  review  framework.  It  will  reclassify 
the  general  State  budget  to  better  monitor 
environmental  and  gender-equality-related 
expenditure. Lastly, the RRP plans to complete 
the  fiscal  federalism,  expected  to  increase 
transparency 
spending 
and 
efficiency across all government levels. 

encourage 

Action under the RRP is supporting Italy’s 
digital  transition.  The  plan  includes  an 
Italy's 
ambitious  programme  to  digitalise 
public  administration  worth  EUR 6  billion.  It 
also plans to invest EUR 6.7 billion to complete 
the 
5G 
telecommunications  network  and  EUR 13.4 
billion to digitalise businesses. 

ultra-fast 

national 

and 

Two  reforms  were  adopted  to  foster  the 
digitalisation  of  public  administration. 
The aim of the reforms is to streamline public 
procurement  of 
ICT  services,  support  the 
migration to cloud solutions and improve data 
exchanges between public administrations.  

9 

 
Italy  has  awarded  all  contracts  for  the 
roll-out of ultra-fast internet connections 
to  improve  connectivity.  This  will  focus  on 
poorly connected households (Italia a 1 Giga), 
remote  areas  (Italia  5G),  schools,  healthcare 
facilities and smaller islands. 

Italy  is  taking  measures  to  support  the 
digitalisation of firms, to diversify and to 
internationalise  small  and  medium-sized 
enterprises.  The  Annual  Competition  Law 
adopted  in  2022  will  reduce  the  number  of 
days it currently takes to start a business. The 
programme Transizione 4.0 is set to accelerate 
the  digital  transition  of  firms  by  offering  tax 
credits  to  invest  in  technologically  advanced 
goods, research and development and training 
for an estimated cost of EUR 13.4 billion under 
the  RRF.  Italy  has  committed  to  supporting 
women-owned start-ups and research projects 
of  national  interest.  Italy  will  also  help  small 
internationally. 
and  medium  firms  expand 
Under 
to  earmark 
additional  resources  to  a  fund  to  support 
Italian  companies  in  contributing to  important 
projects of common European interest (IPCEIs). 
To this end, Italy launched calls for expression 
of  interest  and  allocated  funding  for  national 
projects, notably in micro-electronics and cloud 
computing,  to  better  integrate  Italian  firms  in 
EU  value  chains  and  strengthen  the  country’s 
position in advanced technologies. 

Italy  plans 

the  RRP, 

in 

the  RRP, 

research  projects, 

Under 
Italy  adopted  a 
comprehensive  R&D  reform  in  2022  and 
major  investments  are  underway.  The 
reform promotes a more systematic approach 
to  R&D  by  creating  a  simplified  model  for 
line  with 
selecting 
international  best  practice.  The  Ministry  for 
University  and  Research  will  coordinate  the 
selection  process  to  reduce  dispersion  and 
  The 
fragmentation  of  research  priorities. 
reform  simplifies 
researcher  careers  and 
creates incentives to promote mobility of high-
profile 
figures  between  academia  and 
business, strengthening business-science links. 
In  2022,  contracts  were  awarded  for  major 
R&D investments, in particular in research and 
innovation infrastructures,  national  leaders  on 
innovation 
enabling 
ecosystems.  Italy  expects  to  complete  these 
investments in full within the RRP timeframe.   

technologies 

and 

The  RRP  is  boosting  public  and  private 
investment  to  support 
Italy’s  green 
transition.  Italy’s  RRP  envisages  significant 
investments in energy efficiency in residential 
in 
and  public  buildings  (EUR 15.3  billion), 
sustainable  mobility 
(EUR 34  billion)  and 
renewable energy, in the circular economy and 
in  improving  waste  and  water  management 
(EUR 11.2 billion). 

Major investments have started to reduce 
the  country's  dependence  from  fossil 
fuels  and  to  increase  energy  efficiency. 
The government has awarded contracts for the 
development  of  factories  producing  batteries, 
photovoltaics,  and electrolysers.  The  aim is  to 
expand  the  production  of  renewable  energy 
and  to  change  the  energy  mix,  which  is  still 
highly dependent on fossil fuels (see Annex 1 
investments  are  fully 
and  7).  Once  the 
implemented, 
the  production  capacity  of 
photovoltaics is expected to increase from 200 
MW  to  at  least  2GW  per  year  and  the 
production  of  batteries  to  at  least  11  GWh. 
The  government  has  also  awarded  contracts 
for investing in green communities and for the 
green  transition  in  a  number  of  Italy’s  small 
islands.  Schemes  have  started  to  expand  the 
use  of  clean  energies  and  to  improve  the 
logistics and energy efficiency of the agri-food 
sector. 
include 
contracts  to  strengthen  the  electricity  grid  to 
expand  the  network  capacity  to  handle  the 
distribution  of 
renewable  energy.  These 
contracts also aim to make the network more 
resilient  to  hydrogeological  risks  or  adverse 
weather conditions.  

Investments 

underway 

is  rolling  out 

Italy 
investments  and 
reforms  to  improve  the  sustainability  of 
the  transport  sector.  The  government  has 
awarded  contracts  for  the  deployment  of  at 
least  3 600  Km  of  the  European  Rail  Traffic 
Management  System 
(ERTMS),  which  will 
make  Italy's  rail  network  interoperable  with 
Europe.  Italy  has  adopted  legislation  reducing 
the  time  needed  to  authorise  and  implement 
rail  projects.  Port  authorities  have  started 
investments and have assigned works to make 
ports more sustainable and energy efficient.  

Italy  has  revised 
its  water  sector 
governance  to  reduce  fragmentation  and 

10 

 
make  water  management  more  efficient. 
The  government  has  adopted 
legal  acts 
making  a  single  operator  responsible  for 
providing an integrated water service (Servizio 
Unico Integrato) in every district, known as the 
Ambito  Territoriale  Ottimale.  This 
reform 
reduces  fragmentation  in  water  management 
and  is  expected  to  improve  efficiency.  Other 
legal  changes  increased  the  penalties  for 
illegal  water  extraction,  better  aligned  fees 
with  the  polluter-pays  principle  and  aim  to 
curb  the  expansion  of  irrigation  systems.  The 
reform  also  shortened  the  deadlines  for 
authorising and implementing projects related 
to  water  infrastructure  and  hydrogeological 
risks. 

Italy  has  adopted  reforms  to  accelerate 
the  green  transition.  The  milestones  and 
targets  for  the  three  first  instalments  of  the 
RRP  included  the  adoption  of  a  national 
strategy  for  the  circular  economy,  a  national 
waste  management  programme  and  creating 
fiscal  incentives  to  produce  and  consume 
renewable  energies  such  as  biomethane  or 
green  hydrogen.  The  national  strategy  for  the 
circular  economy  includes  a  roadmap  with 
deadlines  to  scrap  environmentally  harmful 
subsidies, to promote the circular economy, to 
set  up  a  new  system  of waste  traceability,  to 
adopt  fiscal  incentives  to  recycle  and  re-use 
materials  and  to  increase  landfilling  taxes. 
Italy has also adopted legislation to streamline 
projects  to  renovate  buildings  and  other 
energy efficiency projects in general.  

The  investments  and  reforms  underway 
are also expected to improve educational 
outcomes.  The  comprehensive  reforms  of 
primary  and  secondary  education  adopted  in 
2022  include  action  to  improve  the  academic 
guidance  system  in  secondary  schools,  align 
the  curricula  of  technical  and  professional 
institutes  with  local  labour  market  needs  and 
to foster students’ skills in science, technology, 
engineering  and  maths.  The  teaching  reform 
adopted  in  2022  is  expected  to  enhance  the 
quality  of  teaching.  The  government  plans  to 
approve  further  implementing  acts  in  2023 
reforms  will  be 
(see  Annex  15).  The 
investments  to  expand 
complemented  by 
vocational  education,  to  train  teachers  and 
school staff and to mentor young people who 

have dropped out or are at risk of dropping out 
from  education.  Digital  equipment  and 
infrastructure  will  be  upgraded  under  the 
School  4.0  plan  and  other 
investments 
envisaged  by  the  RRP.  Investments  to  expand 
and  improve  school  infrastructure,  notably  in 
early  childhood  education  and  care  facilities, 
are also included. 

and 

tertiary 

remain  priorities. 

Improving  young  people’s  employment 
education 
prospects 
qualifications 
Italy 
adopted  comprehensive  reforms  of  tertiary 
and higher education. These include measures 
on  PhD  programmes,  degree  recognition  to 
help  students  access  the  jobs  market  in 
regulated  professions  and  to  group  university 
degrees.  The  reforms  adopted  in  2021  are 
complemented  by 
in  student 
housing.  The  2022  reform  to  strengthen 
tertiary  vocational  training  should  also  help 
reduce  skills  mismatches  on 
labour 
market. The RRP includes action to expand the 
universal  civil  service  programme,  which 
enables  young  people 
in 
volunteering schemes to boost their skills and 
job prospects.    

to  participate 

investments 

the 

and 

re-skilling. 

A new active labour market policy system 
and  investment  to  boost  the  capacity  of 
public employment services both promote 
The 
up-skilling 
effectiveness  of  public  employment  services 
and  adult  participation  in  training  remain  low 
in  Italy  (see  Annex  14).  The  reform  of  active 
labour  market  policies  brought  in  a  national 
programme  for  the  guaranteed  employability 
of  workers  in  2021  and  aims  to  combine  job 
search and training services to provide tailored 
pathways  to  employment.  The  programme 
started to reach the first beneficiaries in 2022, 
including  people  facing  poverty,  receiving 
strengthened social services and young people 
neither in employment nor in education. 

The  RRP  seeks  to  reduce  the  gender 
employment  gap  and  to  create  more 
inclusive conditions in the private sector. 
Italy  has  one  of 
the  highest  gender 
employment  gaps  in  the  EU,  especially  in 
southern  regions  (see  Annex  14)  and  the  gap 
due  to  care  responsibilities  has  widened  (see 
Annex  1).  To  support  women  in  joining  the 

11 

 
to 

The  RRP  is  expected  to  help  improve 
territorial  cohesion  across  the  country. 
Italy  aims  to  allocate  an  indicative  share  of 
40%  of  RRP  funding  (including  the  national 
the  south.  The 
complementary  plan) 
planned  investments in infrastructure are key. 
Italian authorities have committed to awarding 
contracts  to  upgrade  680  km  of  regional 
railway  lines  and  to  extend  5G  coverage  to 
15  000 km2 in ‘market failure areas’ by 2022. 
The  south  will  also  benefit  from  projects  to 
boost  administrative  capacity  and  improve 
of 
public 
administrative  procedures,  waste  and  water 
management,  and  the  justice  system.  By  end 
2023,  the  Italian  government  expects to  start 
infrastructural projects of primary urbanisation 
work  to  foster  competitiveness  and  economic 
development in special economic zones in the 
south.  Lastly,  in  2022,  the  government  began 
investment  programmes  to  improve  social 
services  and  infrastructure  in  remote  inland 
areas. 

including 

services, 

reforms 

labour market, the government set up the fund 
Impresa-donna  in  2021  to  support  new  or 
expanding businesses led by women. To meet 
the  need  for  family  care  services,  the  plan 
increase  early 
includes 
childhood  education  and  care  services  (for 
children between 0 and 6), long-term care and 
services for vulnerable families. 

investments 

to 

promoted 

autonomy 

in  adequate  housing  and 

The  RRP  aims to  improve  social  inclusion 
and  prevent  marginalisation.  Italy  has 
launched a reform and has begun investing in 
support for people with disabilities, along with 
investments 
in 
revitalising  urban  areas.  The  plan  includes 
measures to improve social services and their 
the  country.  The  2021 
coverage  across 
Framework  Law  on  Disability  brought  in  a 
more  multidisciplinary  disability  assessment 
and 
non-
institutionalised care. For 2023, the next steps 
are  expected  to  be  the  implementing  decrees 
of the reform of disability and a reform of the 
non-self-sufficiency  condition.  In  2021,  the 
government  approved  an  operational  plan  to 
invest  in  support  measures  for  vulnerable 
families and children, elderly people and social 
workers.  In  2021  and  2022,  it  approved 
official  plans  and  agreements 
to  start 
investing 
in  public  and  social  housing, 
temporary housing with services for homeless 
people  and  adequate  housing  solutions  for 
workers in agriculture.  

and 

Action under the RRP is also boosting the 
resilience  of  Italy's  health  system  and 
improving access to territorial healthcare 
across  the  country.  The  2022  reform  of 
territorial  healthcare  sets  up  new  proximity 
healthcare  structures  (including  community 
health  houses,  community  hospitals  and 
coordination  centres)  and  brings 
in  new 
standards.  The  reform  and  complementary 
investments are expected to improve proximity 
and access to healthcare services and alleviate 
pressure  on  hospital  care.  The  investments 
needed  to  make  the  reform  operational 
started  in  2022  but  major  implementation 
steps  remain  pending  as  these  structures  are 
expected  to  become  operational  gradually  by 
2026.  In  2022,  Italy  also  began  investing  in 
telemedicine  and  technological  and  in  digital 
equipment for hospitals. 

12 

 
Box 2: 

Key deliverables expected under the RRP in 2023/2024 

 

Justice  reform.  Italy  has  adopted  the  enabling  and  implementing  legislation  to 
underpin  the  civil  and  criminal  justice  reform.  Follow-up  action  expected  in  2023  will 
include  the  entry  into  force  of  the  secondary  acts  needed  to  complete  the  reform 
process and the corresponding acts on digitalisation of the justice system. In 2024, Italy 
is  expected  to  finalise  the  recruitment  of  temporary  staff  for  civil,  criminal  and 
administrative courts to reduce the backlog of cases and the length of proceedings over 
the period 2024-2026. 

  Public administration reform. Italy plans to roll out the reform of public employment, 
to  streamline  administrative  procedures  in  a  structural  manner  and  roll  out  cloud 
services. 

  Business  environment.  Italy  plans  to  adopt  the  2022  Annual  Competition  Law, 
complete  the  public  procurement  reform,  reform  the  industrial  property  system,  make 
progress on the Transizione 4.0 plan and reduce late payments by the public sector. 

  Government finances and taxation. Measures will improve and interlink datasets to 
better target tax audits and controls and will be coupled with an increase in the number 
of  compliance  letters  sent.  Pre-filled  VAT  tax  returns  are  expected  to  result  in  lower 
compliance  costs  for  taxpayers.  Key  deliverables  also  envisage  improved  operational 
capacity  of  the  tax  administration,  the  completion  of  two-yearly  cycles  of  spending 
reviews,  adoption  of  a  classification  of  the  State  budget  providing  evidence  of  public 
expenditure to promote the green transition and gender equality. 

  Green transition. Key deliverables in this area include adopting a national strategy for 
the circular economy, a national waste management programme, the new framework to 
integrate  water services,  hydrogen,  tenders for  key  railway  infrastructure  investments, 
including  high-speed  rail  services  to  the  south,  and  action  to  simplify  administrative 
procedures. 

  Digital  transition.  Key  deliverables  expected  in  this  area  are  investments  in 
cybersecurity,  the  National  Digital  Data  Platform,  digitisation  of  central  public 
administrations,  contracts  signed  for  cloud  services  for  local  public  administration,  for 
satellite investments and to boost the competitiveness and resilience of supply chains. It 
will  include  support  to  select  firms  to  participate  in  important  projects  of  common 
European  interest  (IPCEI),  national  ‘R&D  leaders’  on  key  enabling  technologies,  to  run 
tenders for the European Rail Traffic Management System, and lastly action to provide 
at least 18 small islands with ultra-broadband connectivity. 

 

Jobs market, skills and social policies. Key deliverables include a reform of services 
for non-self-sufficient elderly people, the adoption of implementing  decrees to reform 
of  the  framework  law  on  disability,  and  full  implementation  of  the  actions  under  the 
reform to combat undeclared work. They include investing in women-led businesses, in 
the universal civil service programme, and in infrastructure to boost territorial cohesion 
across southern and rural areas of the country. 

  Education. Action under this part of the plan includes awarding contracts for investing 
in  childcare  facilities,  in  increasing  university  scholarships  and  in  the  provision  of 
educational support to under-aged people living in the south of the country. 

  Health.  Lastly,  action  expected  in  this  area  includes  starting  operations  of  territorial 
coordination  centres,  providing  large-scale  health  equipment  and  action  to  provide 
scholarships for GP training courses. 

Source: CID Annex. 

13 

 
 
 
FURTHER PRIORITIES AHEAD 

In addition to the challenges tackled by Italy’s 
recovery  and  resilience  plan,  Italy  faces  other 
challenges  that  warrant  close  attention.  They 
concern  pension  expenditure,  taxation,  the 
fiscal  framework,  demographic  trends  and 
these 
energy-related  challenges.  Tackling 
in  a  coordinated  way  could 
challenges 
contribute 
long-term  and 
to  sustainable, 
inclusive  growth.  It  would  also  help  drive 
progress  to  achieve  the  UN  Sustainable 
Development  Goals,  not  only 
the  goals 
immediately 
to  macroeconomic 
stability and the green transition, but also the 
goals related to productivity and fairness.  

related 

Fiscal sustainability remains a 
source of concern 

Italy's  public  finances  still  face  risks  in 
the medium and long term. The withdrawal 
of COVID-19 pandemic support measures and 
a strong recovery translated into large gains in 
revenue. This has brought down the deficit and 
debt  ratios,  despite  significant  expansionary 
measures  and  the  exceptional  increases  in 
energy prices. The declining trend in deficit and 
debt  levels  is  expected  to  continue  for  the 
following  years,  partly  due  to  action  to  scale 
down  the  energy  compensatory  measures.  As 
a  result,  Italy's  fiscal  sustainability  challenges 
are  deemed  to  be  limited  in  the  short  term 
(see  Annex  21).  However, given  the high  level 
of  government  debt  and  projected  costs 
related  to  the  ageing  population,  Italy's  fiscal 
sustainability  risks  are  high  in  the  medium 
term and medium in the long term. The higher 
cost  of  funding  is  a  drag  on  expenditure, 
is  gradual.  Structural 
though  the 
reforms,  including  setting  up  a  tax  system 
better  geared  to  growth  and  improving  the 
design  of  fiscal  policies,  are  crucial  to  boost 
economic  growth.  Rationalising  and  reviewing 
current  expenditure  and 
tax 
in  achieving  an 
compliance  would  help 

improving 

impact 

appropriate  fiscal  adjustment  and  ensuring 
growth-enhancing expenditure.  

in 
increasing 

Ageing  and  the  surge  in  inflation  are 
expected to increase pension expenditure. 
Pension  expenditure  in  Italy  is  among  the 
highest  in  the  EU  as  a  share  of  GDP,  which 
limits  the  resources  available  for  growth-
(see  Annex  21). 
enhancing  expenditure 
inflation,  pension 
Following  the  surge 
expenditure  started 
in  2022. 
Despite  the  change  to  the  pension  indexation 
mechanism, spending on pensions is expected 
to  accelerate  over  the  coming  years.  It  will 
continue to rise over the medium term as the 
population  ages,  despite  earlier  reforms  to 
improve  long-term  sustainability.  The  policy 
measures  taken 
increase 
pension expenditure over the short to medium 
term.  According to  recent estimates,  the  early 
retirement scheme introduced in 2019 (Quota 
100),  amended  in  2022  and  2023  to  make 
access  gradually  stricter,  is  expected  to  have 
increased  pension  expenditure  by  around  EUR 
25  billion  from  2019-2022 (11).  Italy  also 
adopted  other  temporary  early  retirement 
schemes  for  women  and  vulnerable  workers. 
The average effective retirement age was 63.9 
years  at  the  end  of  2021,  well  below  the 
statutory age of 67. To ensure Italy's pension 
system is sustainable over the long term, it is 
essential  to  implement  the  2011  reform  in 
full.  

in  recent  years 

Italy’s tax system hinders 
economic efficiency and growth 

Despite recent changes to the tax system, 
the  tax  burden  on  labour  remains  high. 
The cut in personal income taxes introduced in 

(11)  MEF, Le tendenze di medio-lungo periodo del sistema 
pensionistico e socio-sanitario 2022, November 2022. 

14 

 
 
                                                 
2022 marginally decreases the tax  burden on 
labour,  especially  for  middle  income  earners. 
The  government  also  reduced  tax  on  low-
income  earners  as  a  temporary  measure  to 
counter the economic and social impact of the 
exceptional rise in energy prices. Nevertheless, 
tax on labour remains high compared to other 
EU Member States (see Annex 19). 

Extended  flat-rate  tax  schemes  for  the 
self-employed  increase  complexity  and 
reduce fairness. The 2023 budget introduced 
two  provisions  that  lower  taxes  on  self-
employed  workers  and  other 
individual 
entrepreneurs. First, the government extended 
the  scope  of  the  simplified  tax  regime  by 
increasing  the  income  threshold  from  EUR 
65 000 to EUR 85 000. Second, a one-off flat-
rate  tax in  2023  only  of 15%  is  available  for 
individual firms that do not apply the flat-rate 
regime.  The  design  of  this  flat-rate  tax  is 
complex,  as 
income 
it  only  extends 
increases  in  2023  over  the  highest  income 
declared  in  the  2020-2022  period.  These  two 
measures  are  small  in  scope  and  affect  a 
limited  number  of  taxpayers,  they  raise 
concerns in terms of the equity and efficiency 
of the tax system since they reduce the wealth 
redistribution  effect,  imply  different  taxation 
levels across taxpayer categories and create a 
disincentive 
grow. 
Furthermore,  a  rising  share  of  self-employed 
workers (Italy already has a higher share than 
the EU average) could be eligible for relatively 
lower  pension  contributions,  putting  pressure 
on the sustainability of the welfare system. 

businesses 

for 

to 

to 

Overall,  the  taxation  system  hinders 
economic efficiency and growth and does 
the  green 
not  sufficiently  promote 
transition.  Compared  to  other  EU  Member 
States, the tax burden in Italy is skewed more 
heavily  to  production,  and  therefore  is  not 
conducive  to  economic  growth.  The  extended 
use  of  reduced  rates  partly  explains  the  low 
level of revenue that Italy receives from value-
added taxes compared with other EU Member 
States.  Although  data  on  real  estate 
is 
collected  in  a  single  digital  platform,  Italy's 
long-awaited  revision  of  cadastral  values  to 
remains 
reflect  market  values 
properly 
pending.  In  addition,  tax  expenditures,  which 
revenue, 
create  distortions  and 

reduce 

15 

increased  further  in  2022.  Although  revenue 
from  environmental  taxes  is  above  the  EU 
average, largely driven by taxes on energy, the 
current  structure  of  energy  taxes  does  not 
sufficiently  promote  the  transition  to  cleaner 
technologies.  Lastly,  frequent  changes  in  tax 
policy  increase  uncertainty  in  the  economy, 
making  the  tax  system  more  complex  and 
increasing  the  burden  on compliant  firms  and 
households.  Ongoing  delays  in  implementing 
effective competitive procedures for awarding 
licences to run maritime, lakeside and riverside 
(beach 
facilities  for 
concessions)  remain  a  source  of  concern  and 
imply  a  significant  loss  of  revenue.  Although 
the  government  had  made  some  progress  in 
reforming  the  sector  by  adopting  the  2021 
Annual  Competition  Law 
(law  118/2022), 
subsequent  legislative  initiatives  that  granted 
further  extensions  were  tabled,  hampering 
progress on the reform of the sector. 

leisure  and  tourism 

The recent proposal for reforming the tax 
system  increases  risks  related  to  equity. 
On  16  March,  the  government  presented  a 
new  draft  enabling  law  to  reform  the  tax 
system.  The  draft 
law  provides  for  the 
transition to a general flat-rate tax regime for 
personal  income  taxes  in  the  medium  term, 
including  by  reviewing  tax  rates  and  brackets 
and  confirming  the  flat-rate  tax  on  earning 
increases.  It  includes  a  redesign  of  corporate 
taxation  to  set  lower  tax  rates  on  reinvested 
profits  and  on  new  hires.  It  provides  for 
progressively  phasing  out  the  regional  tax  on 
productive  activities  (IRAP)  and  integrating  it 
into corporate tax. It comprises changes to tax 
collection, recovery procedures and the system 
of  penalties,  as  well  as  the  introduction  of  a 
It  also 
simplified  tax  settlement  system. 
includes  the  mandate  to  streamline  tax 
expenditure,  including  reduced  VAT  rates,  and 
simplify  certain  VAT  rules,  including  VAT  on 
immovable property. Following the adoption of 
the  draft  law  by  Parliament,  the  government 
will  need  to  adopt  implementing  decrees 
within 24 months. To implement the law, it will 
be  crucial  to  maintain  the  progressive  nature 
of the tax system, reduce complexity, increase 
the incentives to work and step up past efforts 
to  combat  tax  evasion.  In  particular,  reducing 
the  number  of  personal  income  tax  brackets 
risks  hampering  the  progressivity  of  the  tax 
system. It will also be important to ensure that 

 
tax collection measures that aim to reorganise 
some  categories  of  tax  debits  and  sanctions 
do not weaken incentives to tax compliance. In 
addition,  the  draft  delegated  law  does  not 
mention  the  revision  of  cadastral  values. 
Lastly, 
is 
implemented  in  a  budgetary  neutral  way  also 
in light of fiscal sustainability challenges in the 
medium and long term.  

is  crucial  that  the  reform 

it 

to  be 

A comprehensive tax reform could reduce 
the high tax wedge on labour. A budgetary 
neutral reform could shift taxation from labour 
to  other  sources  deemed 
less 
detrimental to growth. Possible options include 
reviewing reduced VAT rates and their product 
scope, redesigning environmental taxation and 
subsidies  to  promote  the  green  transition, 
redesigning  inheritance  and  gift  taxes,  and 
reconsidering  property 
taxes  on  owner-
occupied  properties (12).  As  an  example  of  a 
targeted  reduction  of  labour  taxes,  EUROMOD 
simulations (13)  by  the  European  Commission 
Joint Research Centre show that an increase in 
the  personal  income  tax  credit  for  the  first 
income bracket from EUR 1 880 to EUR 2 280 
and a similar tax credit increase for the second 
and  third  income  brackets (14)  would  reduce 
the  labour  tax  wedge  by  1  pp  for  single 
earners  on  an  average  wage  and  by  2.2  pps 
for  single  earners  on  50%  of  the  average 
wage. This would considerably narrow the gap 
above  the  EU  average  to  about  1  pps.  For 
earners on 66% of the average wage, the tax 
wedge  would  fall  below  the  EU  average  by 
about  1  pp  following  a  reduction  by  1.5  pps. 
Without shifting taxation from labour to other 
sources,  a  simultaneous  increase  in  the  top 

(12)  For a EUROMOD-QUEST simulation on property taxes, 

see European Commission (2020), Country Report Italy 
2020, Box 4.1.1, p. 31. 

(13)  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. 

(14)  The formula for the second income bracket (EUR 
15,000 to EUR 28,000) would change from 
1,910+1,190*(28,000-taxable income)/13,000 to 
2,280+1,190*(28,000-taxable income)/13,000, and the 
formula for the third income bracket (EUR 28,000 to 
EUR 50,000) would change from 1,910*(50,000-
taxable income)/22,000 to 2,280*(50,000-taxable 
income)/22,000. 

16 

statutory  personal  income  tax  rate  from  43% 
to  49%  could  finance  this  relief  for  low  and 
middle  wage  earners.  This  would  come, 
however, at the cost of increasing the already 
high tax wedge on higher incomes. Overall, the 
modelling  shows  that  this  reform  of  the 
personal  income  tax  would  reduce  poverty  by 
inequality  by  1.2%. (15)  The 
1.0%  and 
reduction  of  the  tax  wedge  on  lower  income 
earners is expected to increase labour market 
participation  rates  and  hours  worked  by  0.7% 
and  0.6%,  respectively,  for  single  women  and 
by 1.1% and 1.0% for single men.  

Proposals to increase regional 
autonomy risk increasing the 
complexity of the fiscal framework 

these 

The  government  adopted  a  framework 
law  on  regional  differentiated  autonomy. 
In February 2023, it adopted a framework law 
with  provisions  to  implement  differentiated 
levels  of  autonomy  of  regions  with  ordinary 
statute  at  the  request  of  the  regions.  This 
regions  wider 
would  both  grant 
competencies and enable them to retain more 
resources, which would no longer be managed 
or  allocated  at  central  level.  Regions  can  only 
be  granted  this  level  of  autonomy  following 
the definition of essential level of services and 
their financing, which is a crucial and complex 
exercise,  warranting  detailed  analysis  and 
thorough  consultation  of all  stakeholders.  The 
law requires that this reform must be budget-
neutral  for  the  general  government  budget. 
However, without additional resources, it could 
prove  difficult  to  provide  the  same  essential 
levels of services in regions with low historical 
expenditure,  also  due  to  the  lack  of  an 
equalisation  mechanism.  Overall,  the  reform 
envisaged under the new framework law risks 
jeopardising  the  government's  ability  to  steer 
public  spending.  This  could  have  a  negative 
impact on the quality of Italy's public finances 
and on regional disparities. 

(15)  Changes in poverty and inequality are measured 

against a poverty line at 60% of median equalised 
disposable income and a Gini indicator of equalised 
disposable income, respectively. 

 
                                                 
                                                 
Demographic challenges keep 
worsening 

lowest 

level  since 

With  2022  birth  rate  at  a  historic  low, 
demographic  trends  indicate  that  the 
working-age  population  continues  to  fall 
and the brain drain is worsening. Italy has 
one of the EU’s lowest birth rates, recording a 
negative  natural  demographic  balance  for  the 
tenth  consecutive  year.  According  to  ISTAT, 
Italy  registered  record  low  births  in  2022 
(393 000),  the 
Italy’s 
unification,  against  a  high  level  of  deaths 
(713 000). This is coupled with an increasingly 
ageing  population  and  a  shrinking  workforce 
(see  Annex  14).  With  younger  generations 
progressively  smaller 
life 
expectancy  increasing  over  the  last  decades, 
the ratio of elderly people to people of working 
age is high and increasing. This poses serious 
challenges,  including  for  the  sustainability  of 
public finances. International migration is also 
having  an  effect  on  the  skills  levels  of  the 
workforce  as  higher-skilled  workers  are 
emigrating  compared  to  the  skills  level  of 
drain 
immigrant  workers 
phenomenon).  At  the  same  time,  internal 
migration 
regional 
disparities. 

in  number  and 

exacerbate 

flows 

brain 

(the 

The migration balance is positive but it is 
no  longer  enough  to  offset  the  low  birth 
rate  and  population  ageing.  Integrating 
people  with  a  migrant  background  also 
remains  a  challenge.  In  2021,  based  on 
official 
registers,  some  361 000  people 
migrated  to  Italy  (up  13.3%  since  2021),  and 
slightly fewer Italian residents left the country, 
down to 132 000 (17% less than in 2021). In 
2021,  25%  of  emigrants  had  at  least  a 
degree.  Based  on  the  last  available  data 
(2018),  around  19%  of  Italian  PhD  graduates 
(many  with  a  STEM  background)  find  jobs 
abroad due to the lack of job  opportunities in 
Italy,  even  for  tertiary  graduates,  and  due  to 
low  salaries  in  Italy  (see  Annex  11).  The 
average  skills  level  of  migrants  attracted  by 
current immigration policies is lower than that 
(54.7%  of  non-EU  born 
of 
migrants  are  low  skilled  and  13.4%  are  high-
skilled (2020)). The immigrant population also 

Italian-born 

17 

faces  greater  challenges  in  the  education 
system (see Annex 15) and a much higher risk 
of  poverty  and  social  exclusion  than  the 
Italian-born  population  (44.4%  vs  22.6%), 
is 
even 
comparable.  

their  employment 

though 

rate 

is 

leads 

High-skilled  people  are  relocating  from 
the  south  of  Italy  to  the  north.  Italy  also 
faces  the  challenge  of  domestic  migration, 
to  population  decline  and 
which 
exacerbates  the  brain  drain 
in  southern 
regions,  where  the  unemployment  rate  is 
higher  and  access  to  services 
lower. 
Between 2011 and 2021, all southern regions 
recorded  an  average  annual  decline 
in 
population (see Annex 17). Between 2012 and 
2021,  southern  regions  lost  around  130 000 
tertiary  graduates  to  northern  and  central 
regions (16).  This  domestic  migration  is  driven 
strongly  by  regional  differences  in  the  job 
market  and  the  availability  and  quality  of 
education  and  social  services.  These  trends 
hinder  the  short  and  long-term  economic 
development of southern regions and have an 
adverse effect on skill levels.  

Several  policy  measures  could  be  taken 
to tackle the negative demographic trend. 
The  low  birth  rate  is  due  to  several  factors, 
including  the  lack  of  access  to  quality  and 
affordable  services,  late  entry  in  the  job 
market,  unfavourable  working  and  social 
conditions  for  young  people,  the  high  tax 
wedge  on  second  earners,  and  insufficient 
work-life  balance  policies,  in  particular  for 
mothers  (e.g.  flexible  working  arrangements, 
leave  policies,  childcare  and  long-term  care). 
Policies  to  tackle  the  demographic  challenges 
have  traditionally  been  based  on  bonus 
transfers  and  tax  credits.  No  comprehensive 
evaluation  or  impact  assessments  have  been 
carried  out  or  planned  to  our  knowledge.  The 
introduction  of  a  universal  child 
recent 
allowance might help increase the birth rate in 
the long term, but it should be complemented 
by  investment  in  care  services,  which  could 
further  support  birth  rates  and  in  enabling 
women to work. Similarly, Italy should step up 
measures to promote, equal opportunities and 

(16)  Istat, Report Migrazioni Interne E Internazionali Della 

Popolazione Residente, 9 February 2023. 

 
                                                 
Italy 

the  capacity  of  existing  pipelines  and  gas 
interconnectors  with  North  Africa,  although 
existing  infrastructures  are  still  not  used  to 
their  full  capacity.  However, 
is  still 
dependent  on  Russian  fossil  fuels  and  further 
efforts  towards  diversification  are  needed  to 
ensure  security  of  supply.  There  is  limited 
capacity  of  the  network  to  distribute  any 
possible new gas intake from south to north. A 
higher  level  of  ambition  on  electrolysers  and 
more  cooperation  on  the  biomethane  supply 
chain  could  help  make  these  investments 
future-proof.  Finally,  while  energy  prices have 
decreased, uncertainty remains regarding next 
winter,  which  requires  continued  efforts  to 
structurally reduce gas demand. 

In  addition  to  diversifying  the  supply  of 
gas, Italy has the potential to expand the 
uptake  of  renewable  energy.  The  share  of 
renewable sources in the electricity production 
mix has stagnated at around 40% since 2013 
(see  Annex  6),  but  momentum  is  building, 
especially  for  photovoltaic  and  offshore  wind 
farms  (see  Annex  7).  Reducing  Italy’s  reliance 
on fossil fuels is an essential part of ensuring 
security  of  supply.  Moreover,  hydropower 
remains  the  leading  source  of  renewable 
energy  (providing  15.9%)  but,  as  climate 
change  worsens  and  water  becomes  scarcer, 
shifting  to  solar  and  wind  energy  (which 
together  provided  16.1%  of  electricity 
production  in  2021)  is  pivotal  to  Italy's  long-
term renewable energy security. 

Resolving the bottlenecks on the internal 
electricity  transmission  grid  is  a  key 
priority  for  Italy  to  integrate  further 
renewable  generation 
capacity  and 
ensure  the  efficiency  of  the  energy 
system.  Around  90%  of  installed  renewable 
capacity  is  linked  to  low  and  medium  voltage 
distribution  networks,  which  are  then  more 
likely  to  generate  excess  energy  as  the 
production  of  renewable  electricity  increases. 
Since  the  grid  was  designed  for  one-way 
operation,  any  update  of  excess  capacity  to 
the  higher  voltage  network  risks  undermining 
the  security  of  the  electricity  system.  Scaling 
up the measures in the recovery and resilience 
ten-year  network 
plan  and 
development plan would help upgrade the grid.  

the  2021 

the  work-life balance,  such  as  healthcare  and 
adoption policy measures to remove obstacles 
and facilitate parenthood. Lastly, demographic 
trends  would  benefit  from  policies  improving 
labour  market  conditions  and  increasing  its 
inclusiveness, particularly for young people. To 
this  end,  it  will  be  key  to  fully  and  swiftly 
implement  several  measures  included  in  the 
recovery and resilience plan (see Section 2).  

Migration  policies  can  also  help  tackle 
the  unfavourable  demographic  dynamics 
in  the  short  term.  These  include  the  swift 
transposition  and  implementation  of  the  EU 
Directive  on  the  Blue  Card,  reflecting  the 
competences and skills needed by businesses. 
Past  measures  to  attract  Italian  workers  back 
to Italy, such as rientro dei cervelli (17) and the 
follow-up agevolazione impatriati (18), could be 
extended  to  non-Italian  citizens  and  better 
targeted.  For 
the  agevolazione 
impatriati  scheme  could  target  workers  based 
on  their  skills,  rather  than  simply  providing 
fiscal  benefits  for  workers  who  move  their 
fiscal 
Italy.  Complementary 
policies  could  help  attract  and  retain  high-
skilled  workers.  These  could  include  easier 
recognition  of  skills  for  non-EU  country 
nationals  (for  which  Italy  receives  support 
under  the  Technical  Support  Instrument  and 
under the EU Skills Profile tool), and measures 
to  improve  job  market  conditions,  quality 
education and social services. 

residence 

instance, 

to 

Infrastructure bottlenecks and 
governance restrictions may 
undermine the green transition 
and energy security 

Italy has improved the security of its gas 
supply.  In  the  wake  of  Russia's  war  of 
aggression  in  Ukraine,  Italy  diversified  its  gas 
supply to Libya, Algeria and Azerbaijan. It met 
its  gas  storage  obligations  and  increased  the 
capacity of liquefied natural gas facilities (see 
Annex  7).  Discussions  are ongoing  to increase 

(17)  Decreto Crescita, Decree No. 34/2019 

(18)  Support for returning expats, Decree No. 124/2019. 

18 

 
 
                                                 
So  far,  measures  taken  to  simplify  the 
process  have  not  systematically  resulted 
in  a  faster  roll-out  of  renewables.  In  line 
with the recovery and resilience plan, Italy has 
simplified  the  permitting  process  (Annex  12), 
but  often  by  amending  numerous  previous 
norms  and  blurring  the  overall  legislative 
framework.  Streamlining  amendments  into  a 
unique legislative text (Testo unico) could help 
make  the  framework  more  transparent  and 
accessible  to  investors  and  policymakers.  The 
regional  legislative  frameworks  are  uneven 
and  inconsistent  and  the  national  guidelines 
regions rely on to assess project proposals are 
outdated.  Local  energy  plans 
lack  strong 
mechanisms  to  monitor  the  achievement  of 
targets.  To  attract  investors,  it  would  be 
helpful to have a fully digitalised procedure to 
obtain  permits,  especially  for  small-scale 
renewables,  easier  access  to  information  on 
grid  status  and  the  availability  of  connection 
substations,  and  a 
contracting 
authority  (stazione  appaltante).  Despite  some 
progress,  obstacles  remain  to  competition  for 
hydropower 
at 
subnational level.  

concessions, 

especially 

central 

is 

energy 

limited 

take-up  of 

financing, 
and 

Italy  has  considerable  energy  efficiency 
potential (see Annex 7), but there are few 
policy tools available to tap the potential. 
There 
financial 
instruments like the National Energy Efficiency 
Fund,  innovative  financing  schemes  such  as 
on-bill 
performance 
contracting, 
pay-for-performance 
schemes.  However,  these  schemes  could  help 
mobilise  private 
in  energy 
efficiency  and  intercept  an  upward  trend  in 
venture  capital  invested  in  climate tech  start-
ups and scale-ups, which is slowly catching up 
but  remains  significantly  below  OECD  peers 
(see  Annex  7).  Uptake  of 
'white 
certificates'  scheme (19)  remains  low  with  no 
sign of an appetite to expand. 

investments 

the 

Tackling  energy  poverty  remains  critical 
to  secure  the  energy  transition.  Italy  has 
taken  measures  to  reduce  the  energy  bill  for 
households  and  firms  in  the  short  term, 

(19)  White certificates are tradeable assets, which certify 
that a reduction of end-use energy consumption has 
been attained as a result of measures and projects to 
increase energy efficiency. 

19 

including  tax  measures,  but  the  surge  in 
energy prices has put them at further risk (see 
Annexes 7 and 8). The complete phase out  of 
regulated  markets  for  gas  and  electricity  can 
help  bring  down  prices  for  households  and 
microenterprises.  Italy's  national  energy  and 
climate plan includes other structural solutions 
but they are not yet priorities. Public incentives 
for  residential  renovations  are  limited  and  do 
not  always 
the  worst-performing 
target 
buildings or vulnerable households.  

from  adopting 
Italy  would  benefit 
sustainable  soil  management  practices 
(e.g.  regenerative  agriculture,  carbon 
farming). Healthy soils are an integral part of 
land  ecosystems.  The  main 
enhancing 
challenges  are 
to  maintain  soil  quality, 
including  organic  content  and  soil's  water 
retention  properties.  Adopting  sustainable  soil 
management  practices  would  contribute  to 
increasing  soil  carbon  content  and  soil 
productivity,  to  reducing  inputs  and  energy 
consumption  in  agricultural  processes,  and  to 
curbing the negative effects of climate change 
rebalancing  soil-water  processes  and 
by 
counteracting 
increasingly 
the  effects  of 
frequent  floods  and  droughts.  Italy  has  the 
highest risk of water soil erosion in the EU (20). 
In terms of soil quality, the content of organic 
carbon in Italian soil is lower than it is in most 
EU  countries (21),  with  an  estimated  loss  of 
15ha/day  due  to  soil  sealing  and  erosion (22). 
The loss of the soil ecosystem has a projected 
cumulative  cost  between  2012  and  2030 
ranging from EUR 78.4 to EUR 96.5 billion (23). 
Between 1980 and 2020, only around 6% (24) 
of  disaster  losses  were  insured  in  Italy.  Italy 
appears to be particularly vulnerable to floods. 
The  current  protection  gap  for  floods  in 

(20)  ESTAT Agri-environmental indicator - soil erosion - 
Statistics Explained, European Commission/JRC Soil 
Atlas of Europe, pp 110-6. 

(21)  European Commission/AGRI Soil Quality; European 
Commission/JRC Top Soil Organic Carbon Content. 

(22)  ISPRA, Yearbook 2021 in figures p. 120. 

(23)  ISPRA, Consumo di suolo, dinamiche territoriali e servizi 

ecosistemici, Edizione 2022. 

(24)  Disaster Risk Financing: Limiting the Fiscal Cost of 

Climate-Related Disasters (Radu, 2022) 

 
                                                 
                                                 
 
Italy (25) suggests that the insurance coverage 
remains  low  compared  to  projected  risk,  and 
this could result in losses to be covered by the 
public sector, thereby potentially posing a risk 
to public finances. 

in 

Italy 

transport 

Sustainable 
is 
struggling  to  gain  momentum.  The  market 
for zero-emission vehicles is consolidating and 
would  benefit  from  action  to  expand  the 
infrastructure  (for  example,  Italy  has  6.7 
charging  outlets  every  100  kilometres, 
compared  to  the  EU  average  of  8.9).  Italy 
continues to grant substantial environmentally 
harmful subsidies, including to road transport, 
which  discourages  the  transition  to  more 
sustainable transport solutions (see Annex 6).  

Labour  shortages  in  key  sectors  have 
increased  in  recent  years,  also  due  to  a 
lack  of  relevant  skills.  These  shortages 
are creating bottlenecks in the transition 
to  a  net-zero  economy.  In  2022,  labour 
shortages  were  reported  in  Italy  for  105 
occupations  that  required  specific  skills  or 
knowledge  for  the  green  transition,  including 
refuse  sorters,  waste  and  recycling  collectors 
and  environmental  engineers (26).  The 
job 
vacancy  rate  increased  across  key  sectors, 
such  as  construction  (from  0.9%  in  2016  to 
2.8% in 2021) and manufacturing (from 0.8% 

(25)  The climate protection gap refers to the share of non-
insured economic losses caused by climate-related 
disasters. This indicator is based on the modelling of the 
current risk from floods, wildfires, and windstorms as 
well as earthquakes, and the estimation of the current 
insurance penetration. The indicator does not provide 
information on the split private/public cost of climate 
related disasters. A score of 0 means no protection gap, 
while a score of 4 corresponds to a very high gap. 
EIOPA considers that a score below 3 is not a relevant 
protection gap but that countries with a score of 2.5 
need to be monitored (EIOPA, 2022). 

(26)  Data on shortages is based on European Labour 

Authority (2023), EURES Report on labour shortages 
and surpluses 2022. National authorities report through 
a questionnaire, based on administrative data and other 
sources as submitted by the EURES National 
Coordination Offices (definitions of shortages differ, 
thus data is not comparable across countries and 
covers a wide variety of sectors). Skills and knowledge 
requirements are based on the ESCO (European Skills 
Competences and Occupations) taxonomy on skills for 
the green transition (for occupations at ISCO 4-digit 
level, of which there are 436 in total). Examples are 
identified based on their ESCO “greenness” score and 
relevant sectors. 

20 

in  2015  to  1.5%  in  2021),  with  both  sectors 
below  the  EU  average  of  3.6%  and  1.9%, 
respectively,  in  2021 (27).  In  2022,  labour 
shortages  were  reported  as  a  factor  limiting 
industrial  production  (for  6.0%  of  firms)  and 
construction (for 13.9% of firms) (28). The lack 
of  environmental  skills  in  the  public  sector, 
notably  at  local  level,  is  also  constraining 
green investments (29). Upskilling and reskilling 
workers  to  participate  in  the  green  transition, 
including  in  occupations  and  regions  that  are 
set to be the most affected (30), and promoting 
inclusive  labour  markets  are  essential  policy 
measures  to  accelerate  the  transition  to  net 
zero  and  to  ensure  social  fairness  during  the 
transition (see Annex 8). 

Other bottlenecks are linked to excessive 
restrictions and barriers to competition in 
regulated  professions  and  business 
services. Being key input for investment, it is 
crucial  to  ensure  an  appropriate  level  of 
competition  in  these  sectors.  However,  for 
several  important  regulated  professions  Italy 
records  a  level  of  restrictiveness  higher  than 
the  EU  average.  For  instance,  Italy  is  among 
the  most  restrictive  Member  States  for  civil 
engineers,  while  for  accountants  and  tax 
advisers  it  ranks  third  in  the  EU.  For  several 
other  important  professions,  including  e.g. 
architects,  patent/trademark  agents  and  real 
estate agents, Italy’s level of restrictiveness is 
also  above  EU  average. (31)  Reducing  the 
overall level of restrictiveness in regulation as 
well  as  decreasing  barriers  could  ease  the 
into  the  market, 
entry  of  new  providers 
thereby  spurring  competition  and  generating 
positive spillovers, including on service prices. 

(27)  Eurostat (JVS_A_RATE_R2). 

(28)  European Business and Consumer Survey. 

(29)  European Investment Bank (EIB), 2023, Investment 

Report 2022/2023: Resilience and renewal in Europe. 

(30)  Evidence indicates a lack of access to training for 

people most affected by the green transition in Italy 
with the risks that some Italian regions fall further 
behind than other regions in OECD countries. See OECD, 
2023, Job Creation and Local Economic Development 
2023. Bridging the great green divide. 

(31)  European Commission, COM(2021) 385 final 

 
                                                 
                                                 
KEY FINDINGS 

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

disparities in different areas of the country, 
including  investing  in  railways  in  regions 
that lag behind.  

  Reforms  and  investments  to  boost  the 
effectiveness,  efficiency  and  resilience  of 
the public sector. They focus on the justice 
system  and 
the  public  administration, 
particularly  administrative  capacity  and 
public  procurement,  and  on  improving  the 
business  environment  and  competition 
framework.  

includes  action 

  Reforms and investments to accelerate the 
green  transition,  with  measures  promoting 
energy efficiency, in particular of buildings. 
the 
This 
development of and accelerate the roll-out 
of  renewable  energy,  promote  the  shift  to 
cleaner 
the 
management  of  biodiversity  and  natural 
resources, 
including  water  and  waste 
management.  

transport  and 

improve 

foster 

to 

  Support  for  the  digital  transition,  including 
support 
digitalise  manufacturing, 
upgrade  the  digital  skills  of  the  workforce 
and improve Italy's digital infrastructure. 

to 

  Reforms and investments to improve active 
labour  market  policies,  tackle  undeclared 
work  and  promote  social 
inclusion  of 
vulnerable  people,  for  instance  of  people 
with  disabilities,  vulnerable  families,  and 
include 
elderly  people.  The 
investments 
and 
improving  the  resilience  of  the  healthcare 
system. 

reforms 

housing 

social 

in 

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

  Reforms  and 
economic, 

investments 
and 

to 

reduce 
infrastructural 

social 

Italy  should  ensure  an  effective  governance 
and  strengthen  the  administrative  capacity, 
particularly at subnational level, to allow for a 
continued swift and steady implementation of 
the  recovery  and  resilience  plan.  Italy  should 
swiftly  finalise the  REPowerEU  chapter  with  a 
view to rapidly starting its implementation.  

to 

In  addition 
reforms  and 
investments  planned  in  the  recovery  and 
resilience plan, Italy would benefit from: 

the 

  Reforms of the tax system to provide more 
incentives  for  growth,  with  a  focus  on 
reducing the tax wedge on labour.  

  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. 

  Measures to strengthen and simplify Italy's 
fiscal  framework,  including  by  fostering 
transparency,  accountability  and  fairness 
and  ensuring  streamlined 
control  of 
national public finances. 

  Measures  to  mitigate  the  demographic 
challenges,  including  measures  to  attract 
and retain high-skilled workers, to integrate 
people  with  a  migrant  background,  and  a 
comprehensive strategy to support families 
and young people.   

  Promoting  training  in  the  skills  needed  for 

the green transition. 

energy 

  Measures  to  diversify  energy  imports  and 
Additional 
tackle 
investments and measures to speed up the 
roll-out  of  renewable  energies,  to  improve 
energy  efficiency,  to  promote  sustainable 

poverty. 

21 

 
 
transport  and  to  promote  sustainable  soil 
management.  

22 

 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Cross-cutting indicators 

A1.  Sustainable Development Goals 

A2.  Progress in the implementation of country-specific recommendations 

A3.  Recovery and resilience plan - overview 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy security and affordability 

A8.  Fair transition to climate neutrality 

Productivity 

A9.  Resource productivity, efficiency and circularity 

A10.  Digital transformation 

A11.  Innovation 

A12.  Industry and single market 

A13.  Public administration 

Fairness 

A14.  Employment, skills and social policy challenges in light of the European Pillar of Social Rights 

A15.  Education and training 

A16.  Health and health systems 

A17.  Economic and social performance at regional level 

Macroeconomic stability 

A18.  Key financial sector developments 

A19.  Taxation 

A20.  Table with economic and financial indicators 

A21.  Debt sustainability analysis 

A22.  Macroeconomic imbalance procedure assessment matrix 

25 

28 

28 

30 

33 

36 

38 

39 

39 

44 

50 

53 

53 

56 

58 

60 

64 

66 

66 

69 

71 

73 

76 

76 

78 

80 

81 

84 

 
 
 
LIST OF TABLES 

A2.1. 
Summary table on 2019-2022 CSRs 
A3.1. 
Key elements of the Italian RRP('s) 
A5.1. 
Resilience indices summarising the situation across RDB dimensions and areas 
A6.1. 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
A7.1. 
Key Energy Indicators 
A8.1. 
Key indicators for a fair transition in Italy 
A9.1. 
Overall and systemic indicators on circularity 
A10.1.  Key Digital Decade targets monitored by DESI indicators 
A11.1.  Key innovation indicators 
A12.1. 
Industry and the single market 
A13.1.  Public administration indicators 
A14.1.  Social Scoreboard for Italy 
A14.2.  Situation of Italy on 2030 employment, skills and poverty reduction targets 
A15.1.  EU-level targets and other contextual indicators under the European Education Area strategic framework 
A16.1.  Key health indicators 
A17.1.  Selected indicators at regional level in Italy 
A19.1.  Taxation indicators 
A20.1.  Key economic and financial indicators 
A21.1.  Debt sustainability analysis - Italy 
A21.2.  Heat map of fiscal sustainability risks - Italy 
A22.1.  Assessment of macroeconomic imbalances matrix 

LIST OF GRAPHS 

A1.1. 
Progress towards the SDGs in Italy in the last 5 years 
A2.1. 
Italy’s progress on the 2019-2022 CSRs (2023 European Semester) 
A3.1. 
Total grants disbursed under the RRF 
A3.2. 
Total loans disbursed under the RRF 
A3.3. 
Fulfilment status of milestones and targets 
A3.4. 
Disbursements per pillar 
A4.1. 
Cohesion policy funds 2021-2027 in Italy: budget by fund 
A4.2. 
Synergies between cohesion policy funds and the RRF with its six pillars in Italy 
A4.3. 
Cohesion policy funds contribution to the SDGs in 2014-2020 and 2021-2027 in Italy 
A6.1. 
Thematic – greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2021 
A6.2. 
Energy mix (top) and electricity mix (bottom), 2021 
A6.3. 
Thematic – environmental investment needs and current investment, p.a. 2014-2020 
A7.1. 
Gas storage levels in Italy 
A7.2. 
Share of gas consumption per sector, 2021 
A7.3. 
Gas consumption per industrial sector, 2021 (% of total gas consumption in industry) 
A8.1. 
Fair transition challenges in Italy 
A8.2. 
Distributional impacts of energy prices due to rising energy expenditure (2021-2023) 
A9.1. 
Trend in material use 
A9.2. 
Treatment of municipal waste 
A11.1. 
Innovation performance 2015-2022 
A12.1.  Labour productivity per person [% of EU-27] 
A12.2.  Labour productivity by sector [2015=100] 
A12.3.  Business environment and productivity drivers 
A13.1. 

Italy: a) ratio of 25-49 to 50-64 year-olds by sector and occupation and b) higher education attainment level (in percent) of 
25-64 year-olds by sector and occupation. 2021 data 
Italy. Performance in the single market scoreboard governance tools 

A13.2. 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2019-2070 
A17.1.  GDP growth (x-axis) and population growth (y-axis) (2011-2020) – Italy 
A17.2.  GDP per capita (PPS) in 2021 and population with high level of education 
A18.1.  Evolution of credit activity 
A19.1.  Tax revenues from different tax types as % of total taxation 

26 

31 
33 
39 
44 
50 
52 
55 
58 
60 
65 
67 
69 
70 
73 
75 
77 
81 
83 
86 
86 
88 

28 
30 
34 
34 
34 
35 
36 
36 
37 
40 
41 
42 
45 
46 
46 
51 
52 
54 
54 
59 
62 
62 
64 

66 
67 
74 
74 
76 
77 
80 
82 

 
 
A19.2.  Tax wedge for single and second earners as a % of total labour costs, 2022 

82 

27 

 
 
 
 
 
CROSS-CUTTING INDICATORS 
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  and  the 
environmental crisis, 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  the  SDGs  in  an 
EU context. 

related 

Italy  is  improving  on  most  of  the  SDG 
environmental 
indicators 
sustainability.  It  performs  well  on  clean 
energy, 
and 
production and life below water (SDGs 7, 12, 

consumption 

responsible 

to 

sustainable 

14),  but  needs  to  catch  up  with  the  EU 
industry  and 
average  on  zero  hunger, 
innovation, 
and 
cities 
communities,  climate  action and  life on land 
(SDGs  2,  9,  11,  13,  15)  and  is  moving  away 
from  the  SDG on  clean  water  and sanitation 
(SDG  6).  In  Italy,  the  circular  material  use 
increased (18% of material input for domestic use, 
vs.  12%  in  the  EU  in  2021;  SDG  12),  and  marine 
eutrophication  fell  to  negligible  levels,  further 
Italy 
surpassing  the  EU  average 
(SDG  14). 
performs  well  on 
efficiency  and 
energy 
consumption (SDG  7),  but the  share  of  renewable 
energy  remains  low  (19%  of  gross  final  energy 
consumption vs.  22% in the EU in 2021; SDG 13). 
Italy also faces some of the highest and increasing 
climate-related 
(EUR 
economic 
42/inhabitant  vs.  34  in  the  EU  in  2021;  SDG  13). 
The  use  of  railways  for  freight  transport  is  far 
from  the  EU  average  (10  percentage  points 
difference in % of inland freight tonne/km in 2021; 
SDG  9).  The  recycling  rate  at  municipal  level  is 

losses 

Graph A1.1: Progress towards the SDGs in Italy in the last 5 years 

For detailed datasets on the various SDGs, see the annual Eurostat report ‘Sustainable development in the European Union’; for 
details on extensive country-specific data on the short-term progress of Member States: Key findings – Sustainable development 
indicators – Eurostat (europa.eu). The status of each SDG in a country is the aggregation of all indicators for the specific goal 
compared to the EU average. A high status does not mean that a country is close to reaching a specific SDG, but signals that it is 
doing better than the EU on average. The progress score is an absolute measure based on the indicator trends over the past 5 
years. The calculation does not take into account any target values, as most EU policy targets are only valid for the aggregate EU 
level. Depending on data availability for each goal, not all 17 SDGs are shown for each country. 
Source: Eurostat, latest update of early April 2023, except for the EU Labour Force Survey (LFS) indicators released on 27 April 
2023. Data mainly refer to 2016-2021 or 2017-2022. 

28 

 
 
 
 
 
 
now  above  the  EU  average  but  the  share  of  the 
population  connected  to  secondary  wastewater 
treatment  lags  behind  (less  than  60%  of  the 
population in 2015 vs.  almost 80% in the EU; SDG 
11 and SDG 6) and access to sanitation worsened 
(despite  remaining  low,  the  share  of  households 
not  having  sanitary  facilities  increased  between 
2015 and 2020; SDG 6). Soil sealing increased and 
soil erosion levels are well above the EU average: 
almost 25% in 2016 vs. 5.3% in the EU (% of non-
artificial erodible area; SDGs 2 and 15). Moreover, 
average  performance 
in  each  dimension  of 
environmental  sustainability  masks  large  regional 
differences  across  the  country.  The  recovery  and 
resilience  plan  (RRP)  includes important measures 
that are expected to support the green transition in 
the  field  of  renewable  energy,  circular  economy, 
natural  resource  management,  hydrogeological 
risks,  sustainable  transport,  and  energy  efficiency 
of buildings.  

to 

gap 

due 

gender 

While Italy is improving in all SDG indicators 
related  to  fairness  and  performs  well  on 
health (SDG 3), it still needs to catch up with 
the EU average on most of them (SDGs 1, 4, 
5,  8,  10).  Labour  market  participation  improved 
but  wide  gaps  with  the  EU  remain.  The  share  of 
young  people  not  in  education,  employment  or 
training  is  declining  but  is  still  well  above  EU 
average (19%  of  the  15-29  population  vs.  11.7% 
in the EU in 2022). Despite a relatively high share 
of  women  in  senior  management  positions,  the 
participation 
caring 
responsibilities  only  slightly  decreased  and 
remains twice as high as in the EU (2.6 pps vs. 1.2 
in  the  EU  in  2022  in  the  20-64  population), 
similarly to the gender employment gap (19.7 pps 
vs.  10.7 pps in  the  EU  in the  20-64  population in 
2022) (SDGs 5 and 8). The share of working poor 
remained  stable,  while  fatal  accidents  at  work 
increased,  against  a  decline 
the  EU 
(3.4/100 000  workers  vs  1.8  in  the  EU  in  2020; 
SDG  8).  Italy  progressed  on  almost  all  indicators 
on  education,  but  the  share  of  tertiary  education 
graduates  remains 
(29%  of  the  25-34 
population  in  2022  vs.  42%  in  the  EU;  SDG  4). 
Preventing early leaving from education remains a 
challenge,  especially  for  students  with  a  migrant 
background  (22.5  pps  difference  in  %  of  the 
population  aged  18-24  vs.  18  pps  in  the  EU  in 
2022; SDG 10). Reading skills worsened but in line 
with  a  general  EU  trend  (over  2015-2018,  the  % 
low  achievers  in  reading  among  15-year-olds 
increased of 2 pps, exceeding 20% in Italy and the 
EU; SDG 4). Access to housing (SDG 1), affordable 

low 

in 

energy  (SDG  7)  and  healthcare  (SDG  3)  improved 
and the share of people at risk of poverty or social 
exclusion declined sharply but remains higher than 
in  the  EU  (25.2%  of  the  total  population  in  2021 
vs.  21.7%  in  the  EU;  SDG  1).  The  RRP  measures 
related  to  education  and  training,  active  labour 
market  policies,  social  and  territorial  cohesion, 
social  services  and  inclusion  and  gender  equality 
are  expected  to  improve  Italy’s  performance  on 
the SDGs related to fairness.  

Italy is improving on all SDGs on productivity 
(SDGs  4,  8,  9),  but  still  needs  to  catch  up 
with  the  EU  average.  Patent  applications  are 
increasing but gross domestic expenditure on R&D 
remains stable and is below the EU average (1.5% 
of GDP compared to 2.3% in the EU in 2021; SDG 
9).  The  share  of  households  with  a  high-speed 
internet connection in 2021 (44.2%) is well below 
the  EU  average  (70.2%),  despite  progress  since 
2016  (19%  in  2016).  The  RRP  is  expected  to 
contribute significantly to the digital transition and 
productivity  by  investing  in  the  digitalisation  of 
public  administration,  the  justice,  education  and 
research  systems,  and  the  tourism  and  cultural 
sector.  Measures  supporting  the  digitalisation  and 
competitiveness  of  manufacturing  and  research 
and 
innovation  are  also  expected  to  boost 
productivity.  

its 

Italy  is  improving  on  SDG  indicators  related 
to macroeconomic stability, but still needs to 
catch  up  compared  to  the  EU  (SDGs  8  and 
17),  while  it  performs  well  on  SDG  16.  Italy 
has  made  progress  on  peace,  justice  and  the 
institutions,  with  a  significant 
quality  of 
reduction  in  reported  crime  to  below  the  EU 
average  (from  19.4%  in  2015  to  8.4%  in  2020, 
EU:  11%  of  total  population).  Access  to  justice 
remains  a  challenge  instead  (SDG  16).  Despite 
progress,  economic  growth  and  investment  levels 
remain  low  (SDG  8).  It  progressed  on  global 
partnerships  but  faces  challenges  on  public  debt 
and  taxation,  including  environmental  taxation 
(SDG  17).  Several  structural  reforms  included  in 
the  RRP  are  expected 
Italy’s 
macroeconomic  stability,  notably  the  reforms  of 
public  administration  and  the  justice  system  and 
the measures to fight tax evasion. 

improve 

to 

As the SDGs form an overarching framework, any 
links  to  relevant  SDGs  are  either  explained  or 
the  other  Annexes.
in 
depicted  with 

icons 

29 

 
ANNEX 2: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC 
RECOMMENDATIONS 

The Commission has assessed the 2019-2022 
country-specific  recommendations  (CSRs) (32) 
addressed  to  Italy  as  part  of  the  European 
Semester.  These  recommendations  concern  a 
wide  range  of  policy  areas  that  are  related  to  13 
of  the  17  Sustainable  Development  Goals  (see 
Annexes  1  and  3). The  assessment  considers  the 
policy  action  taken  by  Italy  to  date (33)  and  the 
commitments  in  its  recovery  and  resilience  plan 
(RRP) (34).  At  this  stage  of  RRP  implementation, 
84%  of  the  CSRs  focusing  on  structural  issues 
from  2019-2022  have  recorded  at  least  ‘some 
progress’,  while  9%  recorded  ‘limited  progress’ 
(see  Graph  A2.1).  As  the  RRP  is  implemented 
further,  considerable  progress 
in  addressing 
structural CSRs is expected in the years to come. 

Graph A2.1: Italy’s progress on the 2019-2022 
CSRs (2023 European Semester) 

Source: European Commission. 

(32)  2022 CSRs: EUR-Lex - 32022H0901(12) - EN - EUR-Lex 

(europa.eu) 

      2021 CSRs: EUR-Lex - 32021H0729(12) - EN - EUR-Lex 

(europa.eu)  
2020 CSRs: EUR-Lex - 32020H0826(12) - EN - EUR-Lex 
(europa.eu) 
2019 CSRs: EUR-Lex - 32019H0905(12) - EN - EUR-Lex 
(europa.eu) 

(33)  Including policy action reported in the national reform 

programme and in Recovery and Resilience Facility (RRF) 
reporting (twice a year reporting on progress in implementing 
milestones and targets and resulting from the payment 
requests assessment). 

(34)  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 considers the 
degree of implementation of the measures included in the 
RRP and of those carried out outside of the RRP at the time 
of assessment. Measures laid down in the Annex of the 
adopted Council Implementing Decision on approving the 
assessment of the RRP, which are not yet adopted or 
implemented but considered 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. 

30 

No progress7%Limited progress9%Some progress66%Substantial progress14%Full implementation4% 
 
                                                 
                 
  
 
Table A2.1: Summary table on 2019-2022 CSRs 

(Continued on the next page) 

31 

ItalyAssessment in May 2023*RRP coverage of CSRs until 2026**Relevant SDGs2019 CSR 1Limited 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 applicableSDG 8, 16Shifttaxationawayfromlabour,includingbyreducingtaxexpenditureand reforming the outdated cadastral values.Limited progressSDG 8, 10, 12Fight 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 progress Relevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022 and 2023SDG 8, 16Implementfullypastpensionreformstoreducetheshareofold-agepensionsinpublicspendingandcreatespaceforothersocialandgrowth-enhancing spending.No progressSDG 82019 CSR 2Some progressStep up efforts to tackle undeclared work. Some progressRelevant RRP measures planned as of 2022 SDG 8Ensure 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 2022 and planned as of 2023SDG 1, 2, 8, 10Support 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 2023SDG 8, 10Improve 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 as of 2022 and planned as of 2022 and 2023SDG 42019 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 2022 and planned as of 2022 and 2023SDG 7, 9, 10, 11, 13Improve 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 2023SDG 4, 9, 16Address 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 2022SDG 92019 CSR 4Substantial 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 2022 and planned as of 2022 and 2023SDG 16Improvetheeffectivenessofthefightagainstcorruptionbyreformingprocedural rules to reduce the length of criminal trials.Some progressRelevant RRP measures being implemented as of 2021 and as of 2022 and planned as of 2022 and 2023SDG 162019 CSR 5Some 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 progressSDG 8Improve non-bank financing for smaller and innovative firms.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2024SDG 8, 92020 CSR 1Some progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositionsandensuring debt sustainability, while enhancing investment.Not relevant anymoreNot applicableSDG 8, 16Strengthen the resilience and capacity of the health system, in the areas of health workers, critical medical products and infrastructure.Some progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022SDG 3Enhance coordination between national and regional authorities.Some progressRelevant RRP measures being implemented as of 2022SDG 3, 162020 CSR 2Some progressProvide adequate income replacement and access to social protection, notably for atypical workers.Some progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022SDG 1, 2, 8, 10Mitigate the employment impact of the crisis, including through flexible working arrangements andSome progressNot applicableSDG 8active support to employment.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022SDG 8Strengthen distance learning and skills, including digital ones.Some progressRelevant RRP measures being implemented as of 2021 and planned as of 2022 and 2023SDG 42020 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 2022 and planned as of 2022 and 2023SDG 8, 9Front-load mature public investment projectsSome progressRelevant RRP measures being implemented as of 2021 and 2022 planned as of 2022, 2023, 2025 and 2026SDG 8, 16 
 
 
 
  
 
Table (continued) 

Note: 
* See footnote (33). 
** RRP measures included in this table contribute to the implementation of CSRs. Nevertheless, additional measures outside the 
RRP are necessary to fully implement CSRs and address their underlying challenges. Measures indicated as ‘being implemented’ 
are only those included in the RRF payment requests submitted and positively assessed by the European Commission. Measures 
included in the third payment request under assessment are classified as planned as of 2022.  
Source: European Commission 

32 

and promote private investment to foster the economic recovery.Some progressRelevant RRP measures being implemented as of 2021 and 2022SDG 8, 9Focusinvestmentonthegreenanddigitaltransition,inparticularonclean and efficient production and use of energy,Some progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022, 2023 and 2024SDG 7, 9, 13research and innovation,Some progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022 and 2023SDG 9sustainable public transport,Some progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022, 2023 and 2024SDG 11waste and water managementSome progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022, 2023, 2024 and 2025SDG 6, 12, 15aswellasreinforceddigitalinfrastructuretoensuretheprovisionofessential services.Some progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022SDG 92020 CSR 4Some progressImprove the efficiency of the judicial system andSubstantial progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022 and 2023SDG 16the effectiveness of public administration.Some progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022SDG 162021 CSR 1Substantial progressIn2022,usetheRecoveryandResilienceFacilitytofinanceadditionalinvestmentinsupportoftherecoverywhilepursuingaprudentfiscalpolicy.Preservenationallyfinancedinvestment.Limitthegrowthofnationally financed current expenditure.Full implementationNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Some progressNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticular investment supporting the green and digital transition. SUbstantial progressNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthandsocialprotectionsystems for all.Some progressNot applicableSDG 8, 162022 CSR 1Some progressIn2023,ensureprudentfiscalpolicy,inparticularbylimitingthegrowthofnationallyfinancedprimarycurrentexpenditurebelowmedium-termpotentialoutputgrowth,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspending to the evolving situation.Full implementationNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandotherUnionfunds.Substnatial progressNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringcredibleandgradualdebtreductionandfiscalsustainabilityinthemediumtermthroughgradual consolidation, investment and reforms.Some progressNot applicableSDG 8, 16Inordertofurtherreducetaxesonlabourandincreasetheefficiencyofthesystem,adoptandappropriatelyimplementtheenablinglawonthetaxreform,particularlybyreviewingeffectivemarginaltaxrates,aligningthecadastralvaluestocurrentmarketvalues,streamliningandreducingtaxexpenditures,alsoforVAT,andenvironmentallyharmfulsubsidieswhile ensuring fairness, and by reducing the complexity of the tax code.No progressSDG 8, 10, 122022 CSR 2Limited progressProceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 13 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionofthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtostartingtheirimplementation.2022 CSR 3Reduce the reliance on fossil fuels and diversify energy import.Some progressRelevant RRP measures being implemented as of 2021 and  2022 and planned as of 2022, 2023 and 2024SDG 7, 9, 13Overcomebottleneckstoincreasethecapacityofinternalgastransmission,No progressSDG 7, 9, 13develop electricity interconnections,Some progressSDG 7, 9, 13accelerate the deployment of additional renewable energy capacitiesSome progressRelevant RRP measures being implemented as of 2021 and  2022 and planned as of 2022, 2023 and 2024SDG 7, 9, 13and adopt measures to increase energy efficiencyLimited progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022, 2023 and 2024SDG 7and to promote sustainable mobility.Limited progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022, 2023 and 2024SDG 11RRP implementation is monitored by assessing RRP payment requests and analysing reports published twice a year on the achievement of the milestones and targets. These are to be reflected in the country reports.Progress on the cohesion policy programming documents is monitored under the EU cohesion policy. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN - OVERVIEW 

The  Recovery  and  Resilience  Facility  (RRF)  is 
the centrepiece of the EU’s efforts to help it 
recover  from  the  COVID-19  pandemic,  speed 
up  the  twin  transition  and  strengthen 
resilience  against  future  shocks.  The  RRF 
also  contributes  to  implementation  of  the 
SDGs  and  helps  to  address  the  Country 
Specific Recommendations (see Annex 4). Italy 
submitted  its  initial  recovery  and  resilience  plan 
(RRP) on 30 April 2021. The Commission’s positive 
assessment  on  22  June 2021  and  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  over  the 
2021-2026 period.   

into  force  of  the  RRF 
Since  the  entry 
Regulation  and  the  assessment  of  the 
national  recovery  and  resilience  plans, 
geopolitical  and  economic  developments 
have caused major disruptions across the EU. 
In  order  to  effectively  address  these  disruptions, 
the  (adjusted)  RRF  Regulation  allows  Member 
States to amend their recovery and resilience plan 
for  a  variety  of  reasons.  In  line  with  article  11(2) 
of the RRF, the maximum financial contribution for 
Italy  was  moreover  updated  on  30  June  2022  to 
an amount of EUR 69 billion in grants.  

Table A3.1: Key elements of the Italian RRP('s) 

Source: European Commission  

Italy’s  progress  in  implementing  its  plan  is 
published  in  the  Recovery  and  Resilience 
Scoreboard (35).  The  Scoreboard  also  gives  an 
overview  of  the  progress  made  in  implementing 
the RRF as a whole, in a transparent manner. The 

(35)  https://ec.europa.eu/economy_finance/recovery-and-

resilience-scoreboard/country_overview.html 

33 

graphs in this Annex show the current state of play 
of  the  milestones  and  targets  to  be  reached  by 
and  subsequently  assessed  as  satisfactorily 
fulfilled  by  the  Commission.  No  revision  was 
submitted  at  the  time  of  publication  of  this 
country report yet. 

EUR  66.89  billion  has  so  far  been  disbursed 
to  Italy  under  the  RRF.  The  Commission 
disbursed  EUR 24.89  billion  to 
in  pre-
financing  on  13  August  2021,  equivalent  to  13% 
of the financial allocation.  

Italy 

Italy’s  first  payment  request  was  positively 
assessed  by  the  Commission,  taking  into 
account  the  opinion  of  the  Economic  and 
Financial  Committee,  leading  to  EUR  21 
billion  being  disbursed  in  financial  support 
(net  of  pre-financing)  on  13 April 2022.  The 
related 51 milestones and targets cover reforms in 
the  areas  of  public  administration,  public 
review 
spending 
the 
procurement, 
labour 
framework, 
tertiary  education,  active 
law  to 
market  policies  and  the  framework 
strengthen 
the  autonomy  of  people  with 
disabilities,  as  well  as  Italy's  audit  and  control 
system  for  the  implementation  of  the  RRF.  They 
also  concern  major  investments  in  the  field  of 
digitalisation  of  businesses,  energy  efficiency  and 
renovation of residential buildings.   

justice, 

second 

request  was 
payment 
Italy’s 
positively  assessed  by  the  Commission, 
taking 
into  account  the  opinion  of  the 
Economic  and  Financial  Committee,  leading 
to EUR 21 billion being disbursed in financial 
support (net of pre-financing) on 8 November 
2022.  The  related  45  milestones  and  targets 
cover reforms in the areas of public employment, 
public  procurement,  teaching,  tax  administration 
and  healthcare,  as  well  as  investments  in  areas 
such  as  ultra-broadband  and  5G  networks, 
research  and  innovation,  tourism  and  culture, 
production  and  consumption  of  clean  hydrogen, 
urban regeneration and digitalisation of schools. 

On  30  December  2022,  Italy  submitted  its 
third  payment  request,  for  which  the 
Commission’s  assessment  is  ongoing.  Overall, 
Italy  reports  a  timely  implementation  of  the 
milestones  and  targets  covered  by  the  third 
request,  which  does  not  however 
payment 
prejudge 
the  submission  of 
the 
subsequent payment requests or the Commission’s 

timing  of 

Current RRPScope Initial planCID adoption date13 July 2021Total allocation EUR 68.9 billion in grants and EUR 122.6 billion in loans (10.79% of 2021 GDP)Investments and reforms 133 investments and 59 reforms Total number of milestones and targets527 
 
 
  
 
                                                 
 
formal  assessment  of  the  fulfilment  of  the 
relevant milestones and targets.  

Graph A3.3: Fulfilment status of milestones and 
targets 

Graph A3.1: Total grants disbursed under the RRF 

Note: This graph displays the share of satisfactorily fulfilled 
milestones and targets. A milestone or target is satisfactorily 
fulfilled once a Member State has provided evidence to the 
Commission that it has reached the milestone or target and 
the Commission has assessed it positively in an implementing 
decision. 
Source: Recovery and Resilience Scoreboard 

Note: 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 the 
total estimated cost of the respective RRP. 
Source: Recovery and Resilience Scoreboard 

Graph A3.2: Total loans disbursed under the RRF 

Note: 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: Recovery and Resilience Scoreboard 

34 

€ 5.75billion€ 37.94billionSatisfactorily fulfilledNot fulfilled 
   
 
   
 
   
 
Graph A3.4: Disbursements per pillar 

Note: Each disbursement reflects progress in the implementation of the RRF, across the six policy pillars. This graph displays how 
disbursements under the RRF (excluding pre-financing) relate to the pillars. The amounts were calculated by linking the milestones 
and targets covered by a given disbursement to the pillar tagging (primary and secondary) of their respective measures. 
Source: Recovery and Resilience Scoreboard 

35 

0 bn2 bn4 bn6 bn8 bn10 bn12 bnGreen transitionDigitaltransformationSmart,sustainable andinclusive growthSocial andterritorialcohesionHealth, andeconomic, socialand institutionalresiliencePolicies for thenext generation 
   
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

The  EU  budget  of  over  EUR  1.2  trillion  for 
2021-2027  is  geared  towards  implementing 
the  EU’s  main  priorities.  Cohesion  policy 
investment amounts to EUR 392 billion across the 
EU and represents almost a third of the overall EU 
budget, including around EUR 48 billion invested in 
line with REPowerEU objectives. 

Graph A4.1: Cohesion policy funds 2021-2027 in 
Italy: budget by fund 

(1) million EUR in current prices, % of total; (total amount 
including EU and national co-financing) 
Source: European Commission, Cohesion Open Data 

in 

Italy,  cohesion  policy 
In  2021-2027, 
funds (36)  will  invest  EUR  20.5  billion  in  the 
green  transition  and  EUR  3.3  billion  in  the 
digital  transformation  as  part  of  the 
country’s total allocation of EUR 74 billion. In 
particular,  the  European  Regional  Development 
Fund (ERDF) will improve the competitiveness and 
productivity of Italian industry. 148 783 firms will 
receive  support  to  strengthen  innovation,  up-
skilling, speeding up the country’s digital and green 
transitions.  The  ERDF  will  also  support  energy 
efficiency  in  public  buildings,  covering  almost  3 
million  square  meters,  as  well  as  the  deployment 
of renewables to help sustain over 852 renewable 
energy communities. Public goods and services will 
also  be  improved,  particularly  water,  urban  waste 
and  transport  in  the  South  of  Italy.  Italy  will  be 
allocated an additional EUR 1 billion under the Just 
Transition  Fund  (JTF),  to  support  territories  facing 
the 
socio-economic  challenges  arising 
transition to climate neutrality. The JTF will target 
Sulcis Iglesiente in Sardinia, and Taranto in Puglia, 
helping  to  get  15 775  people  into  jobs  and 
supporting  2 900  businesses.  Administrative 
capacity  is  key  to  the  successful  implementation 

from 

(36)  European Regional Development Fund (ERDF), Cohesion Fund 
(CF), European Social Fund+ (ESF+), Just Transition Fund 
(JTF) excluding Interreg programmes. Total amount includes 
national and EU contributions. Data source: Cohesion Open 
Data.  

36 

of  projects  benefiting  companies  and  citizens,  in 
particular  in  the  South  of  Italy.  Attention  should 
therefore be paid to on the synergy with the public 
administration reforms to be carried out under the 
Italian  recovery  and  resilience  plan.  The  European 
Social  Fund  Plus  (ESF+)  allocates  EUR  4  billion  to 
education  and  skills  and,  overall,  EUR  2.17  billion 
to  digital  skills  (partially  in  other  thematic  areas). 
This  investment  will  strengthen  green  and  digital 
skills  by  supporting  the  extension  of  vocational 
education  and  training  (VET)  and  its  link  with 
labour  market  needs,  as  well  as  through  training 
life-long 
to 
learning. 

low-skilled  adults  and  promoting 

Of  the  investments  mentioned  above,  EUR 
5.1  billion  will  be  invested  in  line  with 
REPowerEU objectives. This is on top of the EUR 
2.5  billion  dedicated  to  REPowerEU  under  the 
2014-2020  budget.  EUR  2.6  billion  (2021-2027) 
and EUR 432 million (2014-2020) is for improving 
energy efficiency; EUR 1.5 billion (2021-2027) and 
EUR  2.1  billion  (2014-2020)  is  for  renewable 
energy  and  low-carbon  R&I;  and  EUR  1  billion 
(2021-2027) is for smart energy systems. 

Graph A4.2: Synergies between cohesion policy 
funds and the RRF with its six pillars in Italy 

(1) million EUR in current prices (total amount, including EU 
and national co-financing)   
Source: European Commission  

In  2014-2020,  cohesion  policy  funds  made 
EUR  47.9  billion  available  to  Italy (37)  with  an 
absorption 
national 
financing,  the  total  investment  amounts  to  EUR 
64.9 billion - around 0.5% of GDP for 2014-2020.  

of  64% (38). 

Including 

(37)  Cohesion policy funds include the ERDF, CF, ESF and the 
Youth Employment Initiative (YEI). ETC programmes are 
excluded here. According to the ‘N+3 rule’, the funds 
committed for 2014-2020 must be spent by 2023. REACT-
EU is included in all figures. The total amount includes EU 
and national co-financing. Data source: Cohesion Open Data. 

(38)  2014-2020 Cohesion policy EU payments by MS is updated 

daily on Cohesion Open Data.   

44,21660%28,64039%1,2111%CFERDFESF+JTF13 007 2 299 13 700 25 204 4 082 1 030 20 518 3 340 12 029 23 434 1 498 7 326 050001000015000200002500030000Green transitionDigitaltransformationSmart, sustainableand inclusive growthSocial and territorialcohesionHealth, economic,social andinstitutionalresiliencePolicies for the nextgenerationEU CP 2014-2020 (million EUR)EU CP 2021-2027 (million EUR) 
 
  
                                                 
   
                                                 
 
 
Italy  continues  to  benefit  from  cohesion 
policy flexibility to support recovery, step up 
convergence  and  provide  vital  support  to 
regions  following  the  COVID-19  pandemic. 
The  Recovery  Assistance  for  Cohesion  and  the 
Territories  of  Europe  instrument  (REACT-EU) (39) 
under NextGenerationEU provides EUR 14.4 billion 
to 
for  SMEs, 
accelerating  the  green  transition  and  investing  in 
human  capital.  With  SAFE  (Supporting  Affordable 
Energy),  the  2014-2020  cohesion  policy  funds 
may  also  be  mobilised  by 
Italy  to  support 
jobs  and  companies 
vulnerable  households, 
particularly affected by high energy prices.  

includes  support 

Italy.  This 

Graph A4.3: Cohesion policy funds contribution to 
the SDGs in 2014-2020 and 2021-2027 in Italy 

(1) 5 largest contributions to SDGs in million (EUR) current 
prices 
Source: European Commission  

In both 2014-2020 and 2021-2027, cohesion 
policy  funds  have  contributed  substantially 
the  Sustainable  Development  Goals 
to 
(SDGs).  These  funds  support  11  of  the  17  SDGs, 
notably SDG 8 ‘decent Work and economic growth’ 
and 
and 
‘industry, 
SDG 
infrastructure’ (40). 

innovation 

9 

Other  EU  funds  make  significant  resources 
available  to  Italy.  The  common  agricultural 
policy  (CAP)  made  EUR  50.5  billion  available  in 
2014-2022. It will keep  supporting Italy with EUR 
28.1  billion  in  2023-2027.  The  two  CAP  Funds 
(European  Agricultural  Guarantee  Fund  and 
Rural 
European 
Development),  contribute  to  the  European  Green 

Agricultural 

Fund 

for 

Deal while ensuring long-term food security. They 
promote  social,  environmental  and  economic 
sustainability  and  innovation  in  agriculture  and 
rural  areas,  in  coordination  with  other  EU  funds. 
The  European  Maritime  and  Fisheries  Fund  made 
EUR  537  million  available  to  Italy  in  2014-2020 
and 
the  European  Maritime,  Fisheries  and 
Aquaculture  Fund  allocates  EUR  518  million  in 
2021-2027. 

also 

from 

other 

benefits 

Italy 
EU 
programmes,  notably  the  Connecting  Europe 
Facility,  which  under  CEF  2  (2021-2027)  has  so 
far allocated EU funding of EUR 426 million to 27 
specific  projects  on  strategic  transport  networks. 
Similarly,  Horizon  Europe  has  so  far  allocated 
more than  EUR  958 million  for  Italian  R&I  actors, 
while,  Horizon  2020  earmarked  EUR  5.7  billion. 
The  Public  Sector  Loan  Facility  established  under 
the  Just  Transition  Mechanism  makes  EUR  78.1 
million  of  grant  support  available  in  2021-2027, 
which will be combined with loans from the EIB to 
support  investments  by  public  sector  entities  in 
just transition regions. 

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, to mitigate the impact of 
financial 
Council 
COVID-19. 
assistance  to  Italy  in  September  2020  for  EUR 
27.438  billion  in  loans,  which  supported  around 
57%  of  workers  and  50%  of  firms  in  2020,  and 
around 28% of workers and 25% of firms in 2021. 

granted 

The 

Instrument 

The  Technical  Support 
(TSI) 
supports Italy in designing and implementing 
including  the 
growth-enhancing  reforms, 
implementation of its recovery and resilience 
plan  (RRP).  Italy  has  received  significant  support 
since  2017. 
combating 
disparities  in  access  to  inclusive  education  and 
enhancing  the  quality  and  cooperation  of  public 
administrations.  The  TSI  is  also  helping  Italy 
implement  specific 
investments 
included in its RRP, e.g. the digitalisation of Italy’s 
national and local healthcare systems (41). 

reforms  and 

Examples 

include 

(39)  REACT-EU allocation on Cohesion Open Data. 

(40)  Other EU funds contribute to the implementation of the 
SDGs. In 2014-2022, this includes both the European 
Agricultural Fund for Rural Development (EARDF) and the 
European Maritime and Fisheries Fund (EMFF). 

(41)  Country factsheets on reform support are available here. 

37 

26 1088 5664 3607 0953 29020 52411 49510 1917 3875 75205 00010 00015 00020 00025 00030 000SDG 8 Decentwork andeconomic growthSDG 9 Industry,innovation,infrastructureSDG 1 No povertySDG 4 QualityeducationSDG 7 Affordableand clean energyEU CP 2014-2020 (millions EUR)EU CP 2021-2027 (millions EUR) 
     
                                                 
                                                 
in 

capacities 
the  digital  and  geopolitical 
dimensions,  and  medium-high  capacities  in  the 
social  and  economic  and  the  green  dimensions. 
Italy  shows  stronger  capacities  than  the  EU 
average 
‘sustainable  use  of 
resources’. There is room for improving capacities 
compared  to  the  EU 
‘health, 
education  and  work’,  ‘digitalisation  for  industry 
and  personal  space’  and  ‘financial  globalisation’, 
among others.  

in  the  area  of 

in  relation  to 

Table A5.1: Resilience indices summarising the 
situation across RDB dimensions and areas 

Data are for 2021, and EU-27 refers to the value for the EU 
as a whole.  Data underlying EU-27 vulnerabilities in the area 
‘value chains and trade’ are not available as they comprise 
partner concentration measures that are not comparable with 
Member States’ level values. 
Source: JRC Resilience Dashboards - European Commission 

ANNEX 5: RESILIENCE 

Italy’s 

illustrates 

This  Annex 
relative 
resilience capacities and vulnerabilities using 
the  Commission’s 
resilience  dashboards 
(RDB) (42).  Comprising  a  set  of  124  quantitative 
indicators,  the  RDB  provide  broad  indications  of 
Member  States’  ability  to  make  progress  across 
four interrelated dimensions: social and economic, 
green, digital, and geopolitical. The indicators show 
vulnerabilities (43)  and  capacities (44)  that  can 
become  increasingly  relevant,  both  to  navigate 
ongoing  transitions  and  to  cope  with  potential 
future shocks. To this end, the RDB help to identify 
areas  that  need  further  efforts  to  build  stronger 
and  more  resilient  economies  and  societies.  They 
in  Table  A5.1  as  synthetic 
are  summarised 
resilience 
illustrate  the  overall 
relative  situation  for  each  of  the  four  dimensions 
and  their  underlying  areas  for  Italy  and  the  EU-
27 (45). 

indices,  which 

in 

dimensions 

According  to  the  set  of  resilience  indicators 
under  the  RDB,  Italy  generally  displays  a 
similar  level  of  vulnerabilities  compared  to 
the  EU  average. 
Italy  shows  medium-high 
vulnerabilities  in  the  social  and  economic  and 
green 
the  RDB,  medium 
of 
the  digital  dimension  and 
vulnerabilities 
in  the  geopolitical 
medium-low  vulnerabilities 
dimension. It has higher vulnerabilities than the EU 
average  in  all  areas  of  the  social  and  economic 
dimension  as  well  as  in  ‘sustainable  use  of 
biodiversity, 
resources’ 
sustainable  agriculture’.  Italy  has  relatively  low 
vulnerabilities 
‘climate  change 
mitigation  and  adaptation’,  ‘digital  for  industry’, 
‘raw  material  and  energy 
‘cybersecurity’  and 
supply’. 

in  relation  to 

‘ecosystems, 

and 

Compared to the EU average, Italy shows an 
overall  lower  level  of  capacities  across  all 
RDB  indicators.  Italy  has  medium-low  resilience 

(42)  For details see https://ec.europa.eu/info/strategy/strategic-
planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en; see also 2020 Strategic 
Foresight Report (COM(2020) 493). 

(43)  Vulnerabilities describe features that can exacerbate the 

negative impact of crises and transitions, or obstacles that 
may hinder the achievement of long-term strategic goals. 

(44)  Capacities refer to enablers or abilities to cope with crises 
and structural changes and to manage the transitions.  

(45)  This Annex is linked to Annex 1 on SDGs, Annex 6 on the 
green deal, Annex 8 on the fair transition to climate 
neutrality, Annex 9 on resource productivity, efficiency and 
circularity, Annex 10 on the digital transition and Annex 14 
on the European pillar of social rights. 

38 

ITEU-27ITEU-27Vulnerabilities IndexHighMedium-highMediumMedium-lowLowNot availableCapacities IndexHighMedium-highMediumMedium-lowLowNot availableDimension/AreaVulnerabilitiesCapacitiesSocial and economicHealth, education and workInequalities and social impact of the transitionsGreenEconomic & financial stability and sustainabilitySustainable use of resourcesClimate change mitigation & adaptationDigitalEcosystems, biodiversity, sustainable agricultureDigital for industryDigital for personal spaceCybersecurityDigital for public spaceRaw material and energy supplyGeopoliticalValue chains and tradeFinancial globalisationSecurity and demography 
 
                                                 
 
  
 
 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

Italy’s  green  transition  requires  action  on 
several  aspects,  including  renewable  energy 
and  on  climate  adaptation,  in  particular 
concerning  soil  and  water.  Implementation  of 
the European Green Deal is underway in Italy with 
some  weaknesses  as  those  quoted  above.  This 
Annex  provides  a  snapshot  of  the  key  areas 
involved (46).  

Italy  has  not  yet  defined  all  the  climate 
policy  measures  it  needs  to  reach  its  2030 
climate 
target  for  the  effort  sharing 
sectors (47).  Data  for  2021  on  Italy’s  greenhouse 
gas  emissions  in  these  sectors  are  expected  to 
show the country generated slightly more than its 
annual emission allocations (48). Current policies in 
Italy  are  projected  to  reduce  these  emissions  by 
29% relative to 2005 levels in 2030, not sufficient 
to  reach  the  effort  sharing  target  even  before  it 
was  raised  to  meet  the  EU’s  55%  objective. 
Additional measures tabled but not adopted would 
bring  the  emission  reductions  to  40%,  exceeding 
the  current  target  but  not  reaching  the  updated 

(46)  The overview in this Annex is complemented by the 

information provided in Annex 7 on energy security and 
affordability, Annex 8 on the fair transition to climate 
neutrality and environmental sustainability, Annex 9 on 
resource productivity, efficiency and circularity, Annex 11 on 
innovation, and Annex 19 on taxation. 

(47)  Member States’ greenhouse gas emission targets for 2030 
(‘effort sharing targets’) were increased by Regulation (EU) 
2023/857 (the Effort Sharing Regulation) amending 
Regulation (EU) 2018/842, aligning the action in the 
concerned sectors with the objective to reach EU-level, 
economy-wide greenhouse gas emission reductions of at 
least 55% relative to 1990 levels. The Regulation sets 
national targets for sectors outside the current EU Emissions 
Trading System, notably: buildings (heating and cooling), road 
transport, agriculture, waste, and small industry. Emissions 
covered by the EU ETS and the Effort Sharing Regulation are 
complemented by net removals in the land use sector, 
regulated by Regulation (EU) 2018/841 (the Land Use, Land 
Use Change and Forestry (LULUCF) Regulation) amended by 
Regulation (EU) 2023/839. 

(48)  Italy’s annual emission allocations for 2021 were some 

266.6 Mt CO2eq, and its approximated 2021 emissions were 
271.7 Mt (see European Commission, Accelerating the 
transition to climate neutrality for Europe’s security and 
prosperity: EU Climate Action Progress Report 2022, 
SWD(2022)343). Greenhouse gas emissions in the effort 
sharing sectors above the annual emission allocations do not 
imply non-compliance with the Effort Sharing Regulation, as 
the latter provides for specific flexibility instruments that 
may be used for compliance. 

one,  44% (49).  In  its  recovery  and  resilience  plan 
(RRP),  Italy  has  attributed  37.5%  of  its  Recovery 
and  Resilience  Facility  allocations  to  key  reforms 
and investments to attain climate objectives (50). 

Graph A6.1: Thematic – greenhouse gas emissions 
from the effort sharing sectors in Mt CO2eq, 
2005-2021 

Source: European Environmental Agency. 

Italy’s  net  carbon  removals  from  the  land 
use  sector  have  been  declining,  with  a 
growing  distance  to  the  2030  target (51). 
Italy’s  forests  achieve  the  majority  of  carbon 
removals  through  land  use,  land  use  change  and 
forestry  (LULUCF).  For  2030,  Italy’s  target  for the 
sector  implies  to  remove  35 758  kt CO2eq  (see 
Table A6.1). Net removals have increased in 2018 
but they kept on decreasing from 2019. The Italian 
RRP  includes  investment  for  the  protection  of  the 
territory  and  to  safeguard  the  quality  of  the  air, 
including the planting of over 6 million trees. 

Imported  fossil  fuels  made  up  the  bulk  of 
Italy’s  energy  mix,  although  the  share  of 
renewable energy is very slowly increasing. In 
2021, natural gas provided 41% of Italy’s energy, 
followed  by  oil  (35%)  and  coal  (4%),  while 
renewable  energy  provided  20%.  Italy’s  electricity 
production  mix  comprised  a  share  of  42%  from 
renewable sources in 2021, with hydropower being 
the leading source, and the remaining part coming 
from  gas  (50%),  solid  fossil  fuels  (5%)  and  oil 

(49)  See the information on the distance to the 2030 climate 

policy target in Table A6.1. Current and additional measures 
as of 15 March 2021. 

(50)  For example, investments in zero-emission mobility, energy 
efficiency of buildings and near-zero emission buildings for 
the education system.  

(51)  This value is indicative and will be updated in 2025 (as 

mandated by Regulation (EU) 2023/839). 

39 

05010015020025030035040020052021Domestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
 
                                                 
     
                                                 
 
 
infrastructure  would 

(3%) (52).  Further  investment  in  renewable  power 
generation,  renewable  heat  and  heat  pumps  and 
grid 
the 
decarbonisation of Italy’s economy. Italy envisages 
phasing  out  coal  for  electricity  production  and 
decommissioning coal power plants by 2025. 

accelerate 

Graph A6.2: Energy mix (top) and electricity mix 
(bottom), 2021 

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. 

Renewable  energy  plays  a  central  role  in 
decarbonising  Italy’s  energy  system.  Italy’s 
target of 30% of share of energy from renewable 
sources  in  gross  final  energy  consumption  by 
2030 
in  the  NECP  was  considered 
sufficiently  ambitious.  Italy  will  need  to  increase 
its  renewable  energy  target in  the  updated  NECP 
to  reflect  the  more  ambitious  EU  climate  and 
energy targets in line with the Fit for 55 Package 

included 

in 

and in the REPowerEU Plan.  Although Italy met the 
2020  target  (17%)  already  in  2014,  the  share  of 
renewable  energy 
Italy  has  essentially 
stagnated  over  the  past  few  years  (at  18.3%  in 
2017).  Italy’s  RRP  envisages  several  measures 
promoting renewable energy such as a reform the 
process  of  awarding  hydropower  concessions,  or 
investments  to  support  the  development  of 
offshore  multi-power  systems,  combining  wind, 
floating photovoltaics, and wave motion power, or 
for  example  the  experimental  use  of  hydrogen  in 
hard-to-abate industries.  

The planned energy efficiency actions if fully 
implemented  would  allow  Italy  to  meet  its 
energy  efficiency  goals  and  the  2030 
targets. Italy’s NECP targets for final and primary 
energy consumption were considered of sufficient 
ambition  in  the  2020  Commission  assessment. 
Based  on  the  energy  consumption  trajectory  for 
2018-2021,  Italy  is  expected  to  be  on  track  to 
meet its 2030 target for primary and final energy 
consumptions  notified  in  the  current  NECP (53). 
Overall,  Italy  aims  to  reduce  its  primary  energy 
its  final  energy 
consumption  by  13.7%  and 
consumption  by  8.8%  by  2030,  compared  to 
energy  consumption  in  2021.  Italy  has  multiple 
measures  in  place that  have  a  substantial  energy 
saving  potential,  such  as  the  white  certificates 
scheme  and  the  tax  deduction  schemes  for 
supports 
building 
renovations. 
efficiency, 
important  measures 
addressing  in  particular  residential  renovations 
with  the  “Superbonus”  scheme,  as  well  as  energy 
efficiency  in  public  buildings  and  district  heating 
networks.  Italy  has  repeatedly  amended  the  key 
features  of  its  main  programme  for  residential 
renovation “Superbonus”, increasing uncertainty on 
the  building  renovation  sector.  A  more  stable  and 
comprehensive  environment  is  needed  to  support 
investments in renovation and the decarbonisation 
of  the  Italian  building  stock  and  to  achieve  the 
medium- and long-term goals. 

Italy’s  RRP 
in 

energy 

Road  transport  is  the  dominant  form  of 
transport in Italy. Freight haulage has increased, 
in turn increasing greenhouse gas emissions from 
transport.  The  share  of  zero-emission  vehicles  in 
Italy’s car fleet is well below the EU average. The 
government  has  recently  provided  incentives  for 

(52)  According to Terna, in 2022, the demand for electricity was 

met at 55.3% by production from non-renewable sources, for 
31.1% from renewable energy and 13.6% from energy 
imports. Source: Rapporto Mensile sul Sistema Elettrico – 
Dicembre 2022. 

(53)  After the conclusion of the negotiations for a recast EED, the 
ambition of both the EU and national targets as well as of 
the national measures for energy efficiency to meet these 
targets is expected to increase. 

40 

4%41%35%20%Solid fossil fuels, peatand oil shaleGasOilRenewables5%50%3%42%Solid fossil fuels, peatand oil shaleGasOilRenewables 
      
                                                 
                                                 
zero-emission  vehicles,  but  they  have  not  been 
fully  used,  partly  due  to  competing  incentives  for 
conventional  cars. 
Italy’s  share  of  electrified 
railroads  is  among  the  highest  in  the  EU,  but  the 
rail  network  needs  more  investment.  Italy’s  RRP 
allocates  funding  for  rail  corridors,  mass  transit 
systems  in  local  public  transport,  the  purchase  of 
3 000 zero-emission buses and 150 zero-emission 
trains,  the  installation  of  21 000  charging  points 
for  electric  vehicles,  and  hydrogen  re-fuelling 
stations.  Air  quality  remains  a  serious  concern:  in 
terms  of  number  of  deaths  from  air  pollution, 
Italy’s results are among the worst in the EU (see 
Table A6.5). 

Graph A6.3: Thematic – environmental investment 
needs and current investment, p.a. 2014-2020 

areas  together  cover  21.4%  of  Italy’s  land (56).  It 
has  yet  to  allocate  sufficient  resources  to  the 
priority action frameworks (57), and the designation 
of marine protected areas is not yet completed.  

Climate  change  is  affecting  many  sectors  in 
Italy,  with  adaptation  challenges  concerning 
soil and water management in particular (58). 
The  problem  of  water  scarcity  has  expanded  to 
cover  northern  Italy (59),  with  decreasing  moisture 
and  increased  sealing  and  degradation  of  soils. 
This  affects  hydropower  generation,  water  for 
human  consumption,  agriculture,  and  the  flow  of 
water  bodies (60).  Local  communities  are  exposed 
to flash floods and extreme heat, with the risk of 
heat-related death and morbidity projected to rise 
of  water 
significantly. 
fragmented  with  significant 
management 
leakages (61) 
in 
agriculture  is  a  concern  in  the  south.  Investing  in 
re-naturalising  water  bodies, 
flood 
improving  land  use  planning,  reducing  the  sealing 
of  soils,  and  regenerating  them  would  help 
mitigate some adverse effects of climate change. 
The  recovery  and  resilience  plan  contains  some 
measures  to  restore  biodiversity  and  regenerate 
soils (Annex 9). 

Italy’s 
is 
(Annex  17).  High  water  use 

governance 

control, 

fossil 

fuel  and  other 
Italy  provides 
environmentally harmful subsidies that could 
be  considered  for  reform,  while  ensuring 
food  and  energy  security  and  mitigating 
social  effects. 
Italy  has  a  catalogue  of 
environmentally  harmful  subsidies,  estimated  at 
EUR  20.4  billion  in  2020 (62),  which  it  intends  to 

(56)  In 2021, Italy had 21.4% terrestrial protected areas (Natura 
2000 and nationally designated areas), against the EU 
average of 26.4% (European Environment Agency, 2023, 
Natura 2000 Barometer). 

(57)  Environmental Implementation Review 2022 – country report 
Italy, p. 36; Quinto rapporto sullo stato del capitale naturale 
in Italia, Ministry of Environment and Energy Security, 2023, 
p.9. 

(58)  European Environmental Agency, Advancing towards climate 

resilience in Europe, forthcoming. 

(59)  JRC Global Drought Observatory (GDO) of the Copernicus 
Emergency; Drought in northern Italy, March 2022. 

(60)  According to the 6th IPCC climate adaptation report, in 

southern Europe, more than a third of the population will be 
exposed to water scarcity if global warming reaches 2 °C. 

(61)  ISTAT, i divari territoriali nel PNRR: dieci obiettivi per il 

Mezzogiorno, 25.1.2023. 

(62)  Ministry of Environment and Energy Security, Economia 

Ambientale. 

Source: European Commission. 

and 

Italy  would  benefit  from  investing  more  in 
better 
protection 
environmental 
protecting biodiversity, tackling pollution and 
promoting  the  circular  economy,  including 
waste  management.  Between  2014  and  2020, 
investment  needs (54)  were 
the  environmental 
estimated  to  be  at  least  EUR 21.9  billion  while 
investment  was  about  EUR 11.7  billion,  leaving  a 
gap  of  at  least  EUR 10.1  billion  per  year  (see 
Graph  A6.3) (55).  Key  sectors  for  investment  are 
waste  and  urban  wastewater  treatment.  Italy’s 
Natura 2000 land network and national protected 

(54)  Environmental objectives include pollution prevention and 

control, water management and industries, circular economy 
and waste, biodiversity and ecosystems (European 
Commission, 2022, Environmental Implementation Review, 
country report Italy). 

(55)  When also accounting for needs estimated at EU level only 

(e.g., water protection, higher circularity, biodiversity 
strategy). 

41 

5482.7863.4223.4021.5915.5883.9416.6443.5842.1370,01000,02000,03000,04000,05000,06000,07000,0Pollutionprevention andcontrolWater (industries,excl. protection)Circular economy(incl. waste)Biodiversity andecosystemsR&I&D and otherEUR million (at current prices)Current investmentTotal need 
      
                                                 
                                                 
carbon.  In  2021,  Italy’s  revenue  from  the  EU 
Emissions  Trading  System  amounted  to  some 
EUR 2.5  billion. 
Italy  has 
allocated only 50% to climate and energy-related 
measures, 
the 
Emissions Trading System Directive. 

the  minimum  allowed  under 

In  the  past  years, 

reduce.  Environmentally  harmful  subsidies  have 
been  identified,  via  an  initial  assessment,  in  the 
agriculture,  forestry  and  fishing,  electricity,  gas, 
steam  and  air  conditioning,  transportation  and 
storage,  mining  and  quarrying,  manufacturing, 
water supply and sewerage, accommodation, food 
services  and  other  services  sectors.  Italy  has 
increased  fossil  fuel  subsidies  slightly  since  2016 
(see  Table  A6.1).  Examples  of  environmentally 
harmful subsidies include the flat rate taxation of 
privately used company cars, the reduced VAT rate 
for fertilisers and pesticides, the excise tax refund 
the 
for  diesel 
reimbursement  of  excise  duty  on  diesel  used  in 
freight  and  other  categories  of  passenger 
transport  or  the  refund  scheme  for  energy-
intensive industry under conditions (63). 

in  agriculture, 

fuel  used 

Italy  has  the  potential  to  use  taxation  to 
tackle  resource  use  and  pollution,  despite 
having above-average environmental tax revenues 
compared  with  other  EU  countries (64)  (see  Annex 
19).  Low  water  charges  discourage  investment  in 
water  infrastructure  and  contribute  to  high  water 
consumption  rates.  Italy  planned  to  increase  the 
floor  rate  for  the  regional  landfill  tax  under  the 
2022  circular  economy  action  plan  (addendum), 
but it has not yet done so (65). It also has scope to 
bring  in  pesticide  taxes (66)  and  use  congestion 
taxes  to  reduce  air  pollution,  as  the  city  of  Milan 
does (67). 

By  earmarking  a  higher  share  of  Emission 
Trading  System  revenue  for  climate  action, 
Italy could reduce its exposure to the cost of 

(63)  Fossil fuel figures in EUR of 2021 from the 2022 State of 

the Energy Union report. Initial assessment of 
environmentally harmful subsidies done by the Commission 
in the 2022 toolbox for reforming environmentally harmful 
subsidies in Europe, using OECD definitions, and based on the 
following datasets: OECD Agriculture Policy Monitoring and 
Evaluations; OECD Policy Instruments for the Environment 
(PINE) Database; OECD Statistical Database for Fossil Fuels 
Support; IMF country-level energy subsidy estimates. Annex 4 
of the toolbox contains detailed examples of subsidies on 
the candidates for reform. 

(64)  European Commission, 2021, Green taxation and other 

economic instruments – Internalising environmental costs to 
make the polluter pay. 

(65)  Ministry of Environment and Energy Security, Riforma 1.1 - 

Strategia nazionale per l’economia circolare. 

(66)  European Commission, Study on assessing the environmental 

fiscal reform potential for the EU 28, 2016. 

(67)  European Commission, 2021, Green taxation and other 

economic instruments – Internalising environmental costs to 
make the polluter pay. 

42 

 
                                                 
Table A6.1: Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources: (1) Historical and projected emissions, as well as Member States’ climate policy targets and 2005 base year emissions 
under the Effort Sharing Decision (for 2020) are measured in global warming potential (GWP) values from the 4th Assessment 
Report (AR4) of the Intergovernmental Panel on Climate Change (IPCC). Member States’ climate policy targets and 2005 base 
year emissions under the Effort Sharing Regulation (for 2030) are in GWP values from the 5th Assessment Report (AR5). The 
table above shows the base year emissions 2005 under the Effort Sharing Decision, using AR4 GWP values. Emissions for 2017-
2021 are expressed in percentage change from 2005 base year emissions, with AR4 GWP values. 2021 data are preliminary. The 
table shows the 2030 target under Regulation (EU) 2023/857 that aligns it with the EU’s 55% objective, in percentage change 
from 2005 base year emissions (AR5 GWP). Distance to target is the gap between Member States’ 2030 target (with AR5 GWP 
values) and projected emissions with existing measures (WEM) and with additional measures (WAM) (with AR4 GWP values), in 
percentage change from the 2005 base year emissions. Due to the difference in global warming potential values, the distance to 
target is only illustrative. The measures included reflect the state of play as of 15 March 2021.  
(2) Net removals are expressed in negative figures, net emissions in positive figures. Reported data are from the 2023 
greenhouse gas inventory submission. 2030 value of net greenhouse gas removals as in Regulation (EU) 2023/839 
amending Regulation (EU) 2018/841 (LULUCF Regulation) – Annex IIa, kilotons of CO2 equivalent, based on 2020 submissions. 
(3) Renewable energy and energy efficiency targets and national contributions are in line with the methodology established under 
Regulation (EU) 2018/1999 (Governance Regulation).  
(4) Percentage of total revenue from taxes and social contributions (excluding imputed social contributions). Revenue from the EU 
Emissions Trading System is included in environmental tax revenue.  
(5) Expenditure on gross fixed capital formation for the production of environmental protection services (abatement and 
prevention of pollution) covering government, industry, and specialised providers.  
(6) European Commission, Study on energy subsidies and other government interventions in the European Union, 2022 edition.  
(7) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters. This 
indicator is based on modelling of the current risk from floods, wildfires and windstorms as well as earthquakes, and an 
estimation of the current insurance penetration rate. The indicator does not provide information on the split between the 
private/public costs of climate-related disasters. A score of 0 means no protection gap, while a score of 4 corresponds to a very 
high gap (EIOPA, 2022).  
(8) Sulphur oxides (SO2 equivalent), ammonia, particulates < 10 µm, nitrogen oxides in total economy (divided by GDP).  
(9) Battery electric vehicles (BEV) and fuel cell electric vehicles (FCEV). 

43 

2030200520172018201920202021target/valueWEMWAMGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq; %; pp334,5-19%-17%-18%-24%--43,7%-14,7-3,7Net carbon removals from LULUCF (2)kt CO2eq-35.557-23.298-45.171-41.837-32.545-27.473-35758n/an/a200520172018201920202021Share of energy from renewable sources in gross final consumption of energy (3)%8%18%18%18%20%19%30%Energy efficiency: primary energy consumption (3)Mtoe180,8148,9147,2145,9132,3145,3125,1Energy efficiency: final energy consumption (3)Mtoe137,2115,2116,3115,4102,7113,3103,8201620172018201920202021201920202021Environmental taxes (% of GDP)% of GDP3,53,33,33,23,03,02,42,22,2Environmental taxes (% of total taxation) (4)% of taxation 8,38,07,97,77,16,95,95,65,5Government expenditure on environmental protection% of total exp.1,81,81,81,91,71,71,701,611,6Investment in environmental protection (5) % of GDP0,30,30,30,3--0,40,40,4Fossil fuel subsidies (6)EUR2021bn5,96,05,65,75,1-53,050,0-Climate protection gap (7) score 1-42,42,41,5Net greenhouse gas emissions1990 = 10083,085,084,084,082,078,076,069,072,0Greenhouse gas emission intensity of the economykg/EUR'100,290,280,270,270,27-0,310,300,26Energy intensity of the economykgoe/EUR'100,100,100,100,090,09-0,110,11-Final energy consumption (FEC)2015=10099,799,1100,199,388,497,5102,994,6-FEC in residential building sector2015=10099,0101,298,295,894,398,6101,3101,3106,8FEC in services building sector2015=100100,3118,5123,5118,2107,6112,8100,194,4100,7Smog-precursor emission intensity (to GDP) (8)tonne/EUR'100,700,740,690,710,67-0,930,86-Years of life lost due to air pollution by PM2.5per 100.000 inh.854,5884,6782,5711,6775,0-581,6544,5-Years of life lost due to air pollution by NO2per 100.000 inh.242,7241,6205,4204,0165,4-309,6218,8-Nitrates in ground watermg NO3/litre------21,020,8-Land protected areas% of total20,221,4-21,321,321,426,226,426,4Marine protected areas% of total5,2--5,4-6,910,7-12,1Organic farming% of total utilised agricultural area14,014,715,215,216,016,88,59,1-201720182019202020212022202020212022Share of zero-emission vehicles (9)% in new registrations0,10,30,62,44,63,65,48,910,7Number of AC/DC recharging points (AFIR categorisation)---133792412232936188626330028432518Share of electrified railways%71,471,671,6-71,670,256,6n/a56,6Hours of congestion per commuting driver per year37,437,337,2-n/an/a28,7n/an/aMobility'Fit for 55'DistanceProgress to policy targetsNational contribution to 2030 EU targetItalyEUFiscal and financialindicatorsEnergyPollutionBiodiversityClimate 
 
   
 
ANNEX 7: ENERGY SECURITY AND AFFORDABILITY 

Italy is progressing with its efforts to reduce 
dependency  on  Russian  fossil  fuels,  but 
important  challenges  on  the  electricity 
transmission and distribution system, on the 
increase  of  renewable  capacity  and  the 
reduction of the energy demand still need to 
be  addressed.      Imported  fossil  fuels  represent 
the  bulk  of  Italy’s  energy  mix.  This  makes  its 
economy  particularly  sensitive  to  global  price 
developments, requiring it to step up efforts on the 
energy  transition.  This  Annex (68)  sets  out  actions 
carried  out  by  Italy  to  achieve  the  REPowerEU 
objectives,  including  through  the  implementation 
of  its  recovery  and  resilience  plan,  in  order  to 
improve  energy  security  and  affordability  while 
accelerating  the  clean  energy  transition,  and 
contributing to enhancing the EU’s competitiveness 
in the clean energy sector (69). 

Italy  put 

Italy  operates  nine  storage  fields (72)  with  a  total 
capacity of around 19.8 billion cubic metres (bcm), 
representing  26%  of  its  total  yearly  demand. 
Gazprom halved the amount of gas sent to Italy in 
June  2022.  Since 
in  place 
then, 
determined  energy  diplomacy  and  diversified  gas 
supplies  coming  through  the  pipeline  from  Libya, 
Algeria  and  Azerbaijan.  Extra  volumes  are 
expected  to  come  from  Qatar,  Egypt  and  the  US. 
Following  a  legal  issue,  Gazprom  resumed  gas 
deliveries  to  Italy  via  Austria  on  5  October  2022. 
Moreover,  Italy  received  1.36  bcm  of  Russian  gas 
via liquefied natural gas (LNG) in 2022.  

Graph A7.1: Gas storage levels in Italy 

the 

issued 

Despite  its  high  dependence  on  Russian  gas 
‘Early  Warning’ (70) 
in 
and 
February 2022,  Italy showed a  good  level of 
gas  supply  security  in  light  of  challenging 
strategic 
Considering 
circumstances. 
geographical 
gas 
infrastructure can contribute to the overall security 
of  supply  in  Europe.  Italy  fulfilled  its  gas  storage 
obligations  last  winter,  reaching  95.45%  by  1 
November  2022  (well  above  the  80%  EU  legal 
obligation),  and  ended  the  heating  season  with  a 
filling gas storage at 60.65% by 15 April 2023 (71). 

its 
natural 

location, 

Italy’s 

(68)  It is complemented by Annex 6 as the European Green Deal 
focuses on the clean energy transition, by Annex 8 on the 
actions taken to mitigate energy poverty and protect the 
most vulnerable ones, by Annex 9 as the transition to a 
circular economy will unlock significant energy and resource 
savings, further strengthening energy security and 
affordability, and by Annex 12 on industry and single market 
complementing ongoing efforts under the European Green 
Deal and REPowerEU.  

(69)  In line with the Green Deal Industrial Plan COM(2023) 62 
final, and the proposed Net-Zero Industry Act COM(2023) 
161 final. 

(70)  According to Regulation (EU) 2017/1938 of the European 

Parliament and of the Council of 25 October 
2017 concerning measures to safeguard the security of gas 
supply and repealing Regulation (EU) No 994/2010. 

Source: JRC calculation based on AGSI+ Transparency 
Platform, 2022 (Last update 2 May 2023) 

The security of supply of the gas system and 
electricity system are closely interlinked, and 
Italy has adopted a comprehensive plan with 
demand response measures. Electricity security 
in  Italy  had  a  share  of  42%  coming  from 
renewable  sources  in  2021,  with  hydropower  as 
the leading source, and 59% coming from thermal 
power  plants  (49.9%  natural  gas,  5%  coal  and 
1.5% petroleum) (Annex 6). To address the risk of 
supply  disruption  and  high  energy  prices,  Italy 
launched national campaigns on energy efficiency, 
approved  mandatory  energy  saving  measures  in 
public  and  residential  buildings,  adopted  heating 
and cooling measures, and provided direct support 
to  customers.  Voluntary  and  mandatory  energy 
saving  measures  are  expected  to  deliver  6.2  bcm 

(71)  Regulation of the European Parliament and of the Council 
amending Regulations (EU) 2017/1938 and (EC) No 
715/2009 with regard to gas storage and Implementing 
Regulation (EU) 2022/2301 of 23 November 2022 setting 
the filling trajectory with intermediary targets for 2023 for 
each Member State with underground gas storage facilities 
on its territory and directly interconnected to its market area. 

(72)  Through its subsidiary company Stogit, Snam is the largest 
storage operator in Italy and one of the largest in Europe. It 
manages nine storage facilities: 5 in Lombardy (Brugherio, 
Bordolano, Ripalta, Sergnano and Settala), 3 in Emilia-
Romagna (Cortemaggiore, Minerbio, Sabbioncello), and 1 in 
Abruzzo (Fiume Treste). It operates in synergy with the 
company’s transport and regasification infrastructure, 
ensuring energy security for the country. 

44 

 
 
                                                 
 
 
                                                 
 
 
in  2023 (73).  Recent 
of  natural  gas  savings 
measures and the high energy prices led to a gas 
demand  reduction  of  about  19%  over  the  period 
August 2022 – March 2023 when compared to the 
previous  5-years  average.  However,  no  direct 
interlinkages were established between the short-
term  emergency  energy  saving  measures  and 
medium-term 
efficiency 
improvements. 

structural 

energy 

Graph A7.2: Share of gas consumption per sector, 
2021 

Source: Eurostat 

from 

the  environmental 

On  natural  gas  infrastructure,  Italy  has 
interconnectors  with  Switzerland,  Austria, 
Slovenia  and  Albania  via  the  Trans  Adriatic 
Pipeline as well as 3 LNG terminals. Moreover, 
the Italian government mandated its transmission 
system operator Snam to purchase and set up two 
additional floating storage and regasification units 
near the cities of Piombino (Tuscany) and Ravenna 
(Emilia  Romagna)  with  an  annual  regasification 
capacity  of  5  bcm.  They  benefit  from  an 
exemption 
impact 
assessment  to  speed  up  implementation.  One  of 
the terminals has been commissioned in 2023 and 
the  second  one  in  2024.  To  increase  its  import 
transmission,  the 
Italian  transmission  system 
operator  is  considering  improving  its  internal 
transmission 
the 
interconnection  point  with  Austria,  and  potentially 
also building an offshore pipeline with Spain. If the 
Southern Gas Corridor is enhanced, the capacity of 
the  Trans  Adriatic  Pipeline  would  need  to  be 
increased.  In  parallel,  the  internal  bottlenecks  in 
the  Italian  network  would need  to  be  removed  by 
realising the Projects of Common Interest Adriatica 
Line and the Matagiola-Massafra pipeline. 

upgrading 

network, 

is 

its 

level 

would 

further 

electricity 

upgrading 

interconnection 

for  2030.  Electricity 

grid 
Italy 
infrastructure 
infrastructure,  but  further 
investments 
to 
needed 
be 
accommodate  a  higher  share  of  renewable 
electricity.  Italy  will  carry  out  investments  to 
strengthen  the  grid  in  order  to  facilitate  the 
integration of renewable energy sources. Its cross-
border 
is 
approximately 5% in 2023, still significantly below 
the  interconnection  target  of  10%  for  2020  and 
15% 
interconnections 
currently in the pipeline with Austria and Slovenia 
would  help  progress  towards  the  target.  Besides 
the cross-border interconnections, Italy also needs 
to  make  progress  with  the  internal  bottlenecks  in 
the energy grids, in particular the limited electricity 
transmission  capacity  to  connect  areas  with  high 
renewable  generation  capacity  and  the  high 
energy  consumption  centres.  The  2021  Ten  Year 
Network Development Plan envisages over EUR 18 
billion  in  investments  in  the  national  electricity 
transmission grid until 2030 to enable the energy 
transition  and  integrate  the  growing  amount  of 
variable  renewable  production  capacity  from  the 
south and the islands.  

Graph A7.3: Gas consumption per industrial sector, 
2021 (% of total gas consumption in industry) 

Source: Eurostat 

in 

the 

energy 

particular 

Despite  the  measures  taken  by  Italy  to 
prices, 
soaring 
mitigate 
households, 
low-income 
families,  and  industries  are  being  severely 
impacted.  Based  on  Eurostat  2021  data,  Italy 
uses  mainly gas  for  power  generation (32.5  bcm) 
and  household  consumption  (20  bcm).  This  puts 
households  at  risk  and  their  ability  to  cover basic 
needs  such  as  heating  or  transport (74).  Similarly, 

(73)  Italian national plan to contain national gas consumption 
(Piano nazionale di contenimento dei consumi di gas 
naturale) 2022. 

(74)  Annex 8 looks at the impact of soaring energy prices on the 

most vulnerable households. 

45 

43.8%15.3%2.3%11.4%27.0%0.3%EnergyIndustryTransportServices and public sectorHouseholdsAgriculture, forestry andfishery0.0%5.0%10.0%15.0%20.0%25.0%30.0%Iron and steelChemical and petrochemicalNon-ferrous metalsNon-metallic mineralsTransport equipmentMachineryMining and quarryingFood, beverages and tobaccoPaper, pulp and printingWood and wood productsConstructionTextile and leather 
     
                                                 
     
                                                 
the surge in energy prices has had a considerable 
impact  on  the  Italian  industry,  which  consumes 
around  12  bcm  of  gas.  Industrial  sectors  such  as 
non-metallic  minerals,  chemicals,  paper,  iron  and 
steel are heavily exposed to energy shocks and are 
experiencing growing pressure to either raise their 
prices  to  safeguard  margins  or  reduce  production 
due to the high share of energy consumption.  

Graph A7.4: Italy´s retail energy prices for 
industry (top) and households (bottom) 

(1) On electricity, the band consumption is DC for households 
and ID for industry 
(2) On gas, the band consumption is D2 for households and I4 
for industry 
Source: Eurostat 

Italy  has  high  ambitions  to  transform  its 
energy  system,  and  further  policy  support 
could  steer  its  potential  for  decarbonising 
the  economy.  Renewable  capacity  grew  very 
slowly in the last period. From 2016 to 2021, Italy 
added  only  around  5.8  GW  (slightly  more  than  1 
GW  per  year)  to  its  renewable  energy  capacity, 
reaching  a  total  of  58  GW.  In  2021,  the  installed 
solar PV capacity  increased by 4.4% compared to 
the  year  before  (22.6  GW  total  capacity),  while 
wind grew by 3.5% (11.3 GW total capacity). Data 
from  2022  show  an  accelerating  trend,  with 
around  3  GW  of  additional  capacity  installed (75). 

(75)  Terna, renewable installed capacity, 

https://www.terna.it/it/sistema-elettrico/dispacciamento/fonti-
rinnovabili  

46 

of 

new 

added), 

capacity 

This was mostly due to the growth in solar PV (2.5 
especially 
GW 
decentralised  installations,  whose  growth  was 
driven  by  simplified  permitting  procedures  and 
support schemes. Nevertheless, progress is still too 
slow  regarding  permitting  for  larger  renewable 
generation  facilities.  The  permitting  timeline  for 
solar PV and wind is 1.5 and 5 years respectively. 
This  is  mostly  due  to  the  fragmentation  of 
involvement  of  many 
competencies  and  the 
stakeholders. Slow procedures are the main reason 
for  the  low  participation  rate  in  auctions  for 
renewable  energy  deployment.  A  contribution  to 
renewables  development 
from 
innovative  forms  of  deployment  such  as  agri-PV, 
which  will  be  supported  under  the  recovery  and 
resilience  plan.  Offshore  wind  energy  represents 
reduce 
an 
important  potential 
dependence  on  fossil  fuels. 
Italy 
completed  the  construction  of  its  first  offshore 
wind  farm  in  Taranto  after  a  lengthy  permitting 
process.  The  development  of  innovative  floating 
offshore  renewables  is  supported  by  the  RRP 
Mission 2 to trigger innovation in the sector. Wind 
power,  including  offshore  wind  power,  can  boost 
the 
revisions 
hindering  the  development  of  the  sector  need  to 
be addressed. 

recovery,  but  some  structural 

In  2022, 

come 

could 

Italy 

to 

in 

to 

2030 

production 

association 

There is still potential to further explore key 
sectors  to  meet  the  country’s  renewables 
penetration and decarbonisation targets. The 
national 
biogas/biomethane 
of 
Italy’s  potential  for 
producers  has  estimated 
biomethane 
be 
in 
approximately  8  bcm/year.  Italy  has  put  in  place 
large investments in biomethane, including as part 
of  its  RRP.  It  adapted  its  legislative  framework to 
incentivise  the  use  of  biomethane,  but  further 
in 
implementation  measures  are 
particular  to  set  specific  tariffs.  Another  example 
is provided by geothermal energy, where Italy has 
been  a  historical  frontrunner,  but  the  sector  has 
seen  limited  development  in  recent  years.  A 
specific  plan  to  develop  geothermal  potential, 
notably  to  reduce  dependency  on  imported  fossil 
gas, has not been developed yet. 

required, 

to 

contribute 

Italy’s 
affordability 

Improving efficiency potential in key sectors 
energy 
could 
independence, 
and 
decarbonisation objectives. Energy efficiency of 
buildings  will  remain  a  key  priority  for  Italy,  in 
particular  with  regard  to  the  worst  performing 
Its  building  stock  has  considerable 
buildings. 

 
     
 
 
                                                 
considering 

efficiency  potential, 

energy 
in 
particular  the  large  share  of  old  and  low  energy 
buildings.  For  instance,  in  the  residential  sector, 
65% of buildings are over 45 years old, i.e. before 
the first law on energy savings was passed. At the 
moment,  Italian  public  budget  financing  schemes 
do  not  target  worst  performing  buildings,  low-
income households and deep renovations. Most of 
the  schemes  to  support  energy  renovations  in 
residential  buildings  are  grant-based  such  as  the 
successful  Conto  Termico  for  energy  efficiency 
measures and on-site renewables, and/or the well-
known  110%  Superbonus  tax  credit,  and  the  use 
of financial instruments is rather limited. A stable 
targeted support framework could ensure that the 
goals  envisaged  in  Italy’s  Long-term  Renovation 
Strategy  are  achieved.  Italy  is  not  carrying  out 
checks  on  products  covered  by  ecodesing  and 
energy  labelling.  This  generates  serious  concerns 
with  respect  to  the  level  playing  field  among 
economic  operators  and  uncertainty  as  to  the 
compliance  levels  of  the  concerned  products,  and 
therefore  possible  missed  energy  and  CO2 
savings (76). 

Increased  energy  efficiency  in  industry  and 
tertiary sectors remains key to help boost EU 
energy  independence,  competitiveness  and 
decarbonisation.  The  key  enabling  measures  to 
increase  energy  efficiency  in  businesses  are  the 
Italian  white  certificate  scheme  and  the  positive 
coverage  in  terms  of  the  energy  audit  obligation. 
However,  the  public  budget  support  available  to 
increase  energy  efficiency  uptake  in  businesses, 
and  in  particular  in  micro,  Small  and  Medium 
Enterprises, is limited by the small capacity of the 
National  Energy  Efficiency  Fund (77)  and  the 
absence of dedicated technical support. This limits 
the  possibility  to  access  low-interest  finance  and 
implement energy audit recommendations.  

has 

strong 
Italy 
manufacturing 
low-carbon 
technologies and components (wind (78), solar 

traditionally 
of 

base 

a 

(76)  The internet-supported information and communication 
system for the pan-European market surveillance 

(77)  The Italian National Energy Efficiency Fund has a capacity of 
EUR 310 million to support the financing of energy efficiency 
measures in businesses and public authorities.  

(78)  Italy is one of the leading markets in the EU with a 

substantial number of manufacturers. The 
WindEurope/WoodMackenzie (2020) data set covers Tier1 
and Tier2 component manufacturers of the following 
components: Nacelle, Bearings, Blades, Converters, 
Gearboxes, Generators, Castings, Forgings, Towers.  

47 

in  order 

to  achieve 

thermal  and  solar  PV),  which  it  aims  to 
the 
strengthen 
decarbonisation  objectives.  According 
to 
EurObserv’ER  indicative  estimate,  the  deployment 
of  clean  energy  technologies  had  the  biggest 
impact on conventional energy sector employment 
in  Italy,  among  other  countries (79).  In  2021,  the 
renewable  energy  direct  and  indirect  employment 
(all  technologies)  in  Italy  totalled  68.173  jobs (80).  
Public investment in research and innovation (R&I) 
in  the  energy  field (81)  decreased  from  0.036%  in 
2014  to  0.024%  in  2019  (as  a  share  of  GDP), 
while no absolute change (as a share of GDP) was 
recorded  over  the  same  period  for  private 
investment  in  R&I (82) (83).  There  was  an  upward 
trend  in  venture  capital  invested (84)  in  climate 

(79)  EurObserv’ER. 2022. The State of Renewable Energies in 

Europe. Edition 2021 – 20th EurObserv’ER Report. 

(80)  Source IRENA and ILO (2022), Renewable energy and jobs: 

Annual review 2022, Interna.onal Renewable Energy Agency, 
Abu Dhabi and Interna.onal Labour Organiza.on, Geneva. 
Data are principally for 2021, with some dates for 2020 and 
a few instances in which only earlier informa.on is available. 
The data for hydropower include direct employment only and 
for other technologies include both direct and indirect 
employment wherever possible. 'Other Technologies' include 
jobs not broken down by individual renewable energy 
technologies. 

(81)  Renewables, smart systems, efficient systems, sustainable 

transport, carbon capture, utilisation and storage, and nuclear 
safety, COM(2015) 80 final (Energy Union Package).   

(82)  Private R&D spending on Energy Union topics was 0.041% in 
2014 and 0.041% in 2019 as a share of GDP (EUR 668.6 
million and EUR 731.2 million respectively). Source: JRC 
SETIS (20222) https://setis.ec.europa.eu/publications/setis-
research-and-innovation-data_en Mountraki, A., Georgakaki, 
A., Shtjefni, D., Ince, E. and Charleston, G., RandI data for 
SETIS and the State of the Energy Union Report, European 
Commission, 2022, JRC130405. 
http://data.europa.eu/89h/jrc-10115-10001 

(83)  Italy is among the 5 EU countries with the highest public 

investment in solar energy technologies (peaking at 0.0034 
of GDP in 2014). Also among the 5 countries with the 
highest level of private investments in PV for the period 
2010-2018. Source: JRC analysis based on (Fiorini et al., 
2017; Pasimeni, Fiorini and Georgakaki, 2019) in Clean 
Energy Technology Observatory: Photovoltaics in the 
European Union 2022 Status Report on Technology 
Development, Trends, Value Chains and Markets. 

(84)  Venture capital investment includes venture capital deals (all 
stages) and private equity growth/expansion deals (for 
companies that have previously been part of the portfolio of 
a venture capital investment firm). Venture capital deals are 
defined as early-stage deals (including pre-seed, 
accelerator/incubator, angel, seed, series A and B occurring 
within 5 years of the company's founding date) and later-
stage deals (usually series B to series Z+ rounds and/or 
occurring more than 5 years after the company's founding 
date, undisclosed series and private equity 
growth/expansion). 

 
                                                 
                                                 
tech  start-ups  and  scale-ups,  which  are  at  the 
forefront of innovation (1.1% in 2021 compared to 
0.1%  in  2019  as  a  percentage  of  total  venture 
capital invested in Italy) (85), which follows the EU 
growing  trend  in  2021.  More  public  and  private 
investment  in  clean  energy  R&I,  like  the  TANGO 
(iTaliAN pv Giga factOry) (86) in Catania (Sicily) are 
pivotal  in  bridging  the  gap  between  R&I  and 
market uptake and boosting EU competitiveness. 

(85)  The analysis presented in this section is based on the JRC 

calculation of Pitchbook data. PitchBook currently identifies 
more than 2 750 venture capital companies in its climate 
tech vertical. 

(86)  The project was selected as part of EU’s first Innovation Fund 
call for large-scale projects. ENEL had already set up a 200 
MW heterojunction pilot production line in its production 
plant in Catania (Sicily) back in 2017. With the TANGO 
project, the capacity of ENEL’s cell production plant will 
increase to 400 MW in September 2023 and 3,000 MW by 
July 2024. The total investment in the new module factory 
will reach EUR 600 million, with the European Union and the 
Italian government contributing up to EUR 188 million. Enel 
Green Power will initially target the European market, where 
it is required to sell up to 60% of its products, due to 
conditions related to the aforementioned EU funding. This 
will generate a total of 1,000 indirect jobs, including current 
ones, by 2024, according to the company. 

48 

 
                                                 
Table A7.1: Key Energy Indicators 

(1)  The ranking of the main suppliers is based on the latest available figures (for 2021) 
(2) FSRU included 
(3) Venture Capital investments include Venture Capital deals (all stages) and Private Equity Growth/Expansion deals (for 
companies that have previously been part of the portfolio of a VC investment firm). 
Source: Eurostat, Gas Infrastructure Europe (Storage and LNG Transparency Platform), JRC SETIS (2022), JRC elaboration based 
on PitchBook data (06/2022) 

49 

EU20182019202020212018201920202021Import Dependency [%] 76%77%73%74%58%61%57%56%of Solid fossil fuels 101%99%93%97%44%44%36%37%of Oil and petroleum products 90%93%89%84%95%97%97%92%of Natural Gas 93%95%93%94%83%90%84%83%Dependency from Russian Fossil Fuels [%]of Hard Coal36%43%56%62%40%44%49%47%ofCrude Oil9%14%11%10%30%27%26%25%of Natural Gas 48%47%43%40%40%40%38%41%20152016201720182019202020212022Gross Electricity Production (GWh)282,993289,768295,830289,708293,853280,531289,070-Combustible Fuels191,458198,693208,824192,129195,084180,805189,132-Nuclear0000000-Hydro46,96944,25738,02550,50348,15449,49547,478-Wind14,84417,68917,74217,71620,20218,76220,927-Solar 22,94222,10424,37822,65423,68924,94225,039-Geothermal 6,1856,2896,2016,1056,0756,0265,914-Other Sources595736661601650501579-Net Imports of Electricity (GWh)46,37837,02737,76143,89938,14132,20042,790-   As a % of electricity available for final consumption 16%13%13%14%13%11%14% -Electricity Interconnection (%)----8.7%8.8%3.8%4.0%20152016201720182019202020212022Gas Consumption (in bcm)67.570.975.272.774.370.976.168.5Gas Imports - by type (in bcm)67.171.577.576.684.978.782.9-Gas imports - pipeline61.365.369.767.971.166.473.0-Gas imports - LNG5.86.27.98.713.812.39.9-Gas Imports - by main source supplier (in bcm) (1)Russia27.726.833.132.933.428.729.2-Algeria7.719.620.218.816.518.423.8-Qatar11.511.013.513.113.113.913.7-Azerbaijan0.00.00.00.00.00.07.2-Others20.214.010.711.821.817.79.0-2019202020212022LNG TerminalsNumber of LNG Terminals (2)3333LNG Storage capacity (m3 LNG)487,500487,500487,500487,500Underground StorageNumber of storage facilities14141414Operational Storage Capacity (bcm)20.120.220.219.82019202020212022VC investments in climate tech start-ups and scale-ups (EUR Mln) (3)1.00.115.9n.a.as a % of total VC investments in Italy0.1%0.0%1.1%n.a.Research & Innovation spending in Energy Union R&i priorites Public R&I (EUR mln)417.3n.a.n.a.n.a.Public R&I (% GDP)0.023%n.a.n.a.n.a.Private R&I (EUR mln)731.2n.a.n.a.n.a.Private R&I (% GDP)0.04%n.a.n.a.n.a.CLEAN ENERGYDIVERSIFICATION OF GAS SUPPLIESELECTRICITYITALYENERGY DEPENDENCE 
 
   
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

in 

transition 

line  with 

Italy’s  progress 

This  Annex  monitors 
in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
notably  for  workers  and  households 
in 
vulnerable situations. The number of jobs in the 
green economy has quickly risen. To ensure a fair 
the  Council 
green 
Recommendation (87),  upskilling  and 
reskilling 
measures  will  promote  smooth  labour  market 
transitions and the implementation of REPowerEU. 
Italy's  recovery  and  resilience  plan  (RRP)  outlines 
crucial  reforms  and  investment  for  a  fair  green 
transition (88),  such  as  significant  investment  in 
energy  efficiency 
residential  and  public 
buildings,  sustainable  transport  and  renewable 
energy, 
just 
transition  plans  and  action  supported  by  the 
European Social Fund Plus (ESF+). 

complementing 

territorial 

the 

in 

Graph A8.1: Fair transition challenges in Italy 

Source: Eurostat, EMPL-JRC GD-AMEDI/AMEDI+ projects and 
World Inequality Database (see Table A8.1).  

Employment  in  Italy’s  most  affected  sectors 
remains  stable  while  the  green  economy  is 
expanding, but workers in declining activities 
need active support. The greenhouse gas (GHG) 
emissions  intensity  of  Italy’s  workforce  declined 
from  13.8  to  12.4  tonnes  per  worker  between 
2015 and 2021, and is now below the EU average 
of  13.7  tonnes  in  2021  (see  Graph A8.1  and 
Table A8.1).  Employment 
Italy’s  energy-
intensive  industries  (EII)  represented  a  share  of 
2.4%  of  total  employment  in  2020  (EU  average: 
in  mining  and  quarrying 
3.0%).  Employment 
decreased by 9.8% since 2015 (to around 21 000 

in 

workers) along with the decline of coal and lignite 
mining. Total jobs in the environmental goods and 
services sector grew by 10.5% (to 435 677) during 
2015-19  (EU:  8.3%),  reaching  1.7%  of  total 
employment, close to the EU average (see Annex 9 
for circular jobs specifically). The job vacancy rate 
in  construction,  a  key  sector  for  the  green 
transition,  is  3.3%  vs  4.0%  in  the  EU  (2022) (89). 
Since  2016,  through  the  Green&Blue  Economy 
project, local authorities in Sardinia, in cooperation 
with  business  communities,  offer  various  training 
courses related to roles within the green economy.   

Upskilling  and  reskilling  in  declining  and 
transforming  sectors  has  slightly  increased. 
Skills are key for smooth labour market transitions 
and  preserving  jobs  in  transforming  sectors.  In 
energy-intensive  industries,  workers’  participation 
in education and training has increased from 6.3% 
in 2015 to 7.7% in 2022, remaining below the EU 
average  (10.4%).  In  2020,  green  skills  were 
considered 
for  around  38%  of 
vacancies (90),  while  in  2022  43%  of  citizens 
believed  they  did  not  have  the  necessary  skills  to 
contribute  to  the  green  transition  (EU:  38  %) (91) 
(cf. Annex 15).  

important 

To address this challenge, the Just Transition 
Mechanism  assists  workers  and  jobseekers 
through up- and reskilling, as well as support 
for  job  creation  on  green  subjects.  Support 
focuses  particularly  on  two  territories:  Sulcis 
Iglesiente,  headquarter  of  Italy’s  last  coal  mine, 
and  Taranto,  which  hosts  one  of  Europe’s  largest 
steel  mills  (ILVA).  Furthermore,  through  funding 
under  its  RRP  and  REACT-EU,  a  broader  training 
offer  is  financed  at  national  level,  including 
innovative  doctorate-level  studies  relevant  to 
green skills as well as training for both employed 
workers and those looking for a job (Fondo e Piano 
Nuove Competenze). In Italy, around 14% of ESF+ 
funding contributes to green skills and jobs. 

Significant  progress  has  been  made  on 
people’s  ability  to  keep  homes  adequately 
warm,  but  the  spike  in  energy  prices  is 
expected to worsen the situation. The share of 

(87)  Council Recommendation of 16 June 2022 on ensuring a fair 
transition towards climate neutrality (2022/C 243/04) covers 
employment, skills, tax-benefit and social protection 
systems, essential services and housing. 

(89)  Eurostat (JVS_A_RATE_R2)   

(90)  European Commission, European Centre for Expertise (ECE) 
article on skills shortages and structural changes in the 
labour market (forthcoming).  

(88)  See 2022 Country Report (Annex 6 and Annex 3) for an 

(91)  Special Eurobarometer 527. Fairness perceptions of the 

overview. 

green transition (May – June 2022). 

50 

00.511.522.5GHG per workerEmployment EIIEducation &training EIIEnergy povertyTransportpoverty(proxy)CarboninequalityEU LatestIT Latest (vs EU Latest)IT 2015 (vs EU Latest) 
 
  
                                                 
                                                 
 
Table A8.1: Key indicators for a fair transition in Italy 

Source: Eurostat (env_ac_ainah_r2, nama_10_a64_e, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-
JRC GD-AMEDI/AMEDI+ projects and World Inequality Database (WID).      

those  unable  to  keep  their  homes  adequately 
warm  declined  to  8.1%  in  2021  (2015:  17%) (92). 
In 2021, 17% of the population at risk of poverty 
(EU:  16.4%)  and  8.3%  of  lower  middle-income 
households  (in  deciles  4-5)  were  affected  (EU: 
8.2%).  Energy  poverty  is  higher  in  the  South  and 
on the islands (around 14% in both), and lower in 
urban  and  suburban  areas. (93)  Before  the  energy 
price  hikes,  an  estimated  20.8%  of  the  total 
population  and  49.1%  of  the  (expenditure-based) 
had 
(AROP) 
at-risk-of-poverty 
residential 
on 
electricity,  gas,  and  other  fuels (94)  above  10%  of 
their  household  budget  (EU:  26.9%  and  48.2%, 
includes  measures 
respectively). 
stimulating  the  construction  of  efficient  district 
heating networks in urban areas.  

expenditure 

The  RRP 

population 

budget 

shares 

the 

The  increased  energy  prices  in  2021-2023 
negatively  affect  household  budgets, 
in 
particular  for  low-income  groups.  As  a  result 
of energy price changes during the August 2021 to 
January  2023  period  relative  to  the  18  months 
prior (cf. Annex 7), in the absence of policy support 
and  behavioural 
share  of 
responses, 
individuals living in households which spend more 
than  10%  of  their  budget  on  energy  would  have 
increased  by  30.0  percentage  points (pps)  for  the 
whole  population  and  by  35.3  pps  among  the 
(expenditure-based)  AROP  population,  much  more 
than  for  the  EU 
(16.4  pps  and  19.1  pps, 
respectively). (95)  Expenditure  shares  of  low  and 
lower-middle income groups would have increased 
the most, particularly for electricity, and to a lower 
extent  for  gas,  as  shown  in  Graph A8.2.  By 
contrast,  transport  fuel  price  increases  in  Italy 

(92)  Energy poverty is a multi-dimensional concept. The indicator 
used focuses on an outcome of energy poverty. Further 
indicators are available at the Energy Poverty Advisory Hub. 

(93)  Osservatorio Italiano sulla Povertà Energetica, link.  

(94)  Products defined according to the European Classification of 

Individual Consumption according to Purpose (ECOICOP): CP045. 

(95)  EMPL-JRC GD-AMEDI/AMEDI+ ; see details in the related 

technical brief. 

would affect the middle class in particular. Among 
the  (expenditure-based)  AROP  population,  the 
share  of  individuals  living  in  households  with 
budget shares for private transport fuels (96) above 
6%  would  have  increased  less  than  the  EU 
average  (4.5  pps  vs  5.3  pps),  reaching  52.3%  in 
January  2023  (EU:  37.1%)  due  to  the  increase  in 
transport fuel prices.  

Graph A8.2: Distributional impacts of energy prices 
due to rising energy expenditure (2021-2023) 

Mean change of energy expenditure as a percentage (%) of 
total expenditure per income decile (D) due to observed price 
changes (August 2021 – January 2023 relative to the 18 
months prior), excl. policy support and behavioural responses. 
Source: EMPL-JRC GD-AMEDI/AMEDI+ projects, based on 
Household Budget Survey 2015 and Eurostat inflation data 
for CP0451 and CP0452. 

(50%  vs  60%).  As 

Access to public transport displays an urban-
rural divide. Around half the population perceive 
public  transport  to  be  available  (48%  vs  55%  in 
the  EU),  affordable  (52%  vs  54%)  and  of  good 
quality 
these 
perceptions,  rural  areas  in  Italy  perform  worse 
than  urban  areas,  yet  are  still  better  when 
compared to rural areas in the EU overall (97). The 
average  carbon  footprint  of  the  top  10%  of 
emitters among the population in Italy is about 4.8 
times  higher  than  that  of  the  bottom  50%  (see 
Graph  A8.1), i.e.  slightly  less  pronounced  than  the 

regards 

(96)  ECOICOP: CP0722. 

(97)  Special Eurobarometer 527. 

51 

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%ElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasElectricityGasD1D2D3D4D5D6D7D8D9D10IT GasIT ElectricityEU GasEU ElectricityIndicatorDescriptionIT 2015IT LatestEU LatestGHG per workerGreenhouse gas emissions per worker - CO2 equivalent tonnes13.812.4 (2021)13.7 (2021)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24), automotive (C29) - %2.52.4 (2020)3 (2020)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries - %6.37.7 (2022)10.4 (2022)Energy povertyShare of the total population living in a household unable to keep its home adequately warm - %178.1 (2021)6.9 (2021)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport - %47.852.3 (2023)37.1 (2023)Carbon inequalityAverage emissions per capita of top 10% of emitters vs bottom 50% of emitters4.74.7 (2020)5 (2020) 
                                                 
   
                                                 
 
  
 
EU average (5.0 times). In Italy, the average levels 
of  air  pollution  in  2020  stood  above  the  EU 
average (15 vs 11.2 µg/m PM2.5), with 94% of the 
population  living  in  regions  exposed  to  critical 
levels  of  air  pollution (98),  leading  to  significant 
health impacts, in particular on vulnerable groups, 
and 52 300 premature deaths annually (99).  

(98)  Two times higher than the recommendations in the WHO Air 

Quality Guidelines (annual exposure of 5µg/m3) 

(99)  EEA- Air Quality Health Risk Assessment 

52 

 
 
 
 
                                                 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The  circular  economy  transition  is  key  to 
climate  and 
delivering  on 
the  EU’s 
environmental  goals  and  provides 
large 
socio-economic  benefits. It  spurs  job  growth, 
innovation  and  competitiveness  and 
fosters 
resilience  and  resource  security.  The  circularity 
transition  of  industry,  the  built  environment  and 
agri-food  can  generate  significant  environmental 
improvements (see Annex 6), as they rank among 
the most resource-intensive systems. 

Italy  is  on  track  to  meet  the  EU’s  circular 
economy  goals, although  there remain  areas 
in  which  improvement  is  needed.  The  EU’s 
2020 circular economy action plan (CEAP) aims at 
doubling  circular  material  use  by  2030  vs  2020. 
Italy’s  circular  use  of  material  increased  from 
17.8% in 2016 to 18.4% in 2021, well above the 
EU 2020 average of 11.7%. The CEAP also aims to 
significantly  decrease  the  EU’s  material  footprint. 
Italy’s  material  footprint  at  9.8  tonnes/head  was 
well below the EU average of 13.7 tonnes/head in 
2020.  Despite  limited  data  availability,  the  labour 
market  benefits  of  the  circular  transition  are 
materialising,  with  an  increase  in  direct  circular 
jobs  since  2016  (see  Annex  8).  As  regards  health 
and safety in circular jobs, fatal accidents in waste 
management  and  materials  recovery  are  above 
the  average  of  all  economic  sectors  in  Italy  but 
below the EU average (100). 

Italy  adopted  a  national  strategy  for  the 
circular economy in June 2022. Italy also has a 
national  circular  economy  network  and  platform. 
Furthermore,  Italy  adopted  a  national  programme 
for  waste  management (101).  Italy  had  a  recovery 
and  resilience  plan  milestone  in  2022  for  setting 
selection  criteria  for  flagship  circular  economy 
projects.  Since  2021  the  Commission’s  technical 
support  instrument  has  been  supporting  a  project 
on  measuring  circular  economy  processes,  and  in 
industrial 
2023  a  project 
ecosystems  for  sustainable  tourism.  Regions  in 
Italy  are  at  different  stages  of  development  in 
terms  of  circular  economy  policies,  with  those  in 
the centre-north more advanced (102). 

is  starting  up  on 

(100) Eurostat [HSW_N2_02] for NACE Rev. 2 sector E38; 5.70 

fatal accidents p.100 000 employed in 2018-2020 vs 2.58 
for all sectors in IT; 6.33 in the EU-27 for sector E38. 

(101) Ministry of Environment and Energy Security 

(102) Politecnico di Milano, 2022. 

Graph A9.1: Trend in material use 

Source: Eurostat 

Graph A9.2: Treatment of municipal waste 

Source: Eurostat 

Italy  demonstrates  steady  improvements  in 
waste  management  performance  despite 
regional  differences.  There  has  been  a 
consistent increase in recycling (51.4% in 2020 vs 
the  EU  average  of  48.5%  in  2021 (103)  and  a 
decrease in landfilling (with a 20% share in 2020). 
The centre and south of the country perform less 
well  than  the  north (104),  with  a  lower  separate 
collection rate and recycling performance and the 

(103) N.B. no data available for Italy for 2021 

(104) ISPRA, Rapporto Rifiuti Urbani 2022, (e.g. p. 40 on separate 
collection by region & p. 239 on quantity-based pricing). 

53 

0.020.040.060.080.0100.0120.00.02.04.06.08.010.012.014.016.0201620172018201920202021kg/capitatonnes/capitaMaterial footprint Italy (tonnes/capita)Material footprint EU-27 (tonnes/capita)Trade in recyclable raw materials Italy (imports extra EU, kg/capita)Trade in recyclable raw materials EU-27 (imports extra EU, kg/capita)497488499503487010020030040050060020162017201820192020Kg per capita Difference waste generated/treatmentLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27 
 
 
                                                 
             
 
          
                                                 
 
Table A9.1: Overall and systemic indicators on circularity 

(1) Persons employed in the circular economy only tracks direct jobs in selected sub-sectors of NACE codes E, C, G and S; (2) the 
circular material use rate measures the share of material recovered and fed back into the economy in overall material use; (3) the 
recovery rate of construction and demolition waste includes waste which is prepared for reuse, recycled or subject to material 
recovery, including through backfilling operations; (4) soil sealing: 2016 column refers to 2015 data; (5) food waste includes 
primary production, processing and manufacturing, retail and distribution, restaurants and food services, and households.  
Source: Eurostat, European Environment Agency 

use of quantity-based pricing almost exclusively in 
the  north.  In  June  2022,  there  were  still  23 
irregular  landfills  for  which  Italy  is  paying  fines. 
Campania is continuing to pay fines for poor waste 
management, after it was sanctioned by the Court 
of  Justice  of  the  EU  for  its  previous  waste-
management  policies.  Italy  is  not  considered  at 
risk of missing the EU’s 2025 targets for recycling 
of municipal and packaging waste, but efforts are 
necessary to comply with later-date EU targets. 

The  industrial  system  in  Italy  is  increasingly 
circular.  The  economy,  particularly  industry,  is 
more  efficient  at  using  materials  than  the  EU 
average,  with  a  resource  productivity  of  3.4  PPS 
per  kg  in  2021  vs  2.3  for  the  EU  (see  Annex  5). 
Italy’s  consumption  footprint  is  above  the  EU 
average  and  its  material  input  dependency  is 
almost double the EU average, which can threaten 
competitive  sustainability.  Italy  performs  better 
than the EU average for SMEs green performance 
and is a frontrunner on green public procurement. 

The  built  environment  system  provides  an 
opportunity  to  increase  resource  efficiency. 
The  recovery  rate  of  construction  and  demolition 
waste  has  remained  steady  since  2016  (98%  in 
2020)  and  above  the  EU  average  (89%  in  2020). 
Soil  sealing  has  increased  between  2015  and 
2018 at a faster rate than the EU average; ISPRA 

54 

estimated  15 ha/day  are  lost  to  soil  sealing  and 
erosion.  A  law  on  containing  the  loss  of  land  and 
soil reuse is pending in the Italian parliament. The 
2023  budget  law  sets  up  a  soil  protection  fund. 
The restoration of land sites without an owner was 
also  a  2022  RRP  milestone.  Furthermore,  links 
between land use, water abstraction and circularity 
underpin the national circular economy strategy. 

The  agri-food  system  has  yet  to  design  out 
food  waste  and  efficiently  manage  water 
resources. 
Italy’s  composting  and  anaerobic 
digestion per head has increased and is above the 
Increasing  anaerobic  digestion 
EU  average. 
generating 
Italy’s 
enhances 
biomethane  and/or  organic 
fertilisers.  Scope 
remains  for  using  more  efficient  techniques  to 
promote water reuse and reduce leakages. 

autonomy 

in 

There remains a financing gap in the circular 
economy, 
including  waste  management 
requiring additional investments. The financing 
gap  was  estimated  at  EUR  3.2  billion  per  year 
between  2014  and  2020.  Over  this  period, 
investment  needs  were  estimated  to  be  at  least 
EUR  6.6  billion  per  year,  while 
investment 
baselines were EUR 3.4 billion per year (see Annex 
6). Italy is using funds from the ERDF and RRF for 

AREA201620172018201920202021EU-27 Latest year EU-27Overall state of the circular economyMaterial footprint (tonnes/capita)10.911.211.610.99.8-13.72020YoY growth in persons employed in the circular economy (%)10.00.5-3.4--2.92019Water exploitation index plus (WEI+) (%)9.814.17.37.3--3.62019IndustryResource productivity (purchasing power standard (PPS) per kilogram)3.53.63.63.63.73.52.32021Circular material use rate (%)217.818.418.819.520.618.411.72021Recycling rate (% of municipal waste)45.947.849.851.451.4-49.62021Built environmentRecovery rate from construction and demolition waste (%)398.0-98.0-98.0-89.02020Soil sealing index (base year = 2006)4103.1-106.4---108.32018Agri-foodFood waste (kg per capita)5----146.0-131.02020Composting and digestion (kg per capita)94.098.0105.0107.0116.0-100.02021 
 
      
 
recycling.  The  capacity  gap  is  estimated  at  5.2 
million tonnes by 2035 (105). 

(105) Cassa Depositi e Presiti, Brief, 2023 

55 

 
                                                 
ANNEX 10: DIGITAL TRANSFORMATION 

transformation  by  2030, 

Digital  transformation  is  key  to  ensuring  a 
resilient and competitive economy. In line with 
the  Digital  Decade  Policy  Programme,  and  in 
particular  with  the  targets  in  that  Programme  for 
digital 
this  Annex 
describes  Italy’s  performance  on  digital  skills, 
digital 
the 
digitalisation  of  businesses  and  public  services. 
Where relevant, it makes reference to progress on 
implementing  the  Recovery  and  Resilience  Plan 
(RRP).  Italy  allocates  25%  of  its  total  RRP  budget 
to digital (EUR 48.1 billion) (106). 

infrastructure/connectivity 

and 

The  Digital  Decade  Policy  Programme  sets 
out a pathway for Europe’s successful digital 
transformation  by  2030.  The  Programme 
provides  a  framework  for  assessing  the  EU’s  and 
Member States’ digital transformation, notably via 
the  Digital  Economy  and  Society  Index  (DESI).  It 
also  provides  a  way  for  the  EU  and  its  Member 
States  to  work  together,  including  via  multi-
country  projects,  to  accelerate  progress  towards 
the  Digital  Decade  digital  targets  and  general 
objectives (107).  More  generally,  several  aspects  of 
digital  transformation  are  particularly  relevant  in 
the current context. In 2023, the European Year of 
Skills, building the appropriate skillset to make full 
use of the opportunities that digital transformation 
offers  is  a  priority.  A  digitally  skilled  population 
increases the development and adoption of digital 
technologies  and  leads  to  productivity  gains (108). 
Digital  technologies,  infrastructure  and  tools  all 
play  a  role  in  the  fundamental  transformation 
needed to adapt the energy system to the current 
structural challenges (109). 

Stepping  up  work  to  improve  digital  skills 
remains a key priority for Italy, to support an 
inclusive  and  robust  digital  transformation. 
Italy has very low levels of basic digital skills and 

(106) The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII of the RRF 
Regulation. 

(107) The Digital Decade targets as measured by DESI indicators 
and complementary data sources are integrated to the 
extent currently available and/or considered particularly 
relevant in the MS-specific context.  

(108) See for example OECD (2019): OECD Economic Outlook, 

Digitalisation and productivity: A story of complementarities, 
OECD Economic Outlook, Volume 2019 Issue 1 | OECD 
iLibrary (oecd-ilibrary.org). 

(109) The need and possible actions for a digitalisation of the 
energy system are laid out in the Communication 
‘Digitalisation the energy system – EU action plan’ 
(COM(2022)552. 

has  the  lowest  share  of  ICT  graduates  in  the  EU 
(1.4% of all Italian graduates in 2020 studied ICT, 
compared with an EU average of 3.9%). The share 
of  ICT  specialists  is  also  below  the  EU  average 
(see  also  annex  15  for  further  information  on 
measures taken). 

Italy 

regards 

digital 
although 

infrastructure/ 
As 
recorded 
connectivity, 
progress  on  5G,  the  country  needs  to 
increase  its  very  high  capacity  network 
(VHCN)  coverage,  including  in  remote/rural 
areas. In 2022 a significant increase is observable 
in the percentage of households covered by VHCN, 
including  fibre  to  the  premises.  However,  it  still 
remains considerably below the EU average (54 % 
vs  73 %).  For  5G,  the  overall  coverage  reaches 
100 %  of  populated  areas  and  the  coverage  on 
the  3.4-3.8  GHz  spectrum  band  attains  80%  of 
populated  areas.  Italy  has  started  to  implement 
one of its RRP measures with five projects that are 
expected  to  help 
improve  fixed  connectivity 
throughout the country. The public contracts for all 
five projects have been awarded and are currently 
being implemented.   

Most Italian companies have a basic level of 
digital  intensity,  and  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.  The 
partially  RRP-funded  national  ‘Transition  4.0’  plan 
has  been  launched  and  is  expected  to  support 
enterprises' uptake of digital technologies through 
tax credits for research and development, and the 
purchase of tangible and intangible goods.  

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  online 
interaction with public authorities is slightly above 
the  EU  average  (76%  of  internet  users  vs  the  EU 
average  of  74%).  Italy’s  performance  regarding 
the  access  to  electronic  health  records  is  in  line 
with the EU average with a score of 71 out of 100. 
The  ‘Italia  Digitale  2026’  plan  is  expected  to 
modernise public administration and services, with 
RRP support. The uptake of electronic identification 

56 

 
 
                                                 
 
 
(eID), provided via two schemes notified under the 
eIDAS regulation, continues to increase: The Italian 
eID card (Carta di Identità elettronica) is notified at 
level of assurance ‘high’. The second scheme, SPID 
–  Public  System  of  Digital  Identity,  offers  eID 
‘low’, 
means  offered  at 
‘substantial’, and ‘high’. 

levels  of  assurance 

Table A10.1: Key Digital Decade targets monitored by DESI indicators 

(1) The 20 million target represents about 10% of total employment. 
(2) The Fibre to the Premises coverage indicator is included separately as its evaluation will also be monitored separately and 
taken into consideration when interpreting VHCN coverage data in the Digital Decade. 
(3) At least 75 % of Union enterprises have taken up one or more of the following, in line with their business operations: (i) cloud 
computing services; (ii) big data; (iii) artificial intelligence.  

Source: Digital Economy and Society Index 

57 

EUDigital Decade target by 2030 DESI 2021DESI 2022DESI 2023DESI 2023(EU)Digital skillsAt least basic digital skillsNA46%46%54%80%% individuals2021202120212030ICT specialists (1)3.6%3.8%3.8%4.5%20 million% individuals in employment aged 15-7420202021202120212030Digital infrastructure/connectivityFixed Very High Capacity Network (VHCN) coverage34%44%54%73%100%% households20202021202220222030Fibre to the Premises (FTTP) coverage (2)34%44%54%56%-% households20202021202220222030Overall 5G coverage8%100%100%81%100%% populated areas202020212022202220305G coverage on the 3.4-3.8 GHz spectrum bandNANA80%41%-% populated areas202220222030Digitalisation of businessesSMEs with at least a basic level of digital intensityNANA70%69%90%% SMEs202220222030Big data (3)9%9%9%14%75%% enterprises20202020202020202030Cloud (3)NA52%52%34%75%% enterprises2021202120212030Artificial Intelligence (3)NA6%6%8%75%% enterprises2021202120212030Digitalisation of public servicesDigital public services for citizensNA676877100Score (0 to 100)2021202220222030Digital public services for businessesNA797584100Score (0 to 100)2021202220222030Access to e-health recordsNANA7171100Score (0 to 100)202320232030Italy 
 
 
 
  
 
 
ANNEX 11: INNOVATION 

This  Annex  provides  a  general  overview  of  the 
performance  of  Italy’s  research  and  innovation 
system,  which  is  essential  for  delivering  the  twin 
green and digital transition. 

Italy  is  a  ‘moderate  innovation  performer’. 
The  gap  between  its  performance  and  the 
overall  performance  of  the  EU  has  widened 
in  2022.  According  to  the  2022  edition  of  the 
European  Innovation  Scoreboard  (EIS) (110),  the 
country’s  innovation  performance  was  91.6%  of 
the  EU  average,  falling  from  its  peak  of  the 
previous  year  (Graph  A11.1).  Improvements  in 
business-science linkages, business innovation and 
government support for business R&D contributed 
to  improving  the  country’s  performance  between 
2015  and  2021.  However,  these  same  sub-
indicators  worsened  in  2022,  as  part  of  Italy’s 
overall decline in innovation performance.  

Graph A11.1: Innovation performance 2015-2022 

2021,  recording  little  improvement  since  2015 
(0.52%)  and  remaining  well  below  the  European 
average (114).  Government  support  for  business 
R&D  has  considerably  increased  since  2015 (115), 
mainly due to the extension of R&D tax relief: the 
number  of  recipients  increased  by  a  factor  of  12 
between 2014 and 2019 (116). 

The Italian recovery and resilience plan (RRP) 
is  mobilising  major  investment  in  research 
and innovation (R&I), estimated at more than 
EUR 14  billion  for  the  2021-2026  period, 
partially  and  temporarily  helping  address 
underinvestment.  The  RRP  measures,  and 
initiatives such  as  the  tax  credit  for  R&I  and  the 
Fund  to  finance  the  priorities  set  out  in  the 
National  Research Programme,  will  translate into 
an  annual  average  increase  of  around  24%  in 
publicly funded R&D investment (117). This increase 
is an important step forward, although it is unclear 
if  higher  public  investment  will  be  maintained  in 
the aftermath of the RRP timeframe.  

in 

rates 

to  Eurostat, 

Italy  underperforms  in  human  resources  for 
research  and  innovation,  which  impacts  the 
performance of the R&I system as a whole. In 
2021,  the  country  had  one  of  the  lowest  tertiary 
the  EU (118). 
education  completion 
According 
the  number  of  new 
graduates  in  science,  technology,  engineering  and 
mathematics  (STEM  subjects)  increased  between 
2010  and  2020,  but  it  is  still  below  the  EU 
average,  while  data  on  new  STEM  doctoral 
graduates  remained  stagnant  between  2013  and 
2020. In  addition,  average  salaries  for  PhD 
graduates  have  been  higher  abroad  than  in  Italy, 
with  those  graduating  in  STEM  PhDs  tending  to 
work abroad more frequently (119). Such a situation 
risks further exacerbating the brain drain. 

(114) Source: Eurostat. Eu average in 2021: 0.76%. 

(115) Source: EIS 2022. 

(116) OECD (2021). ‘R&D Tax Incentives: Italy, 2021’, 

www.oecd.org/sti/rd-tax-stats-italy.pdf. 

Source: European Innovation Scoreboard, 2022 

Rather  stagnant  public  R&D  investment  and 
subdued  private  R&D  expenditure  result  in 
low  overall  R&D  investment.  R&D  intensity 
(defined as gross domestic expenditure on R&D as 
a percentage of GDP) was 1.48% of GDP in 2021, 
falling  from  2020’s  peak (111)  and  still  far  below 
average (112). 
the 
R&D 
investment remains low and below EU levels, while 
slightly  shrinking in  2021 compared  to  2020 (113). 
Public  expenditure  on  R&D was  0.55%  of  GDP  in 

European 

Private 

(110) 2022 European Innovation Scoreboard, Country profile: Italy 
https://ec.europa.eu/assets/rtd/eis/2022/ec_rtd_eis-country-
profile-it.pdf. The EIS provides a comparative analysis of 
innovation performance in the EU countries, including the 
relative strengths and weaknesses of their national 
innovation systems (also compared to the EU average). 

(111) 1.51% in 2020 (source: Eurostat). 

(112) 2.26% in 2021 (source: Eurostat). 

(113) IT: 0.91% / EU: 1.49% (source: Eurostat, 2021). 

(117) Source: elaboration on Eurostat (2021) and RRP data. The 

value refers to the annual growth average and not to entire 
stock of investment for the whole duration of the Italian RRP 
(2021-2026). 

(118) Share of population aged 25-34 who have successfully 

completed tertiary education: 28.3% in IT; 41.2% in the EU. 

(119) Source: elaboration on data of the ‘Relazione sulla Ricerca e 
l’innovazione in Italia’ – Third edition (2021) by the Italian 
National Research Council. Data refers to PhD graduates in 
2018, 6 years after their graduation (2012). 

58 

8287929710210720152016201720182019202020212022EUIT 
 
  
                                                 
                                                 
 
Table A11.1: Key innovation indicators 

(1) EU average for the latest available year or the year with the highest number of country data. 
Source: Eurostat, OECD, DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe 

The RRP includes reforms and investments to 
improve career opportunities for researchers 
and  PhD  graduates.  These  initiatives  not  only 
streamline  researchers’  career  paths,  but  also 
scholarships (120). 
focus  on 
Additional  measures  include  support  for  projects 
presented by young researchers and incentives for 
companies  to  employ  them  temporarily.  These 
initiatives  could  reduce  the  R&I human  resource 
gap, but their impact in the long term is unclear. 

innovative  PhD 

Business-science  linkages  in  Italy  remain 
weak and higher education institutions could 
play  a  more  effective  role  in  knowledge 
co-
valorisation. 
publications are above the EU  average, HRST job-
to-job mobility (121) is low, with negative effects on 
knowledge  creation.  The  Italian  higher  education 
system’s  approach  to  knowledge  exchange  is  still 

public-private 

Although 

not  strategic.  Initiatives  in  this  field  are  often 
poorly institutionalised (122). 

The  Italian  RRP  includes  partial  reforms  and 
adequate investment to facilitate knowledge 
exchange.  Approved  reforms  aim  to  simplify  the 
management  of  research  funds  and  support  the 
intersectoral  mobility  of  high-profile  individuals. 
Proceeding with the planned reform of intellectual 
property  management  could  help  create  a  more 
innovation.  Planned 
conducive  environment  to 
investments  will  support 
industrial  property-
related  projects  and  will  strengthen  technology 
transfer offices. 

(120) They are centred around industry and the twin transitions. 

(122) OECD/EU (2019), Supporting Entrepreneurship and 

(121) Human Resources in Science&Technology. Source: EIS 2022. 

Innovation in Higher Education in Italy, OECD Skills Studies. 

59 

EUaverage (1)R&D intensity (GERD as % of GDP)1.221.341.461.511.482.26Public expenditure on R&D as % of GDP0.520.520.510.550.550.76Business enterprise expenditure on R&D (BERD) as % of GDP0.660.780.920.930.911.49Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 10.010.610.8::9.8Patent Cooperation Treaty patent applications per billion GDP (in PPS)2.02.32.1::3.3Public-private scientific co-publications as % of total publications6.57.68.07.98.17.1New graduates in science & engineering per thousand pop. aged 25-346.510.814.815.1:16.0New doctorate graduates in science & engineering per thousand pop. aged 25-34:0.70.60.6:0.7Total public sector support for BERD as % of GDP0.0510.1060.218::0.194R&D tax incentives: foregone revenues as % of GDP0.0040.0510.162::0.100Share of environment-related patents in total patent applications filed under the Patent Cooperation Treaty (%)12.310.810.4::13.3Venture capital (market statistics) as % of GDP0.0070.0040.0100.0150.0180.074Employment in fast-growing enterprises in 50% most innovative sectors2.93.13.7::5.52021Italy2010201520192020Finance 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  
                                                 
                                                 
 
  
 
 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

Graph A12.2: Labour productivity by sector 
[2015=100] 

the 

but 

labour 

country’s 

productivity 

Italy’s 
vigorously 
rebounded after the sharp fall experienced in 
2020, 
long-term 
productivity  growth  remains  subdued.  After 
the  dramatic  drop  experienced  in  2020,  largely 
due to temporary job-protection schemes, in 2021 
Italy’s  labour  productivity  per  person  employed 
rebounded by 6.3% (aggregate level), compared to 
an  EU  average  of  3.9%.  Over  the  longer  run, 
however,  Italy’s  productivity  performance  remains 
unsatisfactory. As shown in Graph A12.1, given the 
stagnation  of  productivity  growth  over  the  past 
two  decades,  levels  of  productivity  in  Italy  have 
been consistently declining over time vis-à-vis the 
EU  average,  decreasing  from  117%  of  the  EU 
average in 2005 to 105.1% in 2021. 

Graph A12.1: Labour productivity per person [% of 
EU-27] 

Source: Eurostat. 

In  2022,  the  Italian  industrial  sector  was 
significantly  impacted  by  the  consequences 
of Russia’s invasion of Ukraine, in particular 
the  energy  crisis.  The skyrocketing  price  of  gas, 
exceeding  230  EUR/MWh on  the  Italian  wholesale 
market  in  August  2022 (123),  had  a  severe  impact 
on the energy and electricity prices faced by both 
businesses  and  consumers,  particularly  given  the 
high share of natural gas in Italy’s energy mix, as 
well  as  the  country’s  significant  dependence  on 
Russian  gas  imports  (see  Annex  7).  While  the 
incidence  of  energy  costs  over  total  production 
costs  increased  in  most  sectors,  energy-intensive 
industries  were  hit  the  hardest.  For  instance, 
according 
Confindustria, 
metallurgy  saw  the  incidence  of  energy  costs 
increase  by  15  percentage  points  compared  to 
pre-crisis  levels,  while  the  non-metallic  minerals 
and  paper  sectors  faced  increases  of  11  and  6 
percentage  points  respectively (124).  In  order  to 
cope with the energy crisis and reduce reliance on 
imports  from  Russia,  after  the  outbreak  of 
Italian  government 
hostilities 
enacted  an  ambitious  strategy  to  diversify  gas 
sources, which led to a substantial reduction in the 
country’s  dependence  on  Russian  gas  (see  Annex 
7). 

in  Ukraine,  the 

estimates 

by 

to 

(123) European Commission, Quarterly report on European gas 

markets, volume 15 issue 2, 2022. 

(124) Centro Studi Confindustria, Rapporto di Previsione, Economia 

italiana ancora resiliente a incertezza e shock? 2022. 

60 

Source: Eurostat.  

Nevertheless,  as  shown  in  Graph  A12.2, 
is  not  uniform 
productivity  performance 
across  economic  sectors.  Segments  such  as 
financial  and  insurance  activities,  for  instance, 
experienced  steady  productivity  growth  in  recent 
years,  including  during  the  pandemic.  Industry, 
construction  and 
transport  and 
accommodation  sector,  instead,  are  catching  up 
after  being  strongly  affected  by  restrictions  in 
2020  (e.g.  productivity  in  industry  fell  by  9.5%  in 
2020  before  rebounding  by  12.9%  in  2021), 
whereas  agriculture  has  been  suffering  from 
structurally weaker productivity dynamics. 

retail, 

the 

90.095.0100.0105.0110.0115.0120.0125.020052006200720082009201020112012201320142015201620172018201920202021EU-27Euro areaGermanySpainFranceItaly85951052015201620172018201920202021Agriculture, forestry and fishingIndustry (except construction)ConstructionWholesale and retail trade, transport, accommodationand food service activitiesInformation and communicationFinancial and insurance activitiesProfessional, scientific and technical activities;administrative and support service activities 
 
   
   
                                                 
 
 
For  what  concerns  raw  materials  other  than 
fuels,  Italy’s  strategic  dependence  on  the 
belligerent  countries  is  overall  in  line  with 
the EU average. While Italy imports several types 
of non-food materials from Russia and Ukraine, its 
dependence  on  such  imports  is  in  line  with  or 
below the EU average for most product categories 
– with the exception of metals, which Italy imports 
from Ukraine more than the EU average (7.5% of 
Italy’s  extra-EU  imports  of  metals  come  from 
Ukraine,  vs.  EU  average  of  2.8%) (125).  Italy’s 
overall  import  concentration  index  is  also  in  line 
with  the  EU  average,  while  the  share  of  firms 
reporting materials  shortages  in  2022  is  still  well 
below the EU average (18% vs. 47%).  

The  business  environment  in  Italy  remains 
challenging, despite some improvements. The 
percentage  of  firms  reporting  business  regulation 
as  a  major  obstacle  is  significantly  above  the  EU 
average  (36.4%  vs.  29.6%).  When  companies  are 
asked  to  identify  the  areas  that  cause  them  the 
biggest  problems,  the  top  concerns  reported  are 
regulatory obstacles and administrative burden, as 
well as payment delays. The permitting framework 
for  renewable  energy  sources  (RES),  instead,  has 
been  simplified,  including  in  the  context  of  the 
recovery  and  resilience  plan,  although  room  for 
improvement 
remains  ample,  e.g.  for  what 
concerns staffing levels and skills. 

The  situation  of  payment  delays,  which 
affects  both  government-to-business  (G2B) 
and  business-to-business  (B2B)  relations, 
remains a source of concern for Italian firms 
and particularly SMEs, despite improvements 
over  time.  Concerning  G2B  transactions,  while 
there  have  been  improvements,  payment  times 
often  remain  long.  The  gap  between  the  time 
requested  by  the  creditor  firm  for  payment  and 
the actual execution of the payment by the public 
administration was 22 days in 2022, according to 
Intrum, compared to an EU average of 15 days. A 
similar  gap  can  be  observed  in  B2B  relations, 
where  the  gap  is  4  days  longer  for  Italian  firms 
than  for  their  EU  peers  (Intrum).  Consistently, 
52.4%  of  Italian  SMEs  report  having  experienced 
late payments in the 6 months prior to the survey 
(SAFE), which is almost 10 percentage points more 
than  the  EU  average  and  20  percentage  points 

more  than  peer  countries  such  as  Germany  or 
Spain.  Problems  of  payment  delays  are  unevenly 
distributed across levels of government and types 
of  public  administration,  with  large  variations 
across  regions,  municipalities  and  even  central 
government  ministries.  The  Italian  recovery  and 
resilience  plan 
(RRP)  contains  an  ambitious 
initiative for reducing payment arrears, which aims 
to bring payment times within the limits set by EU 
law. Achieving RRP targets, as well as maintaining 
such  performance  in  future  years,  will  be  key  to 
overcoming this structural challenge of the Italian 
business  environment,  which  hampers  firms' 
liquidity  management 
a 
disproportionate  drag  for  smaller  firms,  which 
have  more  limited  resources  to  cope  with  cash 
flow disruptions. 

constitutes 

and 

Access  to  finance  is  instead  perceived  more 
positively,  although  the  relative  underdevel-
opment  of  non-traditional  forms  of  finance 
persists. The share of firms that consider access 
to finance a major challenge is lower in Italy than 
in  the  EU  (12%  vs.  an  EU  average  of  21%) (126). 
Indeed,  Italy  performs  slightly  better  than  the  EU 
average  on  the  2021  EIF  Access  to  Finance 
subindex 
the 
performance  of  loan  finance  in  Member  States. 
The country also records a low share of rejected or 
refused  loans  (SAFE  survey)  and  an  average 
in  the  Credit  and  Leasing  EIF 
performance 
forms  of 
subindex.  Nonetheless,  alternative 
finance  remain  underdeveloped,  as  reflected  for 
instance  in  a  lower-than-average  penetration  of 
venture capital. 

loans,  which  summarises 

for 

enhancing 

digitalisation, 

For what concerns public procurement, a new 
Code of Public Contracts is being introduced. 
The reform is part of the RRP and aims, inter alia, 
streamlining 
at 
procedures  and  professionalising  public  buyers. 
Fully  achieving  RRP  targets  as  well  as  ensuring 
adequate  levels  of  competition  and  transparency 
long-standing 
will  be  key 
challenges  of  Italy's  public  procurement  system, 
including  the  comparatively  high,  and  increasing, 
share of single bids (37% of contracts awarded in 
in 
2022,  up  from  35%  in  2021  and  31% 
2020) (127). 

to  address 

the 

(125) European Commission, JRC Technical Report - Russian trade 

in non-food raw materials (2022), and European 
Commission, JRC Technical Report – Ukraine’s trade in non-
food raw materials (2022). 

(126) Flash Eurobarometer 486. 

(127) European Commission, Single Market Scoreboard, 2022. 

61 

 
                                                 
                                                 
Graph A12.3: Business environment and 
productivity drivers 

Source: 1) % of GDP, 2021 Eurostat;  
2) composite indicator, 2021 European Investment Fund 
access to finance index;  
3) average payment delay in number of days, 2022 Intrum;  
4) % of firms in manufacturing facing constraints, 2022 
European Commission business consumer survey;  
5) proportion of contracts awarded with a single bidder, 2022 
Single Market Scoreboard. 

civil 

agents 

is  well 

integrated 

engineers, 
and 

Italy 
into  the  single 
market, although barriers remain. Italy is well 
integrated into the Single Market, with the shares 
of intra-EU imports and exports of goods reaching 
51% 
in  2022. 
and  52.7% 
respectively 
long-standing  challenges 
Nevertheless,  some 
persist,  notably  in  the  area  of  services.  For 
instance,  in  the  area  of  regulated professions  the 
level  of  restrictiveness  remains  above  the  EU 
average  for  several  professions,  including  e.g. 
accountants, 
architects, 
patent/trademark 
estate 
real 
agents (128),  while  restrictions  are  comparatively 
high  also  in  retail  –  especially  when  it  comes  to 
establishment rules, where Italy is one of the most 
restrictive  Member  States (129).  Similarly, 
the 
implementing  effective  competitive 
delays 
procedures  for  the  award  of  maritime,  lakeside 
and  riverside  concessions  for  leisure  and  touristic 
activities  (‘beach  concessions’),  as  well  as  the 
limited  profitability  of  such  concession  contracts 
for  public  authorities,  remain  sources  of  concern: 
indeed,  although  the  2021  Annual  Competition 
Law (130)  provided  the  preconditions  for  a  reform 
of  the  sector,  subsequent  legislative  initiatives 
granting  further  extensions  of  existing  contracts 
were 
thereby  hindering  progress 
towards such reform. 

introduced, 

in 

In  terms  of  compliance  with  single  market 
rules,  Italy’s  transposition  deficit  is  slightly 
below  the  EU  average,  although  above  the  1% 
target,  while  the  number  of  pending  infringement 
proceedings  is  in  line  with  peer  countries.  Italy  is 
also  equipped  with  a  well-functioning  SOLVIT 
network  for  addressing  problems  related  to  the 
application  of  single  market  legislation,  even 
though  centres  across  the  country  could  benefit 
from additional staff. 

(128) European Commission, COM(2021) 385 final. 

(129) European Commission, Retail Restrictiveness Indicator (2022 

update), forthcoming. 

(130) Legge 5 agosto 2022, n. 118. 

62 

1) Businessinvestments2) EIF access tofinance index3) Payment gap- G2B3) Payment gap- B2B4) Materialshortage4) Labourshortage5) Single bidsEuropean UnionItaly 
                                                 
   
 
Table A12.1: Industry and the single market 

(*) last available year  
Source: (1) AMECO, (2) Eurostat, (3) ECFIN BCS, (4) Eurostat, (5) COMEXT and Commission calculations, (6) Eurostat, (7) Eurostat, 
(8) OECD, (9) Single Market Scoreboard, (10) EIB survey, (11) Eurostat: (12) Intrum, (13) SAFE Survey, (14) EIF SME Access to 
Finance Index. 

63 

POLICY AREAINDICATOR NAME20182019202020212022EU27 average (*)Net private investment, level of private capital stock, net of depreciation, % GDP (1)0.90.8-0.81.93.73.7Net public investment, level of public capital stock, net of depreciation, % GDP (1)-0.6-0.4-0.40-0.20.4Real labour productivity per person in industry (% yoy)(2)0.9-0.8-9.512.9-1.61.4Cost competitive-nessNominal unit labour cost in industry (% yoy)(2)0.52.13.1-3.352.9Material shortage (industry), firms facing constraints, % (3)211101847Labour shortage using survey data (industry), firms facing constraints, % (3)2213628Vacancy rate (business economy)(4)1.31.40.81.82.23.1Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials (5)0.180.160.150.160.170.18Installed renewables electricity capacity, % of total electricity produced (6)48.849.350.343.8n.a.50.9Single Market integrationEU trade integration, % (7)16.116.115.317.720.245.8RestrictionsEEA Services Trade Restrictiveness Index (8)0.060.060.060.060.060.05Public procurement Single bids, % of total contractors (9)303231353729Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle (10)36.540.034.934.336.429.6Bankruptcies, Index (2015=100)(11)75.875.551.56148.686.8Business registrations, Index (2015=100) (11)90.894.777.78984121.2Payment gap - corporates B2B, difference in days between offered and actual payment (12)640111713Payment gap - public sector, difference in days between offered and actual payment (12)31113122215Share of SMEs experiencing late payments in past 6 months, % (13)n.a.56.958.246.652.443EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1 (14)0.790.730.80.6n.a.0.46EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 1 (14)0.10.120.090.12n.a.0.23BUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to financeHEADLINE INDICATORSEconomic StructureRESILIENCEShortagesStrategic dependenciesSINGLE MARKET 
 
   
 
ANNEX 13: PUBLIC ADMINISTRATION 

This  Annex  outlines  the  performance  of 
is 
Italy’s  public  administration,  which 
essential for providing services and carrying 
out reforms. Italy ranks below the EU average for 
government effectiveness1, hindered by significant 
gaps 
in  strategic  management,  an  ageing, 
understaffed and low-skilled public workforce, and 
regional  disparities 
the  administrations’ 
in 
performance.  The  government  reform  agenda  for 
public  administration,  enshrined  in  the  recovery 
and resilience plan (RRP), focuses on improving the 
recruitment and management of public employees, 
strengthening  administrative  capacity,  fostering 
digitalisation 
administrative 
simplification.  

ensuring 

and 

resource 

management 

Progress  has  been  registered,  particularly  in 
human 
and 
digitalisation.  This  has  led  to  the  attainment  of 
several of the milestones set out in the RRP. A key 
issue  is  the  persistently  high  political  instability, 
which in the past has hindered the implementation 
and  continuity  of  public  administration  reforms. 
Also, the regional divide is widening, with southern 
Italy showing, on average, weaker performance in 
public administration.  

in  selected  human 
Italy’s  performance 
capital 
is 
weaker than the EU average. It has among the 
oldest public workforce in the EU, driven in part by 

indicators  and  digitalisation 

The 

a  decade-long  hiring  freeze  (Graph  A13.1a).  The 
share  of  public  sector  workers  with  higher 
education  is  well  below  the  EU  average  (Graph 
A13.1b).  Public  employment  is  set  to  be  renewed 
by one-third and further professionalised, with the 
target of one million better skilled new employees 
entering  the  public  sector  throughout  the  RRP 
digitalised 
implementation. 
recruitment  procedures  and 
significant 
investments  in  the  upskilling  and  reskilling  of 
public employees are expected to help achieve this 
objective.  Italy  ranks  in  the  bottom  third  of 
Member  States  on  the  provision  of  digital  public 
services  and  the  share  of  e-government  users  is 
well below the EU average (Table A13.1 and Annex 
10).  Consequently, 
includes 
investment to improve the supply of digital public 
services, which should be implemented by the end 
of 2023.  

simplified, 
the 

Italian  RRP 

the 

indicators  mask,  however,  a  deep 
The 
geographical  divide.  Public  sector  performance 
is persistently lower in southern Italy, with an older 
population  of  civil  servants  and  lower  levels  of 
education and digitalisation. Since June 2022, the 
internet  portal  Capacity 
Italy  has  assisted 
subnational  governments  by  connecting  them  to 
experts. The planned recruitment of 2,400 experts 
in  Southern  administrations  did  not  yield  the 
expected 
low 
attractiveness  of  the  posts  (temporary  nature  of 

results  due 

relatively 

the 

to 

Graph A13.1: Italy: a) ratio of 25-49 to 50-64 year-olds by sector and occupation and b) higher education 
attainment level (in percent) of 25-64 year-olds by sector and occupation. 2021 data 

2022 data.  
Graph A13.1a): a lower ratio denotes a more aged civil service.  
Source: European Commission, based on the Labour Force Survey  

64 

0.00.20.40.60.81.01.21.41.61.8Publicadministration,defence andsocial securityEducationHealthcareTotal economya) Ratio of older to younger workers by sector and occupationITHigh-skilledMedium-skilledLow-skilledEU-2701020304050607080ITEU-27ITEU-27ITEU-27ITEU-27Public admin.,defence andsocial securityEducationHealthcareTotal economyb) Higher education attainmentHigh-skilled occupationsMedium-skilled occupationsUnskilled occupationsArmed forces 
 
 
  
Table A13.1: Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2022 value. If not available, the 2021 value is shown. 
(3) Measures the user centricity and transparency of digital public services as well as the existence of key enablers for the 
provision of those services. (4) Defined as the absolute value of the difference between the percentage of men and women in 
senior civil service positions. Flags: (b) break in time series; (d) definition differs; (u) low reliability. 
Source: ICT use survey, Eurostat (# 1); E-government benchmark report (# 2); Open data maturity report (# 3); Labour Force 
Survey, Eurostat (# 4, 5, 7), European Institute for Gender Equality (# 6); Fiscal Governance Database (# 8, 9); OECD Indicators of 
Regulatory Policy and Governance (# 10). 

contracts and salaries attached).  

Graph A13.2: Italy. Performance in the single 
market scoreboard governance tools 

(1) Red denotes a poor performance; green, a good 
performance. TRIS: Technical Regulation Information System; 
IMI: Internal Market Information System. 
Source: Single Market Scoreboard 

Once  adopted,  the  new  code  of  public 
is  expected  to  strengthen 
procurement 
competition  in  Italy’s  public  procurement 
system. The increasing share of single bids points 
to  issues  with  competition  (see  Annex  12).  Italy 
that  measure 
also 
performance  on  the  single  market  governance 
tools (Graph A13.2). 

indicators 

in  most 

lags 

The  justice  system  is  still  facing  efficiency 
challenges.  Despite  recent  improvements,  the 
length  of  proceedings  remains  excessive.  At  560 
days in 2021, the time to hand down a decision in 
litigious  civil  and  commercial  cases  at  first 
instance  is  well  above  the  EU  average.  The  RRP 
includes  reforms  that  aim  to  simplify  procedures, 
establish  timeframes  for  cases  and  improve  the 
use  of  mediation  to  reduce  the 
length  of 
proceedings  and  backlogs.  The  overall  quality  of 
the 
is  good,  despite  a  few 
shortcomings, especially in the criminal courts and 
prosecution services. New measures that introduce 
child-friendly 
specific 
proceedings  have  been  implemented.  The level  of 
digitalisation is advanced. No systemic deficiencies 
in judicial independence have been reported (131).  

justice  system 

arrangements 

for 

(131) For a more detailed analysis of the performance of the 

justice system in Italy, see the 2023 EU Justice Scoreboard 
(forthcoming) and the country chapter for Italy in the 2023 
Rule of Law Report (forthcoming). 

65 

IT201720182019202020212022EU-27(2)133.531.729.936.440.4n/a64.82n/an/an/a64.460.961.372.93n/a0.80.80.90.90.90.8426.828.429.330.232.1 (b)34.152.059.710.39.78.614.5 (b)13.716.9638.427.624.224.235.829.011.070.90.80.80.80.9 (b)0.91.580.80.80.80.80.8n/a0.792.32.32.32.32.3n/a1.5102.45n/an/an/a2.55n/a1.7Medium term budgetary framework indexIndicator (1)E-government and open government dataShare of individuals who used the internet within the last year to interact with public authorities (%)E-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with tertiary education (levels 5-8, %)Participation rate of public administration employees in adult learning (%)Gender parity in senior civil service positions (4)Ratio of 25-49 to 50-64 year olds in NACE sector OPublic financial management Strength of fiscal rules indexEvidence-based policy makingRegulatory governance 
 
 
                                                 
 
   
 
FAIRNESS 
ANNEX 14: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF 
THE EUROPEAN PILLAR OF SOCIAL RIGHTS  

The  European  Pillar  of  Social  Rights  is  the 
compass  for  upward  convergence  towards 
better  working  and  living  conditions  in  the 
EU.  This  Annex  provides  an  overview  of  Italy’s 
progress in implementing the Pillar’s 20 principles 
and EU headline and national targets for 2030 on 
employment, skills and poverty reduction. 

Table A14.1: Social Scoreboard for Italy 

in 

steeply 

in  2020 

(2.4%).  Real  wages 

remained one of the highest in the EU. Similarly, in 
2022,  the  activity  rate  in  the  20-64  age  group 
(70.4%) is one of the lowest (EU: 79.4%). In 2022, 
the  share  of  long-term  unemployed  (4.6%)  in  the 
active population is also significantly above the EU 
Italy  have 
average 
stagnated  or  fallen  in  recent  decades.  After 
decreasing 
(-4.5%)  and 
rebounding  in  2021  (4.6%),  real  wages  fell  again 
in  2022  (-2.9%). (132)  The  high  shares  of  non-
standard  employment  and  undeclared  work 
continue  to  be  challenges.  In  2022,  as  many  as 
8.6%  of  employees  state  that  they  have  a 
temporary  job  due  to  their  inability  to  find  a 
permanent  contract.  The  high  prevalence  of  non-
standard  forms  of  work,  especially  among  young 
people, creates persisting gaps in access to social 
protection.  Addressing  these  challenges  would 
support  progress  towards  the  2030  national 
employment target of 73%. As part of its recovery 
and resilience plan (RRP), Italy introduced a reform 
(GOL)  and 
labour  market  policies 
of  active 
capacity-building 
in  employment 
investments 
centres  (PES)  aimed  at  providing  personalised 
services  to  jobseekers  countrywide.  The  European 
Social Fund Plus (ESF+) will contribute by financing 
active  inclusion  policies,  expanding  the  services 
offered  by 
integrating  their 
activities  with  social  services  to  target  the  most 
vulnerable. 

job  centres  and 

(1) Update of 27 April 2023. 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 2023. 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 Italian labour market has made a robust 
recovery 
in  2022,  but  major  challenges 
persist. On the back of a strong recovery from the 
COVID-19  crisis,  the  employment  rate  reached  a 
record  high  of  64.8%  in  2022,  but  still  remained 
significantly  below  the  EU  average  of  74.6%. 
Despite  reaching  its  lowest  level  since  2010  in 
2022  at  8.1%,  the  unemployment  rate  in  Italy 

Adverse  demographic  developments  and  low 
participation  of  women,  young  people  and 
non-EU  nationals  are  key  challenges  for  the 
Italian  labour  market.  The  workforce  (20-64 
age group) decreased by 1.8% in the last 20 years 
and its composition has changed significantly. The 
total population within the 20-39 age group fell by 
25.3% while the 40-64 age group grew by 19.5% 
which  will 
the  adverse 
further  accelerate 
demographic development in the future. Moreover, 
the  gender  employment  gap  in  Italy  (19.7  pps)  is 
among  the  highest 
in  the  EU  (10.8%).  The 
employment  rate  of  women  with  children  aged 
less  than  6  years  (55.5%)  is  considerably  lower 
than that of women without children (76.6%) (133). 
Moreover,  with  less  than  38%  in  employment, 
women with children under 6 years in the south of 

(132) AMECO database and DG EMPL computations on Eurostat 

data. 

(133) ‘Benessere equo e sostenibile in Italia (BES) 2022’, ISTAT. 

66 

11.545.61919.75.8664.88.14.694.5725.229.729.4714.97.233.41.8Critical situationTo watchWeak but improvingGood but to monitorOn averageBetter than averageBest performersPolicy areaHeadline indicatorDynamic labour markets and fair working conditionsEmployment rate(% of population aged 20-64, 2022)Unemployment rate(% of active population aged 15-74, 2022)Long term unemployment(% of active population aged 15-74, 2022)GDHI per capita growth                                                              (2008=100, 2021)Social protection and inclusionAt risk of poverty or social exclusion rate                                            (% of total population, 2021)At risk of poverty or social exclusion rate for children                       (% of population aged 0-17, 2021)Impact of social transfers (other than pensions) on poverty reduction (% reduction of AROP, 2021)Disability employment gap(percentage points, 2021)Housing cost overburden(% of total population, 2021)Children aged less than 3 years in formal childcare(% of population under 3-years-old, 2021)Self-reported unmet need for medical care(% of population 16+, 2021)Equal opportunities and access to the labour marketEarly leavers from education and training(% of population aged 18-24, 2022)Share of individuals who have basic or above basic overall digital skills (% of population aged 16-74, 2021)Youth NEET rate(% of population aged 15-29, 2022)Gender employment gap(percentage points, 2022)Income quintile ratio(S80/S20, 2021) 
 
 
 
   
 
                                                 
 
the  country  are  much  less  likely  to  be  employed 
than those in the centre at 63.4% or the north at 
almost  66%. One  of  the  reasons  is  that  childcare 
responsibilities  affect  mothers  disproportionately. 
At  33.4%,  the  share  of  children  aged  less  than  3 
years  in  formal  childcare  in  2021  was  below  the 
EU  average  (36.6%),  with  significant  regional 
differences  in  the  availability  of  childcare  places. 
In  addition,  compulsory  paternity  leave  (10  days) 
is  still  considerably  lower than  maternity  leave  (5 
months). Italy has committed to increase childcare 
services  under  its  RRP  and  through  cohesion 
funding.  Finally,  the  rate  of  young  people  not  in 
employment, education or training (NEET) (15-29) 
(19%)  is  among  the  highest  in  the  EU  (11.7%). 
While in the 15-24 age group, the female (15.4%) 
and  male  (16.3%)  NEET  rates  are  similar,  in  the 
25-29  age  group,  the  female  NEET  rate  (30.2%) 
significantly  exceeds  that  of  males  (20.4%).  The 
higher  rates  of  the  older  groups  reflect  the 
challenges that young people face in entering the 
labour  market  (accompanied  by  a  prevalence  of 
temporary  contracts  compared  to  older  groups). 
Although 
rate  of  non-EU 
nationals  (63.5%)  almost  matches  that  of  Italian 
nationals (65.5%) in 2022, they face much higher 
poverty or social exclusion risks (47.6% vs 24.7%) 
and in-work poverty (31.2% vs 9.7%). 

the  employment 

Table A14.2: Situation of Italy on 2030 
employment, skills and poverty reduction targets 

(1) Adult Education Survey, adults in learning in the past 12 
months. 
(2) Number of persons at risk of poverty or social exclusion 
(AROPE), reference year 2019. 
Source: Eurostat, DG EMPL. 

Italy  faces  challenges  in  relation  to  the  low 
proportion  of  young  adults  with  a  tertiary 
educational  qualification  (29.2%  vs  42%  in 
the EU), and further efforts on adult learning 
are needed. In 2021, only 45.6% of Italian adults 
had at least basic digital skills, significantly fewer 
than  in  the  EU  (53.9%),  and  in  2022,  only  11.9% 
participated  in  training  over  the  past  4  weeks.  In 
2021,  the  share  of  ICT  graduates  at  1.4%  also 
stood  well  below  the  EU  average  (3.9%).  Labour 
in  sectors  such  as 
shortages  are 

reported 

67 

construction, industry, manufacturing and services 
to  businesses.  In  response,  Italy  is  developing  its 
non-academic  tertiary  sector  by  reforming  the 
istituti  tecnici  superiori  (ITS)  to  make  them  an 
integral  part  of  the  tertiary  vocational  education 
system. Up- and re-skilling is funded by REACT-EU 
and  the  ESF+  to  support  the  green  and  digital 
transitions and contribute to the target of at least 
60%  of  adults  participating  in  training  every year 
by 2030 (41.5% in 2016). 

the  social  consequences  of 

Although  it stayed broadly  stable during  the 
pandemic,  the  risk  of  poverty  and  social 
exclusion remains high. While swift policy action 
mitigated 
the 
pandemic, the rate of people at risk of poverty or 
social  exclusion  (AROPE)  slightly  increased  from 
24.9%  in  2020  to  25.2%  in  2021.  This  remains 
above  pre-pandemic  levels  (24.6%  in  2019)  and 
the  EU  average  (21.7%  in  2021).  At  29.7%,  the 
AROPE  rate  among  children  significantly  exceeds 
the  EU  average  (24.4%).  The  introduction  of  the 
universal family allowance in 2022 is estimated to 
have reduced the risk of poverty (134). According to 
national  data,  the  share  of  persons  in  absolute 
poverty,  which  doubled  between  2010  and  2018, 
continued rising to 9.4% in 2021; it is particularly 
high  in  the  south (135).  Access  to  affordable  and 
suitable  housing  is  still  a  challenge,  with  many 
households  not  having  a  sufficient  number  of 
rooms (28% vs EU: 17%), in particular for tenants 
renting at market prices and young people. 

A  well-functioning  minimum  income  scheme 
is  key  to  reduce  social  inequalities  and 
disparities,  but  its  implementation  in  Italy 
needs  to  be  monitored.  The  minimum  income 
scheme  (so-called  citizens’  income)  introduced  in 
2019,  along  with  the  active  inclusion  approach, 
helps  to  prevent  and  mitigate  poverty.  While  the 
total  number  of  households  benefiting  from  the 
scheme  increased  during  the  pandemic  (1.11 
million  in  2019  vs  1.77  million  in  2021),  that 
number  fell  to  1.66  million  in  2022.  The  2023 
budget  law  reduced  the  length  of  time  during 
which  people  can 
receive  benefits,  added 
conditions on education and training, and included 
the  possibility  to  combine  benefits  with  income 
from  seasonal  work.  From  2024,  the  scheme  will 
be  suspended  and 
recently 
lower  coverage  and 
introduced  measure.  A 

replaced  by  a 

(134) ‘La redistribuzione del reddito in Italia’, ISTAT. 

(135) ‘Nel 2021 stabile la povertà assoluta’, ISTAT. 

IndicatorsLatest dataTrend            (2015-2022)National target by 2030EU target by 203064.8(2022)33.9(2016)+31(2021)Adult learning1 (%)6060Employment (%)7378Poverty reduction2 (thousands)-3 200-15 000 
 
   
 
                                                 
adequacy could further limit the poverty reduction 
potential  of  the  future  scheme  for  vulnerable 
groups. Weak active labour market policies should 
be strengthened to support the job integration part 
of  the  scheme.  Overall,  there  is  scope  for  greater 
efforts to achieve the national target of 3.2 million 
fewer people at risk of poverty or social exclusion 
by 2030 (compared to 2019). 

68 

 
ANNEX 15: EDUCATION AND TRAINING 

This Annex outlines the main challenges for Italy’s 
education  and  training  system  in  light  of  the  EU-
level targets and other contextual indicators under 
the European Education Area strategic framework, 
based  on  the  2022  Education  and  Training 
Monitor. 

The  Italian  education  and  training  system 
struggles with some long-standing structural 
challenges  that  hinder  the  formation  of 
human  capital  with  the  relevant  skills  for 
labour  market  developments.  Italy  faces  key 
challenges linked to the quality, equity and labour 
market relevance of education and training as well 
as  wide  territorial  disparities.  These  translate  into 
skills  shortages  and  mismatches,  and  high  rates 
in 
for  youth  unemployment  and  those  not 
education,  employment  or 
(NEET), 
particularly in the south of the country (see Annex 
14). Wide-ranging reforms implemented under the 
Recovery and Resilience Facility (RRF) are expected 
to address some of these challenges. 

training 

School  education  in  Italy  produces  mixed 
results  in  terms  of  basic  skills  proficiency, 
with  significant  differences  between  regions 
and  types  of  schools.  After  the  learning  loss 
recorded in 2021, the results of the 2022 round of 
standardised  national  testing  remained  largely 
stable  for  Italian  and  maths  and  improved  for 
English.  The  results  confirmed  wide  geographical 
disparities,  which  tend  to  widen  with  school  level. 
The gaps in student performance between schools 
and  between  classes  are  more  pronounced  in  the 
southern  regions.  This  indicates  that  primary 
education in the south is not able to ensure equal 
opportunities  for  all  pupils,  with  clear  negative 
repercussions  on  subsequent  school  grades.  More 
generally, 
family 
background  on  learning  achievement  throughout 
the  country  is  an  indication  that  school  education 
does  not  adapt  sufficiently  to  different  learning 
needs  and  is  not  able  to  compensate  for  socio-
economic  disadvantage.  The  government  has 
in  RRF  support  for 
allocated  EUR 1.5  billion 
initiatives 
in 
to 
learning  outcomes.  The  investment  shall  promote 
mentoring  activities  for  young  people  at  risk  of 
early school leaving or that have already dropped 
out.  

territorial  disparities 

influence  of 

reduce 

strong 

the 

Early  school  leaving  is  on  a  declining  trend 
but  remains  well  above  the  EU  average.  The 
proportion  of  early  leavers  from  education  and 
training (ELET) in the 18-24 age group was 11.5% 

69 

in  2022,  down  from  12.7%  the  previous  year, 
confirming the downward trend seen over the past 
decade.  While  below  the  national  target  of  16%, 
the  ELET  rate  remains  above  the  EU  average  of 
9.6% and some way off the new EU-level target of 
below  9%  by  2030.  The  ELET  rate  varies  widely 
across  regions:  from  9.6%  in  the  north-east  to 
15.3% in the south, with a peak of 21.2% in Sicily. 
Boys  are  more  likely  than  girls  to  leave  school 
early (13.6% vs 9.1%), with a wider than average 
gender  gap  (4.5  pps  vs  3.1  pps  for  the  EU).  At 
28.7% thee ELET rate among foreign born 18-24-
year-olds is three times as high as that of Italian-
born  people  (9.7%),  and  considerably  higher  than 
the EU average of 21.6%. 

Italy  is  reforming  the  initial  training  and 
recruitment  of  teachers.  The  new  system 
strengthens the specific teaching qualification that 
needs  to  be  acquired  by  those  wishing  to  access 
national  competitions  for  the  recruitment  of 
teachers. Once fully implemented, the new system 
is expected to have positive effects on educational 
outcomes and on the overall teaching quality. The 
reform also introduces performance-related salary 
increases  following  the  completion  of  three-year 
training  cycles.  However,  it  is  still  to  be  seen 
whether  it  will  be  enough  to  attract  the  best 
graduates  to  the  teaching  profession,  particularly 
those  with  degrees 
technology, 
in  science, 
engineering and mathematics (STEM). 

in 

new 

brings 

legislation 

subjects)  and 

is  promoting  digital 
The  government 
education.  Coding  and  digital  teaching  were 
included 
in  teacher  training  programmes  as 
priorities  starting  from  the  2022/23  school  year. 
The 
computer 
programming  (as  a  subject  and  integrated  into 
other 
further 
development  of  digital  skills  in  primary  and 
secondary  education.  The  plan  ‘School  4.0  - 
innovative 
and 
laboratories’  allocates  over  EUR 2  billion  in  RRF 
funding  to  transform  100 000  classrooms  into 
innovative  learning  environments  and  to  build 
laboratories  for  the  digital  professions  of  the 
future in all upper secondary schools. 

classrooms 

specifies 

schools, 

new 

the 

The  proportion  of  young  adults  with  a 
tertiary  educational  qualification  is  low.  In 
2022,  29.2%  of  25-34-year-olds  had  a  tertiary 
educational  qualification,  well  below  both  the  EU 
average  of  42%  and  the  EU-level  target  of  45% 
by 2030. Women are more likely to hold a tertiary 
qualification than men (35.5% vs 23.1%), in line  

 
 
 
Table A15.1: EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Source: (1,3,4,5,7,8,9,10,11) = Eurostat; 2 = OECD (PISA); 6 = European Commission (Joint Research Centre). Notes: Data is not 
yet available for the remaining EU-level targets under the European Education Area strategic framework, covering 
underachievement in digital skills and participation of adults in learning. The equity indicator shows the gap in the share of 
underachievement in reading, mathematics and science (combined) among 15-year-olds between the lowest and highest quarters 
of socio-economic status. 

with  the  rest  of  the  EU  but  with  a  slightly  wider 
gender  gap  (12.4  pps  vs  11.1  pps).  The  tertiary 
educational  attainment  rate  is  particularly  low 
among the foreign population, whether born in the 
EU  (13.2%)  or  outside  (12.6%),  reflecting  a 
substantial  difficulty  in  attracting  highly  qualified 
people. 

The  share  of  STEM  graduates  remains 
In  2020,  22.7%  of  all 
comparatively  low. 
graduates had a STEM qualification, fewer than in 
2019 (24.5%) and below the EU average (24.9%). 
The  share  of  graduates 
information  and 
communication technologies is particularly low, at 
just 1.4% compared with the EU average of 3.9%. 

in 

EU  average  of  84.5%.  Low  demand  from  a 
productive  sector  characterised  by  small-  and 
medium-sized  firms  contributes  to  the  poor 
employment prospects of graduates. 

In  2021, 

Recent  reforms  are  expected  to  increase 
flexibility  and  make  tertiary  education 
curricula  more 
the 
innovative. 
government adopted a reform of university degree 
the  creation  of  cross-
groups,  encouraging 
disciplinary  paths  and 
the  development  of 
innovative  professional  profiles.  It  also  adopted  a 
reform  of  PhD  programmes,  promoting 
the 
involvement  of  businesses  in  university  research 
programmes  and  applied 
through 
industrial PhDs. 

research 

a 

tertiary 

educational 

While 
degree 
constitutes  an  advantage  on  the  labour 
market,  transition  into  employment  remains 
difficult.  The  employment  rate  of  recent  tertiary 
graduates  has  risen  steadily  over  recent  years, 
is 
reaching  67.5% 
considerably higher than the employment rates for 
vocational  education  and  training  and  general 
upper school graduates, it remains well below the 

in  2021.  But  while 

it 

70 

96%94.9%91.9%94.6%202093.0%2020Reading< 15%21.0% 20.0%23.3%201822.5%2018Mathematics< 15%23.3% 22.3%23.8%201822.9%2018Science< 15%23.2% 21.1%25.9%201822.3%2018< 9 %14.7%11.0%11.5% 9.6%Men17.5%12.5%13.6%11.1%Women11.8%9.4%9.1%8.0%Cities14.8%9.6%12.5%8.6%Rural areas15.2%12.2%10.2%10.0%Native12.7%10.0%9.7%8.3%EU-born26.4%20.7%22.9%20.3%Non EU-born33.0%23.4%30.6%22.1%6Equity indicator (percentage points)::18.4201819.320187Exposure of VET graduates to work based learningTotal ≥ 60% (2025) : :25.9%60.1%45%25.2%36.5%29.2%42.0%Men19.4%31.2%23.1%36.5%Women31.0%41.8%35.5%47.6%Cities30.0%46.2%35.2%52.2%Rural areas21.3%26.9%24.7%30.2%Native28.0%37.7%32.5%43.0%EU-born13.0%32.7%14.5%39.5%Non EU-born12.7%27.0%12.6%35.7%57.2% 38.3%53.0%202039.2%2020Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth11Share of school teachers (ISCED 1-3) who are 50 years or over1Participation in early childhood education (age 3+)2Low achieving 15-year-olds in:Early leavers from education and training (age 18-24)3Total3By gender4By degree of urbanisation5By country of birth20152022IndicatorTargetItalyEU27ItalyEU27 
 
  
 
ANNEX 16: HEALTH AND HEALTH SYSTEMS 

A  healthy  population  and  an  effective, 
accessible,  and  resilient  health  system  are 
prerequisites  for  a sustainable  economy and 
society.  This  Annex  provides  a  snapshot  of 
population health and the health system in Italy.  

reflecting 

the  decrease 

Italy has one of the highest life expectancies 
at  birth  in  the  EU.  After  a  significant  drop  in 
2020,  life  expectancy  significantly  rebounded  in 
2021, 
in  COVID-19 
mortality in 2021 (136). Italy has one of the lowest 
rates  in  the  EU  for  treatable  and  preventable 
mortality.  In  2020  leading  causes  of  death  are 
diseases 
systems 
(“cardiovascular diseases” notably ischaemic heart 
diseases)  followed  by  neoplasms  and  COVID-19. 
Overall, large regional differences are observed. 

circulatory 

the 

of 

Health  spending  relative  to  GDP  in  Italy  is 
below the EU average, despite an increase in 
2020 (by almost one percentage point). This is 
in line with the upward trend in all Member States. 
For  2020  in  Italy,  the  increase  of  the  share  of 
healthcare  spending  relative  to  GDP  was  largely 
explained  by  the  significant  GDP  contraction 
observed  (by  9%,  compared  to  5.7%  in  the  EU 
overall).  Spending  per  capita  in  purchasing  power 
standards  (at  EUR  2 608)  is  well  below  the  EU 
average (EUR 3 269). 

Graph A16.1: Life expectancy at birth, years 

Source: Eurostat 

The  public  share  of  health  expenditure  in  Italy  is 
below  the  EU  average  and  slightly  increased  in 
2020  (to  76.1%,  from  73.7%  in  2019).  Italy’s 
hospital  bed  density  is  below  the  EU  average. 
Nevertheless,  the  overall  breakdown  of  total 
healthcare  spending  by  outpatient  and  inpatient 
services is broadly similar to that of the rest of the 
EU.  At  21.3%,  the  share  of  household  out-of-
pocket spending is almost 1.5 times higher than in 

(136) “Based on data provided directly by Member States to ECDC 
under the European Surveillance System (data current as of 
13 April 2023)” 

71 

the  EU  overall  (14.4%).  Spending  on  preventive 
care,  one  of  the  highest  in  EU  ((5.5%  of  total 
healthcare  expenditure), 
increased  by  19% 
between  2020  and  2019  (compared  to  a  26% 
increase  for  the  EU  overall),  driven  mainly  by 
spending  on  public  health  COVID-19  pandemic 
response programmes. 

Based  on  the  age  profile  of  the  Italian 
population,  public  expenditure  on  health  is 
projected  to  increase  by  1.2  percentage 
points (pps) of GDP by 2070 (compared to 0.9 
pps  for  the  EU  overall).  This  underscore  concerns 
about  the  long-term  fiscal  sustainability  of  the 
Italian health system. 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2019-2070 

AWG reference scenario 
Source: European Commission / EPC (2021) 

Italy  has  an  above-average  number  of 
practising doctors per 1 000 inhabitants, but 
the  overall  availability  and 
territorial 
distribution  of  the  health  workforce  raise 
concerns.  The  high  share  of  active  physicians 
over the age of 55 (56% in Italy vs an EU average 
of  35.9%)  and  the  significant  shortage  of  nurses 
(the  provision  level  per  1 000  population  is  well 
below  the  EU  average)  underline  challenges  as 
regards  staff  availability  in  the  longer term.    This 
is coupled with a consolidated trend of population 
ageing (with an increase of 26,7 million people in 
the  cohort  “old-age  dependency  ratio  20-64”) 
which  will  be  in  growing  need  of  health  care 
assistance (in 2019 around 30% of the population 
aged  above  65  years  is  reporting  unmet  medical 
needs  ).In  recent  years,  the  number  of  medicine 
graduates  have  slightly  increased,  fact  that  can 
partially  mitigate 
shortages, 
although  the  challenge  of  ensuring  long  term 
accessibility to health services. Another reason for 
concern  is  the  territorial  distribution  of  doctors 
(especially in primary care, with variations of up to 
50%  between  regions).  Shortages  of  qualified 

the  projected 

83.483.183.483.682.382.780.980.981.081.380.480.1201620172018201920202021ItalyEU6.65.90.91.202468EUItaly% of GDP20192070increase 
 
      
                                                 
      
 
Table A16.1: Key health indicators 

Note: The EU average is weighted for all indicators, except for (*) and (**), for which the EU simple average is used. The simple 
average for (*) uses data for 2020 or most recent year if former not available. Doctors' density data refer to practising doctors in 
all countries except EL, PT (licensed to practice) and SK (professionally active). Nurses' density data refer to practising nurses in all 
countries except FR, PT, SK (professionally active) and EL (nurses working in hospitals only). 
Source: Eurostat; except: ** ECDC 

large 

Italy  is  carrying  out  an  ambitious  plan  for 
investing in the effective digital transition of 
health  systems.  The  plan  aims  to  update  the 
medical  equipment  stock  of  health  and  care 
facilities.  There  are  three  main  strands  to  the 
investment:  modernising 
healthcare 
equipment,  digitising  the  processes  of  emergency 
rooms,  and  increasing  the  number  of  beds  in 
intensive and semi-intensive care units. Approving 
telemedicine  guidelines  is  the  first  step  in  the 
large-scale  adoption  of  telemedicine  solutions  (to 
increase their uptake in home care), supported by 
investments  in  setting  up  territorial  coordination 
centres.  These  centres  aim 
the 
coordination  of  various  territorial,  social-health 
and hospital services, and the emergency network. 

to  ensure 

staff  were  exacerbated  during  the  COVID-19 
pandemic,  especially 
intensive  care  and 
in 
emergency care, but also in primary care and long-
term  care.  A  mix  of  measures  and  allocation  of 
extra  funding  has  alleviated  acute  pressures  on 
healthcare  facilities.  In  the  long  term,  appropriate 
staffing  policies  can  be  expected  to  mitigate 
territorial health inequalities in access to care, and 
migration  of  patients  across  regions.  This  is 
particularly 
with 
higher-than-average  rates  of  comorbidities  and 
non-communicable diseases. 

important 

regions 

in 

Italy’s  recovery  and  resilience  plan  (RRP) 
contains  both  healthcare 
reforms  and 
healthcare investments (representing around 
8.5% of the RRP’s total value). As part of the 
ongoing reform of the organisational model of the 
territorial  healthcare  assistance  network,  a 
framework  was  developed.  This 
regulatory 
framework  identifies  structural,  technological  and 
organisational  standards  for  specialised  care 
structures (such as community houses, community 
hospitals, and territorial coordination centres). The 
ambitious  reform  of  the  healthcare  network  is 
supported by a significant set of investments. The 
Ministry of Health has entered into contracts with 
regions  for  major  investments  in  the  identified 
specialised 
contracts  are 
expected  to  create  the  administrative  framework 
for  investments  (with  operational  plans  laying 
down the scope, objectives, operational indications, 
time  schedule,  and  evaluation  and  monitoring 
criteria  of  individual  investments).  The  RRP  also 
includes  reforms  and  investments  to  improve  the 
health  system's  cost-effectiveness  and  fiscal 
sustainability.  

structures.  These 

72 

20172018201920202021EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)66.564.963.766.5NA91.7 (2020)Cancer mortality per 100 000 population237.9234.7230.9227.0NA242.2 (2020)Current expenditure on health, % GDP 8.78.78.79.6NA10.9 (2020)Public share of health expenditure, % of current health expenditure73.773.973.776.1NA81.2 (2020)Spending on prevention, % of current health expenditure 4.44.74.75.5NA3.4 (2020)Acute care beds per 100 000 population262259260266NA387.4 (2019)Doctors per 1 000 population *4.04.04.14.04.13.9 (2020)Nurses per 1 000 population *5.85.86.26.36.38.3 (2020)Consumption of antibacterials for systemic use in the community, daily defined dose per 1 000 inhabitants per day (total consumption for CY and CZ) **19.019.519.816.516.014.5 (2021) 
 
   
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

This  Annex  showcases  the  economic  and 
social  regional  dynamics  in  Italy,  providing  an 
update on economic, social and territorial cohesion 
in 
recovery 
challenges for the regions. 

the  main  economic 

Italy  and 

There are two main divergences affecting the 
Italian  economy:  an  emerging  EU-Italy  gap 
and  a  persistent  North-South  divide.  Italy’s 
GDP  per  capita  (in  purchasing  power  standard 
(PPS))  was  93.6%  of  the  EU  average  in  2020, 
following  a  steady  decline  (it  was  109  in  2007), 
which affected all regions except the autonomous 
province  of  Bolzano/Bozen.  Also  thanks  to  the 
measures  to  mitigate  the  effect  of  the  COVID 
pandemic, Italy’s GDP per capita moved up to 95% 
of the EU average in 2021. However, the structural 
or temporary nature of the rebound should be duly 
assessed  once  the  relief  measures  will  be 
completely  phase  out  and  new  data  will  be 
available. In 2021, 6 out of 21 regions had a GDP 
per  capita  below  75%  of  the  EU  average  (Table 
A17.1):  Calabria  and  Sicilia  were  the 
least 
developed regions, with GDP per capita below 60% 
of  the  EU  average,  closely  followed  by  Campania 
and Puglia (only just above 60%). 

Graph A17.1: GDP growth (x-axis) and population 
growth (y-axis) (2011-2020) – Italy 

Source: Eurostat, DG REGIO elaboration 

regional 

increasing 

GDP  and  population  growth  offer  insights 
into 
inequalities 
following  the  financial  crises  of  the  past 
decade.  Both  the  GDP  and  the  population  of 
Lombardia,  Emilia  Romagna,  Veneto,  Trento, 
Bolzano/Bozen  and  Toscana  grew  faster  than  the 
national  average  in  2011-20,  while  southern  and 
insular regions, Marche and Umbria lost population 
and  their  GDP  growth  was  below  the  national 
average (Graph A17.1 and table A17.1). Lazio is an 
outlier  since  its  GDP  grew  more  slowly  than  the 
its  population  grew 
national  average  but 

significantly (+6.3%). Basilicata was characterised 
by  a  GDP  growth  of+0.4%  and  a  population 
decline of 5.3% over the period 2011-2020. 

Labour  productivity  decreased  in  real  terms 
nearly  everywhere  in  Italy.  The  fall  in  labour 
productivity (103% of the EU-27 average in 2020, 
down  from  133%  in  2000  and  116%  in  2010) 
concerned  all  the  Italian  regions  except  Basilicata 
(Table  A17.1).  Productivity  per  worker  declined 
despite  the  fall  in  the  number  of  employed 
persons in the southern regions, including the two 
islands,  and  in  Umbria,  Marche,  Piemonte,  Valle 
d’Aosta  and  Liguria.  However,  the  number  of 
employed  persons  increased  in  Lombardia,  Lazio, 
Emilia Romagna, Trento and Bolzano/Bozen. 

In  the  southern  regions  and  the  two  islands, 
the  fall  in  employment  levels  was  a  direct 
result of weak business activity, characterised 
by  a  very  high  number  of  micro-enterprises, 
irregular  work,  a  limited  share  of  permanent 
contracts and poor innovation dynamics. 

The  employment  rate  mirrors  fundamental 
regional  gaps  (Table  A17.1).  The  employment 
rate rose from 66% in 2002 to 73.1% in 2021 in 
the EU27 and from 59.2% to 62.7% in Italy, but it 
was stationary in the south, from 48.6% to 48.9%, 
and  the  islands,  from  47.5%  to  47.7%.  In  2021 
the employment rate in the north was only slightly 
below  the  EU-27  (73.1%)  while  it  was  around  25 
percentage  points  lower  in  the  southern  and 
insular  regions.  Campania,  Calabria,  Sicilia  and 
Puglia  were  among  the  15  worst  performing 
regions  in  the  EU,  with  employment  rates  below 
50%. 

73 

MoliseBasilicataBozenLazioEU averageItalian average-8.0-6.0-4.0-2.00.02.04.06.08.0-2.0-1.5-1.0-0.50.00.51.0 
 
  
 
 
 
 
 
 
 
 
 
 
Table A17.1: Selected indicators at regional level in Italy 

Source: EUROSTAT 

Graph A17.2: GDP per capita (PPS) in 2021 and 
population with high level of education 

was significantly lower than the EU-27 average of 
42.0%  and  the  gap  was  wider  with  the  southern 
regions,  where  the  share  was  below  25%.  Lower 
levels  of  educational  attainment  go  hand  in  hand 
with lower levels of GDP per capita (Graph A17.2). 

Boosting 
innovation  systems  remains  a 
Italy  and  for  the 
major  challenge  for 
southern  regions  in  particular.  The  Italian 
business  sector's  expenditure  on  R&D  (0.9%  of 
GDP)  remained  significantly  below  the  EU-27 
average  of  1.5%,  but  in  the  southern  and  insular 
regions  it  was  less  than  a  third  of  the  EU-27 
average  (Table  A17.1).  Huge  regional  disparities 
are  also  reflected  in  the  2022  edition  of  the 
regional  competitiveness  index.  Compared  to  the 
EU  average  (score  100),  all  the  Italian  regions 
performed  significantly  worse,  with  southern  and 
insular  regions  (scores  lower  than  70)  lagging 
behind  compared  to  the  rest  of  Italy  (scores 
between  70  and  100).  Lombardia  is  the  only 
exception 
2021-27 
programming  period,  Italy  has  the  opportunity  to 
frame industrial  policy interventions by combining 
research  and  development  activities  with  a  major 
involvement  of  businesses 
innovation  and 
enhanced skills for the industrial transition. 

(103.2). 

During 

the 

in 

Italy's demographic dynamics are a cause for 
its  economic 
regarding 
major  concern 
growth,  social  cohesion  and 
territorial 
disparities.  Between  2011  and  2020, population 
growth  was  limited  to  just  seven  regions  in  the 
north  and  centre  (Lombardia,  Veneto,  Emilia-

74 

Source: Eurostat, DG REGIO elaboration. GDP per capita (PPS) 
(EU-27 = 100; 2021) (x-axis) and percentage of the 
population aged 30-34 with a high level of educational 
attainment (EU-27 average = 41.6%; in 2021) (y-axis) 

Sectoral  specialisation  and  human  capital 
are important causes of the regional gaps in 
productivity  and  employment.  In  2020,  the 
proportion  of  the  workforce  employed  in  high 
technology  sectors  in  the  northern  and  central 
regions was broadly aligned to the EU-27 average, 
while  in  southern  and  insular  regions  it  was  less 
than half. The high number of early school leavers 
also contributes to constraining the economic and 
social potential of the south, with a peak in Sicilia 
that  records  a  rate  twice  as  high  as  the  EU-27 
average (21.2% against 9.7%). In 2022, the share 
of 
the  population  aged  25-34  with  higher 
education  attainment  in  Italy  as  a  whole  (29.2%) 

Italian averageEU27 average152025303540450.020.040.060.080.0100.0120.0140.0160.0RegionGDP per head (PPS) GDP growthPopulation growthProductivity (GVA (PPS) per person employed)Real productivity growthEmployment rate, ages 20-65Population aged 30-34 with high educational attainmentEarly school leaversR&D expenditure in the business enterprise sector (BERD)Employment in high-technology sectorsQuality of Government Index (QoG)Index, EU27 = 100; 2021Average annuale growth 2011-20Average annuale growth 2011-20Index, EU27 = 100; 2021Average annuale growth 2011-20% of population aged 20-64; 2021% of population aged 30-34; 2021% of population aged 18-24; 2021% of GDP; 2019% of total employment; 2021Index - values range between 0 and 100; 2021European Union1000,71,71000,273,141,69,71,54,848,6Italia95.0-0.70.7104.3-0.862.726.812.70.94.0Nord-Ovest118.0-0.71.7117.5-0.870.829.811.51.24.9Nord-Est113.0-0.31.6109.6-0.772.331.39.61.23.2Centro 101.0-0.93.0102.6-1.167.230.09.80.85.7Sud64.0-1.0-2.086.3-0.848.921.615.30.52.4Isole61.0-1.5-1.886.8-0.947.718.719.50.32.2Piemonte101.0-0.8-1.4107.1-0.769.827.411.41.83.937.0Valle d’Aosta121.0-1.6-2.1115.3-1.171.627.70.336.9Liguria101.0-1.3-2.5107.0-1.268.026.212.90.93.134.5Lombardia128.0-0.53.7123.0-0.971.631.311.31.05.530.4Abruzzo81.0-0.9-1.293.9-0.662.127.18.00.53.023.7Molise69.0-1.6-6.089.5-1.055.933.17.60.82.021.2Campania62.0-1.1-1.487.1-0.945.021.216.40.72.85.2Puglia63.0-0.9-1.783.4-1.050.519.117.60.42.118.3Basilicata76.00.4-5.394.40.356.724.78.70.22.116.3Calabria56.0-1.7-3.580.7-0.745.521.614.00.21.61.7Sicilia58.0-1.6-1.786.9-0.944.517.821.20.32.218.0Sardegna70.0-1.2-2.186.4-0.957.021.813.20.12.020.1Provincia Autonoma Bozen151.00.66.5124.4-0.275.824.712.90.51.743.0Provincia Autonoma Trento126.00.03.2118.8-0.472.533.78.80.63.748.9Veneto107.0-0.50.8105.5-0.970.830.89.31.03.145.3Friuli-Venezia Giulia103.0-0.5-1.2105.7-0.672.326.08.60.93.047.3Emilia-Romagna116.0-0.32.5111.8-0.673.533.69.91.63.540.0Toscana98.0-0.61.4100.4-0.770.529.011.11.03.740.5Umbria84.0-1.4-1.291.4-1.269.333.912.00.53.032.1Marche90.0-1.0-2.594.6-0.868.928.97.90.72.831.9Lazio109.0-1.06.3107.5-1.364.430.39.20.88.221.5 
 
  
 
  
 
 
 
Romagna,  Toscana,  Lazio,  and  the  autonomous 
provinces  of  Trento  and  Bolzano/Bozen).  On  the 
other  hand,  the  population  has  fallen  in  all  the 
southern and insular regions over the past decade. 
This  limits  the  economic  potential,  particularly  in 
the  light  of  the  limited  number  of  applications  to 
study  at  universities  in  the  southern  regions,  and 
the  more  limited  human  resources  available  to 
private  undertakings  and  the  public  sector.  This 
demographic  trend  also  threatens  social  cohesion 
because  it  makes  it  harder  to  meet  the  needs  of 
an  ageing  population  (as  shown  by  the  current 
staff  shortages  in  the  public  health  and  care 
services). 

of 

quality 

institutions 

The 
varies 
dramatically  between  the  north  and  the 
south.  In  2021,  the  quality  of  government  index 
for Italy as a whole was 29 points out of 100 (the 
EU-27 average was 49).  The northern and central 
regions scored on average around 37 – more than 
twice  the  average  score  for  the  southern  and 
insular regions, which is 15. 

The  quality  of  public  services  is  generally 
lower  in  the  southern  regions.  This  concerns 
not  only  services  managed  at  the  regional  and 
local  levels  (e.g.  transport,  water,  waste  and  risk 
prevention)  but  also  services  managed  by 
ministries at the national level (e.g. education and 
justice). 

and  selection)  took  246 days  in  the  southern  and 
insular  regions  –  compared  with  189  days  in  the 
northern  and  central  regions.  The  next  phase  (i.e. 
the  awarding  of  public  works  contracts)  took 
88 days  on  average  in  the  southern  and  insular 
regions  –  compared  with  66  days  in  the  northern 
and central regions. Finally, the actual execution of 
public  works  took  on  average  492  days  in  the 
southern and insular regions – compared with 408 
days in the northern and central regions (138). This, 
in  turn,  explains  the  gap  in  terms  of  both  the 
number of awards of public works (21 602 in the 
insular  regions  compared  with 
southern  and 
72 928  in  the  northern  and  central  regions)  and 
their  monetary  value  (EUR 15 608 million  in  the 
southern  and 
insular  regions  compared  with 
EUR 47 194  million  in  the  northern  and  central 
regions). 

The COVID-19 pandemic affected all regions, 
but  to  different  degrees.  The  average  excess 
mortality in 2020-2021 was higher than in 2015-
2019  in  all  regions,  but  it  varied  considerably 
between  regions.  It  was  highest  in  the  north-
western  regions  at  an  average  of  21%  (with  a 
peak of 25% in Lombardia), followed by the north-
eastern regions at 15%, while it averaged around 
10% in the central, southern and insular regions. 

are 

inhabitants  and  68%  of 

particularly 
services  are  absent 

Regional  gaps  in  the  provision  of  water 
significant. 
services 
Wastewater 
in  296 
municipalities  with  a  combined  population  of 
1.3 million 
these 
municipalities  are  located  in  the  southern  regions 
(particularly Sicilia, Campania and Calabria). At the 
national level, 42.2% of distributed water was lost 
in  2020  (42%  in  2018)  and  the  loss  was  higher 
than  the  national  average  in  the  hydrographic 
districts  of  the  central  Apennine  territories  and  in 
regions (137).  The 
the  southern  and 
reorganisation  of  the  water  service  has  begun  in 
the  worst  affected  southern  regions  but  is  still 
only in the initial phase. 

insular 

Varying 
levels  of  administrative  and 
technical  capacities  mean  that  public  works 
take longer in the southern regions. In 2012-
2020,  the  first  project  phase  of  public  works  (i.e. 
the  preparatory  phases  for  projects’  preparation 

(137) https://www.istat.it/it/archivio/279363 

BDAP e Open ANAC 

(138) Source: Banca d’Italia, Rapporti annuali regionali sul 2021, 

75 

 
                                                 
                                                 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

slowdown 
in  economic  growth,  banking-
sector  resilience  has  been  safeguarded.  The 
capital  adequacy  ratio  for  Italian  banking  sector 
stood at 18.4% in Q3-2022, marginally lower than 
in  2021  and below  the  EU  average.  This  was  due 
to the gradual phasing in of IFRS9, the payment of 
dividends, and the share buy-back programmes of 
some  banks.  Asset  quality  has  improved  further, 
due  to:  (i)  banks’  efforts  to  dispose  of  non-
performing  loans  (NPLs);  and  (ii)  the  support 
provided  by  the  State-guarantee  schemes  and 
loan moratorium, which was in place until the end 
of  2021.  The  gross  NPL  ratio  declined  to  3.0%  in 
Q3-2022,  albeit  still  above  the  EU  average  of 
1.8%.  (Table  18-1)  Banking-sector  profitability 
rebounded, with return on equity reaching 5.7% in 
2021  and  improved  further  to  8.6%  in  the  third 
quarter of 2022 (above the EU  average of 6.1%). 
Banks  have  continued  their  efforts  to  increase 
efficiency  and  rationalise  their  branch  network, 
which led to a decrease in the cost-to-income ratio 
to  59.8%  at  the  end  of  Q2-2022,  below  the  EU 
average  of  60.6%.  The  liquidity  position  has 
remained  comfortable,  with  the  liquidity  coverage 
ratio  (LCR)  increasing  to  roughly  204%.  However, 
Italian banks have made extensive use of the ECB 
refinancing  operations,  and  central  bank  liquidity 
amounted to 10.8% of total bank liabilities at the 
end of Q3-2022.  

In  spite  of  the  resilience  of  the  banking 
sector, several vulnerabilities warrant closer 
oversight.  The  Italian  banking  sector  has  the 
second  largest  exposure  to  Russia  of  all  EU 
Member  States.  The  bulk  of  this  exposure  is 

Italy  has  a  predominantly  bank-based 
financial  sector,  with  banks  being  the  most 
important  providers  of  financial  services  to 
households and companies.  The banking sector 
is  primarily  domestically  owned 
(domestically 
owned  banks  account  for  roughly  92%  of  total 
largest 
banking-sector  assets),  with  the  five 
banking  groups  accounting  for  52%  of  banking-
sector  assets.  The  largest  banking  groups  (Intesa 
Sanpaolo  and  UniCredit)  have 
substantial 
international  operations,  in  particular  in  central, 
eastern  and  south-eastern  Europe.  Following 
reforms  implemented  in  the  cooperative  sector 
since  2015,  the  fragmentation  of  the  banking 
sector has gradually reduced. These reforms have 
also  led  to  a  steady  decline  in  the  number  of 
branches  and  employees,  which  has  increased 
efficiency.  Despite  efforts  to  diversify  non-bank 
financing and facilitate the access of companies to 
capital  markets,  the  market-funding  ratio  stood 
slightly below 38% in 2021, the highest level since 
2017,  but  lower  than  the  EU  average  of  51%. 
Sustainable financing expanded markedly in 2021, 
helped  by  an  increase  in  the  issuance  of  green, 
social  and  sustainable  bonds.  The  volume  of 
green-bond  issuance  increased  by  almost  four 
reached 
times 
EUR 22.2 billion in 2021. The issuance of the first 
green bond by the Italian treasury (EUR 8.5 billion) 
in  September  2021  contributed  substantially  to 
the increase in green-bond issuance in 2021.  

to  2020 

compared 

and 

Despite  the  challenges  posed  by  the  COVID-
19  pandemic  and,  more  recently,  by  the 

Table A18.1:Financial Soundness Indicators 

(1) Last data: Q3 2022.  
(2) Data is annualised.  
Source:  ECB, Eurostat, S&P Global Capital IQ Pro. 

76 

 
 
 
 
 
  
 
 
to 

amounted 

concentrated  in  the  two  largest  Italian  banking 
groups.  The  exposure  of  Italian  banks  to  Russian 
counterparts 
EUR 22.8 billion 
(European Banking Authority data) or 30.3% of the 
EU’s total EU exposure to Russian counterparts by 
end-March  2022.  This  exposure  has  been 
manageable  from  a  capital  perspective,  but 
further  second-round  effects  and  reputational 
risks  cannot  be  excluded.  Meanwhile,  high  energy 
prices  have  put  strain  on  the  more  energy-
intensive sectors of the economy and are likely to 
impact  banks’  asset  quality  and  business  more 
broadly. Although Italian banks have continued the 
process of NPL disposal, loans that are unlikely to 
be  repaid  have  remained  a  matter  of  concern. 
More than half of the NPL stock in Italy is made up 
of unlikely-to-pay (UTP) loans, which may become 
defaulted as the increase in interest rates and the 
erosion  of  disposable  income  could  negatively 
affect  the  debt-servicing  capacity  of  borrowers. 
The  extensive  guarantee  schemes  to  support 
corporate  lending  put  in  place  after  the  onset  of 
the  COVID-19  pandemic  by  authorities  have 
further  deepened 
the  already  strong  nexus 
between  banks  and  the  Italian  sovereign.  The 
exposure  of 
Italian  banks  to  sovereign  debt 
amounted to roughly 11.5% of total assets at the 
end  of  December  2022.  To  shield  their  capital 
base  from  adverse  market  developments,  banks 
have  reshuffled  their  sovereign  bond  portfolios 
and  booked  an increasing  part  of these  portfolios 
(roughly  72%)  in  the  amortised  cost  portfolio  (i.e. 
HTC - held to collect), which does not impact bank 
capital. 
future  minimum 
requirement  for  own  funds  and  eligible  liabilities 
(MREL)  issuances  and  the  gradual  phasing  out  of 
the  ECB’s 
refinancing 
operations may impact banks’ cost of funding. 

longer-term 

targeted 

pricing 

The 

of 

to  households  and  corporates 
Lending 
remained  robust  in  2022.  Partly  supported  by 
the  State-guaranteed  loans  granted  through  the 
SME  Guarantee  Fund, 
lending  to  corporates 
remained  strong  in  the  first  half  of  2022  and 
accelerated further during the summer months of 
2022, on the back of higher demand for credit by 
larger  firms.  Loans  to  households  have  also 
continued  to  grow  despite  the  tightening  in  credit 
standards.  The  erosion  of  disposable  income 
coupled  with  a  further  tightening  of  credit 
standards 
lending  to 
households  –  in  particular  mortgage  lending  –  in 
the  last  quarter  of  2022.  The  normalisation  of 
monetary policy has also led to an increase in the 
cost of lending to households and companies, with 

led  to  a  slowdown 

in 

new 

loans 

the  average  lending  rate  reaching  2.96%  in 
November  2022,  up  from  2.17%  in  November 
2021.  According  to  data  from  the  Italian  Banking 
Association,  the  lending  rate  increased  the  most 
for 
non-financial 
granted 
corporations. This rate stood at 3.11% at the end 
of  November  2022,  roughly  2  percentage  points 
higher than in November 2021. Private sector debt 
decreased by roughly 5 percentage points in 2021 
compared with 2020 and stood at 113.5% of GDP, 
still markedly higher than in 2019.  

to 

Graph A18.1: Evolution of credit activity 

Adjusted loans for sales and securitisations. 
Source: ECB. 

the  disposable 

Real-estate  prices  continued  to  increase  in 
the  first  half  of  2022,  and  at  a  faster  pace 
than  in  the  second  half  of  2021.  In  spite  of 
increasing  real-estate  prices,  developments  in 
Italy’s real-estate market have been less worrying 
than 
in  other  EU  Member  States.  Demand 
remained high in the first half of 2022 and during 
the  summer  of  2022,  as  inflation  did  not  weigh 
income  of 
significantly  on 
households.  This  favourable  backdrop 
led  to 
increases  in  sales  of  residential  real  estate. 
Meanwhile,  the  decline  in  prices  of  commercial 
real estate continued, albeit at a slower pace than 
in 2021. While oversight of the real-estate market 
in  Italy  remains  warranted,  market  developments 
do  not  suggest  an  overvaluation  of  real-estate 
prices,  which  would  require  a  tightening  of  the 
current  macro-prudential  policy  stance.  The  Bank 
of  Italy,  Italy’s  central  bank,  has  maintained  the 
countercyclical capital buffer at zero. 

77 

-15-10-505101520092010201120122013201420152016201720182019202020212022Total privateNFCHH% 
  
 
ANNEX 19: TAXATION  

This  Annex  provides  an 
indicator-based 
overview  of  Italy’s  tax  system.  It  includes 
information  on  Italy’s  tax  structure  (the  types  of 
tax that Italy derives most revenue from),  the tax 
burden  on  workers,  as  well  as  the  progressivity 
and redistributive effects of the tax system. It also 
provides 
tax  collection  and 
compliance. 

information  on 

Italy’s  tax  revenues  in  relation  to  GDP  are 
relatively  high,  with  the  largest  contribution 
coming  from  labour  taxation.  Table  A19.1 
shows that Italy’s tax revenues as a percentage of 
GDP  were  above  the  EU  aggregate  in  2021  and 
have been on an increasing trend in recent years. 
The shares of labour and environmental taxes as a 
share  of  GDP  were  above  the  EU  aggregate. 
Revenues from consumption taxes are close to the 
EU aggregate, both as a share of GDP and of total 
taxation  (see  Graph  A19.1),  despite  relatively  low 
VAT  revenues  due  to  a  wide  use  of  reduced  VAT 
rates.  Revenues  from  recurrent  taxes  on  property, 
which  are  among  the  taxes  least  detrimental  to 
growth,  were  above  the  EU  aggregate  as  a 
percentage  of  GDP.  However,  first  residences  are 
exempt  for  almost  all  property  classes,  and  the 
values  used  for  property  taxation  are  outdated.  A 
revision  of  outdated  cadastral  values  to  bring 
them closer to market values has not taken place. 
More  broadly,  the  enabling  law  tabled  in  October 
2021,  which  provided  for  a  general  tax  reform 

Table A19.1: Taxation indicators 

addressing  several  longstanding  weaknesses  of 
Italy’s  tax  system,  has  not  been  approved  by  the 
Parliament. 

labour  tax  burden 

Italy’s 
is  relatively 
progressive  also  thanks  to  the  current 
structure  of  tax  brackets.  Graph  A19.2  shows 
that  the  labour  tax  wedge  for  Italy  in  2022  was 
higher  than  the  EU  average  for  single  persons  at 
different  wage  levels  (50%,  67%,  100%  and 
167% of the average wage).  Second earners at a 
wage  level  of  67%  of  the  average  wage,  whose 
spouses  earn  the  average  wage,  also  faced  a  tax 
wedge  higher  than  the  EU  average.  While  the 
changes to personal income taxation introduced in 
2022  may  have  reduced  the  tax  burden  for  low 
and  medium  income  earners,  the  tax  wedge 
remained  above  the  EU  average.  A  lower  labour 
tax  wedge  could  markedly  support 
labour 
participation,  as  EUROMOD  simulations  suggest 
(see Chapter 3). Regarding corporate taxation, the 
average 
corporate 
forward-looking  effective 
income tax rates were considerably above the EU-
27 average in 2021.  

Several  measures  have  been  enacted  in 
recent  years  to  encourage  tax  compliance, 
but  tax  evasion  remains  very  high.  Recent 
the  compulsory  use  of 
measures 
electronic  invoicing  and  government  incentives  to 
encourage  the  use  of  electronic  payments.  As  a 

included 

(1) Forward-looking effective tax rate (OECD) 
(2) A higher value indicates stronger redistributive impact of taxation 
(*) EU-27 simple average 
For more data on tax revenues as well as the methodology applied, see European Commission, Directorate-General for Taxation 
and Customs Union, Taxation trends in the European Union: data for the EU Member States, Iceland, Norway and United Kingdom: 
2021 edition, Publications Office, 2021, https://data.europa.eu/doi/10.2778/843047 and the ‘Data on Taxation’ webpage (data 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en). For more details on the VAT gap, 
see European Commission, Directorate-General for Taxation and Customs Union, ‘VAT gap in the EU: report 2022’, Publications 
Office, 2022, https://data.europa.eu/doi/10.2778/109823  
Source: European Commission, OECD. 

78 

2010201920202021202220102019202020212022Total taxes (including compulsory actual social contributions) (% of GDP)41.242.242.543.337.939.940.040.6Labour taxes (as % of GDP)21.521.522.322.020.020.721.320.9Consumption taxes (as % of GDP)10.611.210.611.310.811.110.711.2Capital taxes (as % of GDP)9.29.59.79.97.18.18.08.5Total property taxes (as % of GDP)1.82.42.42.51.92.22.22.2Recurrent taxes on immovable property (as % of GDP)0.61.41.51.41.11.21.21.1Environmental taxes as % of GDP2.83.23.03.02.42.42.22.2Tax wedge at 50% of average wage (Single person) (*)40.736.436.335.634.733.932.331.932.131.7Tax wedge at 100% of average wage (Single person) (*)47.247.946.945.445.941.040.139.939.639.7Corporate income tax - effective average tax rates (1) (*)20.921.321.319.519.419.1Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)5.96.56.68.08.67.78.17.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)200.7213.631.640.7VAT Gap (% of VAT total tax liability, VTTL)21.820.811.09.1ItalyEU-27Tax structureProgressivity & fairnessTax administration & compliance 
 
 
 
      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph A19.1: Tax revenues from different tax types as % of total taxation 

Note: Values for EU are GDP-weighted EU averages (EU aggregates) 
Source: European Commission 

Graph A19.2: Tax wedge for single and second 
earners as a % of total labour costs, 2022 

Note: Second earner tax wedge assumes first earner at 100% 
of the average wage and no children. For the methodology of 
the tax wedge for second earners see OECD (2016) “Taxing 
Wages 2014-2015”.  
Source: European Commission 

revenues.  They 

result,  the  VAT  gap  (the  gap  between  revenues 
actually  collected  and  the  theoretical  tax  liability) 
continued  to  decrease  and  reached  20.8%  in 
2020, although it remains well above the EU-wide 
gap  of  9.1%. 
Important  additional  measures 
against  tax  evasion  have  been  implemented  in 
2022  as  part  of  the  RRP,  and  are  expected  to 
improve  tax  compliance  and  support 
further 
government 
include  better 
targeting  of  audits  and  controls,  the  extension  of 
electronic  invoicing  to  self-employed  workers  in 
simplified regimes and sanctions for the refusal of 
electronic  payments.  At  the  same  time,  measures 
equivalent  to  tax  amnesties  that  were  introduced 
with  the  2023  budget,  together  with  the  increase 
of the legal threshold for cash payments from EUR 
2 000 to EUR 5 000, risk having a negative impact 
on  tax  compliance.  Outstanding  tax  arrears  have 
increased slightly by 12.9 pps. to 213.6% of total 
net  revenue  for  2021  and  remained  significantly 
above  the  EU-27  average.  However,  the  high 
amount of tax arrears is mostly related to national 
accounting rules which prevent writing-off arrears 
considered  not  collectable,  while  the  share  of 
‘collectable  arrears’  is  very  low  in  Italy. (139)  The 
RRP also includes measures to further develop the 
digitalisation of the tax administration, such as the 
launch  of  pre-filled  VAT  tax  returns,  which  is 
expected  to  further  reduce  compliance  costs  and 
tax arrears. 

(139) See OECD (2023) “Tax Administration 2022, Comparative 
Information on OECD and other Advanced and Emerging 
Economies” (1e797131-en.pdf (oecd-ilibrary.org)) 

79 

34.740.145.953.842.520253035404550556050100150Tax wedge, % of total labour costsEarnings in % of the average wageSingle earner - ITSingle earner - EU averageSecond earner -  ITSecond earner -  EU average51.4327.5421.0150.8826.1822.94Tax revenue shares in 2021, Italy (outer ring) and the EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital5.474.321.381.000.070.193.342.642.452.75012345678Italy -environmentaltaxationEU -environmentaltaxationItaly - propertytaxationEU - propertytaxationEnvironmental and property taxation as % of total tax revenue, Italy and the EUEnergy taxesTransport taxesResource/pollution taxesRecurrent property taxesOther property taxes 
                                                 
      
 
 
 
 
  
 
ANNEX 20: TABLE WITH ECONOMIC AND FINANCIAL INDICATORS 

Table A20.1: Key economic and financial indicators 

(1) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches. 
(2) Net international investment position (NIIP) excluding direct investment and portfolio equity shares. 
Source: Eurostat and ECB as of 2 May 2023, where available; European Commission for forecast figures (Spring forecast 2023). 

80 

2004-072008-122013-1920202021202220232024Real GDP (y-o-y)1.4-1.40.5-9.07.03.71.21.1Potential growth (y-o-y)0.7-0.20.0-0.10.10.90.80.9Private consumption (y-o-y)1.2-1.10.5-10.44.74.60.11.2Public consumption (y-o-y)0.3-0.4-0.30.01.50.00.4-1.3Gross fixed capital formation (y-o-y)1.8-4.90.6-7.918.69.42.61.4Exports of goods and services (y-o-y)5.9-0.92.6-13.514.09.42.33.1Imports of goods and services (y-o-y) 5.3-2.92.8-12.115.211.80.82.3Contribution to GDP growth:Domestic demand (y-o-y)1.2-1.70.3-7.66.44.60.70.8Inventories (y-o-y)0.1-0.20.1-0.50.4-0.40.00.0Net exports (y-o-y)0.10.60.0-0.80.2-0.50.60.3Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.3-0.30.0-0.4-0.50.30.10.1Capital accumulation (y-o-y)0.60.3-0.1-0.10.20.40.40.4Total factor productivity (y-o-y)-0.2-0.10.10.40.30.30.30.4Output gap2.2-1.1-2.1-8.3-2.00.71.11.3Unemployment rate7.38.511.59.39.58.17.87.7GDP deflator (y-o-y)2.31.51.01.60.63.05.92.7Harmonised index of consumer prices (HICP, y-o-y)2.22.40.7-0.11.98.76.12.9HICP excluding energy and unprocessed food (y-o-y)2.02.10.80.50.84.05.83.1Nominal compensation per employee (y-o-y)2.61.10.8-4.15.94.83.94.1Labour productivity (real, hours worked, y-o-y)0.20.00.33.1-1.0-0.30.20.7Unit labour costs (ULC, whole economy, y-o-y)2.32.10.83.1-0.42.83.13.1Real unit labour costs (y-o-y)0.00.5-0.21.5-1.0-0.2-2.60.4Real effective exchange rate (ULC, y-o-y)0.90.3-0.5-2.20.3-0.8-2.7-0.5Real effective exchange rate (HICP, y-o-y)0.6-0.4-0.10.3-0.2-1.4..Net savings rate of households (net saving as percentage of net disposable income)8.64.62.910.27.62.1..Private credit flow, consolidated (% of GDP)9.92.9-0.14.03.5...Private sector debt, consolidated (% of GDP)99.7121.3113.3118.4113.5...of which household debt, consolidated (% of GDP)34.142.441.644.943.3...of which non-financial corporate debt, consolidated (% of GDP)65.578.971.773.570.2...Gross non-performing debt (% of total debt instruments and total loans and advances) (1)4.48.310.63.52.7...Corporations, net lending (+) or net borrowing (-) (% of GDP)-0.20.63.06.26.25.15.45.5Corporations, gross operating surplus (% of GDP)23.021.321.421.221.222.222.722.6Households, net lending (+) or net borrowing (-) (% of GDP)2.40.91.77.46.02.1-0.9-0.6Deflated house price index (y-o-y)3.7-1.6-3.01.81.0-3.4..Residential investment (% of GDP)5.55.44.24.05.35.8..Current account balance (% of GDP), balance of payments-1.1-2.22.23.93.1-1.30.01.3Trade balance (% of GDP), balance of payments-0.2-0.72.93.62.3-1.5..Terms of trade of goods and services (y-o-y)-1.4-1.01.23.6-4.7-8.73.61.8Capital account balance (% of GDP)0.10.10.10.10.10.5..Net international investment position (% of GDP)-17.9-21.0-12.91.58.33.9..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-9.4-22.4-12.41.06.21.7..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)94.5113.9122.5139.3137.0128.6..Export performance vs. advanced countries (% change over 5 years)-0.5-12.4-6.5-2.3-1.6...Export market share, goods and services (y-o-y)-2.6-5.8-0.2-2.8-0.45.3-0.3-0.7Net FDI flows (% of GDP)0.81.0-0.11.11.7-1.1..General government balance (% of GDP)-3.1-3.7-2.4-9.7-9.0-8.0-4.5-3.7Structural budget balance (% of GDP)-4.7-3.4-1.4-5.2-8.4-8.6-5.3-4.5General government gross debt (% of GDP)105.6117.6134.4154.9149.9144.4140.4140.3forecast 
 
 
 
      
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  Annex  assesses  fiscal  sustainability 
risks  for  Italy  over  the  short,  medium  and 
long term. It follows the same multi-dimensional 
approach  as  the  European  Commission’s  2022 
Debt Sustainability Monitor, updated based on the 
Commission’s 2023 spring forecast. 

1  -  Short-term  risks  to  fiscal  sustainability 
low  overall.  The  Commission’s  early-
are 
detection  indicator  (S0)  does  not  signal  major 
short-term  fiscal  risks  (Table  A21.2). (140)  Gross 
financing  needs  are  expected  to  remain  large  at 
around  24%  of  GDP  in  the  short  term  (i.e.  over 
2023-2024),  although  declining  compared  with 
the  recent  peak  in  2020  (Table  A21.1).  Financial 
markets’ perceptions of sovereign risk are positive, 
as confirmed by the ratings of the main agencies. 

2 - Medium-term risks to fiscal sustainability 
are high overall.  

The  DSA  for  Italy  shows  that,  under  the 
baseline,  the  government  debt  ratio 
is 
projected  to  remain  at  a  high  level  over  the 
medium  term  (at  156.5%  of  GDP  in  2033) 
(Graph  1). (141), (142)  The  assumed  structural 
primary  balance  (a  deficit  of  0.3%  of  GDP) 
contributes  to  these  developments.  It  appears 
plausible  compared  with  past  fiscal  performance, 
indicating that the country has room for corrective 
action.  At the  same  time, the  baseline  projections 

(140) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of macro-financial and 
fiscal variables that have proven to perform well in the past 
in detecting situations of upcoming fiscal stress.  

(141) The assumptions underlying the Commission’s ‘no-fiscal 
policy change’ baseline notably comprise: (i) a structural 
primary deficit, before ageing costs, of 0.3% of GDP as of 
2024; (ii) inflation converging linearly towards the 10-year 
forward inflation-linked swap rate 10 years ahead (which 
refers to the 10-year inflation expectations 10 years from 
now); (iii) the nominal short- and long-term interest rates on 
new and rolled over debt converging linearly from current 
values to market-based forward nominal rates by T+10 (as 
for all Member States); (iv) real GDP growth rates from the 
Commission 2023 spring forecast until 2024, followed by 
EPC/OGWG ‘T+10 methodology projections between T+3 and 
T+10, i.e. for 2025-2033 (on average 0.5%); (v) ageing costs 
in line with the 2021 Ageing Report (European Commission, 
Institutional Paper 148, May 2021). For information on the 
methodology, see the 2022 Debt Sustainability Monitor 
(European Commission, Institutional Paper 199, April 2023). 

until 2033 are overall affected by an unfavourable 
snowball  effect,  driven  by  the  tightening  of 
financing  conditions,  though  the  impact  of  Next 
Generation  EU  is  expected  to  support  real  GDP 
growth  at  around  0.5%  over  2025-2033. 
Government gross financing needs are expected to 
remain  large  over  the  projection  period,  reaching 
around  28%  of  GDP  in  2033,  above  the  level 
forecast for 2024 (Table A21.1).  

lead 

(SPB)’  scenario  would 

The  baseline  projections  are  stress  tested 
against  four  alternative  scenarios  to  assess 
the  impact  of  changes  in  key  assumptions 
(Graph  1).  For  Italy,  reverting  to  historical  fiscal 
trajectories under the ‘historical structural primary 
balance 
to  a 
significantly  lower  government  debt  ratio.  If  the 
SPB  gradually  converged  to  a  surplus  of  1.4%  of 
GDP (its historical 15-year average), the projected 
debt-to-GDP  ratio  would  be  around  12  pps.  lower 
compared  to  the  baseline  in  2033.  A  permanent 
worsening  of  the  macro-financial  conditions,  as 
reflected  under  the  ‘adverse  interest-growth  rate 
differential’  scenario  (i.e.  1  pp.  higher  than  the 
baseline)  would  result  in  a  persistently  higher 
government  debt-to-GDP  ratio,  by  around  13.5 
pps.  of  GDP  by  2033,  as  compared  with  the 
baseline.  A  temporary  worsening  of  financial 
conditions,  as  reflected  in  the  ‘financial  stress 
‘scenario  (i.e.  temporary increase  of  interest  rates 
by 3.2 pps.), would lead to a higher public debt-to-
GDP  ratio  by  2033  (about  +5  pps.  of  GDP) 
compared  with  the  baseline.  The  ‘lower  structural 
primary  balance  (SPB)’  scenario  (i.e.  SPB  level 
permanently  reduced  by  half  of  the  cumulated 
forecast change), would also lead to a significantly 
higher  government  debt-to-GDP  ratio  by  2033 
(around  +21.5  pps.  of  GDP)  compared  with  the 
baseline.  

Additionally,  stochastic  debt  projections 
(Graph  2). (143)  These 
indicate  high  risk 
stochastic simulations point to 47% probability of 
the debt ratio in 2027 being greater than in 2022, 
entailing  high  risk  given  the  initial  high  level  of 
debt.  In  addition,  such  shocks  point  to  high 
uncertainty  (i.e.,  the  difference  between  the  10th 
and 90th debt distribution percentiles) surrounding 
the government debt baseline projections. 

(142) Table 1 shows the baseline debt projections and its 

(143) These projections show the impact on debt of 2000 different 

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.  

shocks affecting the government’s primary balance, 
economic growth, interest rates and exchange rates. The 
cone covers 80% of all simulated debt paths, therefore 
excluding tail events 

81 

 
 
                                                 
                                                 
 
 
financing  sources 

COVID-19  crisis  related  state  guarantees.  On  the 
other-hand,  risk-mitigating  factors  include  the 
lengthening  of  debt  maturity  in  recent  years, 
relatively  stable 
(with  a 
diversified  and  large  investor  base)  and  the 
positive  net  international  investment  position.  In 
addition, 
the 
NGEU/RRF,  if  fully  implemented,  could  have  a 
further  positive  impact  on  GDP  growth  in  the 
coming years, and therefore help to mitigate debt 
sustainability risks. 

reforms  under 

the  structural 

3  -  Long-term  risks  to  fiscal  sustainability 
are medium overall. (144)  

The S2 sustainability gap indicator (at 0.5 pp. 
of  GDP)  points  to  low  risk,  suggesting  that 
Italy would only need a limited  improvement 
in  its  structural  primary  balance  to  ensure 
debt  stabilisation  over  the  long  term.  This 
result  is  mostly  underpinned  by  the  projected 
decrease  of  pension  spending  (-1.7  pps.  of  GDP) 
over  the 
long  term,  which  is  offset  by  an 
unfavourable initial budgetary position (+0.9 pp. of 
GDP) and the projected increase of health care and 
long-term  care  spending 
(+0.8  pp.  of  GDP 
respectively; 
Table  A21.1).  A  number  of 
investments  and  reforms in  the  RRP  contribute to 
supporting the efficiency of the Italian health care 
system,  and  it  will  be  important  to  carefully 
monitor their implementation. 

Yet,  combined  with  debt  vulnerabilities,  as 
highlighted by the S1 indicator, overall long-
term  risks  are  assessed  as  medium.  Indeed, 
the  S1  sustainability  gap  indicator  signals  that  a 
consolidation  effort  of  3.5  pps.  of  GDP  would  be 
needed  to  reduce  debt  to  60%  of  GDP  by  2070. 
This result is mainly driven by the high level of the 
Italian  government  debt  ratio  (contribution  of  1.6 
pps.  of  GDP),  the  contribution  of  ageing  costs  (1 
pp. of GDP) and an unfavourable initial budgetary 
position  (contribution  by  0.8  pp.  of  GDP)  (Table 
A21.1).  

Finally,  several  additional  risk  factors  need 
to  be  considered  in  the  assessment.  On  the 
one hand, risk-increasing factors are related to the 
recent  increase  of  interest  rates,  the  share  of 
short-term  government  debt  and  to  contingent 
liability  risks  stemming  from  the  private  sector, 
including  via  the  possible  materialisation  of 

(144) The S2 fiscal sustainability gap indicator measures the 

permanent fiscal effort (SPB adjustment) in 2024 that would 
be required to stabilise public debt over the long term. It is 
complemented by the S1 fiscal sustainability gap indicator, 
which measures the permanent fiscal effort required in 2024 
to bring the debt-to-GDP ratio to 60% in the long term (by 
2070). For both the S1 and S2 indicators, the risk 
assessment depends on the amount of fiscal consolidation 
needed: ‘high risk’ if the required effort exceeds 6 pps. of 
GDP, ‘medium risk’ if it lies between 2 pps. and 6 pps. of 
GDP, and ‘low risk’ if the effort is negative or below 2 pps. of 
GDP. The overall long-term risk classification brings together 
the risk categories derived from S1 and S2. S1 may notch up 
the risk category derived from S2 when it signals a higher 
risk than S2. See the 2022 Debt Sustainability Monitor for 
further details. 

82 

 
                                                 
 
Table A21.1: Debt sustainability analysis - Italy 

Source: Commission services. 

Table A21.2: Heat map of fiscal sustainability risks - Italy 

Source: Commission services. 

83 

Table 1. Baseline debt projections20202021202220232024202520262027202820292030203120322033Gross debt ratio (% of GDP)154.9149.9144.4140.4140.3140.2140.8142.1143.3145.0147.3150.0153.2156.5Changes in the ratio20.8-5.0-5.5-4.0-0.1-0.10.61.31.21.72.32.73.23.2of whichPrimary deficit6.25.53.60.5-0.50.00.40.81.01.21.51.71.92.0Snowball effect14.4-7.4-5.2-5.7-1.00.00.20.50.20.50.81.11.31.2Stock-flow adjustments0.2-3.1-3.91.21.40.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)29.925.523.023.923.422.723.424.124.625.225.926.727.528.3S1S2Overall index  (pps. of GDP)3.50.5of which Initial budgetary position0.80.9Debt requirement1.6Ageing costs1.0-0.3of which    Pensions0.0-1.7     Health care0.70.8     Long-term care0.60.8Others-0.2-0.3Table 2. Breakdown of the S1 and S2 sustainability gap indicators608010012014016018020020202021202220232024202520262027202820292030203120322033Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p9045556575859510511512513514515516517520202021202220232024202520262027% of GDPGraph 2. Stochastic debt projections 2023-2027MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallHIGHHIGHHIGHHIGHHIGHHIGHDebt level (2033), % GDP156.5144.3178.0169.9161.3Debt peak year20332022203320332033Fiscal consolidation space63%46%74%63%63%Probability of debt ratio exceeding in 2027 its 2022 level47%Difference between 90th and 10th percentiles (pps. GDP)43.2(1)Debtlevelin2033.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidtationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2027its2022level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifference 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.Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)LOWHIGHLOWMEDIUMMEDIUM 
 
 
   
 
 
   
 
ANNEX 22: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX  

interest 

increasing 

and 
further 
strengthen  bank  profitability.  The  corporate-
sovereign-bank  nexus  has  been  intensified  by  the 
wide use of public guarantee schemes.  

rates  may 

recent 

reforms  may 

started 
reviews  and 

reduce 
Some 
macroeconomic  imbalances,  contingent  on 
implementation,  while  policy  needs 
full 
to 
remain.  The  government  has 
implement  yearly  spending 
is 
progressing with actions to improve tax collection. 
Reforms  and  investments  are  set  to  gradually 
boost  productivity and growth. The major steps in 
2021  were  followed  by  efforts  in  2022,  including 
the  implementation  of  the  reforms  in  the  judicial 
and  education  systems,  as  well  as  the  reform  to 
improve  the  management  of  public  employment, 
coupled  with  major  investments,  such  as  to 
support digitalisation of firms. In 2022, measures 
were  also 
the  business 
environment, including public procurement and the 
annual  competition  law.  The  government  also 
enhanced  and  extended  active  labour  market 
policies.  The  new  insolvency  framework  entered 
into force in July 2022 and is expected to prevent 
the  accumulation  of  new  non-performing  loans. 
Challenges  in  the  areas  of  pension  expenditure, 
taxation,  fiscal  framework,  demographic  trends, 
and  energy  call  for  further  policy  measures  that 
are not or only partially envisaged in the RRP. 

improve 

taken 

to 

Based  on  this  assessment,  the  Commission 
considered  in  its  communication  European 
Semester – 2023 Spring Package (COM(2023) 
600  final)  that  Italy  continues  to experience 
excessive imbalances. 

The  Macroeconomic 
Imbalance  Procedure 
matrix presents the main elements of the in-
depth  review  undertaken  for  Italy (145).  Italy 
was  selected  for  an  in-depth  review  in  the  2023 
Alert  Mechanism  Report.  This  in-depth  review  on 
the  prevention  and  correction  of  macroeconomic 
imbalances  presents  the  main  findings  on  the 
gravity  and  evolution  of  the  challenges  identified, 
as  well  as  policy  responses  and  potential  policy 
needs.  Findings  cover  all  areas  of  vulnerability 
assessed in the in-depth review. 

constitutes  a 

While  there  have  been  some  improvements, 
Italy  continues  to  face  vulnerabilities  with 
cross-border  relevance,  relating  to  the  high 
government  debt  and  weak  productivity 
labour  market 
in  a  context  of 
growth, 
fragilities  and  some  weaknesses 
in  the 
financial  sector.  Italy’s  public  debt  ratio  further 
in  2022  along  with  the  economic 
declined 
recovery, but it remains high, above pre-pandemic 
levels  and 
fiscal 
sustainability  and  financial  sector  stability.  Since 
the  COVID-19  pandemic,  volatile  productivity 
growth  has  masked  structural  shortcomings  that 
led to a virtual stagnation of GDP per hour worked 
over almost two decades. While employment rates 
are  still  low,  youth  unemployment  still  high,  and 
regional as well as gender disparities persist, there 
have  been 
recently.  Visible 
improvements  have  also  been  made  in  reducing 
NPLs,  while  the  corporate-sovereign-bank  nexus 
remains  a  challenge 
in  a  macroeconomic 
environment with increasing interest rates.  

improvements 

risk 

for 

Italy’s 

forward, 

long-standing 
Going 
vulnerabilities  are  not  expected  to  unwind 
quickly. While the public debt ratio is forecast to 
further  decline  by  next  year,  it  is  set  to  remain 
funding  costs  dampen  capital 
high.  Rising 
deepening. Productivity is nonetheless expected to 
gradually  improve,  as  a  result  of  implemented 
reforms  and  investment  included  in  Italy’s  RRP. 
The labour market proved to be resilient during the 
pandemic crisis, including due to the public policies 
support,  however,  structural  challenges  remain. 
Banks’  asset  quality  may  be  negatively  impacted 
by the energy crisis and increasing financing costs. 
The  banking  system  is  in  relatively  good  shape, 

(145)  European Commission (2023), In-Depth Review for Italy, 

Commission staff working document (COM(2023) 634 final),  
in accordance with Article 5 of Regulation (EU) No 
1176/2011 on the prevention and correction of 
macroeconomic imbalances.  

84 

 
 
                                                 
 
 
Table A22.1: Assessment of macroeconomic imbalances matrix 

Source: European Commission 

85 

Gravity of the challengeEvolution and prospectsPolicy responseUnsustainable trends, vulnerabilities and associated risksPublic debtItaly’s public debt ratio remains high in a euro area comparison, at 144.4% of GDP in 2022. 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, which hamper their lending activity.After the public debt ratio reached its peak of 154.9% in 2020, on the back of policies tackling the Covid crisis and the drop in economic activity, it declined markedly in 2021 and 2022, also in part due to the economic recovery. It is projected to further decline to 140.3% by 2024 thanks to improving primary balances. The withdrawal of energy support measures is also expected to reduce the budget deficit, albeit it is projected to remain above 3% of GDP in 2024. Sovereign yields increased in 2021 and further in 2022, amid tighter financing conditions. Debt sustainability analysis suggests that fiscal sustainability risks are low in the short term, but high in the medium term and medium in the long term.Recent policy measures help reduce the public debt ratio, but more actions are needed. New measures of around 1% of GDP weigh on the 2023 deficit, including temporary ones to counter the social and economic impact of high energy prices. Temporary early retirement schemes since 2019, partly extended to 2023, increase pension expenditure in the medium term and worsen the public spending bias towards them. Policies against tax evasion started to bear fruit and RRP measures in 2022 may underpin it. The Finance Ministry’s reinforced role following the RRP is expected to raise the effectiveness of spending reviews, for which the 2023 budget set savings targets. A revenue-neutral tax shift from labour to less growth detrimental sources would help closing remaining policy gaps.Productivity and competitivenessWeak productivity growth is a long-standing challenge. Growth in real labour productivity (per hour worked) averaged 0.4% during 2009-2019 after stagnating in the decade before (EU: 1.2% in both decades). 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 critical to sustain competitiveness and GDP growth, which is crucial to substantially reduce the public debt ratio.From 2019 to 2022, labour productivity grew by 0.6% per year, slightly above the weak trend growth of the past decade. This average annual growth masks strong annual fluctuations since 2020. Productiv-ity grew sizeably by 3.1% in 2020, as the drop in hours worked largely exceeded the fall in economic output. With rising hours worked, productivity dropped by 1% in 2021, followed by a 0.3% decline in 2022. Going forward, rising capital costs dampen investments, while the green transition, supply chain reorganisations and reforms that improve the business environment might lift productivity in the medium term. Recent RRP measures to improve the business environment, including those on  public procurement and the 2022 annual competition law, may simplify and speed up bureaucratic procedures as well as improve sectoral regulations. The government further implemented the judicial system reforms launched in 2021 to increase the efficiency of courts. In 2022, measures were also adopted to improve administrative capacity and the management of public employment. Productivity would benefit from additional policy efforts beyond the RRP, notably in the areas of demography, labour market and energy.Labour market participation and unemploymentThe labour market continues to face low participation rates, particularly for women, young people and in the South. The youth unemployment rate and the share of young people not in employment, education or training are among the highest in the EU. The supply of tertiary and vocational graduates is well below the level of peer countries and falls short of available job vacancies.  The unemployment rate averaged 8.1% in 2022, down from 9.5% in 2021. On the back of renewed dynamism in recruitment of permanent employees, the labour demand outlook stays positive despite slowing output growth.  Both long-term and youth unemployment dropped significantly in 2022, to well below pre-crisis levels. RRP measures are expected to address some of the labour market’s structural challenges in the medium term.Some policies addressed labour market vulnerabilities. The 2021 labour market reform and the RRP’s strengthening of work-based skill formation facilitate job matching and transitions. The RRP supports vocational training, notably at tertiary level, adult learning and the dual system. Their balanced sectoral and geographical distribution may reduce territorial divides. Expanded child care facilities may encourage female labour market participation. Implementation of RRP measures to reduce undeclared work, improve labour activation and enhance workers’ skills is pending. Financial SectorSubstantial progress was made in the reduction of NPLs. The gross NPL ratio declined from 16.5% in 2014 to 2.9% in Q3-2022. However, risks are concentrated in less significant institutions and in southern regions where NPL ratios and borrowing costs are higher. The policy response to the pandemic intensified the corporate-sovereign-bank nexus, which remains a challenge for the banking sector. Italian banks remain highly capitalized with a CET1 ratio of 14.7% in Q3-2022 and a rising trend in profitability driven by the increase of net interest income (+9% yoy).A dynamic  market for securitizations and asset disposal  allowed considerable improvements in the reduction of NPLs. However, the slowdown of economic activity, inflation and increasing financing and refinancing costs weigh on borrowers’ ability to repay loans and may negatively affect asset quality. This is also relevant for public guaranteed loans which account for more than 35% of loans to non-financial corporations. As regards to funding, banks are expected to be able to cope with the challenges posed by the phasing out of the TLTRO loans. Important policies tackled financial sector imbalances. The insolvency reform entered into force in 2022. The new out-of-court settlement is now operational and may facilitate an earlier restructuring of distressed companies. Liquidity schemes were extended for energy intensive sectors and prudent capital endowment has been built up for potential losses on public guaranteed exposure. The budget law 2023 offered the option for low-income households to switch from a variable to fixed interest rate mortgage. The GACS scheme expired in 2022 but a revised version is under consideration. To lower risks from the corporate-sovereign-bank nexus, further public debt reduction would be supportive.