COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Italy Accompanying the document Recomendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Italy
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Italy, budget policy, competitiveness, economic policy, economic recovery, economic reform, employment policy, fiscal policy, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 19.6.2024  SWD(2024) 612 final  COMMISSION STAFF WORKING DOCUMENT 2024 Country Report - Italy Accompanying the document Recomendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Italy {COM(2024) 612 final}  
 
 
 
 
 
ECONOMIC AND EMPLOYMENT SNAPSHOT 

The  flow  of  credit  has  decreased  over  the 
course  of  2023,  especially  for  non-financial 
corporations,  and 
interest  rates  for  both 
households  and  non-financial  corporations 
have  increased  significantly.  Italy  has  phased 
out  the  tax  credits  for  housing  renovation, 
bringing  investment  in  construction  down  in 
2024  after  the  2021-2023  boom.  However, 
the  negative  impact  on  capital  formation  is 
going  to  be  more  than  offset  by  the  steady 
roll-out  of  investments  in  infrastructure  and 
equipment under the RRP in 2024-2025, which 
will  boost  GDP  growth.  At  the  same  time, 
higher borrowing costs coupled with lower real 
disposable  incomes over the past 3 years are 
expected to push households to increase their 
savings and hold back spending. 

Exports  have  been  hit  by 
lacklustre 
growth,  worldwide  and  in  the  EU.  Supply 
chain bottlenecks and war-induced disruptions 
eased  in  2023  but  global  demand  rose  only 
slightly  since  prices  remained  high  and  the 
monetary  policy  stance  stayed  tight  to  tame 
inflation.  Thanks  largely  to  improving  relative 
prices, the trade balance went back to positive 
territory,  with  net  exports  of  goods  and 
tourism-related services recovering better than 
in 
exports  of  other  services,  traditionally 
deficit.  Negative  net 
income  flows  from 
financial  portfolio  investments  were  also  a 
drag on the 2023 current account, due to the 
maturity mismatch of assets and liabilities. 

Energy  deflation 
is  bringing  down 
consumer  price  inflation.  With  the  rapid 
decline  in  the  price  of  energy  and  industrial 
commodities,  headline  inflation  fell  rapidly  to 
a low of 0.5% year-on-year in December (well 
below  the  2.9%  euro-area  average)  and 
remained  low  in  early  2024.  Prices  of  goods, 
including processed food, benefited from lower 
costs  of  energy  and  material  inputs.  Prices  of 
labour-intensive  services  are  likely  to  keep 
rising,  reflecting  long-overdue  work-contract 
renewals in a tight  labour market  and after a 

Slowdown in growth and inflation 

After a vigorous post-pandemic recovery, 
Italy’s outlook for growth has clouded (1). 
Over  2021-2022,  real  GDP  swiftly  rebounded 
from 
the 
the  COVID-19  pandemic,  but 
economic  recovery  was  hit  by  the  fallout  of 
Russia’s  war  of  aggression  against  Ukraine, 
affecting  both  trade  flows  and  prices.  Growth 
slowed  from  4.0%  in  2022  to  0.9%  in  2023, 
reflecting softer domestic demand and smaller 
trade  flows.  GDP  is  forecast  to  increase  by 
0.9% in 2024, due to higher interest rates and 
tighter  financing  conditions  and  then  to 
accelerate  to  1.1%  in  2025,  partly  thanks  to 
the  fiscal  stimulus  given by  funding  allocated 
under the recovery and resilience plan (RRP). 

Graph 1.1: Investment by component 

Source: AMECO 

The phasing out of tax incentives and the 
tighter  financial  conditions  in  Italy  are 
curbing  private  investment,  but  public 
funds  backed  by  the  Recovery  and 
Resilience  Facility  (RRF)  provide  support. 

(1)  The cut-off date for the data used to prepare the 

Country Report was 15 May 2024. 

2 

0510152005101520959799010305070911131517192123% of GDPDwellingsInfrastructureEquipmentOther% of GDP 
 
   
 
protracted  loss  of  workers’  purchasing  power. 
Overall, headline inflation is forecast to fall to 
1.6%  this  year  and  then  to  pick  up  slightly to 
1.9% in 2025. 

Graph 1.2: Current account balance breakdown 

including  action  under  the  RRP,  are  making 
progress but further efforts are needed. 

Fiscal deficit improves with the 
unwinding of public support 
measures, but the debt keeps 
rising  

the 

These 

economy. 

Major fiscal  support  measures  and rising 
borrowing  costs  have  kept  government 
deficits  high  in  recent  years.  The  pre-
pandemic  average  primary  surplus  of  around 
into  a  deficit, 
turned 
1.6%  of  GDP 
averaging  -4.8%  of  GDP  each  year  between 
2020  and  2023,  driven  by  measures  to 
support 
included 
measures  to  cushion  the  negative  impact  of 
the  pandemic  and  energy  price  increases  on 
the economy, as well as government subsidies 
for private investment to accelerate the green 
and  digital  transition.  The  recent  increase  in 
borrowing  costs  has  also  added  to  the 
government  deficit.  Nevertheless,  thanks  to 
the  rapid  recovery  in  nominal  GDP  (+25.5% 
between 2020 and 2023), the public debt ratio 
fell  by  nearly  18  pps  of  GDP  compared  to  its 
2020 peak, reaching 137.3% of GDP in 2023. 

that 

the  debt-to-GDP 

The  government  deficit  is  expected  to 
improve from a very high base, but more 
fiscal  consolidation  will  be  needed  to 
ratio 
ensure 
remains  on  a  downward  path.  Overall,  the 
general  government  deficit  is  expected  to 
improve by 2025 according to the Commission 
forecast, although starting from a high deficit 
in 2023. This is strongly driven by the phasing 
out  of  the  extensive  policy  support  provided, 
including incentive schemes. At the same time, 
other policy measures adopted in recent years 
that  have  a  permanent  impact  (such  as  early 
retirement  schemes,  the  revised  tax-benefit 
system and a reduction in social contributions 
in poorer regions) create additional challenges 
for  the  speed  of  deficit  reduction.  Given  the 
higher  cost  of  borrowing  and  the  high  cash 
borrowing needs, the debt ratio is expected to 
increase again over 2024-2025. 

Source: Eurostat 

found 

Italy  still 

Italy  continues  to  face  vulnerabilities 
related  to  public  debt,  productivity, 
labour  and  the  financial  sector.  An  in-
depth  review  carried  out  as  part  of  the 
Macroeconomic  Imbalance  Procedure  earlier 
this  year 
faces 
that 
vulnerabilities relating to the high government 
debt  coupled  with  sizeable  fiscal  deficits  and 
weak  productivity  growth  in  a  context  of 
labour  market  fragilities  and  some  residual 
weaknesses  in  the  financial  sector (2).  The 
public debt ratio is projected to remain high in 
the  medium  term;  as  a  result,  the  sizeable 
debt servicing costs will limit the government's 
scope for growth-enhancing fiscal policies. Flat 
productivity 
structural 
shortcomings 
Italy's  economy.  Tighter 
financing  conditions  also  make  it  harder  to 
raise the level  of capital per worker. Although 
labour market conditions continued to improve, 
participation  rates  are  still  low,  especially 
among  young  people,  women  and  southern 
residents.  While  asset  quality  and  profitability 
have  risen,  Italian  banks  still  face  risks  linked 
to  the  sovereign,  including  via  the  state-
guaranteed  loans  in  their  balance  sheets. 
Access  to  non-bank  finance  remains  limited, 
affected also by higher market financing costs. 
vulnerabilities, 
Policies 

growth 
in 

reflects 

tackle 

these 

to 

(2)  COM(2024) 104 final. 

3 

-6-4-202468€ bnGoods' tradeServices' tradePrimary incomeSecondary incomeCurrent account 
   
 
 
Graph 1.3:  

Source: European Commission, Spring 2024 forecast 

In 

residential  buildings 

Tax credits, in particular schemes for the 
energy-efficient renovation of residential 
buildings,  have  a  major  impact  on  public 
finances. 
tax  credits, 
recent  years, 
especially  credits  for  the  energy-efficient 
renovation  of 
(the 
Superbonus  scheme)  and  for  the  digital 
transformation  of  businesses  (Transition  4.0), 
have  had  a  significant  impact  on  government 
finances,  leading  to  high  deficits.  The  uptake 
of  these  schemes,  which  was  higher  than 
expected  in  2022  and  2023,  is  anticipated  to 
put  significant  pressure  on  cash  borrowing 
needs and public debt as from 2024. 

tax 

The 
system  hinders  economic 
efficiency  and  growth.  There  is  room  to 
the  composition  of  government 
improve 
revenues 
fiscal 
to  support  growth  and 
sustainability. Italy’s tax system remains prone 
to  long-standing  weaknesses.  Special  regimes 
and  the  wide  range  of  tax  expenditures, 
including  on  VAT, make the  tax  system  highly 
complex  and  erode  the  tax  base,  resulting  in 
significant  revenue  loss.  Shifting  the  current 
high tax burden on labour to other underused 
sources of revenue less detrimental to growth 
would  lift  the  economic  potential.  Taxes  on 
energy  are  not  designed  to  encourage  the 
transition  to  clean  technologies.  Tax  evasion 
remains  high,  although  the  countermeasures 
taken in recent years are bearing fruit. 

4 

Employment increased but wages 
have not kept pace with inflation 

Employment  continues  to  increase,  but 
gaps  remain  for  women  and  young 
people,  adding  to  the  broader  challenges 
to  upward  social  convergence.  The 
participation  rate  rose  again  in  2023  to  a 
record  high  of  66.7%  of  the  population  aged 
15 to 64, though this is still well below the EU 
average  of  75.0%.  Although  the  increase  was 
similar  for  men  and  women,  the  rate  for 
Italian  women  remains  below  60%,  i.e.  more 
than  10  pps  below  the  EU  average.  Italy’s 
younger  generations  are  also  less  involved  in 
the  labour  market  than  their  EU  peers,  with 
over  16%  of  people  aged  15-29  not  in 
employment,  education  or  training,  5  pps 
above  the  EU  average  although  declining 
steadily since 2020. The employment rate (for 
people  aged  20-64)  rose  to  record  levels  in 
2023,  reaching  66.3%  and  narrowing  the  gap 
to  the  EU  (75.3%)  for  both  men  and  women. 
However, the employment rate remains one of 
the  lowest  in  the  EU  and  well  below  Italy’s 
2030  target  of  73%.  The  unemployment  rate 
decreased  further  to  7.7%  in  2023,  with  a 
particularly  strong  decrease  for  young  people 
aged  15-24  (-1.1  pp,  after  -6  pps  in  2022). 
Nonetheless,  the  youth  unemployment  rate 
remains  well  above  the  EU  average  at  22.7% 
against 14.5%. It will be important for Italy to 
tackle these long-standing challenges in order 
to  boost  economic  growth  and  implement  the 
European Pillar of Social Rights. 

Regional  disparities  within  Italy  remain 
profound.  The  employment  rate  in  the  south 
of  the  country  is  21  pps  lower  than  in  the 
north, with an even wider gap  for women (28 
pps).  The  regional  gap 
in  unemployment 
narrowed in 2022 but widened again in 2023. 
The unemployment rate in southern regions is 
still  triple the rate in northern regions (double 
for  people  aged  15-24,  see  Annex  14).  Italy 
must  increase  the  effectiveness  of  its  active 
labour  market  policies  to  bridge  the  regional 
divide and better match jobs to workers across 
the  country.  In  this  respect,  Italy  needs  to 
strengthen  monitoring  activities  to  effectively 
reforms  and 
track 

results  of 

the 

the 

-20-15-10-50510152025201120122013201420152016201720182019202020212022202320242025Stock-flow adjustmentInterestPrimary balanceReal GDPDeflatorDebt change% GDPForecast 
  
investments  undertaken  with  the  RRP  support 
(see Annex 14). 

Graph 1.4: Employment by job status 

Source: Italian statistics office (ISTAT) 

to 

restrictions 

The  educational  outcomes  of  young 
people  have  marginally  improved  but 
training  has  worsened  again. 
adult 
school 
Pandemic-related 
attendance  have  taken  a  toll  on  student 
performance in Italy, as elsewhere in the EU. In 
2022,  one  third  of  15-year-olds  both  in  Italy 
and the EU average lacked basic mathematics 
skills,  a  significantly  higher  share  than  in  the 
previous  OECD’s  PISA  survey 
in  2018. 
However,  the  share  of  Italian  15-year-olds 
without  basic  science  or  reading  skills  fell 
slightly 
respectively. 
Weaknesses 
in  school  performance  are 
compounded by a higher than average (though 
leaving 
falling)  share  of  young  people 
education and training early. Italy also has one 
of  the  lowest  tertiary  attainment  rates  in  the 
EU (see Annex 15). The shares of scientific and 
technical graduates and of ICT specialists rose 
very gradually (see Annex 10). Participation in 
adult  learning  schemes  fell  from  33.9%  in 
2016  to  29%  in  2022,  well  below  the  2030 
national target of 60% (3) (see Annex 14). 

to  24%  and  21% 

inflation 

non-standard 
High 
limit  workers’  purchasing 
contracts 
power. After a protracted stagnation, average 

and 

real  wages (4)  in  Italy  fell  by  2.6%  in  both 
2022  and  2023.  In  addition,  Italy  has  one  of 
highest  shares  in  the  EU  of  temporary  and 
self-employed  workers,  who  have  less  access 
to  adequate  social  protection.  As  a  result,  in-
work poverty rates remain high, on a par with 
Spain  but  well  above  France’s  or  Germany’s, 
particularly  for  employees  in  the  prime  age 
group  25-54.  Income  inequality  is  higher  in 
Italy  than  in  France  or  Germany.  The  ratio 
between the income of people in the first and 
fifth  quintiles  of  the  distribution  was  5.62  in 
2022,  down  from  the  previous  year  but  well 
above  the  levels  in  north-western  European 
countries.  The  Gini  coefficient  (a  measure  of 
inequality)  for  disposable  income  remained 
broadly  static  at  around  32-33%  in  recent 
years, 3 points above the EU average. 

Recent  changes  in  the  social  safety  net 
could  have  adverse  effects  on  upward 
social  convergence  in  terms  of  people  at 
risk  of  poverty  and  social  exclusion.  The 
new  minimum  income  scheme,  ‘Assegno  di 
inclusione’,  replacing  the  previous  ‘Reddito  di 
cittadinanza’  as  of  2024,  aims  to  strengthen 
the  incentives  for  people  to  join  the  labour 
market  and  has  more  restrictive  eligibility 
conditions.  People  not  eligible  for  this  benefit 
can  receive  a  smaller  transfer  for  up  to  12 
months, subject to attending a training course. 
Absolute  poverty  has  risen  significantly  to 
reach 8.3% of households in 2022, due to the 
impact  of  the  COVID-19  pandemic  and  the 
recent surge in inflation. (5) In 2022, the share 
of people at risk of poverty or social exclusion 
fell to 24.4%, from 25.2% one year earlier, on 
the  back  of  rising  incomes  and  employment. 
Further action is needed however to reach the 
2030  poverty  reduction  target.  After  social 
transfers,  the  share  of  people  at  risk  of 
poverty  or  social  exclusion  has  hovered  at 
around  20%.  The  poverty  risk  is  higher  for 
children  and  young  people  than  for  older 
people, given relatively generous pensions. It is 
for  single-adult  households, 
also  higher 
for  women  or  adults  with 
particularly 

(4)  Nominal gross wages and salaries per employee, 

deflated with the household consumption deflator. 

(5)  ISTAT, 2023, Le statistiche dell’Istat sulla povertà, Anno 

(3)  Eurostat, Adult Education Survey, 2022. 

2022. 

5 

610141822millionPermanent employeesTemporary employeesSelf-employed 
   
 
 
dependent  children.  Foreign  citizens  have 
nearly  double  the  risk  of  poverty  or  social 
exclusion than Italian citizens. The poverty risk 
is far higher in the south, more than twice the 
rate as in the centre-north of the country. 

Box 1: 

Italy’s competitiveness in brief 

Italy’s competitiveness is expected to get a boost from strong public investment and 
reform momentum under the RRP. Italy is relatively open to non-EU trade, although more in 
goods than in services. The main drivers of competitiveness include the higher rates of adoption 
of cloud technologies  by Italian businesses than  by their peer-country counterparts, though the 
rate  of  adoption  of  big  data  and  AI  is  lower.  The  combination  of  reforms  and  investments 
included in the RRP in public administration and procurement, justice, education, labour market, 
competition, healthcare, energy, digitalisation, research and innovation, sustainable mobility and 
social inclusion has the potential to improve Italy’s competitiveness.  

To  tackle  the  long-standing  challenges  to  competitiveness,  it  is  crucial  for  Italy  to  sustain  the 
pace of reform to create more growth-friendly conditions, including action under the RRP. 

The following competitiveness challenges remain: 

• 

• 

• 

There is room to improve the effectiveness of the  public administration to make it more 
responsive  to  businesses  and  citizens,  to  boost  administrative  capacity,  particularly  at 
subnational level, and to improve the implementation of investments and reforms. 

The  need  to  improve  the  business  environment.  Several  factors  would  contribute: 
shortening  the  time  it  takes  for  court  rulings  in  the  justice  system  would  incentivise 
investments,  especially  from  abroad,  by  increasing  legal  certainty.  Greater  competition 
would let more productive firms thrive, and improving access to finance, particularly non-
bank finance, would support young and innovative businesses. 

The  need  to  boost  research  and  innovation  capacities  and  to  invest  in  the  workforce, 
particularly  by  improving  the  education  system  and  expanding  up-  and  re-skilling 
schemes for adults. 

Box 2: 

UN Sustainable Development Goals (SDGs) 

Italy is  making progress  on all the SDGs related to competitiveness and productivity 
(SDG 4, 8, 9) and on macroeconomic stability (SDGs 8, 16, 17), though it is still below 
the  EU  average.  Performance  in  terms  of  work  and  economic  growth  (SDG  8)  and  global 
partnerships  (SDG  17)  is  significantly  below  the  EU  average,  mainly  due  to  low  levels  of 
investment  and  high  public  debt.  Italy's  performance  on  SDG  9  on  innovation,  industry  and 
resilient infrastructure is also below the EU average, mostly due to few patent applications, the 
low  share  of  freight  transport  infrastructure  and  fewer  households  with  a  high-speed  internet 
connection. 

Italy is improving its results on the indicator tracking life below water (SDG 14), but 
the  indicators  tracking  good  health  and  well-being,  clean  water  and  sanitation,  and 
life on land are showing worsening results (SDGs 3, 6, 15). Marine eutrophication fell to 
zero,  further  outperforming  the  EU  average  (SDG  14).  By  contrast,  land  degradation  has 
worsened, the impact of droughts on ecosystems has increased and the areas at risk of severe 
soil  erosion  by  water  have  also  increased  (SDG  15).  Health  indicators  are  still  above  the  EU 
average  but are  deteriorating, with fewer people  perceiving themselves as healthy,  the obesity 
rate rising and the use of antibiotics increasing (SDG 3). 

6 

 
 
 
 
 
 
IMPLEMENTATION OF KEY REFORMS AND 
INVESTMENTS USING EU INSTRUMENTS 

Funding from the Recovery and Resilience 
Facility  (RRF)  and  cohesion  policy  is 
mutually  reinforcing  Italy’s  efforts  to 
boost 
its  competitiveness  and  foster 
In  addition  to  the 
sustainable  growth. 
EUR 194.4  billion  of  RRF  funding  described  in 
Annex  3,  cohesion  policy  provides  Italy  with 
EUR 42.2  billion  for  the  2021-2027  period. 
Combined support from these two instruments 
is  equivalent  to  around  11.34%  of  the 
country’s  2023  GDP,  well  above  the  EU 
average of 5.38% (see Annex 4).  

challenges  and  reduce  the  country’s 
territorial  and  social  disparities.  The 
current  2021-2027  programming  period 
focuses  on  implementing  the  European  Pillar 
of  Social  Rights,  promoting  smart  growth, 
supporting SME competitiveness, research and 
innovation, contributing to the green objectives 
and  to  tackling  climate  change,  regional 
development and narrowing the gaps between 
the south and centre/north. The Just Transition 
Fund focuses its support on areas with carbon-
intensive  production  activities  in  Apulia  and 
Sardinia. 

Under  the  recovery  and  resilience  plan 
(RRP), Italy has launched important policy 
measures  that  are  expected  to  improve 
is 
the  country’s  competitiveness.  Italy 
implementing 
in 
reforms 
comprehensive 
several  areas  including  competition,  justice, 
tax 
public 
administration,  education,  the  labour  market 
Italy  has  also  made 
and  healthcare. 
substantial 
energy, 
in 
investments 
innovation, 
research 
digitalisation, 
sustainable mobility and social inclusion. 

procurement, 

employment, 

and 

Italy  has 

The  implementation  of  Italy’s  recovery 
and resilience plan is underway, however 
timely  completion  will  require  increased 
efforts. 
received  an  overall 
disbursement  of  EUR  102.48  billion  and  has 
submitted  a  5th  payment  request  on  29 
December  2023  (see  Annex  3).  The  size  and 
complexity  of  the  plan,  and  challenges  linked 
to  absorption  capacity,  call  for  accelerating 
investments  and  addressing  emerging  delays 
while  strengthening  administrative  capacities 
to  ensure  that  reforms  and  investments  can 
in 
be  completed  on 
particular, are highly concentrated towards the 
end  of  the  RRP  implementation  and  merit 
special attention. 

Investments, 

time. 

Cohesion  policy  funding  helps  tackle 
competitiveness 
Italy’s  growth  and 

7 

Boosting the green transition  

Italy  progress 

Cohesion  policy  funds  and  the  RRP 
in  the 
together  help 
transition  to  a  circular  economy  by 
improving  strategic  planning  and  waste 
management. Under the RRP, the strategy for 
circular  economy  and the waste  management 
programme provide a strategic framework for 
the  sector,  allowing  access  to  the  European 
(ERDF).  This 
Regional  Development  Fund 
support 
the 
narrow 
to 
infrastructure  gap  between  regions  in  the 
provision  of  waste 
services. 
waste  management 
Investments 
infrastructure  and  circular  economy  projects 
under 
the 
investments made with ERDF funds at regional 
the  national 
levels  under 
and  urban 
programme Metro+. 

the  RRP  also 

complement 

collection 

expected 

in 

is 

Italy  has  improved  its  regulatory  and 
market framework to boost the efficiency 
and effectiveness of public investment in 
the  water  sector.  The  RRP  brought  in  the 
single  operator 
incentive 
responsible  for  water  management 
in  a 
designated area, improving resource allocation 
and  streamlining  decision-making.  The  plan 

create  a 

to 

 
 
also discourages water waste and incentivises 
the  responsible  use  of  funds  to  improve 
infrastructure.  Italy  has  a  significant  risk  of 
hydrogeological instability, exacerbated by the 
effects  of  climate  change.  Therefore,  the  RRP 
includes  measures 
reduce  flood  and 
to 
hydrogeological risks and a reform to simplify 
and accelerate procedures for work to protect 
assets  from  hydrogeological  instability.  The 
ERDF  also  allocates  EUR  1.2  billion 
to 
sustainable  water  management  across  9 
regions 
targeting  water  supply, 
leakage reduction and capacity building. 

Italy, 

in 

is 

to 

steps 

taking 

Italy 
reduce 
administrative  barriers  in  the  energy 
sector  and  to  streamline  permitting 
procedures.  Under  its  RRP,  Italy  has  already 
adopted reforms to facilitate the permitting of 
projects  in  renewable  energy  sources  and 
sustainable transport. The REPowerEU chapter 
will  help  streamline  the  authorisation  process 
for  renewable  energy  projects  into  a  single 
reducing 
legal  document 
compliance  costs  and  accelerating  project 
approvals. These reforms have the potential to 
improve implementation of ERDF programmes. 
These  programmes  allocate  EUR  1.6  billion  to 
roll  out  solar,  wind,  sustainable  biomass, 
geothermal and other renewable sources, with 
a 
self-
focus  on 
technologies, 
consumption  and 
especially in less developed regions. 

small-scale  energy 

(Testo  Unico), 

innovative 

the 

2022 

complemented  the  civil  and  criminal  justice 
reform  initiated  in  2021  to  reduce  the  length 
of  proceedings  and  focus  on  digitalisation  of 
the  justice  system.  A  new  Public  Procurement 
Code  simplifies  and  streamlines  tendering 
procedures.  Under 
Annual 
Competition  Law,  Italy  is  improving  anti-trust 
enforcement  and  simplifying  authorisation 
procedures in the retail sector. Implementation 
of 
is 
underway. 
public 
administrations,  in  particular  at  central  and 
local  levels,  has  been  a  critical  challenge  for 
SMEs and a deterrent to bid for public tenders. 
Under  the  RRP,  Italy  plans  action  in  2024  to 
reach 30 days for public authorities to process 
payments. 

the  public  administration 

reform 
by 

payment 

Late 

A tax administration reform that aims to 
encourage  tax  compliance  and  reduce 
compliance  costs  for  taxpayers  also 
supports  competitiveness.  The  framework 
for 'compliance letters', a mechanism designed 
to  prevent  tax  evasion,  has  been  significantly 
strengthened  under 
to 
improved analytical tools and datasets for the 
tax  administration.  Italy  also  launched  a  pilot 
project  providing  pre-filled  value-added  tax 
returns  for  more  than  2.3  million  taxpayers. 
This 
is  expected  to  substantially  reduce 
compliance costs and overall to help digitalise 
business contacts  with  the  tax  administration, 
expected  to  have  positive  spillover  effects  on 
accounting practices. 

the  RRP 

thanks 

for  energy  efficiency. 

There  is  scope  to  boost  the  long-term 
The 
demand 
REPowerEU  chapter  significantly 
increased 
support  for  energy  efficiency.  Nonetheless,  a 
more supportive environment could help boost 
demand,  mobilisation  and  absorption  of 
energy  efficiency  investments  beyond  2026, 
including  by  expanding  technical  assistance. 
Italy  could  also  accelerate  implementation  of 
the National Energy Efficiency Fund. 

Fostering competitiveness 

Reforms  to  justice,  public  procurement, 
competition and public administration are 
improving  the  business  environment, 
including for SMEs. Under the RRP, Italy has 

The  RRF,  cohesion  policy  funding  and 
jointly  mobilising 
Horizon  Europe  are 
substantial  resources 
it 
in  R&I  but 
remains  challenging  to  optimise  these 
investments.  The  RRP  includes  a  component 
worth  EUR  11  billion  for  basic  and  industrial 
research,  and  innovative  businesses  to  tackle 
Italy’s  structural  underinvestment  in  R&I  (see 
Annex  11).  Cohesion policy,  with over EUR 9.5 
billion  of  investments,  focuses  on  supporting 
SME growth, competitiveness, R&D, promoting 
innovation and building skills for sustainability.  

However,  there 
is  still  a  significant  gap 
between  Italy  and  the  EU's  top  performers  in 
human  and  financial  resources  allocated  to 

8 

 
the 

technological  transfer  offices (6),  limiting  the 
potential  to  capitalise  on  this  knowledge  and 
investment.  There  is  also  scope  to  strengthen 
the  link  between  research  institutions  and 
strategic 
improving 
businesses  by 
governance of universities and public research 
bodies,  achieving  economies  of  scale 
in 
knowledge  transfer  activities  and  forging 
closer  forms  of  cooperation  among  research 
institutions (7).  The  R&I  ecosystem  would 
benefit  from  a  less  fragmented  and  more 
coordinated  approach  and  from  focusing  the 
financial  resources  on  the  most  effective  and 
strategic investments. Italy could further boost 
competitiveness  by 
to 
business  incubation,  acceleration  and  venture 
capital programmes (8) and by action to match 
the  national  research  priorities  with  Italy’s 
industrial  needs.  The  RRP  supports  non-bank 
finance  by  setting  up  two  public  vehicles  for 
venture  capital  and  for  attracting  private 
investors.  However,  further  action  could  be 
taken  to  facilitate  business  funding  through 
capital markets. 

research 

linking 

to 

for 

Italy is highly exposed to climate change, 
exacerbated  by  human  activities.  The 
impact  of  climate  change  represents  a  high 
burden  for  Italian  firms,  the  government  and 
to  damaged 
insurers, 
instance  due 
infrastructure (9).  According 
ISPRA,  21 
hectares/day  of  soil  was  consumed  in  2021, 
the  highest  figure  in  11  years,  with  a  yearly 
cost  for  the  soil  ecosystem  estimated  up  to 
EUR  5  billion.  On  this  front,  the  RRP  includes 
measures such as investment to support start-
ups  and  venture  capitals  active 
the 
ecological transition, to boost  competitiveness 
of  SMEs  in  the  agri-food sector  and  action  to 
increase the resilience of the power grid. A law 

in 

(6)  Centro Nazionale Ricerche - 

Relazione_sulla_ricerca_e_innovazione_in_Italia_2023.
pdf (cnr.it) 

(7)  ITA.CON – Improving the system of knowledge 

exchange and collaboration between universities and 
society in Italy - OECD 

(8)  European Investment Fund: “Venture Capital: tra Europa 

e Mezzogiorno. Una proposta per l’Ecosistema 
dell’innovazione meridionale” 

(9)  Floods in May 2023 are estimated to have cost EUR 8.8 
billion in Emilia-Romagna alone – Emilia Romagna Land 
Security and Civil Protection Agency. 

9 

on reducing soil use is pending in the national 
parliament. 

and 

country. 

ultra-fast 

these  measures 

Making  use  of  multiple  funding  sources, 
Italy  is  making  progress  to  complete  the 
national 
5G 
telecommunication  network,  reducing  the 
digital  divide.  Under  the  RRP,  it  allocates  up 
to EUR 5.3 billion to the large-scale roll-out of 
ultra-fast  broadband  and  5G  infrastructure 
Overall, 
throughout 
the 
implementation  of 
is 
progressing,  but  the  scale  of  the  investment 
requires  significant  efforts  to  ensure  the 
connectivity projects are completed within the 
timeframe  set  in  the  RRP.  At  the  same  time, 
cohesion  policy  plans  measures  to  improve 
public administration services, connect remote 
and isolated areas and inner areas. The plan to 
roll  out  ultra-fast  broadband  and  5G  also 
reinforces  ERDF  action  to  provide  digital 
solutions  for  public  services,  especially  the 
national  programmes  Schools  and  skills  and 
Equity  in  Health.  Under  the  RRP,  Italy  also 
made  progress  in  the  digital  transition  of 
cybersecurity and its public administration. 

Reinforcing economic and social 
resilience 

Complementary  action  supported  by  EU 
funds  aims  to  reduce  skills  mismatches, 
foster  youth  employment  and  expand 
tertiary  vocational  education.  Under  the 
RRP, in 2022 Italy reformed the governance of 
tertiary vocational training, establishing shared 
governance  between  local  firms,  secondary 
schools and tertiary education bodies (such as 
universities). By providing professional training 
(formazione  professionalizzante)  to  students, 
the  measure  aims 
to  boost  economic 
development  and  the  competitiveness  of  the 
local  economy.  The  reform is  coupled  with  an 
investment  of  EUR  1.5  billion  to  expand  the 
educational  offer  of  vocational 
training 
institutes and increase the number of enrolled 
students by 2025.  

Regional  programmes  and  the  national 
programme School and Skills financed by 

 
 
Box 3: 

Combined action to increase the impact of EU funds 

To boost economic growth and maximise the impact of EU funding, Italy’s RRP includes reforms 
that  support  investment  under  other  EU  instruments,  creating  important  synergies  and 
complementarities  between  the  funds.  Two  key  measures  to  this  end  are  the  reform  of  public 
employment  and  simplification  of  administrative  procedures,  which  are  expected  to  improve 
spending  capacity  and  ensure  a  smoother  flow  of  information  and  collaboration  between  the 
different  bodies  that  manage  EU  funds.  The  plan  also  envisages  a  reform  to  accelerate 
implementation of cohesion policy programmes, in complementarity with the RRP. 

the  European  Social  Fund  (ESF+)  are 
complementary  to  RRF  initiatives.  They 
fund  measures  to  increase  student  access  to 
tertiary  vocational  education  and  to  improve 
teaching  quality,  study  programmes  abroad 
and to develop green skills. 

regions. 

reform  of 

The  RRF  and  cohesion  policy  funds 
support  measures  that  aim  to  reduce 
fragmentation in the labour market, also 
among 
the 
The 
guaranteed  employability  of  workers  (GOL) 
scheme  financed  by  the  RRF  aims  to  reshape 
employment  policies.  According  to  ANPAL,  the 
scheme  had  reached  more  than  2  million  
beneficiaries  on  31  January  2024  (10).  The 
national  plan  for  new  skills  sets  training 
standards for unemployed people taken on by 
job  centres  and  promotes  a  strengthened, 
integrated  system  of  education,  training  and 
the 
local 
job  services  at 
REPowerEU  plan,  an  additional  reform 
is 
designed to better align training courses to job 
market  needs  and  to  boost  the  skills  needed 
for  the  green  and  digital  transition.  These 
measures are complemented  at regional  level 
by  the  ESF+  with  training  to  tackle  functional 
illiteracy or basic digital skills and focusing on 
providing this support to unemployed, inactive 
or vulnerable individuals.  

level.  Under 

is  taking  measures  to  reduce 
Italy 
poverty  and  give  greater  autonomy  to 
older  people  and  people  with  disabilities. 
Under  the  RRP,  Italy has  started  delivering  on 
measures  to  boost  economic  and  social 

(10)https://www.anpal.gov.it/documents/552016/1309678/N

ota+GOL+n.+14+Focus+ANPAL+n.+169+- 
+dati+al+31dicembre2023.pdf/d072616e-936e-d0f9-
6193-bb41fb1f5571?t=1706534727814.  

10 

resilience,  including  a  reform  of  services  for 
non-self-sufficient  older  people,  a  reform  of 
the  framework  law  on  disability,  and  full 
implementation  of  the  measures  under  the 
reform  to  tackle  undeclared  work.  Using 
national 
cohesion 
programmes  Inclusion  and  Poverty  Reduction 
and  Youth,  Women  and  Jobs  support 
vulnerable groups such as migrants, people in 
undeclared  work  and  people  with  disabilities 
by providing pathways to job market inclusion. 

funds, 

policy 

the 

Governance framework 

to 

identify 

Recent  measures  aim  to  improve  the 
2021  governance  framework;  it  remains 
crucial 
potential 
implementation  issues  early  on  and  to 
take  remedial  action.  In  particular,  the 
recent  Law  56/2024  includes  provisions  to 
step  up  monitoring  of  the  plan  and  brings  in 
substitutive  powers  by  a  central  authority. 
Greater  use  of  the  data  included  in  the  RRP 
repository  system  (ReGiS)  could  improve  the 
existing  early  warning  mechanism  to  track 
implementation  progress  at  a  detailed  and 
frequent level and identify remedial measures. 
Law 
specific 
coordination  mechanisms  to  foster  synergies 
and  strengthen  monitoring  at  local  level.  It  is 
local  authorities 
crucial 
in 
identifying  and 
tackling  any  emerging 
challenges,  to  share  best  practices  and  pool 
procurement  processes.  The  recruitment  and 
retention  of  skilled  staff,  particularly  in  the 
south,  remains  key.  Continuous  support  to 
local  administrations,  which  was  also 
policy 
underscored 
Italy's 
programme,  would 
swift 
implementation. 

cohesion 
ensure 

56/2024 

provides 

involve 

help 

for 

to 

in 

 
 
 
FURTHER PRIORITIES AHEAD 

policy, 

taxation 

Italy  faces  additional  challenges  related 
to territorial divide and fiscal framework, 
competition 
and 
demographic  trends  that  have  relevant 
implications also for pension expenditure. 
Tackling  these  challenges  will  help  boost 
Italy’s 
and 
potential  growth,  ensure  the  resilience  of  its 
economy and underpin financial sustainability. 
It will also help Italy make further progress in 
achieving  the  UN  Sustainable  Development 
Goals. 

competitiveness 

long-term 

It  is  important  to  tackle  the  challenges 
both  at  national  and  regional  level  to 
improve 
reduce 
regional disparities and build up administrative 
and investment capacity across the country. 

competitiveness, 

Italy’s 

Growing demographic challenges 

With  birth  rates  at  a  historical  low  in 
2022, 
Italy's  working-age  population 
continues to shrink and the brain drain is 
worsening.  Italy  has  one  of  the  lowest  birth 
rates (11) in the EU, 6.7 against an EU average 
of 8.7. The average age of women at birth of 
the  first  child  is  31.7,  against  an  EU  average 
of  29.4.  Italy  registered  record-low  births  in 
2022  (393 333),  and  a  high  level  of  deaths 
(715 077) 
(ISTAT).  The  migration  balance 
remains  positive  but  it  no  longer  offsets  the 
low  birth  rate.  In  2022,  over  410 000  people 
migrated  to  Italy,  while  around  150 200  left 
the  country.  Since  emigrants  have  a  higher 
average  skill  level  than  immigrants,  the  brain 
(European 
drain 
Commission,  2023a).  This  is  coupled  with  an 
increasingly ageing population and a shrinking 

challenge 

remains 

a 

(11)  Number of live births per 1 000 people in the 

population. 

11 

workforce (see Annex 14). Italy has one of the 
oldest  populations  in  the  EU,  with  a  median 
age of 48.4 years in 2023. The projected 0.7% 
fall in the working-age population in 2030 and 
14.1%  in  2050  increases  the  risk  of  labour 
shortages (12),  posing  serious  challenges  on 
several  fronts,  including  the  sustainability  of 
government finances. 

Unfavourable  demographic  developments 
are  set  to increase  spending on  pensions 
before it starts falling in the longer term 
thanks to the 2011 pension reform. Italy’s 
pension  expenditure  as  a  share  of  GDP  is 
among the highest in the EU (in 2022, 15.6% 
of GDP v 11.4% in the EU (13)), which limits the 
for  growth-enhancing 
resources  available 
spending,  particularly  given  the  high  level  of 
government  debt.  Although  the  2011  pension 
reform  will  help  reduce  spending  on  pensions 
over  the  long  term,  this  is  still  expected  to 
increase substantially in the medium term due 
to demographic developments.  

Policy  measures  adopted  in  recent  years 
have 
increased  spending  on  pensions 
further  over  the  short  to  medium  term. 
These  include  the  early  retirement  scheme 
introduced  in  2019  (Quota  100),  the  recent 
decision  to  extend  it  with  stricter  access 
criteria (Quota 102 and Quota 103) and other 
temporary  early 
retirement  schemes  for 
women and vulnerable workers. Together with 
low participation rates and productivity growth, 
this contributes to Italy’s estimated high fiscal 
sustainability  risks  in  the  medium  term  and 
medium risks in the long term (see Annex 21). 

(12)  Economic and Social Developments in Europe 2023, 

European Commission, July 2023. 

(13)  2024 Ageing Report. Economic and Budgetary 

Projections for the EU Member States (2022-2070) 
(European Commission, Institutional Paper 279, April 
2024). 

 
 
 
 
The  universal  child  allowance  will  help 
tackle  child  poverty  and  potentially  the 
low  birth  rate, 
if  complemented  by 
investment  in  care  services  and  better 
job  market  access.  The  lack  of  access  to 
quality and affordable care services, late entry 
in  the  job  market,  low  quality  jobs  and  long-
term  wage  stagnation  are  all  factors  behind 
the  low  birth  rate  in  Italy,  while  also  raising 
significant risks of in-work poverty. This in turn 
impairs  the  sustainability  of  public  finances 
and reduces the workforce over the long term. 
Data  show  a  positive  correlation  between 
family-related  policies  and  birth 
rates. 
However, their impact is lower when there are 
higher economic uncertainties (14), as there are 
in Italy. A way to mitigate this is to strengthen 
work-life  balance  policies  and  provide 
accessible  and  high-quality  childcare  (UNFPA, 
2019). The universal child allowance as well as 
measures  included  in  the  2024  budget  law 
might help increasing the birth rate in the long 
term;  beyond  the  RRP  investment,  additional 
measures  in  care  services  could  also  boost 
birth  rates  by  enabling  women  to  work. 
Similarly,  measures 
equal 
opportunities  and  work-life  balance,  including 
more  generous  parental  leave  for  fathers, 
increasing  the  share  of  adult  participating  in 
training  and  supporting  the  participation  of 
women and young people would be beneficial. 
Simultaneously,  such  measures  could  help  to 
alleviate poverty and social exclusion risks that 
remain  entrenched  in  Italy  and  that  are 
particularly high in the South.   

to  promote 

Migration  policies  could  be  reinforced  to 
mitigate  the  unfavourable  demographic 
dynamics  in  the  short  and  medium  term. 
The  new  2024  decree  on  migration  flows (15) 
almost doubles the number of foreign citizens 
from non-EU countries admitted yearly to Italy 
compared  to  the  previous  migration  flow 
decree  from  2020  (+99.5%).  It  extends  the 

(14)  For example, in terms of job stability and suitable 

housing. Uncertainty has a negative impact on people's 
decisions to have a first child and contributes to 
decisions to postpone parenthood. 

work permit duration to 3 years and adds new 
employment  sectors.  It  also  simplifies  the 
process  to  convert  study  permits  into  work 
visas  and  activates  collaboration  with  foreign 
jurisdictions  to  facilitate  the  recognition  of 
skills for non-EU  nationals. However, to tackle 
the brain drain in the short term, it is essential 
to  frame  a  more  comprehensive  strategy  to 
attract  and  retain  high-skilled  workers  and 
students,  and  to  align  it  with  the  country's 
industrial and development needs. 

Addressing  these  challenges  will  help 
Italy  boost  upward  social  convergence. 
The  second-stage  analysis  in  line  with  the 
features of the Social Convergence Framework 
points  to  challenges  for  Italy  that  may  affect 
social  convergence  in  relation  to  the  labour 
market,  social  protection  and  inclusion,  and 
education and skills (16). 

Unlocking the potential of 
southern Italy 

to 

economy 

southern 

contribution 

Italy 
of 
The 
contributed  to  the  post-COVID  recovery, 
but  it  centres  on  lower  value-added 
sectors  than in the  centre-north.  In  2022, 
the share of manufacturing out of total value 
added in the south was 10%, against 24.5% in 
the  centre-north.  The  service  sector  made  the 
biggest 
the  post-COVID 
recovery, but in the south, this was skewed to 
more  traditional  services,  notably  tourism 
(accommodation  and  restaurants).  The  real 
value  added  of  the  industrial  sector  in  the 
south fell by 24.8% between 2000 and 2022, 
against  the  national  average  of  -4.4%.  In  the 
south,  foreign-owned  companies  account  for 
only  9.4%  of  value  added,  against  a  national 
average  of  17.1%.  Almost  half  the  south’s 
exports  (from  oil  refinery  to  the  automotive 
sector),  will  be  greatly  affected  by  action  on 
decarbonisation. 

(15)  ‘Decreto Flussi’ sets the maximum number of foreign 
citizens from non-EU countries who can enter Italy 
yearly on a work visa. It is adopted every 3 years and 
updated annually. 

(16)  European Commission, SWD(2024)132. The analysis 
relies on all the available quantitative and qualitative 
evidence and analysing the policy response undertaken 
and planned. 

12 

 
 
 
The  south  has  major  potential  as  a 
logistics  hub  in  the  Mediterranean.  In 
2022, sea transport carried 74% of the goods 
traded  between  the  EU  and  the  rest  of  the 
(Eurostat).  The  Mediterranean  Sea 
world 
covers  1%  of  the  global  sea  surface  but 
carries  20%  of  maritime  transport.  Ports  in 
southern  Italy  are  gaining  competitiveness: 
Gioia Tauro ranked 9th in the EU for container 
traffic,  Augusta  ranked  7th  for  liquid  bulk (17) 
seaborne  trade  and  Naples,  Palermo  and 
Messina are among the top 20 Mediterranean 
ports  for  cruise  passengers.  Southern  Italy 
ports  also  cover  51%  of  national  wheeled 
cargo ships traffic (roll on-roll off) and 48% of 
national  liquid  bulk  seaborne  trade.  Short 
in 
shipping 
(distance) 
prominence in step with the trend of reshoring 
and  nearshoring.  In  2021,  Italy  was  the  first 
country  in  the  EU  for  short-sea  shipping, 
providing  17.6%  of  all  EU  traffic.  Given  its 
central  position  in  the  Mediterranean,  Italy 
could  have  a  greater 
in  providing 
connections  (and  trade)  in  the  region.  To  this 
end, a major challenge and an opportunity will 
be to green its maritime transport services. 

is  gaining 

role 

sea 

less  than  3%  to 

ICT.  The 
services  and 
advantages  granted  to  firms  operating  in  the 
eight  special  economic  zones (18) 
(SEZs), 
including  simplified  procedures,  attracted 
investments  in  the  energy  transition,  logistics, 
agrifood,  retail,  vehicle  repair  and  metallurgy 
sectors (among others). Firms operating in the 
south  are  also  eligible  for  reduced  employee 
social  contributions  (excluding  only  a  few 
sectors  like  agriculture,  domestic  work  and 
public entities). Simulations carried out by the 
Commission’s Joint Research Centre show that 
raising  wages  at  the  bottom  of  the  wage 
distribution  would  be  particularly  beneficial  to 
employees in the south (see Annex 14). 

Some  initiatives  taken  at  national  level 
indicate  greater  central  coordination  of 
policy  action,  in  particular  for  the  south. 
In 2022 a new ministry was created combining 
EU  affairs  and  territorial  cohesion.  In  2023, 
the ‘decreto Mezzogiorno’ created a single SEZ, 
transferring 
the 
extraordinary  commissioners  in  the  previous 
eight  SEZs  to  a  single  dedicated  body  under 
the responsibility of the same ministry. 

responsibility 

from 

the 

The  south  also  generates  most  of  the 
country's  renewable  energy.  96.3%  of 
Italy's wind energy and 40.2% of photovoltaic 
energy  are  produced  in  the  south,  generating 
19.7  TWh  and  11.3  TWh  respectively,  with 
considerable untapped potential. Given its high 
renewable  energy  potential,  the  south  also 
accounted  for  80.7%  of  national  electric  grid 
connection  requests  for  solar  energy  and 
88.0% for wind energy in 2022 (GSE). 

Several  policy  measures,  notably  tax 
incentives, support economic activities in 
the south, but they lack a clear focus. The 
main instrument used is the tax credit for the 
south. In 2020, this measure mostly benefited 
manufacturing  (35.1%),  trade  (16.8%)  and 
construction  (14.8%).  The  main  beneficiaries 
are micro or small firms, which absorb 64% of 
all  resources.  Approximately  50%  of  the 
incentive ‘Resto al Sud’ is allocated to tourism, 
22%  to  manufacturing,  20%  to  personal 

An  industrial  and  development  strategy 
for  the  south  would  promote  better 
targeting of policy measures and enhance 
the value added of investments. This is the 
case,  in  particular,  for  transport  infrastructure 
financed  by  both  EU  and  national  funds. 
Framing  an  industrial  strategy,  together  with 
updated cost benefit analyses, would be key to 
select,  prioritise  and  draw  maximum  benefit 
from  investments  in  transport  infrastructure. 
The  strategic  plan  for  the  single  SEZ  is 
expected to reflect a clear industrial policy, for 
instance  by  focusing  on  the  original  idea  to 
develop  port  areas,  while  taking  into  account 
regional  specialisations.  The  strategic  plan 
needs  to  take into  account  and  promote  local 
specialisation  strategies, 
investments 
already  planned  and  funded  by  EU  and 
national 
last-mile 
resources,  notably  on 
connections,  and  coordinate  strategies  to 
attract  firms 
It  would  be 
in  the  south. 
necessary  to  ensure  consistency  between  the 

the 

(17)  Crude oil, petroleum products, chemicals, liquefied 

(18)  In 2024, a single SEZ was created, merging the previous 

gases, food-grade liquids and more. 

8 SEZs and covering all of southern Italy. 

13 

 
 
 
to 

regional 

national 

resources 

requirements  for 

through  bilateral 
corresponding 
negotiations with the central government. The 
draft  law,  which  is  currently  under  discussion 
in  the  Chamber  of  Deputies,  includes  some 
safeguards  for  public  finances,  such  as 
fiscal 
periodic  assessments  of 
regional 
capacities  and 
contributions 
fiscal 
reach 
objectives.  In  addition,  regions  will  be  able  to 
request  additional  competences only once the 
corresponding  ‘essential  levels  of  services’ 
(LEPs)  have  been  defined, 
in  the  areas 
law  also  sets  the 
concerned.  The  draft 
requirement to ensure territorial cohesion both 
in the economic and social domains. However, 
specific 
while 
the 
in 
prerogatives 
negotiation  process,  it  does  not  provide  any 
common  framework  to  assess  the  regional 
requests 
In 
addition,  as  the  LEPs  ensure  only  minimum 
levels of services and do not concern all policy 
areas,  there  are  still  risks  of 
increasing 
regional 
inequalities.  The  devolution  of 
a 
additional 
differentiated  basis  would  also  increase  the 
institutional  complexity,  carrying  the  risk  of 
higher costs both for the public and the private 
sector.  

law  assigns 
the  government 

for  additional  competences. 

the  draft 

regions 

powers 

on 

to 

to 

Unleashing competition to boost 
sustainable growth 

and 

sheltered 

Several  Italian  sectors  are  still  over-
regulated 
from 
competition.  While  the  Italian  RRP  includes 
clear  commitments  on  future  competition 
laws,  the  relevant  policy  areas  remain  to  be 
determined.    Italian  legislation  envisages  the 
adoption  of  an  annual  competition  law  to 
further  liberalise  the  economy.  This  would  be 
particularly  needed  for  retail  trade,  regulated 
professions,  and 
In  addition, 
according  to  the  Italian  competition  authority, 
other  sectors  could  also  be  covered,  such  as 
postal  services,  pharmaceuticals,  chambers  of 
commerce, beach concessions and private-hire 
vehicle  services.  Greater  competition  in  these 
sectors  would  benefit  consumers,  boost 

railways. 

industrial  strategy  at  national  and  local  level 
and EU policies (e.g. the Net-Zero Industry Act, 
Critical Raw Material Act, the Chips Act and the 
New EU Innovation Agenda). 

approach 

ecosystem 

the  definition  of 

could 
An 
complement 
the 
industrial strategy for the south, building 
on  existing  industrial  specialisations  and 
strategic value chains. For instance, Sicily is 
benefiting  from  key  vertical  investments  in 
microelectronics  and  renewable  energy,  with 
the  construction  of  the  first  Silicon  Carbide 
(‘SiC’)  wafer  production  line  in  Europe (19). 
Catania’s 3Sun gigafactory is also becoming a 
key player in the production of solar panels in 
Europe (20),  and  there  are  concurring  major 
investments  supported  by  cohesion  policy (21). 
Nonetheless, there is scope to further develop 
these 
industrial  ecosystems  around 
the 
investments (22).  Building  on  the 
strategic 
targeted  investments  in  the  recovery  and 
resilience  plan  (see  Annex  11),  Italy  could 
encourage  consolidation  among  key  players 
and  new  firms  along  strategic  value  chains, 
strengthen  partnerships  with  academia  and 
technology transfer, and improve the supply of 
targeted  professional 
skills  by  providing 
training (SVIMEZ 2023). 

The devolution of additional competences 
Italian  regions  carries  risks  for 
to 
cohesion  and  public  finances.  In  January 
2024, the Senate approved the framework law 
for the implementation of differentiated levels 
of  autonomy  of  regions  with  an  ordinary 
statute, which will be able to request up to 23 
the 
competences  and 
additional 

retain 

(19)  State aid decision: IP_22_5970_EN.pdf (europa.eu). 

(20)  Generation capacity will be increased from 200 MW to 
3 GW per year also thanks to a grant aid scheme of 
EUR 89.5 million financed by the RRP. State aid 
decision: IP_23_3964_EN.pdf (europa.eu). 

(21)  The Sicilian authorities have applied for EUR 68 million 
in cohesion policy support for a major project in the 
area of semiconductors and advanced chip technologies 
under the Important Projects of Common European 
Interest (IPCEI) of ‘STM’. 

(22)  Examples of industrial ecosystems in the south can also 
be found in Campania and Apulia for the aerospace 
sector, and in Basilicata and Molise for the automotive 
sector. 

14 

 
 
productivity 
finances (23). 

and 

improve 

government 

to 

2022 

competition 

Commission’s 

Restrictions 
remain 
particularly  high  in  the  retail  sector.  The 
European 
retail 
restrictiveness indicator ranks Italy among the 
most  restrictive  Member  States,  particularly 
for  the  establishment  of  shops  and  running 
sales promotions. Although past measures (24) 
removed  significant  restrictions,  regional  and 
local  regulations  still  impose  strict  conditions 
in the authorisation process (25). Firms are still 
not  free  to  run  their  sales  promotions  and 
restrictions remain on the distribution of some 
products, 
including  non-prescription  drugs. 
Reducing these restrictions would enable firms 
to  adjust  their  business  model  to  consumer 
preferences  and  face  online  competition.  It 
would  also  boost  overall  productivity  in  a 
sector  with  a  high  share  of  less  productive 
firms (IMF 2020). 

The green transition would benefit from a 
more  dynamic  and  competitive  railway 
sector.  Despite 
successful  market 
the 
liberalisation  in  high-speed  rail  services,  there 
are  significant  barriers  to  regional  transport 
and  intercity  (long-distance)  services,  where 
public  service  contracts  continue 
to  be 
awarded  directly  to  the 
incumbent.  This 
removes the incentivises to increase efficiency 
and  improve  service  quality.  Better  regulatory 
oversight  by  the  infrastructure  manager  (RFI) 
could  strengthen  investment  decisions  and 
removing  several  technical  barriers  could 
improve  access  to  rail 
infrastructure.  For 
example,  some  areas  lack  the  standardised 
technology  needed  to  access  maintenance 
facilities. 

Public finances and taxation 

the 

level 

Commission, 

Entry  barriers  remain  particularly  high 
for regulated professions. According to the 
European 
of 
restrictiveness  in  Italy  is  higher  than  the  EU 
average for engineers, architects, accountants, 
real estate agents, and to some extent patent 
lawyers. In particular, it is important to strike a 
balance  between  the  need  to  protect  small 
contractual 
professional 
relationships  with 
strong 
bargaining  power,  such  as  banks  and 
insurance companies, and let more productive 
firms thrive. Removing the ‘fair compensation’ 
rules  would  open 
to  more 
productive  businesses  that  could  set  lower 
rates  to  increase  their  market  share  (OECD 
Economic Survey 2024). 

in 
clients  with 

the  market 

businesses 

(23)  For example, increasing competition in the procurement 
of biosimilar pharmaceuticals could generate cost 
savings estimated in the range of 20-30% (IQUVIA 
2020, AGCM 2023). Concerning beach concessions, 
concession fees are not proportionate to the average 
turnover of the sector, leading to lost government 
revenue (Report from National Court of Auditors 2021). 

(24)  Decree Law 201/2011. 

(25)  Requirements include the provision of economic data, a 
number of different impact assessments and specific 
requirements linked to the location. 

is 

to 

improve 

expected 

A  credible,  effective  and  sustainable 
strategy for public finances is key to  put 
the  public  debt  ratio  on  a  persistent 
downward  path.  To  this  end,  Italy  will  need 
to  support  growth  and  better  allocate  public 
resources.  A  thorough  implementation  of  the 
RRP 
fiscal 
sustainability,  by  supporting  economic  growth 
to  make  public 
and  fostering  measures 
spending  and  the  tax  administration  more 
efficient.  Going  forward,  the  reduction  of  the 
public  debt-to-GDP  ratio  will  need  to  be 
underpinned  by  a  credible  medium-term 
strategy,  combining  action  to  consolidate 
public  finances  with  measures 
to  boost 
potential growth and competitiveness, such as 
and 
ambitious 
strategic  investments.  Reforms  should  aim  to 
both enhance the efficiency of public spending, 
for  example  by  conducting  regular  spending 
reviews,  and  to  ensure  the  tax  system  is  fair, 
efficient  and  progressive,  by  restructuring  the 
composition  of  revenues  and  improving  tax 
compliance. 

fiscal-structural 

reforms 

Despite  the  significant  progress  made  in 
fighting  tax  evasion,  recent  measures 
risk  producing  adverse  effects  on  tax 
compliance.  Thanks  to  ambitious  measures, 
including  under  the  RRP,  Italy  has  constantly 

15 

 
 
system 

risk  discouraging 

reduced  revenue  loss  from  tax  evasion  in 
recent years (see Annex 19). Conversely, latest 
amendments  to  the  tax  settlement  and 
collection 
tax 
compliance.  These  include  the  5-year  expiry 
date  of  unpaid  taxes  and  lower  penalties  for 
evading taxes and social security contributions. 
Similarly, 
recently 
the  government  has 
renewed  and  regularly  extends  measures 
equivalent 
tax  amnesties,  allowing 
taxpayers  to  pay  their  liabilities  using  an 
interest-free instalment plan without penalties. 
non-compliant 
This 
behaviour  with  the  risk  of  structural  revenue 
losses  in  the  long  term.  The  system  of  prior 
agreement  between  the  administration  and 
small  businesses  on  their  tax  liabilities  also 
warrants  close monitoring  as  to  its impact  on 
tax compliance.  

indirectly 

rewards 

to 

Despite  relatively  high  revenues  from 
environmental  taxes,  Italy’s  tax  system 
could  be  better  geared  to  the  green 
transition.  Italy  applies  a  broad  range  of 
taxes  on  pollution  and  resources  (see  Annex 
19), but taxes on energy sources do not reflect 
the level of CO2 emissions. For instance, taxes 
on  electricity  are  higher  per  unit  of  energy 
compared to  natural gas and heating oil, and, 
among fossil fuels, diesel is taxed more lightly 
than  petrol. 
In  addition,  registration  and 
recurrent taxes on vehicles, as well as the tax 
treatment  of  company  cars,  do  not  reflect 
vehicle CO2 emission levels. 

rationalising 

Public  finances  would  also  benefit  from 
further 
publicly-owned 
enterprises,  also  to  make  them  more 
efficient  and  effective.  Publicly-owned 
enterprises  (POEs)  play  a  significant  role 
across  Italy’s  economy.  In  2016  Italy  adopted 
a  legal  framework  with  clear  parameters  on 
the  scope  of  activities  and  operational 
efficiency of POEs. The framework is aimed to 
avoid  future  proliferation  of  non-essential 
POEs  and  to  rationalise  existing  ones  via 
mergers,  privatisations  and  wind  ups.  After  a 
promising start of the implementation, central 
and  subnational  authorities  have  been  less 
rigorous 
in  applying  the 
framework.  For  example,  in  2019  the  central 
government extended to 2021 the deadline to 
divest.  Overall,  while  the  number  of  POEs 

in  recent  years 

declined substantially up to 2021, there is still 
significant room for further rationalisation. For 
example,  the  number  of  non-active  POEs  and 
active  POEs  with  zero  employees  remain 
large (26). Revamping the efforts to rationalise 
POEs  would  benefit  both  public  finances  and 
the  quality  of  services  provided  to  citizens, 
especially  when  coupled  with  the  proper 
implementation  of  the  RRP  reform  of  local 
public  services  and  further  improvement  in 
POEs corporate governance (27). 

(26)  According to Istat, the total number of POEs decreased 
from 11 024 in 2012 to 7 808 in 2021. In 2021, the 
absolute number of non-active POEs and of POEs with 
zero employees remains high, 2 111 and 1 525 
respectively.  

(27)  Bank of Italy, Board composition and performance of 

state-owned enterprises: quasi experimental evidence. 

16 

 
 
 
Box 4: 

The mid-term review of cohesion policy funds for Italy 

The mid-term review of the cohesion policy funds is an opportunity to assess cohesion 
policy  programmes  and  tackle  emerging  needs  and  challenges  in  EU  Member  States 
and their regions. Member States are reviewing each programme taking into account, among 
other things, the challenges identified in the European Semester, including in the 2024  country-
specific recommendations. This review forms the basis for a proposal by the Member State for 
the definitive allocation of 15% of the EU funding included in each programme.     

Italy has made progress in the implementation of cohesion policy programmes and the European 
Pillar  of  Social  Rights,  but  challenges  remain  (see  Annexes  14  and  17).  In  particular,  Italy 
registers persistent disparities between the Centre-North and the South, with the latter recording 
lower  public  spending,  lower  quality  of  infrastructure  and  public  services,  and  weaker 
administrative  capacity.  Against  this  background,  it  remains  important  to  continue  the 
implementation of planned priorities, with particular attention to:  

(i)  strengthening administrative capacity, particularly at subnational level;  

(ii)  targeting  investment  in  research,  innovation  and  competitiveness,  notably  in  the  less 
developed regions, in synergy with infrastructure development plans and regional smart 
specialisation strategies;  

(iii) raising  the  quality  of  essential  public  services  in  the  south,  notably  water  and  waste 

services, including by promoting single authorities at regional level;  

(iv) promoting  up-skilling  and  re-skilling,  including  skills  for  the  green  transition,  by 
increasing tertiary education attainment and the share of adults enrolled in training;  

(v)  reducing the number of young people neither in employment nor in education or training 
(NEET)  through  a  more  effective  educational  system  and  more  targeted  active  labour 
market policies, particularly in the south;  

(vi) supporting  women  in  finding  employment  by  increasing  the  supply  of  affordable  and 

quality early childcare, where most needed. 

Italy  could  benefit  from  the  opportunities  provided  by  the  Strategic  Technologies  for  Europe 
Platform (STEP) initiative  (28) to support the transformation of industrial ecosystems, notably in 
the  south,  in  synergy  with  existing  cohesion  policy  programmes. Effective  intervention  would 
entail  integrated  industrial  policies  to  support  the  development  and  application  of  strategic 
technologies, especially in the areas of digital innovation, clean energy and resource-efficiency. 
This is particularly important in the sectors that already have a strong presence in the south such 
as the automotive and aeronautics industries.  

The strategic plan for the recently created single special economic zone (SEZ) for the south could 
provide  a  coherent  framework  to  foster  business  innovation  and  productivity  by  focusing  on 
critical projects and strengthening integration across related value chains.  

(28)  Regulation (EU) 2024/795. 

17 

 
 
 
 
 
KEY FINDINGS 

With its wide policy scope and substantial 
financial  envelope,  Italy’s  recovery  and 
resilience  plan  (RRP)  includes  measures 
to  address  a  series  of  structural 
challenges  in  synergy  with  other  EU 
funds,  including  cohesion  policy  funds, 
by:   

•  Boosting  the  green  transition  through 
measures to facilitate the shift to a circular 
including  water  and  waste 
economy, 
management 
streamlining 
planning, 
permitting procedures for renewable energy 
installations 
the 
electricity grid to enable greater renewable 
integration.  The  RRP  also  includes  energy 
efficiency measures to renovate public and 
social  housing  and  to  optimise  energy 
consumption in SMEs and larger firms. 

strengthening 

and 

•  Advancing  the  digital  transition, 

in 
particular in the areas of cybersecurity and 
public  administration,  and  rolling  out  a 
nation-wide telecommunications network. 

•  Improving  the  business  environment 
through  reforms  and  investments  in  the 
procurement, 
justice 
competition  and  public  administration, 
including late payments.  

system, 

public 

•  Increasing  research  and 
(R&I)  by  mobilising  major 
mostly  focusing  on 
technology transfer and support to SMEs. 

innovation 
investments, 
industrial  research, 

•  Boosting 

and 

economic 

social 
resilience  by  carrying  out  reforms  and 
investments  to  strengthen  basic  skills, 
expand tertiary education and reduce skills 
mismatches 
training 
programmes,  as  well  as  measures  to 
reduce  poverty  and  give  greater  autonomy 
to older people and people with disabilities. 

specific 

with 

•  Enhancing  tax  compliance  by  increasing 
the  data  sources  available  for  audits  and 
checks,  encouraging  the  use  of  electronic 
payments  and  reducing  compliance  costs 
for taxpayers.   

The  implementation  of  Italy’s  RRP  is 
increasing  challenges.  Renewed 
facing 
efforts 
successful 
implementation  of  all  the  measures  of  Italy’s 
RRP by August 2026.  

key 

are 

for 

a 

Beyond  the  reforms  and  investments  in 
the  RRP  and  cohesion  programmes,  Italy 
would benefit from:  

•  Tackling  demographic  challenges  to 
mitigate  the  effects  on  long-term  growth, 
achieve  sustainable  government  finances. 
This would include expanding care services, 
improving  employment  rates  and  bringing 
focus  on 
in  migration  policies 
attracting 
high-skilled 
workers.  

retaining 

that 

and 

•  Framing  a  clear  and  comprehensive 
industrial  and  development  strategy 
for  the  south  to  provide  a  sharper  focus 
on 
as 
infrastructure  projects,  and  to  harmonise 
policy  measures 
to  support  economic 
activities. 

investment 

projects, 

such 

•  Increasing  competition  and  improving 
regulations 
in  a  number  of  sectors, 
including  retail,  regulated  professions  and 
railways, to boost sustainable growth. 

•  Reforming  the  tax  system  to  provide 
more incentives for growth, with a focus on 
reducing the tax wedge on labour.   

•  To support upward social convergence, 
improving employment rates of women 
and young people, also by expanding care 
services  and  improving  job  quality,  and 

18 

 
 
labour 
providing  greater 
market  participation,  while  addressing  in-
work poverty. 

incentives  for 

19 

 
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 – implementation 

A4.  Other EU instruments for recovery and growth 

A5.  Resilience 

Environmental sustainability 

A6.  European Green Deal 

A7.  Energy transition and competitiveness 

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 

LIST OF TABLES 

Summary table on 2019-2023 CSRs 
Key facts of the Italian RRP 

A2.1. 
A3.1. 
A3.2.  Measures in Italy's RRP 

23 

25 

25 

28 

32 

34 

37 

39 

39 

44 

50 

53 

53 

55 

58 

61 

66 

68 

68 

71 

73 

75 

80 

80 

83 

85 

886 

29 
32 
33 

 
 
 
Support from EU instruments in Italy 
Resilience indices across dimensions for Italy and the EU-27 
Indicators tracking progress on the European Green Deal from a macroeconomic perspective 
Key Energy Indicators 
Key indicators for a fair transition in Italy 
Circularity indicators 

A4.1. 
A5.1. 
A6.1. 
A7.1. 
A8.1. 
A9.1. 
A10.1.  Key Digital Decade targets monitored by the Digital Economy and Society Index 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 
A18.1.  Financial soundness indicators 
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 

36 
37 
43 
49 
51 
54 
56 
59 
65 
67 
68 
69 
72 
74 
77 
80 
83 
85 
88 
                                                                                                                       88 

LIST OF GRAPHS 

Progress towards the SDGs in Italy 
Italy’s progress on the 2019-2023 CSRs (2024 European Semester) 
Total grants disbursed under the RRF 
Total loans disbursed under the RRF 
Distribution of cohesion policy funding across policy objectives in Italy 
Distribution of RRF funding by pillar in Italy 
Greenhouse gas emissions from the effort sharing sectors in Mt CO2eq, 2005-2022 
Changes in livestock density and organic farming 
Environmental investment gap, annual average 
Italy's energy retail prices for households and industry & service 
Trends in electricity prices for non-household consumers (EU and foreign partners) 
Italy's installed renewable capacity (left) and electricity generation mix (right) 
Fair transition challenges in Italy 
Job vacancy rate in transforming sectors and mining and quarrying 
ETS emissions by sector since 2018 
Treatment of municipal waste 

A1.1. 
A2.1. 
A3.1. 
A3.2. 
A4.1. 
A4.2. 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2. 
A7.3. 
A8.1. 
A8.2. 
A9.1. 
A9.2. 
A11.1.  Public R&D intensity 2013-2022 
A12.1.  Labour productivity (GDP per hour worked) 2010 = 100 
A12.2.  Labour productivity by sector (GDP per hour worked) 2015 = 100 
A13.1.  a) Use of public authorities’ websites or apps (left side); b) e-government maturity (centre); c) share of individuals with 

basic or above basic overall digital skills (right side) 
A15.1.  Underachievement rates by field, PISA 2012, 2018 and 2022 
A16.1.  Life expectancy at birth, years 
A16.2.  Projected increase in public expenditure on healthcare over 2024-2070 
A17.1.  Total public spending pro-capita vs GDP pro-capita per Italian region (2021) 
A17.2.  Weight of southern regions in Italian population per category of age (1 January, yearly data 2001-2022) 
A18.1.  Evoluton of credit activity 
A19.1.  Tax revenues from different tax types, % of total revenue 
A19.2.  Tax wedge for single and second earners as a % of total labour costs, 2023 

LIST OF MAPS 

A17.1.  Regional Innovation Index 2022 

24 

25 
28 
33 
33 
35 
35 
39 
42 
42 
45 
45 
46 
50 
51 
53 
54 
58 
61 
62 

67 
71 
73 
73 
75 
76 
81 
84 
84 

78 

 
 
 
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  (SDGs 2,  7,  9,  11,  12,  13,  14) 
and performs well on some of them (SDGs 2, 
6,  7,  12,  14).  However,  it  is  moving  away 
from  the  indicators  on  clean  water  and 

to 

sanitation  and  on  life  on  land  (SDGs  6,  15). 
For  the  latter,  Italy  also  needs  to  catch  up 
with the EU average, together with indicators 
on  industry,  innovation  and  infrastructure, 
sustainable  cities  and  communities,  as  well 
as climate action (SDGs 9, 11, 13, 15). In Italy, 
the usage of circular material is higher than in the 
rest  of  the  EU  (18.7%  of  material  input  for 
domestic  use  vs  11.5%  in  the  EU  in  2022; 
SDG 12).  While 
the  percentage  of  marine 
protected  areas  is  below  the  EU  level  (9.7%  vs 
12.1% in the EU in 2021), marine eutrophication is 
non-existent,  further  surpassing  the  EU  average 
(0% of the exclusive economic zone, vs 0.3 in the 
EU  in  2023;  SDG 14).  Italy  performs  well  on 
energy  efficiency  and  consumption  (SDG 7),  but 
the share of renewable energy remains lower than 
the EU (19.1% of gross final energy consumption, 
vs  23%  in  the  EU  in  2022;  SDG 13).  Italy  also 
faces some of the highest and increasing climate-
related  economic  losses  (EUR 51.9/inhabitant,  vs 
EUR 39.5 in the EU in 2022; SDG 13). However, net 
greenhouse  gas  emissions  from  land  use  and 

Graph A1.1: Progress towards the SDGs in Italy 

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). 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 25 April 2024. Data refer mainly to the period 2017-2022 or 2018-2023. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

25 

 
 
 
 
 
 
 
forestry are well below the EU level (-70.2 tonnes 
CO2 eq. per km² vs -56 in the EU in 2022, SDG 13). 
The  use  of  railways  and  waterways  for  freight 
transport  is  far  from  the  EU  average  (9.8  pp. 
difference in % of inland freight tonne/km in 2022; 
SDG 9)  and  the  share  of  households  with  a  high-
speed  internet  connection  is  well  below  the  EU 
average (53.7% of households vs 73.4% in the EU 
in  2022;  SDG 9).  The  recycling  rate  at  municipal 
level  is  above the  EU  average  (51.9% in  2021  vs 
48.6%  in  the  EU  in  2022;  SDG 11)  but  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  the  area  at  risk  of  soil 
erosion  levels  by  water  is  well  above  the  EU 
average  (24.9%  of  non-artificial  erodible  area  vs 
5.3%  in  the  EU  in  2016;  SDGs 2  and  15). 
Moreover,  the  impact  of  drought  on  ecosystems 
increased  from  2017  to  2022  and  is  above  EU 
levels (17.6% of the country area, vs 15.7% in the 
EU in 2022; SDG 15). The average performance in 
each  dimension  of  environmental  sustainability 
masks 
large  regional  differences  across  the 
country.  The  recovery  and  resilience  plan  (RRP) 
includes  important  measures  expected  to  support 
the  green  transition  in  renewable  energy,  the 
circular  economy,  natural  resource  management, 
hydrogeological  risks,  sustainable  transport  and 
the energy efficiency of buildings.  

is 

improving 

Italy 
in  almost  all  SDG 
indicators related to fairness (SDGs 1, 4, 5, 7, 
8, 10), except for good health and well-being 
(SDG 3).  However,  it  performs  well  on  this 
latter  indicator  compared  with  the  rest  of 
the EU, with the same applying to affordable 
and  clean  energy  (SDGs 3,  7).  On  the  other 
hand,  Italy  needs  to  catch  up  with  the  EU 
average  on  most  indicators  (SDGs  1,  4,  5,  8, 
10).  Labour  market  participation  improved  but 
wide  gaps  compared  with  the  EU  remain.  The 
share  of  young  people  not 
in  education, 
employment or training is declining but is still well 
above  the  EU  average  (16.1%  of  the  population 
aged 15-29, vs 11.2% in the EU in 2023; SDG 8). 
Despite a relatively high share of women in senior 
management positions (43% in 2023, vs 33.8% in 
the EU; SDG 5), the participation gender gap due to 
caring  responsibilities  remains  higher than the  EU 
(1.3 pps, vs 0.8 in the EU in 2023 in the population 
aged 20-64; SDG 8). This is similar to the gender 
employment gap (19.5 pps, vs 10.2 pps in the EU 
in  the  population  aged  20-64  in  2023;  SDGs 5). 
The  share  of  the  working  poor  slightly  decreased 

(12.2% of population over 18 in 2017, vs 11.5% in 
2022;  SDG  8),  while  fatal  accidents  at  work 
increased, against a decline in the EU (2.7/100 000 
workers  vs  1.8  in  the  EU  in  2021;  SDG 8).  Italy 
progressed  on  almost  all  indicators  on  education, 
but  the  share  of  tertiary  education  graduates 
remains low (30.6% of the population aged 25-34 
in  2022,  vs  43.1%  in  the  EU;  SDG 4).  Preventing 
early leaving from education remains a challenge, 
especially for students with a migrant background 
(20.5  difference in  percentage  points  between  EU 
and  non-EU  population  aged  18-24,  vs  17.1  pp. 
difference  in  the  EU  in  2023;  SDG 10).  Numerical 
skills worsened, in line with the negative EU trend 
(over 2018-2022, the percentage of low achievers 
in mathematics among 15-year-olds increased by 
almost a quarter, reaching about 30% in Italy and 
the  EU;  SDG 4).  Access  to  housing  in  terms  of 
excessive  costs  (SDG 1)  and  affordable  energy 
(SDG 7) improved, while the share of people at risk 
of poverty or social exclusion declined slightly, but 
remains higher than in the EU (24.4% of the total 
population  in  2022,  vs  21.6%  in  the  EU;  SDG 1). 
Good  health  and  well-being  deteriorated  but 
remain  above  the  EU  average,  with  fewer  people 
perceiving  themselves  as  healthy  (77%  of  people 
aged over 16 in 2017, vs than 72.9% in 2022), an 
increasing  obesity  rate  (5.9%  of  population  over 
18  in  2017, vs  7.1%  in  2022)  and  an  increase in 
the  consumption  of  antibiotics 
(SDG 3).  RRP 
measures on 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  needs to catch  up  with the  EU  average 
on  all  SDGs  related  to  productivity  (SDGs 4, 
8, 9), but it is improving. Patent applications are 
increasing  but  remain  well  below  the  EU  average 
(86  per  million  inhabitants,  vs  153  per  million  in 
the  EU  in  2023).  Gross  domestic  expenditure  on 
R&D  remains  stable  but  is  also  below  the  EU 
average  (1.3%  of  GDP,  against  2.3%  in  the  EU  in 
2021)  (SDG 9).  On  the  other  hand,  real  GDP  per 
capita is almost on a par with the EU (EUR 28 520, 
vs EUR 28 940 in the EU in 2023) and investments 
represent  almost  22%  of GDP  (SDG 8).  The  share 
of  households  with  a  high-speed 
internet 
connection in 2022 (53.7%) was well below the EU 
average (73.4%), despite significant progress since 
2017 (21.7%) (SDG 9). However, the percentage of 
adults  aged  16  to  74  with  at  least  basic  digital 
skills  remained  below  the  EU  average  (45.8%,  vs 
55.6%  in  the  EU  in  2023;  SDG 4).  The  RRP  is 

26 

 
expected  to  contribute  significantly  to  the  digital 
transition  and  productivity  by  investing  in  the 
digitalisation  of  public  administration, 
justice, 
education  and  research,  and  the  tourism  and 
cultural 
the 
of 
digitalisation 
manufacturing  and  research  and  innovation  are 
also expected to boost productivity.  

sector.  Measures 
and 

supporting 
competitiveness 

its 

related 

While  the  country  is  improving  on  SDG 
indicators 
to  macroeconomic 
stability,  it  still  needs  to  catch  up  with  the 
EU  average  on  all  of  them  (SDGs 8,  16,  17). 
Italy has made progress on peace, justice and the 
quality  of 
institutions,  with  a  significant 
reduction  in  reported  crime,  falling  below  the  EU 
average  (from  19.4%  in  2015  to  8.4%  in  2020, 
EU: 10.7% of the total population in 2020). Access 
to  justice  remains  a  challenge,  with  only  40%  of 
the  population  perceiving  the  justice  system  as 
independent  and  with  the  government  spending 
almost EUR 112 per capita on law courts (SDG 16). 
Despite progress, economic growth and investment 
levels remain low (SDG 8). There is little uptake on 
global  partnerships,  and  challenges  remain  on 
public  debt  and  taxation,  including  environmental 
taxation 
(SDG 17).  Several  structural  reforms 
included in the RRP are expected to improve Italy’s 
macroeconomic  stability,  particularly  the  public 
administration and justice system reforms and the 
measures to fight tax evasion. 

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

27 

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

Graph A2.1: Italy’s progress on the 2019-2023 
CSRs (2024 European Semester) 

Source: European Commission. 

The Commission has assessed the 2019-2023 
country-specific  recommendations  (CSRs) (29) 
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  (SDGs) 
(see  Annexes  1  and  3). The  assessment  considers 
the policy action taken by Italy to date (30) and the 
commitments  in  its  recovery  and  resilience  plan 
(RRP) (31).  At  this  stage  of  RRP  implementation, 
85%  of  the  CSRs  focusing  on  structural  issues 
from  2019-2023  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 coming years. 

(29)  2023 CSRs: EUR-Lex - 32023H0901(12) - EN - EUR-Lex 

(europa.eu) 

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) 

(30)  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). 

(31)  Member States were asked to effectively address in their 
RRPs all or a significant subset of the relevant country-
specific recommendations issued by the Council. 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 have not yet been 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. 

28 

No Progress6%Limited Progress9%Some Progress58%Substantial Progress25%Full Implementation2% 
 
 
     
  
 
Table A2.1:  Summary table on 2019-2023 CSRs 

(Continued on the next page) 

29 

ItalyAssessment in May 2024*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.Substantial 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.Substantial 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.Some 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 5Substantial 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.Substantial 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 andSubtantial progressNot applicableSDG 8active support to employment.Substantial 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) 

(Continued on the next page) 

30 

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 4Substantial 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.Substantial progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022SDG 162021 CSR 1Not relevant anymoreIn2022,usetheRecoveryandResilienceFacilitytofinanceadditionalinvestmentinsupportoftherecoverywhilepursuingaprudentfiscalpolicy.Preservenationallyfinancedinvestment.Limitthegrowthofnationally financed current expenditure.Not relevant anymoreNot applicableSDG 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringfiscalsustainability in the medium term.Not relevant anymoreNot applicableSDG 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticular investment supporting the green and digital transition. Not relevant anymoreNot applicableSDG 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthandsocialprotectionsystems for all.Not relevant anymoreNot applicableSDG 8, 162022 CSR 1Some progressIn2023,ensureprudentfiscalpolicy,inparticularbylimitingthegrowthofnationallyfinancedprimarycurrentexpenditurebelowmedium-termpotentialoutputgrowth,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspending to the evolving situation.Substantial progressNot applicableSDG 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilienceFacilityandotherUnionfunds.Substantial progressNot applicableSDG 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringcredibleandgradualdebtreductionandfiscalsustainabilityinthemediumtermthroughgradual consolidation, investment and reforms.No progressNot applicableSDG 8, 16Inordertofurtherreducetaxesonlabourandincreasetheefficiencyofthesystem,adoptandappropriatelyimplementtheenablinglawonthetaxreform,particularlybyreviewingeffectivemarginaltaxrates,aligningthecadastralvaluestocurrentmarketvalues,streamliningandreducingtaxexpenditures,alsoforVAT,andenvironmentallyharmfulsubsidieswhile ensuring fairness, and by reducing the complexity of the tax code.Limited progressSDG 8, 10, 122022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestonesandtargetsincludedintheCouncilImplementing Decision of 13 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionofthe2021-2027cohesionpolicyprogrammingdocumentswithaviewtostartingtheirimplementation.2022 CSR 3Some progressReduce 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,Some 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 efficiencySome progressRelevant RRP measures being implemented as of 2021 and 2022 and planned as of 2022, 2023 and 2024SDG 7and to promote sustainable mobility.Some 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. 
 
 
  
 
Table (continued) 

Note: 
* See footnote (30). 
** 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.  
Source: European Commission 

31 

2023 CSR 1Some progressWinddowntheemergencyenergysupportmeasuresinforce,usingtherelatedsavingstoreducethegovernmentdeficit,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatsuchsupportmeasuresaretargetedatprotectingvulnerablehouseholdsandfirms,are fiscally affordable and preserve incentives for energy savings.Substantial progressNot applicableSDG 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationallyfinancednetprimaryexpenditurein2024tonotmore than 1,3%.Some progressNot applicableSDG 8, 16PreservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofgrantsundertheFacilityandofotherUnionfunds,inparticular to foster the green and digital transitions.Full implementationNot applicableSDG 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetoimprovedproductivityandhighersustainablegrowth,inordertoachieveaprudentmedium-termfiscalposition.No progressNot applicableSDG 8, 16Furtherreducetaxesonlabourandmakethetaxsystemmoreefficientbyadoptinganddulyimplementingtheenablinglawontaxreformwhilepreservingtheprogressivityofthetaxsystemandimprovingfairness,inparticularbystreamliningandreducingtaxexpenditures,includingVATandenvironmentallyharmfulsubsidies,andbyreducingthecomplexityof the tax code. Align the cadastral values with current market values.Limited progressSDG 8, 10, 122023 CSR2 Ensureeffectivegovernanceandstrengthenadministrativecapacity,inparticularatsubnationallevel,inordertoallowforthecontinuedswiftandsteadyimplementationoftherecoveryandresilienceplan.SwiftlyfinalisetheREPowerEUchapterwithaviewtorapidlystartingtheimplementationthereof.Proceedwiththespeedyimplementationofcohesionpolicyprogrammes,inclosecomplementarityandsynergywith the recovery and resilience plan.2023 CSR 3Some progressReduce the reliance on fossil fuels.Some progressSDG 7, 9, 13Streamlinepermittingproceduresinordertoacceleratetheproductionof additional renewable energy, andSome progressSDG 7, 8, 9, 13develop electricity interconnections to absorb it.Some progressSDG 7, 9, 13Increasethecapacityforinternalgastransmissioninordertodiversifyenergy imports and strengthen security of supply.Some progressSDG 7, 9, 13Increaseenergyefficiencyintheresidentialandcorporatesectors,includingthroughbettertargetedincentiveschemes,addressinginparticularthemostvulnerablehouseholdsandtheworst-performingbuildings.Some progressSDG 1, 2, 7, 10Promotesustainablemobility,includingbyremovingenvironmentallyharmful subsidies and speeding up the roll-out of charging stations.Limited progressSDG 8, 10, 11, 12Stepuppolicyeffortsaimedattheprovisionandacquisitionofskillsandcompetences needed for the green transition.Limited progressSDG 4RRP implementation is monitored through the assessment of RRP payment requests and analysis of the bi-annual reporting on the achievement of the milestones and targets, to be reflected in the country reports. Progress with the cohesion policy programming is monitored in the context of the Cohesion Policy of the European Union. 
 
  
 
ANNEX 3: RECOVERY AND RESILIENCE PLAN – IMPLEMENTATION 

This  Annex  provides  a  snapshot  of  Italy’s 
implementation of its recovery and resilience 
plan  (RRP),  past  the  mid-way  point  of  the 
Recovery  and  Resilience  Facility’s 
(RRF) 
lifetime.  The  RRF  has  proven  central  to  the  EU’s 
recovery  from  the  COVID-19  pandemic,  helping 
speed  up  the  twin  green  and  digital  transition, 
while  adapting  to  geopolitical  and  economic 
resilience 
developments, 
against  future  shocks.  The  RRF  is  also  helping 
implement the UN Sustainable Development Goals 
and 
country-specific 
recommendations (see Annex 2).   

strengthening 

address 

and 

the 

The  RRP  paves  the  way  for  disbursing  up  to 
EUR 71.8  billion  in  grants  and  EUR  122.6 
billion in loans under the RRF over the 2021-
2026  period,  representing  9.3%  of  Italy’s 
GDP (32). As of mid-May 2024, EUR 102.48 billion 
have  been  disbursed  to  Italy  under  the  RRF, 
comprising  EUR  41.54  billion  in  grants  and  EUR 
60.94 billion in loans. 

Italy  still  has  EUR  91.9  billion  available  in 
grants  and  loans  from  the  RRF.  This  will  be 
disbursed  after  the  assessment  of  the  future 
fulfilment  of  the  remaining  439  milestones  and 
targets (33)  included  in  the  Council  Implementing 
Decision (34)  (CID),  ahead  of  the  2026  deadline 
established for the RRF.  

Italy’s  progress  in  implementing  its  plan  is 
recorded  in  the  Recovery  and  Resilience 
Scoreboard (35).  The 
scoreboard  gives  an 
overview  of  the  progress  made  in  implementing 
the  RRF  as  a  whole.  Graphs  A3.1  and  A3.2  show 
the  current  state  of  play  as  reflected  in  the 
scoreboard. 

(32)  GDP information is based on 2023 data. Source: 

https://ec.europa.eu/economy_finance/recovery-and-
resilience-scoreboard/index.html?lang=en 

(33)  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. 

(34)  https://data.consilium.europa.eu/doc/document/ST-10160-

2021-ADD-1-REV-2/en/pdf  

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

resilience-scoreboard/country_overview.html 

32 

Italy’s RRP includes a REPowerEU chapter to 
phase  out  its  dependency  on  Russian  fossil 
fuels,  diversify 
its  energy  supplies  and 
increase  the  production  of  clean  energy  in 
the  coming  years.  To  kick-start  the  REPowerEU 
chapter’s  implementation,  EUR  551.2  million  was 
disbursed  as  pre-financing  on  25  January  2024. 
This  helped  launch  of  relevant  reforms,  including 
to streamline  permitting  for  renewable  energy 
deployment, 
reduce  environmentally  harmful 
subsidies, facilitate the production of bio-methane, 
and step up the provision and uptake of the skills 
needed for the green transition. 

Table A3.1:  Key facts of the Italian RRP 

Source: RRF Scoreboard 

The  plan  has  a  strong  focus  on  the  green 
transition,  dedicating  39.04%  of 
the 
available  funds  to  measures  that  support 
climate  objectives  and  25.60%  of  its  total 
allocation to support the digital transition. It 
also  retains  a  strong  social  dimension  with  social 
to 
protection  measures,  especially 
promoting 
transformation  of  vulnerable 
territories  into  smart  and  sustainable  areas  by 
investing  in  social  housing,  strengthening  local 
social  services  to  support  children  and  families, 
improving  the  quality  of  life  of  persons  with 
disabilities,  and  investing  in  infrastructure  for  the 
Special Economic Zones in the South. 

related 

the 

implementation  of 

With  four  payment  requests  completed, 
Italy’s 
is 
completion 
underway.  However, 
requires  increased  efforts.  The  Commission 
gave a positive assessment of Italy’s first, second 
and  third  payment  requests,  taking  into  account 

its  RRP 

timely 

Initial plan CID adoption date13 July 2021Scope Revised plan with REPowerEU chapterLast major revision8 December 2023Total allocation EUR 71.8 billion in grants and EUR 122.6 billion in loans (9.3% of 2023 GDP)Investments and reforms 150 investments and 66 reforms Total number of milestones and targets617Fulfilled milestones and targets178 (28.9% of total) 
 
 
 
 
  
 
 
the  opinion  of  the  Economic  and  Financial 
Committee.  This  led  to  EUR  21  billion  being 
disbursed  in  financial  support  on  13  April  2022; 
EUR  21  billion  on  8  November  2022  and  EUR  19 
billion  on  9  October  2023 (36).  The  related  150 
milestones  and  targets  covered  reforms  and 
the  areas  of 
investments 
justice,  public 
administration, 
tax  administration,  education, 
active labour market policies, social policies, digital 
and tourist sectors as well  as urban regeneration, 
simplification  of  legislation  in  sectors  like  waste, 
water and rail transport. 

in 

Graph A3.1: Total grants disbursed under the RRF 

justice and public employment reforms; as well as 
investments  related  to  digitalisation,  particularly 
transition  of 
local  public 
concerning 
the 
cloud, 
data 
the 
to 
administrations' 
the 
development  of 
industry,  green 
the  space 
hydrogen, transport, research, education and social 
policies, among others. 

As  of  15  May  2024,  the  Commission  is 
working in collaboration with Italy to assess 
its  fifth  payment  request. 
  Table  A3.2 
highlights  some  relevant  measures  achieved  so 
far,  and  some  that  will  be  implemented  before 
2026  to  keep  making  Italy’s  economy  greener, 
more digital, inclusive, and resilient.  

Table A3.2:  Measures in Italy's RRP 

Note: This graph displays the amount of grants, including pre-
financing, 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: RRF Scoreboard 

Graph A3.2: Total loans disbursed under the RRF 

Source: FENIX 

Source: RRF Scoreboard 

The most recent payment request, which the 
Commission  assessed  positively  on  28 
November  2023,  led  to  the  disbursement  of 
EUR  16.5  billion  on  28  December  2023.  The 
disbursement reflected the positive assessment of 
28 milestones and targets covering reforms in the 
areas  of  social  inclusion,  public  procurement, 

(36)  When requested payments are disbursed, the pre-financing 
is cleared proportionally. The net amounts are quoted here. 

33 

EUR 32,04billion (44.6%)Total allocation: EUR 71,78billionEUR 45billion (36.7%)Total allocation: EUR 122,602billionReforms and investments implemented• Digitalization of Business and Construction procedures• Reform of the public administration• Reform of the teacher recruitment systemUpcoming reforms and investments• Construction of flood protective structures• Establishment of a national archive information system• Geothermal Potential Development Plan 
   
 
   
 
 
   
 
 
 
 
ANNEX 4: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH 

EU funding instruments provide considerable 
resources for recovery and growth to the EU 
Member  States.  In  addition  to  the  EUR 194.4 
billion  of  Recovery  and  Resilience  Facility  (RRF) 
funding  described  in  Annex  3,  EU  cohesion  policy 
funds (37)  provide  EUR 42.2  billion  to  Italy  for  the 
2021-2027 period (38).  Support  from  these  two 
instruments  combined  represents  around  11.34% 
of  the  country’s  2023  GDP,  well  above  the  EU 
average  of  5.38%  of  GDP (39).  Cohesion  policy 
supports  regional  development,  economic,  social 
and  territorial  convergence  and  competitiveness 
through  long-term  investment  in  line  with  EU 
priorities and with national and regional strategies. 

funds  boosted 

During  the  2014-2020  programming  period, 
Italy’s 
cohesion  policy 
competitiveness, with  tangible achievements 
notably to support companies, build technical 
administrative  capacity,  improve  the  water 
supply and boost employment.  Over the whole 
period, which financed investments until December 
funds (40)  had  made 
2023,  cohesion  policy 
EUR 47.9  billion  available  to  Italy (41),  of  which 
EUR 27.8  billion  has  been  disbursed  since  March 
2020,  when  the  COVID-19  pandemic began (42). 
The  achievements  of  cohesion  policy  funds  over 
the programming period included a contribution of 
over  EUR 1  billion  to  boost  the  capacity  of  the 
public  administration,  support  to  some  700 000 
businesses,  of  which  490 000  under  the  targeted 
response  initiatives  to  tackle  the  pandemic  (CRII 
and  REACT-EU),  and  already 
the 
provision of water supply to 0.5 million people by 
2022  with  a  view  to  achieving  improvement  for 

improved 

2.3  million  people.  During  the  same  period,  over 
13 million people participated in initiatives funded 
by the European Social Fund (ESF), of which over 7 
million  participants  were  below  25  years  of  age 
and  1.3  million  were  long-term  unemployed.  The 
initiative 
Incentivo  occupazione  sviluppo  sud 
supported over 61 000 jobs by granting incentives 
to  private  employers  hiring  unemployed  people  in 
‘less developed’ and ‘transition’ regions.  

In  the  current  programming  period,  cohesion 
policy  will  provide  a  further  boost  to  Italy’s 
competitiveness,  to  the  green  transition  and 
to  social  cohesion,  improving  the  living  and 
working  conditions  of  the  Italy’s  people.  In 
2021-2027,  the  European  Regional  Development 
Fund  (ERDF)  will  allocate  over  EUR 1.3  billion  to 
boost  the  administrative  capacity  to  implement 
cohesion  policy,  support  70 000  companies  by 
promoting innovation and competitiveness, and to 
build  6 300  km  of  new  public  water  supply 
pipelines.  The  European  Social  Fund  Plus  (ESF+) 
will  contribute  to  tackling  youth  unemployment 
with a budget of around EUR 2.7 billion. The main 
areas  of  ESF+  support  in  this  field  will  include 
action to help young people make the transition to 
work,  develop  new  skills  needed  to  tackle  the 
challenges of the green and digital transition, and 
modernise  services  for  employment  and 
job 
market  policies.  With  this  work,  cohesion  policy 
substantially  contributes  to  achieving  the  UN 
Sustainable  Development Goals  (SDGs)  in  Italy, in 
particular  SDG  8  (Decent  work  and  economic 
growth), 
innovation, 
infrastructure) and SDG 1 (No poverty). 

(Industry, 

SDG 

9 

(37)  In 2021-2027, cohesion policy funds include the European 
Regional Development Fund, the European Social Fund Plus 
and the Just Transition Fund. 

(38)  European territorial cooperation (ETC) programmes are 
excluded from the figure. In 2021-2027, the total 
investment, including national financing, amounts to 
EUR 74.1 billion. 

(39)  RRF funding includes both grants and loans, where 

applicable. The EU average is calculated for cohesion policy 
funds excluding ETC programmes. GDP figures are based on 
Eurostat data for 2022. 

(40)  In 2014-2020, cohesion policy funds included the European 
Regional Development Fund, the European Social Fund and 
the Youth Employment Initiative. REACT-EU allocations are 
included but ETC programmes are excluded. 

(41)  In 2014-2020, the total investment, including national 

financing, amounted to EUR 64.4 billion. 

(42) Cut-off date: 14 May 2024. 

Through combined action, cohesion policy and 
the recovery and resilience plan (RRP) have a 
mutually  reinforcing  impact  in  Italy.  For 
instance,  the  adopted  national  strategy  for  the 
circular economy and the national programme for 
waste  management,  both  promoted  under  Italy's 
RRP, envisage several measures to improve waste 
management  and  incentivise  reuse  and  recycle. 
They  are  complemented  by  ERDF  investments  in 
the circular economy in 17 Italian regions and 14 
metropolitan  cities.  In  addition,  the  RRP  reforms 
need  to  be  reflected  at  regional  level  in  the 
regional  waste  management  plans  required  to 
meet the cohesion policy enabling conditions.  

34 

 
 
 
 
 
Graph A4.1: Distribution of cohesion policy funding 
across policy objectives in Italy 

Graph A4.2: Distribution of RRF funding by pillar in 
Italy 

Source: European Commission 

in  fast 

RRP  and  ERDF 
internet 
investments 
connections  are  also  fully  complementary  and 
mutually reinforcing. Italy's RRP focuses on rolling 
out ultra-broadband and 5G infrastructures in grey 
areas  and  the  ERDF  focuses  on  remote  and 
isolated  areas,  and  on  measures  to  boost  public 
administration  digital  services,  which  depend 
greatly  on  effective  connectivity  infrastructure. 
Finally,  implementing  Italy's  plan  for  new  skills  to 
better  link  vocational  training  to the  needs  of the 
labour  market 
in  the  RRP  will  be 
supported  by  investment  in  smart  specialisation, 
industrial  transition  and  entrepreneurship  under 
ERDF  programmes.  The  contribution  of  cohesion 
policy  and  RRP  funding  by  policy  objective  is 
illustrated by Graphs A4.1 and A4.2. 

included 

The Technical Support Instrument (TSI) helps 
Italy  to  invest  in  its  public  administration 
and create a better enabling environment for 
EU  and  national  investment.  The  TSI  has 
funded  projects  in  Italy  to  design  and  implement 
growth-enhancing 
reforms  since  2017.  The 
support  provided  to  Italy  in  2023  included  action 
to  bring  in  a  new  organisational  model  for  the 
regional  health  and  care  assistance  network,  to 
develop  a  strategy  to  finance  climate  adaptation 
infrastructure  investments,  and  to  draft  national 
guidelines  for  implementing  the  ‘do  no  significant 
harm’  principle  in public  expenditure.  The  TSI  also 
helped 
to 
Italy  boost 
investments 
implement  specific 
implement  the 
in 
included 
REPowerEU chapter in the RRP. 

its  overall  capacity 

its  RRP,  and  to 

reforms  and 

(1) Each RRP measure helps achieve the aims of two of the 
six policy pillars of the RRF. The primary contribution is shown 
in the outer circle while the secondary contribution is shown in 
the inner circle. Each contribution represents 100% of the RRF 
funds. Therefore, the total contribution to all pillars displayed 
on this chart amounts to 200% of the RRF funds allocated to 
Italy. 
Source: European Commission 

Italy  also  receives  funding  from  several  other  EU 
instruments, including those listed in Table A4.1. 

35 

PO1 Smarter EuropePO2 Greener EuropePO3 Connected EuropePO4 Social EuropePO5 Europe closer to citizensPO8 JTF specific objectiveGreen transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generation 
     
   
Table A4.1:  Support from EU instruments in Italy 

(1) RRF implementation period is 2021-2026. 
(2) The public sector loan facility’s programming period is 2021-2025 and the amount reflects the national share in its grant 
component reserved until the end of the period.   
(3) Common agricultural policy programming periods are 2014-2022 and 2023-2027.   
(4) EMFF – European Maritime and Fisheries Fund, EMFAF – European Maritime, Fisheries and Aquaculture Fund. 
(5) Data on the Connecting Europe Facility covers transport and energy and has a cut-off date of 15 May 2024. 
(6) Data on Horizon Europe (2021-2027) has a cut-off date of 13 May 2024. 
(7) 2021-2027 data on the LIFE programme has a cut-off date of 15 May 2024. 
(8) The amount of the EU guarantee signed under the EFSI Infrastructure and Innovation Window was derived based on the 
signed amount of the operations and the average internal multiplier, as reported by the EIB (cut-off date is 31 December 2023). 
(9) The amount of the EU guarantee and of the volume of operations signed under InvestEU includes the EU compartment as well 
as the Member State compartments (cut-off date is 31 December 2023).   
(10) SURE - European instrument for temporary support to mitigate unemployment risks in an emergency. 
Source: European Commission 

36 

Amount 2021-2027 (EUR million)Cohesion policy42 179.5RRF grants (1)71 779.6Public sector loan facility (grant component) (2)78.1Common agricultural policy (3)28 067.0EMFF/EMFAF (4)518.2Connecting Europe Facility (5)1 346.5Horizon 2020 / Horizon Europe (6)2 779.5LIFE programme (7) 263.2Volume of operations (EUR million)European Fund for Strategic Investment 2015-2020 (8)11 679.1InvestEU 2021-2027 (9)2 527.1PeriodTotal amount available (EUR million)Disbursed amount (EUR million)SURE (10)2020-202227 438.527 438.5RRF 2021-2026122 602 60.9EU grantsAmount 2014-2020 (EUR million)47 876.6--50 500.04 186.9 820.9EU loans537.31 674.65 710.0 354.7EU guaranteesEU Guarantee (EUR million) 
 
  
 
ANNEX 5: RESILIENCE 

Table A5.1:  Resilience indices across dimensions for Italy and the EU-27 

The synthetic indices aggregate the relative resilience situation of countries across all considered indicators. For an indicator, each 
country’s relative situation in the latest available year is compared with the collection of values of that indicator for all Member 
States and all years in the reference period. 
Source: Resilience Dashboards - version spring 2024, data up to 2022 

This  Annex  uses  the  Commission’s  resilience 
dashboards (RDB) (43) to show Italy’s relative 
resilience  capacities  and  vulnerabilities (44) 
that  may  be  of  relevance  for  societal, 
economic, digital and green transformations, 
and  for  dealing  with  future  shocks  and 
geopolitical challenges (45). 

Italy 

has  medium 

and  medium 

According  to  the  RDB’s  set  of  resilience 
overall 
indicators, 
vulnerabilities 
overall 
capacities,  consistent  with  2023  RDB.  This  is 
evident  from  the  distribution  of  indicators  across 
various 
resilience  categories.  Over  60%  of 
vulnerability  indicators  are  low,  medium-low,  or 
medium,  while  around  40%  of  capacity indicators 
are medium-high or high. Italian regions’ resilience 

(43)  Https://ec.europa.eu/info/strategy/strategic-

planning/strategic-foresight/2020-strategic-foresight-
report/resilience-dashboards_en. Resilience is defined as the 
ability not only to withstand and cope with challenges but 
also to undergo transitions, in a sustainable, fair, and 
democratic manner. 2020 Strategic Foresight Report: 
Charting the course towards a more resilient Europe 
(COM(2020) 493). 

(44)  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, 
while capacities refer to enablers or abilities to cope with 
crises and structural changes and to manage 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. 

varies  a  lot,  as  Annex  17’s  analysis  of  several 
regional trends shows. 

stable, 

Italy’s  social  and  economic  dimension 
with  medium-high 
remained 
vulnerabilities  and  medium-high  capabilities. 
These  vulnerabilities  are  high: 
the  gender 
employment  gap,  government  debt  and  the 
projected  old-age  dependency  ratio.  A  significant 
macroeconomic  skills  mismatch  and  high  long 
term unemployment rates also put Italy in a risky 
position,  especially  in  the  context  of  the  ongoing 
twin transitions. On a positive note, Italy performs 
well  in  terms  of  healthy  life  years  in  absolute 
value  at  birth,  and  standardised  preventable  and 
treatable mortality. 

Three 

in 
have 

Italy  has  medium-high  vulnerabilities  and 
the  green 
capacities 
medium-high 
significant 
areas 
dimension. 
vulnerabilities:  Fossil  fuel  subsidies,  the  farmland 
bird  index,  and  soil  erosion  by  water.  In  terms  of 
capacities, Italy resource productivity is high, it has 
a  lot  of  organic  farming,  and  both  its  circular 
material use rate and energy productivity are high. 

Italy  has  medium  vulnerabilities  and  has 
strengthened  its  capacities  in  readiness  for 
the digital transition. In particular, matters have 
improved 
the  collaborative 
economy,  and  the  value  of  e-commerce  sales 
indicators. However, the country has low levels of 
digital proficiency, with a medium-low percentage 
information  and  communication 
of  Master’s 

in  e-healthcare, 

37 

 
 
 
 
 
 
 
technology  (ICT)  graduates  and  relatively  few 
businesses actively seeking ICT specialists. 

in 

the 

Vulnerabilities  have  remained  stable  while 
capacities  have  improved  in  the  geopolitical 
dimension.  Italy’s  strengthened  capacities  are 
mainly 
the 
improvements 
result  of 
backward  and  forward  participation 
in  GVC. 
However,  Italy  is  characterized  by  medium-low 
capacities in its trade openness performance (both 
intra-  and  extra-EU  trade)  and  intra-EU  trade  in 
energy  and  recyclable  raw  materials.  In  terms  of 
the  best  supplier 
vulnerabilities, 
concentration  in  base  metals  in  the  EU  and  is 
doing  well  in  terms  of  extra-EU  import  partner 
concentration.  However,  it  has  a  very  low  total 
fertility rate. 

Italy  has 

38 

 
ENVIRONMENTAL SUSTAINABILITY 
ANNEX 6: EUROPEAN GREEN DEAL 

Italy’s  green  transition  requires  more  action 
in  several  areas,  such  as  on  managing 
potential  losses  from  climate  risks,  on  the 
climate 
framework 
institutional 
adaptation,  and  on  sustainable  water  and 
soil  management.  This  Annex  provides  a 
snapshot  of  climate,  energy,  and  environmental 
aspects of the transition (46). 

on 

Italy’s  draft  updated  national  energy  and 
climate plan (NECP) includes some quantified 
information  on  the  investment  needs  to 
achieve its 2030 climate and energy targets. 
It focuses mainly on the energy system, renewable 
the  national 
energy,  distribution  networks, 
transmission  network  and  energy  storage,  but 
does not always quantify the investment needs for 
energy  efficiency.  The  plan  provides  estimates  of 
the  additional  investment  needs  with  existing 
measures (WEM  scenario),  but  it  does  not include 
transport  infrastructure,  nor  policies  in  sectors 
other than energy. It does not give estimates with 
additional  measures  (WAM  scenario).  The  plan 
mentions 
schemes  and 
recognises  the  potential  of  green  bonds  and 
guaranteed schemes for sustainable investment. It 
outlines some of the main funding sources for the 
key  policies  and  measures,  but  coverage 
is 
inconsistent,  which  means  it  is  not  possible  to 
identify potential funding gaps (47). 

innovative 

funding 

Even  including  the  planned  measures  that 
are yet to be adopted, Italy still has a gap to 
its  2030  effort  sharing 
close  to  reach 
target (48). 
Italy’s  greenhouse  gas 
emissions  from  its  effort  sharing  sectors  are 

In  2022, 

(46)  This Annex is complemented by Annex 7 on energy transition 

and competitiveness, Annex 8 on the fair transition to 
climate neutrality, Annex 9 on resource efficiency, circularity, 
and productivity, and relevant topics in other annexes. 

(47)  See the Commission’s (2023) assessment of the draft 

national energy and climate plan of Italy. 

(48)  The national greenhouse gas emission reduction target is 
laid down in Regulation (EU) 2023/857 (the Effort Sharing 
Regulation). The aim is to align action in the sectors 
concerned with the objective to reach the EU-level economy-
wide target of greenhouse gas reductions of at least 55% 
compared to 1990 levels. The target also applies to sectors 
outside the current EU Emissions Trading System, notably 
buildings (heating and cooling), road transport, agriculture, 
waste, and small industry (known as the effort sharing 
sectors).  

expected  to  have  been  18.5%  below  2005  levels. 
Current  policies  are  projected  to  reduce  Italy’s 
effort  sharing  emissions  by  28.3%  from  2005 
levels  by  2030.  Additional  policies  planned  in 
reduce 
Italy’s  draft  NECP  are  projected 
to 
emissions  by  35%-37%  from  2005 
levels, 
undershooting  the  effort  sharing  target  to  reduce 
by  43.7%  by  at  least  6.7  percentage  points (49). 
The  draft  plan  reiterates  Italy’s  commitment  to 
achieve climate neutrality by 2050. 

Graph A6.1: Greenhouse gas emissions from the 
effort sharing sectors in Mt CO2eq, 2005-2022 

Source: European Environment Agency 

Italy  will  have  to  continue  to  scale-up  its 
energy  efficiency  policy  and 
financing 
measures  in  order  to  achieve  its  planned 
contribution to the EU 2030 target. Its energy 
efficiency  contribution  of  115  Mtoe  in  primary 
energy consumption and 94.4 Mtoe in final energy 
consumption  for  2030  set  in  the  draft  updated 
NECP  match  the  contribution  required  under  the 
Energy  Efficiency  Directive,  including  the  +2.5% 
flexibility  provision.  However,  the  draft  updated 
NECP indicates that Italy’s planned contribution to 
the  2030  energy  efficiency  targets  is  higher  than 
the contribution projected under the current energy 
efficiency  policy  and  financing  measures.  Italy’s 
renewable  energy  contribution  set  in  its  NECP  to 

(49)  The effort sharing emissions for 2022 are based on 
approximated inventory data. The final data will be 
established in 2027 after a comprehensive review. 
Projections on the impact of current policies (‘with existing 
measures’, WEM) and additional policies (‘with additional 
measures’, WAM) as per Italy’s draft updated NECP. 

39 

05010015020025030035040020052022MtCO2eWasteSmall industryAgricultureBuildings (under ESR)Domestic transport (excl. aviation) 
 
 
 
      
 
 
 
reach 40.5% by 2030 is above the required share 
of 39% (50). 

Sustainable  transport  has  yet  to  take off  in 
Italy (51).  At  0.4%  in  2022,  the  share  of  battery 
electric  cars  is  comparatively  low  (EU  average: 
1.2%),  as  is  the uptake  of  electric  vehicles,  which 
is  decreasing.  The  supply  of  publicly  accessible 
charging  points  in  2023  is  satisfactory  (39 000 
points, or one for every 9 electric vehicles, against 
the  EU  average  of  1:10).  With  a  13%  share  of 
passenger transport, the use of buses and coaches 
is  higher  in  Italy  than  the  EU  average  (7%).  For 
freight,  the  dominant  mode  is  road  transport, 
which  transports  84%  of  all  freight  (EU  average: 
75%). As a result, traffic congestion and pollution 
are  issues (52).  Rail  is  used  for  only  4%  of  freight 
and 12% of passenger transport (EU average: 6% 
and  16%),  and  almost  no  use  of  waterways  (EU 
average  of  5.6%).  Italy’s  share  of  electrified 
railways is among the highest in the EU but there 
is  scope  for  more  investment  in  the  rail  network, 
especially in southern Italy. 

land  use, 

Italy’s  actions  to  increase  carbon  removals 
through 
land-use  change  and 
forestry (LULUCF) are projected to fall short 
of its 2030 target. Net carbon removals through 
land use have been falling (with a temporary rise 
in  2018).  To  meet  the  2030  target,  Italy  needs 
additional  carbon  removals  of  1 358 kt CO2eq (53). 
According  to  projections,  the  volume  of  removals 
may fall short (54). 

(50)  The EU target set out in the revised Renewable Energy 

Directive is to have 42.5% of gross final energy consumption 
coming from renewable energy sources by 2030, with the 
aspiration to reach 45%. The formula in Annex I to Directive 
(EU) 2023/1791 sets the indicative national contribution for 
Italy at 115 Mtoe for primary energy consumption. The 
Commission communicated a corrected national contribution 
of 93.05 Mtoe in final energy consumption for 2030 in 
accordance with Article 4(5) of the Energy Efficiency 
Directive to increase the contribution towards the Union’s 
binding energy efficiency target. See the Commission 
Recommendation of 18.12.2023 to Italy. 

(51)  Unless otherwise indicated, data in this section refer to 
2021. See European Commission, 2023, EU transport in 
figures, transport.ec.europa.eu. 

Italy’s  challenges 
in  climate  adaptation 
include  a  high  climate  protection  gap (55), 
institutional  weaknesses  and  risks  to  soil 
and  water  management.  Italy  is  vulnerable  to 
climate  change-related  extreme  events  such  as 
floods, droughts and heatwaves. It also has a high 
climate  protection  gap. 
is  estimated  that 
between  1980  and  2022,  extreme  events  and 
natural disasters cost Italy EUR 210 billion, a third 
of  all  costs  in  the  EU,  putting  one  SME  in  four  at 
risk (56).  Only  6%  of  climate-related  losses  were 
insured (57)  and  the  level  of  coverage  for  water-
related risks was particularly low. The annual costs 
of climate change for infrastructure are estimated 
to be around EUR 2 billion (58).  

It 

Italy  has  a  high  risk  of  floods  and  wildfires, 
and  a  medium  level  of  vulnerability  to 
coastal  flooding.  Water  scarcity  has  expanded 
into northern Italy, with moisture levels falling and 
soil  sealing  and  degradation  rising.  In  its  2023 
national multi-sector climate risk assessment, Italy 
improved the accuracy of these assessments. Italy 
highlights  specific  challenges  in  its  adaptation 
strategy, 
coordination, 
disparities  in  sub-national  adaptation  planning, 
and  delays  in  the  planning  process,  despite  good 
practices  of  involving  stakeholders  and  adopting 
nature-based  solutions.  It  is  crucial  to  overcome 
these challenges in climate adaptation action (59). 

insufficient 

including 

Despite  progress  in  improving  the  status  of 
surface  water  bodies,  more  effective  action 
would  help  reduce  hydromorphological  and 
agricultural  pressure  and  boost 
Italy’s 
resilience  to  extreme  events.  The  water 
exploitation index plus (WEI+) reached 57% in Q3 
of  2019 (60).  On  average  over  the  period  2000-
2020,  3.3%  of  Italy  was  affected  by  droughts, 
rising  to  17.6%  in  2022  with  croplands  the  most 
damaged  ecosystem.  Italy  appears  particularly 

(55)  For more on the climate protection gap, see Table A6.1. 

(56)  Disastri e climate change, conto salato per l’Italia, Censis 

Confcooperative. 

(57)  EIOPA, 2022. 

(52)  In 2020, road vehicle drivers experienced peak-hour delays 

(58)  MIMS 2022. 

of 37 hours on average (EU average: 29 hours). 

(59)  See the Commission’s 2023 assessment and 

(53)  National LULUCF targets of the Member States in line with 

recommendation on Italy’s progress on climate adaptation. 

Regulation (EU) 2023/839. 

(54)  Projections submitted in Italy’s draft updated national energy 

and climate plan, 2023. 

(60)  Values above 20% are generally an index of water 

scarcity; values above 40% indicate that stress is severe and 
freshwater use unsuitable. 

40 

 
 
 
in 

the 

the 

vulnerable  to  floods (61).  In  May  2023,  significant 
flooding occurred. In the region of Emilia Romagna 
alone,  damages  were  estimated  at  EUR 8.8 
billion (62), 
third  most  expensive  natural 
disaster 
first  6  months  of  2023 
worldwide (63). 
6.8  million 
inhabitants  are  exposed  to  a  medium  risk  of 
flooding. In terms of public spending, Italy  spends 
EUR 1.25  billion  on  the  consequences  of  flooding 
and  only  EUR 0.19  billion  on  prevention (64).  The 
coordinating  role  of  river  basin  authorities  in 
managing flooding could be enhanced.  

estimated 

An 

Italian  agriculture 
is  becoming  more 
intensive,  exerts  pressure  on  nature  and 
water and generates pollution.  While most  EU 
countries reduced livestock density between 2016 
and 2020, Italy’s livestock density index increased 
from 0.74% to 0.81%. At the same time, the share 
of  extensive  livestock  farming (65)  of  the  area 
under agriculture fell from 38.3% in 2013 to 26.8 
in  2016,  still  above  the  EU  average  of  23.8%, 
albeit  with  strong  regional  differences.  Intensive 
poultry and pig farming were the sectors that put 
the highest burden of ammonia emissions into the 
air.  The  agricultural  sector  was  responsible  for 
generating  91.3%  of  all  ammonia  emissions 
against  the  EU  average  of  90.7%  in  2021.  Italy's 
gross  nitrogen  balance  on  agricultural 
land 
indicated an average surplus of 68 kg of nitrogen 
per  hectare  per  year  in  2017 (66).  The  nitrate 
content in groundwater is below the EU average at 
17.8  against  20.5  mg  nitrates/l.  12.6%  of 
groundwater  monitoring  stations  indicate  levels 
above  the  maximum  50  mg  nitrates/l  (2016-
2019). Waterbodies in Italy are also highly subject 
to  pesticide  contamination.  In  2021,  24%  of 
monitoring  sites  were  reported  to  have  pesticide 
levels  exceeding  the  thresholds  set  by  the  Water 
Framework  Directive,  above  the  EU  average.  Italy 
has  one  of  the  highest  shares  of  irrigated  areas, 

(61)  Disaster Risk Financing: Limiting the Fiscal Cost of Climate-

Related Disasters (Radu, 2022). 

(62)  Emilia Romagna Land Security and Civil Protection Agency; 
another severe incident hit Italy 28-29 February 2024. 

(63)  MunichRe Natural disasters in the first half of 2023. 

(64)  Legambiente and Unipol, Rapporto Citta Clima 2023 

Speciale Alluvioni, p. 3, p. 11. 

(65)  Share of utilised agricultural area with livestock density 

below 1 livestock unit per hectare. 

(66)  EEA, Agricultural land: nitrogen balance. 

41 

its 

20.2%  of 
land  under  agriculture.  Water 
abstracted  for  agricultural  purposes  accounts  for 
49.4%  of  the  volume  abstracted  in  2019 (67). 
Drought  has  become  a  particular  concern  in  Italy 
over the past decade (68), with snow accumulation 
in the 2022-23 winter season recorded as  one of 
the  worst  for  the  last  30  years,  leading  to  less 
runoff and less water available for irrigation (69) as 
well  as  saltwater  intrusion  in  the  Po  Delta  40km 
inland in 2022 (70). In  2023 there was a reduction 
of  available  water  by  18%  with  respect  to  the 
1951–2023 average (71).  

Intensive agriculture also degrades soils and 
undermines  climate  resilience.  Based  on  the 
impact assessment for the Soil Monitoring Law (72) 
47%  of  Italian  soil  is  unhealthy.  Soil  erosion 
affects  80%  of  cropland  area  and  68%  of 
cropland  and  grassland  is  subject  to  the  loss  of 
organic  carbon.  The  average  estimated  organic 
carbon content was 20%, below the EU average of 
24%.  In  2022,  soil  artificialisation  increased  by 
76.8  km2,  10.2%  more  than 
in  2021.  This 
corresponds to 21 hectares/day, the highest figure 
for 11 years (73). The loss of the soil ecosystem is 
estimated 
to  cost  a  cumulative  EUR 80.2-
98.7 billion  between  2012  and  2030 (74).  The 
estimated crop productivity loss due to soil erosion 
in  Italy  was  over  EUR 0.6  billion  (a  high  share  of 
the EU total of over 1.25 billion EUR in 2010) (75). 
The  cost  of  sediment  removal  due  to  soil  erosion 

(67)  EC/ENV calculations based on Annual freshwater abstraction 

by source and sector [env_wat_abs] – EEA, 2024. 

(68)  OECD, Building agricultural resilience to natural hazard-

induced disasters, 2021. 

(69)  JRC, Drought in Europe June 2023. 

(70)  Faranda, D., et al., 2023, ‘Persistent anticyclonic conditions 
and climate change exacerbated the exceptional 2022 
European-Mediterranean drought’, Environmental Research 
Letters 

(71)  ISPRA, Press Release, 21.03.2024 

(72)  SWD 417 final of 5.7.2023 - impact assessment for the 

Directive of the European Parliament and of the Council on 
Soil Monitoring and Resilience (Soil Monitoring Law), (see p. 
10, pp. 189-190, pp. 835-845). 

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

ecosistemici edizione 2023, p. 15. 

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

ecosistemici edizione 2023, p. 31. 

(75)  Cost of agricultural productivity loss due to soil erosion in the 
EU: From direct cost evaluation approaches to the use of 
macroeconomic models, 2016, Land Degrad Dev. 
2018;29:471-484, Table 6, Panagos et al. 

 
 
 
 
in  Italy  is  just  over  EUR 1 billion  a  year (76).  A  law 
on reducing soil use is pending in parliament.           

Graph A6.2: Changes in livestock density and 
organic farming 

Italy  has  scope  to  improve  biodiversity, 
nature protection, restoration and air quality. 
By the end of 2021, Italy had protected 21.4% of 
its land but only 6.9% of marine areas. Less than 
10%  of  habitats  and  44%  of  species  were  in  a 
good  conservation  status (77).  Air  quality  in  Italy 
continues  to  give  cause  for  serious  concern.  The 
Court of Justice of the EU has twice ruled against 
Italy  for  exceeding  PM10  and  N02  levels,  with 
another  case  pending  for PM2.5  (see  Annex  8  for 
more details).  

The  uptake of  organic products is  increasing 
but food consumption is not yet sustainable. 
Italy  has  one  of  the  highest  shares  of land  under 
organic  farming in the  EU,  16.8%  of  total  utilised 
agricultural area in 2021, against  the EU  average 
of  9.1% (78)  and  the  EU  goal  of  at  least  25%  by 
2030.  Conservation  agriculture  practices,  which 
increase  soil  organic  carbon,  were  used  in  less 
than  5%  of  tillage  areas  in  2016 (79).  In  2023, 
organic  food  sales  exceeded  EUR 5.4  billion, 
indicating  a  growing  market  share.  The  country 
produced  140  kg  of  food  waste  per  person  in 
2021, above the EU average (131). Between 2010 
and 2020, while the livestock density decreased in 
most  of  the  EU  countries,  Italy’s  livestock  density 
index increased from 0.74% to 0.81%.  

Italy  would  benefit  from  investing  more  in 
water  and  waste  management.  According  to 
the  latest  Commission  estimates,  the  overall 
environmental  investment  needs  for  2021-2027 
are  at  least  EUR 37  billion  a  year,  against  the 
financing baseline of EUR 28 billion, leaving a gap 
of EUR 9 billion. 

(76)  Understanding the cost of soil erosion: An assessment of the 

sediment removal costs from the reservoirs of the EU, 
Journal of Cleaner Production 434 (2024), Panagos et al. 

(77)  Versus 15% and 28% in the EU respectively. 

(78)  In 2020. 2021 data is not available. 

(79)  Eurostat Share of tillage practices in arable area EU27. 

42 

Livestock unit (LSU)/ha of UAA: it measures the stock of 
animals (cattle, sheep, goats, equidae, pigs, poultry and 
rabbits) converted in LSUs per hectare of UAA. 
Source: Eurostat 

Graph A6.3: Environmental investment gap, annual 
average 

The numbers are computed by the European Commission 
based on the latest internal reports, Eurostat, EIB and national 
data sources. 
Source: European Commission 

Italy  has  defined  the  initial  steps  to  phase 
out  environmentally  harmful  subsidies.  Italy 
estimates  that  these  subsidies  reached  EUR 22.4 
billion  in  2021  (1.3%  of  GDP).  Its  recovery  and 
resilience  plan  includes  the  plan  to  reform  these 
subsidies.  It  involves  reporting  subsidies  by  2024 
and  adopting  legal  provisions  by  2025  to  reduce 
environmentally harmful subsidies by EUR 2 billion 
in 2026 and then by EUR 3.5 billion by 2030.  

0120510152020162020% LSU per hectare% of total utilised agricultural areaLivestock density index Italy (% LSU per ha)Livestock density index EU-27 (% LSU per ha)Organic farming Italy (% of total utilised agricultural area)Organic farming EU-27 (% of total utilised agricultural area)5.0401.1553.2276173.0522.9003.284001.0002.0003.0004.0005.0006.000Pollution prevention &controlWater managementCircular economy andwasteBiodiversity andecosystemsmillion EUR2014-20202021-2027 
 
        
 
        
Table A6.1:  Indicators tracking progress on the European Green Deal from a macroeconomic perspective 

Sources:  (1)  Member  States’  emission  data  for  2019  and  2020  are  in  global  warming  potential  (GWP)  values  from  the  4th 
Assessment Report (AR4) of the Intergovernmental Panel on Climate Change  (IPCC). Member States’ 2005 base year emissions 
under  Regulation  (EU)  2018/842,  emissions  data  for  2021  and  2022,  and  2030  projections  are  in  GWP  values  from  the  5th 
Assessment Report (AR5) of the IPCC. 2021 data are based on the final inventory reports, 2022 data are based on approximated 
inventory reports and European Environmental Agency’s calculation of effort sharing emissions. The final data for 2021 and 2022 
will  be  established  after  a  comprehensive  review  in  2027.  The  2030  target  is  in  percentage  change  of  the  2005  base  year 
emissions. Distance to target is the gap between the 2030 target and projected effort sharing emissions with existing measures 
(WEM) and with additional measures (WAM), in percentage change from the 2005 base year emissions. The  measures included 
for  the  2030  emission  projections  reflect  the  state  of  play  as  reported  in  Member  States'  draft  updated  national  energy  and 
climate plans or, if unavailable, as reported by 15 March 2023 as per Regulation 2018/1999. (2) Net removals are expressed in 
negative figures, net emissions in positive figures. Reported data are from the 2024 greenhouse gas inventory submission. 2030 
value  of  net  greenhouse  gas  removals  as  in  Regulation  (EU)  2023/839  –  Annex  IIa.  (3)  The  2030  national  objectives  for 
renewable  energy  and  energy  efficiency  are  indicative  national  contributions,  in  line  with  Regulation  (EU)  2018/1999  (the 
Governance  Regulation),  the  EU-level  2030  renewable  energy  target  set  out  in  Directive  EU/2018/2001  amended  by  Directive 
EU/2023/2413 (the revised Renewable Energy Directive) – 42.5% of gross final energy consumption with the aspiration to reach 
45% –, and the formula in Annex I to Directive (EU) 2023/1791 (the Energy Efficiency Directive). (4) Passenger battery electric 
vehicles (BEV) and fuel cell electric vehicles (FCEV). (5) The climate protection gap refers to the share of non-insured economic 
losses caused by climate-related disasters, based on modelling of the risk from floods, wildfires, windstorms, and the insurance 
penetration rate. Scale: 0 (no protection gap) –4 (very high gap) (European Insurance and Occupational Pensions Authority, 2022). 
(6) Total water consumption in renewable freshwater resources available for a territory and period. (7) Material extractions  for 
consumption and investment. (8) Years of potential life lost through premature death due to exposure to particulate matter with a 
diameter  of  less  than  2.5  micrometres.  (9)  Share  of  habitats  in  good  conservation  status  according  to  the  records  submitted 
under  Art.  17  of  the  Habitats  Directive  (Directive  92/43/EEC)  for  2013-2018.  (10)  Multi-species  index  measuring  changes  in 
population abundances of farmland bird species. (11) Source: Annex 12 of the Commission’s proposal for a soil monitoring law, 
SWD (2023) 417 final. (12) Estimates of organic carbon content in arable land. 

43 

Target200520192020202120222030WEMWAMProgress to climate and energy policy targetsGreenhouse gas emission reductions in effort sharing sectors (1)Mt CO2eq, %, pp343.101,7-18%-24%-17%-18%-44%-15-8Net greenhouse gas removals from LULUCF (2)Kt CO2eq-33 685-37 702-27 499-24 787-21 199-35.758n/an/aShare of energy from renewable sources (1) (3)%8%18%20%19%19%39%--Energy efficiency: primary energy consumption (3)Mtoe180,8145,9132,3145,6139,3112,2Energy efficiency: final energy consumption (3)Mtoe137,2115,4102,7114,4112,093,1Projected20182019202020212022202120222030Green transition: mobility         Greenhouse gas emissions: road transportMt CO2e---100,9108,1769,0786,689,2Share of zero-emission vehicles in new registrations (4)% 0,30,62,44,63,8912,1n/aNumber of publicly accessible AC/DC charging points --123152127230733299178446956n/aShare of electrified railways%71,6%71,6%71,9%72,2%-56,1%-n/aGreen transition: buildings         Greenhouse gas emissions: buildingsMt CO2e---83,074,2537,0486,770,1Final energy consumption in buildings2015=100106,3%103,0%98,6%99,4%97,0%104,0%97,2% Climate adaptation         Climate protection gap (5)score 1-4--2,42,42,01,51,5n/a20182019202020212022202020212022State of the environmentWater | Water exploitation index (WEI+) (1) (6)% of renewable freshwater7,37,3---3,6--Circular economy | Material footprint (7)tonnes per person11,811,110,211,812,614,214,814,9Pollution | Years of life lost due to air pollution by PM2.5 (8)per 100.000 inhabitants782711779701-545584-Biodiversity | Habitats in good conservation status (9)%9,914,7                       Common farmland bird index (10)2000=100727472--78--Green transition: agri-food sectorOrganic farming% of total utilised agricultural area15,1715,1615,9616,83-9,1--Nitrates in groundwatermg NO3/litre-----20,42--Food waste per capitaKg per capita136140-130131-Share of soil in poor health (11)%4741Soil organic matter in agricultural land (12)Mt per ha507----7.904--DistanceEU-27 
 
       
 
ANNEX 7: ENERGY TRANSITION AND COMPETITIVENESS 

Most  of  the  energy  support  measures  in 
2023  were  targeted  at  the  most  vulnerable 
households or  firms,  although most  of  these 
measures  do  not  fully  preserve  the  price 
signal, needed to reduce energy demand and 
increase energy efficiency. The government has 
continued  to  provide  support  to  the  economy 
through  selective  measures,  prioritising 
the 
initiatives  aimed  at  vulnerable 
extension  of 
families  and  businesses.  The  range  of  support 
measures  extended  in  the  third  quarter  of  2023 
includes  containment  of  gas  bill  costs,  social 
bonuses  for  household  electricity  and  gas  and 
corporate  welfare.  In  2023  measures  related  to 
bill 
facilitated  public 
guarantee  schemes  for  businesses  were  still  in 
place.  However,  tax  credits  for  businesses  related 
to  spending  on  electricity  and  gas  were  not 
extended.  The  energy  package  for  2023 
is 
estimated  at  around  EUR  25.7  billion  (1.3%  of 
GDP), 46% less than in 2022. Italy is expected to 
fully phase out its temporary emergency measures 
by the end of 2024. 

instalment  plans  and 

have 

consumers 

In  relative  terms,  electricity  prices  for  non-
household 
increased 
significantly compared to the US, Japan, and 
to  a  lesser  extent,  the  UK.  Although  there  has 
been  a  notable  decline  since  the  second  half  of 
2022, 
Italy’s  electricity  prices  have  persisted 
above  those  of  the  US  and  Japan  throughout  the 
second  semester  of  2023.  This  could  potentially 
affect the international competitiveness of energy-
intensive industries in the country.    

This  Annex (80)  sets  out  Italy’s  progress  and 
in  accelerating  the  net-zero 
challenges 
energy  transition  while  bolstering  the  EU’s 
competitiveness 
energy 
sector (81). It considers measures and targets put 
forward in the draft updated National Energy and 
Climate Plans (NECP) for 2030 (82). 

clean 

the 

in 

Aligning with the prevailing trends witnessed 
across  the  EU,  energy  prices  in  Italy  have 
fallen,  although  they  remain  at  historically 
high  levels,  as  a  result  of  the  international 
geopolitical  situation.  In  the  second  semester 
2022,  average  household  gas  prices  reached  a 
peak at EUR 0.13/KWh, while household electricity 
prices  peaked  at  EUR  0.38/KWh  before  starting  a 
gradual  drop.  Throughout  the  first  semester  of 
2023,  average  household  gas  prices  in  Italy 
experienced  a  25%  decrease  compared  to  the 
second  half  of  2022.  However,  average  prices 
went up again in the second semester, surpassing 
the  EU  average  by  20%.  On  the  other  hand, 
average  household  electricity  prices  in  the  first 
half  of  2023  witnessed  a  slight  increase  of  4% 
only  to  decrease  by  12%  the  following  semester 
coming down below levels recorded late 2022. For 
the  industrial  and  services  sector,  average  gas 
prices  peaked  in  the  first  half  of  2022  at  EUR 
0.11/KWh, 12% higher than the EU average of EUR 
0.08/KWh.  Since  then,  average  gas  prices  have 
dropped  below  early  2022  levels  and  were  10% 
below  the  EU  average  in  the  second  semester  of 
2023.  Conversely,  average  electricity  prices  for 
non-household consumers remained above the EU 
average  throughout  the  year  though  exhibiting  a 
considerable decline in the first half of the year of 
28%  followed  by  a  persistent  downward  trend  in 
the  second  semester  reaching  an  average  of  EUR 
0.23/KWh. 

(80)  It is complemented by Annex 6, as the European Green Deal 
focuses on the clean energy transition, and by Annex 8 on 
the action taken to protect the most vulnerable groups, 
complementing ongoing efforts under the European Green 
Deal, REPowerEU and the European Green Deal Industrial 
Plan. 

(81)  In line with the Green Deal Industrial Plan and the Net-Zero 

Industry Act 

(82)  Italy submitted its draft updated NECP in July 2023. The 
Commission issued an assessment and country-specific 
recommendations on 18 December 2023. Commission 
Recommendation, Assessment (SWD) and Factsheet of the 
draft updated National Energy and Climate Plan of Italy - 
European Commission (europa.eu) 

44 

 
 
 
 
 
Graph A7.1: Italy's energy retail prices for 
households and industry & service 

gas  imported  in  2021  (followed  by  Algeria  and 
Qatar).  

In  2022,  Italy  had  already  managed  to 
substantially reduce this dependency to 19% 
and aims to phase out Russian gas by 2025. 
Italy  has 
To  support  energy  diversification, 
commissioned 
storage 
floating 
new 
a 
regasification  Unit  (FSRU)  in  Piombino  with  a 
capacity  of  5bcm/y  and  an  additional  unit  is 
expected to start operating in Ravenna by the end 
of  2024  with  a  5bcm/y  capacity. (83)  The  total 
natural gas storage in Italy in 2022 stood at 19.04 
bcm. Italy operates 15 gas storage sites, of which 
13  are  active  underground  storage  sites  (with  a 
combined  working  capacity  of  195.3  TWh).  Italy 
fulfilled  its  gas  storage  obligations  last  winter, 
reaching  99%  by  1  November  2023,  and  ended 
the  winter  season  with  a  storage  filled  at  57.8% 
by 1 April 2024.. Further investment is planned in 
the  Italian  REPowerEU  chapter  to  phase  out 
Russian  gas  imports  and  support  diversification, 
namely  the  construction  of  the  Adriatica  Line  and 
two  other  projects  for  increasing  Italy’s  export 
potential  to  Austria.  With  the  same  purpose  but 
outside REPowerEU are the TAP expansion and the 
Matagiola-Massafra  pipeline.  Italy  also  managed 
to  reduce  its  gas  demand  between  August  2022 
and  December  2023  by  17%  in  comparison  with 
the average of the previous five years. The annual 
consumption  amounted  to  68.5  bcm  in  2022 
(against 76.3 in 2021). 

In  its  draft  updated  NECP,  Italy  postpones 
the  closure  of  one  coal  power  plant,  not 
keeping  its  commitment  from  the  region’s 
territorial  just  transition  plan.  Despite  the 
recent  temporary  increase  in  coal  use,  the  draft 
updated  NECP  confirms  Italy’s  commitment  to 
phase  out  coal  by  2025  for  the  mainland. 
However,  Italy  reports  difficulties  in  meeting  the 
objectives in its current NECP (from 2020) and the 
commitments  in  the  territorial  just  transition  plan 
for  Sulcis  (Sardinia):  there,  the  closure  of  a  coal 
power  plant  will  be  postponed  from  2025  to 
2028. (84)  

(83)  The draft updated NECP also mentions the upgrade of 3 LNG 
terminals (Panigaglia by 2 bcm, Livorno by 1 bcm and Rovigo 
by 2 bcm), as well as a potential 5.7 bcm/year of 
biomethane production by 2030. 

(84)  See the Commission’s assessment of the draft updated 

NECP.  

(1) For industry, consumption bands are I3 for gas and IC for 
electricity, which refer to medium-sized consumers and 
provide an insight into affordability 
(2) For households, the consumption bands are D2 for gas 
and DC for electricity 
(3) Industry prices are shown without VAT and other 
recoverable taxes/levies/fees as non-household consumers 
are usually able to recover VAT and some other taxes 
Source: Eurostat 

Graph A7.2: Trends in electricity prices for non-
household consumers (EU and foreign partners) 

(1) For Eurostat data (EU and IT), the band consumption is ID 
referring to large-sized consumers with an annual 
consumption of between 2 000 MWh and 20 000 MWh, such 
as in electricity intensive manufacturing sectors, and gives an 
insight into international competitiveness 
(2) JP = Japan 
Source: Eurostat, IEA 

Energy  security  is  an  important  aspect  in 
Italian  energy  policy,  with  imported  fossil 
fuels  representing  the  bulk  of  Italy’s  energy 
mix. Italy is still very dependent on fossil fuels, as 
they made  up  79%  of  the  gross  available  energy 
in  the  country  in  2022.  Historically,  Russia  was 
Italy’s largest supplier, accounting for 40% of the 

45 

0,000,050,100,150,200,250,300,350,40€/KWhGas (industry & service) - ITGas (industry & service) - EUGas (households) - ITGas (households) - EUElectricity (industry & service) - ITElectricity (industry & service) - EUElectricity (households) - ITElectricity (households) - EU050100150200250Index ( 2018 S2 = 100)JPUKUSITEU 
     
  
  
 
Installed renewable capacity surged by 5.3% 
in  2022,  driven  by  a  significant  increase  in 
solar, in particular photovoltaics. In 2022, the 
total  renewable  energy  capacity  in  Italy  stood  at 
59 891  MW (85).  Despite  this  increase,  Italy  still 
falls behind Member States of comparable size in 
terms  of  total  new  installed  capacity,  especially 
due  to  the  slow  deployment  of  wind.  The  total 
wind  capacity  was  11780  MW,  of  which  11 750 
from  onshore  and  30  MW  from  offshore  (an 
increase of 4.6% compared to 2021) (86). The total 
solar  capacity  amounted  to  25 083  MW,  an 
to  2021.  The 
increase  of  11%  compared 
acceleration 
installation  of  renewable 
energy  in  2022  was  mostly  due  to  solar  PV. 
Despite  its  big  potential,  Italy  lacks  behind  in  the 
development of offshore wind. (87) Italy’s share of 
renewables in heating and cooling is below the EU 
average  (20.2%  in  2022)  and  36%  of  it  comes 
from heat pumps. (88)  

in  the 

Graph A7.3: Italy's installed renewable capacity 
(left) and electricity generation mix (right) 

(1) "Other" includes solar thermal energy, marine energy, solid 
biofuels, renewable municipal waste, liquid biofuels, biogas, 
geothermal energy 
Source: IRENA, Ember 

Italy made significant steps in implementing 
reforms  to  accelerate  the  deployment  of 
renewables.  On  permitting,  Italy  simplified  the 
permitting  for  rooftop  solar,  established  a  single 
digital  platform  for  the  submission  of  single 
authorisation  applications,  using  a  standard 
authorisation model for all regions, and decreased 
the  minimum  distance  of  renewable  energy 
installations  from  protected  locations.  The  Italian 

(85)  IRENA Report 2023  

(86)  IRENA Report 2023 

(87)  The Italian NECP envisages 2.1 GW of offshore wind in 2030, 
but no support mechanisms have been announced so far. 

REPowerEU chapter includes a reform on the Testo 
Unico  (Single  Text),  aiming  to  create  one  single 
text superseding all previously  existing legislation, 
to  provide  more  clarity  on  the  legislation  on 
permitting for renewables.  

its 

the  need 

cross-border 

to  prioritize 

In  this  sense, 

Italy 
network 

investments, 
electricity 

further 
With 
is 
infrastructure 
to 
upgrading 
accommodate  a  higher  share  of  renewable 
energy. 
Italy  will  carry  out 
substantial  investment  thanks  to  its  recovery  and 
resilience  plan  (RRP),  to  facilitate  the  optimal 
integration of internal networks and the absorption 
of renewable energy sources into the grid. In terms 
of 
the 
electricity 
deployment  of  interconnections  with  Austria  and 
Slovenia will help to increase the nominal capacity 
of  the  existing  electricity  interconnection  with 
these  countries.  At  the  western  border,  the 
electricity interconnector between France and Italy, 
the Piemonte-Savoia S.r.l, became fully operational 
in  August  2023  and  increased  the  exchange 
capacity  with  France  by  40% (89).  Finally,  the 
electricity  link  between  Sicily  and  Tunisia  will 
facilitate 
from 
renewable sources in the Mediterranean region.  

increased  energy  production 

networks, 

is 

significant. 

Consumer  empowerment  in  the  electricity 
and  gas  market 
The 
installation  of  smart  meters  has  been 
mandatory  since  2011,  with  wide  coverage, 
and  consumers  are  interested  in  being  part 
of  energy  communities.  Italy  was  the  second 
country  in  Europe  to  achieve  80%  coverage  for 
smart meters, already in 2011.  By 2025, at least 
90% of delivery points is expected to be equipped 
with  2G  meters  and  96%  by  2026.  A  decree  to 
promote energy communities was published by the 
authorities  on  23  January  2024.  The  Italian  RRP 
notably  contains  an  investment  to  support  the 
installation of 1 600 MW of new power generation 
capacity 
self-consumption 
collective 
configurations and renewable energy communities, 
focusing on towns.  

for 

Italy demonstrated progress but there is still 
untapped  potential  on  energy  efficiency.  In 
2022,  Italy  had  a  primary  energy  consumption  of 
139.3  Mtoe,  a  4.3%  decrease  compared  to  2021 

(88)  In the draft NECP this share is projected to increase to 36.7% 

(89)  An increase by 1200 MWA, considering that Italy started 

by 2030. 

from a capacity of 3150 MWA. 

46 

 
 
 
 
and an 11.1% decrease compared to 2012. It had 
a final energy consumption of 112.0 Mtoe, a 2.1% 
decrease  compared 
to  2021  and  an  8.0% 
decrease  compared  to  2012.  In  2023,  the  best 
results  came  from  the  industry  sector,  which 
decreased its final energy consumption by 13.8%, 
and  the  worst  from  the  transport  sector,  which 
increased its final energy consumption by 7.8%. 

Italy  has  implemented  a  series  of  energy 
efficiency  measures  with  the  support  of 
several  EU  funds.  However,  most  schemes 
are  traditionally  addressed  to  buildings  and 
schemes for industry are still rather limited. 
RRP support for energy efficiency has been scaled 
up  to  EUR  7.7  billion,  notably  by  upscaling 
investment  in  renovation  of  public  and  social 
housing,  and  optimising  energy  consumption  and 
advancing the energy transition in SMEs and larger 
firms.  The  new  ‘Transizione  5.0’  measure  will 
support  energy  efficiency,  on-site  renewables  and 
energy  transition  in  businesses,  with  an  available 
budget  of  EUR  6.3  billion.  The  key  enabling 
measures  and  success  factors 
Italy  for 
increasing energy efficiency in businesses are the 
white  certificate  scheme, 
the  energy  audit 
obligation  and  the  well-developed  market  for 
energy service companies (ESCOs).  

in 

relies  mainly  on  grant-based 

Most  of  the  financing  schemes  for  energy 
efficiency  are  still  grant-based  and  the  use 
of  financial  instruments  is  still  very  limited. 
In  terms  of  existing  funding  schemes  addressing 
mobilisation  of  investment  in  energy  efficiency, 
Italy 
funding 
schemes,  mainly  implemented  via  tax  discounts. 
Some  grant-based  schemes  are  implemented  via 
calls for interest, mainly to support public building 
renovations.  The  use  of  financial  instruments  for 
is  extremely 
energy  efficiency 
limited  and  needs  to  be  scaled  up.  While  a 
National  Energy  Efficiency  Fund  exists, 
its 
implementation is significantly backloaded.   

improvements 

With  regard  to  energy  consumption 
in 
buildings,  Italy  reduced  the  final  energy 
consumption  of  its  residential  sector  by 
1.3% (90)  between  2020  and  2022.  This  is  in 
line  with  the  national  Long  Term  Renovation 

Strategy,  which  envisages  a  12%  reduction  of 
energy  consumption  by  buildings  by  2030, 
compared to 2020. Heating and cooling represent 
almost  79%  of  the  country’s  residential  final 
energy  consumption,  whereof  20%  comes  from 
renewables.  Approximately  510  000  heat  pumps 
were sold in 2022, an increase of 35% compared 
to  the  previous  year.  Electricity  in  Italy  is  3.86 
times more expensive than gas, which means that 
end users save energy but pay more if they chose 
a  heat  pump  for  heating.  Italy’s  RRP  provides 
support  for  energy  efficiency  in  residential  and 
public buildings, investing EUR 16.9 billion. Italy is 
not  reporting  any  checks  on  products  covered  by 
ecodesign and energy labelling. 

Italy  does  not  have  an  official  definition  or 
indicator  of  energy  poverty.  According  to 
national estimates, energy poverty increased from 
7.3% in 2014 to 8.5% in 2022 (about 2.2 million 
households).  However,  in  2022,  the  share  of 
households unable to heat their homes sufficiently 
was in line with the EU, amounting to 2.7%, while 
the  share  of  arrears  was  5%,  below  the  EU 
average  (6.9%).  Targeted  support  schemes  would 
be more efficient in addressing energy poverty, as 
families  living  in  older  multi-apartment  buildings 
or in southern regions are more at risk. 

Hydrogen  infrastructure  is  a  key  asset  in 
Italy.  The  Italy  –  Austria  –  Germany  hydrogen 
corridor included in the first EU List of Projects of 
Common and Mutual Interest, and in particular the 
Italian  H2  Backbone,  will  be  a  key  asset  for  the 
import  of  large  quantities  of  renewable  hydrogen 
produced in North Africa and Southern Italy (Sicily) 
to the export points with Austria and Switzerland.   

facilities. 

Italy  remains  one  of  the  leading  clean 
technology markets (91), hosting a substantial 
number  of  solar  PV  and  wind  energy 
manufacturing 
Regarding 
manufacturing  capacity  for  solar  PV  components, 
integrated 
of 
more 
photovoltaics come from Italy. Italy is between the 
top  two  biggest  producers  within  the  EU  and  has 
companies listed among the leading EU producers 
of  backsheets  and  foils (92).  Italian  companies  are 
also  leading  modules  manufacturers,  with  one 
actor  in  the  Italian  electricity  market  and  a 

than  22% 

building 

(90)  Final energy consumption in households from Eurostat (data 
tables from December 2023), climate-corrected by the Joint 
Research Centre with reference period 2005-2022 (FEC 
climate-corrected = FEC/ (HDD/HDD reference period) 

(91)  Ranking third in the EU after Germany and Spain 

(92)  ETIP-PV, 2023 

47 

 
 
 
countries  in  terms  of  public  investment  in  solar 
energy technologies. There was an upward trend in 
venture  capital  invested  (see  also  Annex  12)  in 
clean  energy  technology  start-ups  and  scale-ups, 
which  are  at  the  forefront  of  innovation  (107.3 
million  EUR  in  2023  compared  to  6.4  million  EUR 
in  2019) (94).  Under  Horizon  2020,  Italy  received 
EUR  385  million  from  2014  to  2020  for  energy 
research,  overall  receiving  9%  of  all  EU  funds 
targeting  energy  research (95).  Italy  is  heading 
international efforts to ramp up progress in power 
system  modernisation,  including  through  Mission 
Innovation Green Powered Future Mission and the 
International Smart Grids Action Network. 

this  project 

gigafactory  in  Sicily,  whose  expansion  is  set  to 
result  in  a  15-fold  increase  in  its  production 
capacity  to  3  GW  per  year  from  the  current  200 
MW.  And  two  other  hubs  of  the  PV  industry  are 
located  in  the  Veneto  region,  which  can  each 
achieve  a  production  capacity  of  1  GW/year.  The 
Italian  RRP  allocates  nearly  EUR  90  million  to  the 
PV  gigafactory  in  Sicily,  which  is  now  underway, 
highlighting  how 
fundamentally 
contributes  to  the  European  strategy  to  build  an 
increasingly  autonomous  renewable  supply  chain. 
In  Northern  Italy,  one  company  comes  in  fourth 
position  at  EU  level  (after  Spain,  Germany  and 
Austria)  but  is  leader  in  the  national  market  with 
production  of  inverters  reaching  7  GW.  For  wind, 
Italy  has  manufacturing  facilities  for  onshore 
towers  and  blades,  operating  in  Lombardy  and 
Apulia. Component production facilities are located 
between  Lombardy  and  the  Veneto  region (93).  At 
the end of 2017, the ex-Whirlpool industrial site in 
Taverola  was  converted  with  the  aim  of  creating 
the  first  Mediterranean  cluster  to  produce  lithium 
batteries.  In  2019,  the  European  Commission 
approved 
the  construction  of  a  8GWh/year 
gigafactory  with  an  integrated  pilot  line  for  end-
of-life battery recycling, as an Important Project of 
Common  European  Interest  (IPCEI).  In  2022,  a 
second plant in Taverola received funding from the 
Ministry  of  Economic  Development  and  the  IPCEI 
fund amounting to EUR 417m to launch a start-up 
to  produce  lithium-ion  batteries.  Other  lithium-ion 
manufacturing facilities for the automotive sector 
have  been  announced  in  2022  in  Termoli,  with  a 
forecast production of 40 GWh, and in Ivrea with a 
gigafactory  planned  to  open  in  2025  with  3  000 
jobs and a productive capacity up to 45 GWh/year. 
Important  actors  in  the  electrolyser  sector  have 
launched  manufacturing  units  for  AEM  (Anion 
Exchange  Membrane)  and  alkaline  electrolysers. 
The  facility  in  San  Miniato  has  a  production 
capacity  of  300  MW/year.  With  additional 
investment,  it  aims  to  reach  a  total  annual 
production capacity equivalent to 1.3 GW.  

to 

the  European 
Italy 

Innovation 
According 
Scoreboard  2023, 
is  a  moderate 
innovator (See also Annex 11). Public investment 
in research and innovation (R&I) in the energy field 
decreased from 0.036% in 2014 to 0.027% in 201 
(as a share of GDP), while no absolute change was 
recorded  over  the  same  period  for  private 
investment  in  R&I.  Italy  is  among  the  top  five  EU 

(94)  JRC figures, based on PitchBook data (extracted in June 

2023). 

(95)  The impact of Horizon 2020 funding on Italian firms: a focus 

(93)  Local impact global leadership | WindEurope 

on the energy sector, APRE, 2021 

48 

 
 
 
Table A7.1:  Key Energy Indicators 

(1) The ranking of the main suppliers is based on the latest available figures (for 2022) 
(2) Venture Capital investment includes Venture Capital deals (all stages), Small M&A deals and Private Equity (PE) growth deals 
(for companies that have previously been part of the portfolio of a VC investment firm or have received Angel or Seed funding) 
Source: Eurostat, Gas Infrastructure Europe, JRC elaboration based on PitchBook data (03/2024), JRC SETIS (2024) 

49 

20192020202120222019202020212022Import Dependency [%] 77,5%73,5%73,4%79,4%60,5%57,5%55,5%62,5%of Solid fossil fuels 98,6%93,0%97,0%102,4%43,3%35,8%37,3%45,8%of Oil and petroleum products 92,5%88,7%84,3%92,9%96,7%96,8%91,7%97,7%of Natural Gas 95,1%92,8%93,7%99,2%89,7%83,6%83,6%97,6%Dependency from Russian Fossil Fuels [%]of Natural Gas 47,1%43,3%40,0%19,3%39,7%41,3%41,1%21,0%of Crude Oil16,8%13,5%12,2%20,9%28,8%26,7%26,4%19,5%of Hard Coal42,9%55,8%62,1%33,2%43,5%49,1%47,4%21,5%2016201720182019202020212022Gas Consumption (in bcm)70,9                 75,2                 72,7                 74,5               71,3               77,5               68,7               Gas Consumption year-on-year change [%]5,0%6,0%-3,3%2,4%-4,3%8,7%-11,3%Gas Imports - by type (in bcm)65,3                 69,7                 67,9                 71,1               66,4               73,0               72,6               Gas imports - pipeline59,1                 61,8                 59,1                 57,3               54,0               63,1               58,2               Gas imports - LNG6,27,98,713,812,39,914,4               Gas Imports - by main source supplier (in bcm) (1)Algeria19,3                 19,5                 18,0                 13,4               15,1               22,5               26,0               Russia26,8                 33,1                 32,8                 33,4               28,7               29,2               14,0               Qatar5,5                   6,7                   6,5                   6,6                 6,9                 6,9                 7,3                 Azerbaijan-                   -                   -                   -                 0,0                 7,2                 10,3               20192020202120222023LNG Terminals - storage capacity m3 LNGNumber of LNG Terminals3                      3                      3                      3                    4                 LNG Storage capacity (m3 LNG)487.500          487.500          487.500          487.500        487.500     Underground StorageNumber of storage facilities14                    14                    14                    14                  14               Technical Capacity (bcm)17,4                 17,5                 17,6                 17,7               17,4               20162017201820192020202120222023Gross Electricity Production (GWh) (2)289.768          295.830          289.708          293.853        280.531        289.070        283.953        -              Combustible Fuels198.693       208.824       192.129       195.084     180.805     189.132     198.515     -              Nuclear0000000-              Hydro44.257         38.025         50.503         48.154       49.495       47.478       30.291       -              Wind17.689         17.742         17.716         20.202       18.762       20.927       20.494       -              Solar22.104         24.378         22.654         23.689       24.942       25.039       28.121       -              Geothermal6.289           6.201           6.105           6.075         6.026         5.914         5.837         -              Other Sources736               661               601               650             501             579             695             -              Gross Electricity Production [%]Combustible Fuels68,6%70,6%66,3%66,4%64,5%65,4%69,9%-              Nuclear0,0%0,0%0,0%0,0%0,0%0,0%0,0%-              Hydro15,3%12,9%17,4%16,4%17,6%16,4%10,7%-              Wind6,1%6,0%6,1%6,9%6,7%7,2%7,2%-              Solar7,6%8,2%7,8%8,1%8,9%8,7%9,9%-              Geothermal2,2%2,1%2,1%2,1%2,1%2,0%2,1%-              Other Sources0,3%0,2%0,2%0,2%0,2%0,2%0,2%-              Net Imports of Electricity (GWh)37.027            37.761            43.899            38.141          32.200          42.790          42.987          -              As a % of electricity available for final consumption 12,5%12,5%14,5%12,6%11,3%14,2%14,5%-              Electricity Interconnection [%]-                8,2%-                8,7%8,8%3,8%4,0%4,6%Share of renewable energy consumption - by sector [%]Electricity34,0%34,1%33,9%35,0%38,1%36,0%37,1%-              Heating/cooling18,9%20,1%19,3%19,7%19,9%19,3%20,6%-              Transport7,4%6,5%7,7%9,0%10,7%9,9%10,1%-              Overall17,4%18,3%17,8%18,2%20,4%18,9%19,1%-                 20192020202120222023VC investments in climate tech start-ups and scale-ups (EUR Mln)6,37              6,09              158,28         354,95          107,29          as a % of total VC investment (3) in Italy start-ups and scale-ups0,8%0,9%9,6%12,4%8,1%Research & Innovation spending in Energy Union R&i prioritesPublic R&I (EUR mln)409,6           445,1           -                -              -              Public R&I (% GDP)0,02%0,03%-                -              -              Private R&I (EUR mln)713,6           561,9           -                -              -              Private R&I (% GDP)0,04%0,03%-                   -                 -                 ELECTRICITY/ENERGYCLEAN ENERGYItalyEUENERGY DEPENDNCEDIVERSIFICATION OF GAS SUPPLIES 
 
 
 
   
 
ANNEX 8: FAIR TRANSITION TO CLIMATE NEUTRALITY 

Italy’s  progress 

This  Annex  monitors 
in 
ensuring  a  fair  transition  towards  climate 
neutrality  and  environmental  sustainability, 
particularly  for  workers  and  households  in 
vulnerable  situations.  In  Italy,  the  number  of 
jobs  in  the  green  economy  has  quickly  risen  in 
recent  years.  Between  2016  and  2021,  total  jobs 
in  the  environmental  goods  and  services  sector 
grew by 52.8% (to around 921 000 jobs jobs) (EU: 
16.4%),  reaching  4.1%  of  total  employment  (EU: 
2.7%).  Also  between  2015-2020,  the  greenhouse 
gas  emission  intensity  of  Italy’s  workforce  (see 
Graph  A8.1  and  Table  A8.1)  decreased  from  15.2 
to  13.9  tonnes  per  worker.  This  is  below  the  EU 
average  (14.3  tonnes  per  worker  in  2022) (96), 
indicating  a  positive  trend  in  the  green  transition. 
Upskilling  and  reskilling  of  workers  in  energy-
intensive  industries (97)  has  increased  to  some 
extent, contributing to a fair green transition in line 
with  the  Council  Recommendation  of  2022  on 
towards  climate 
transition 
ensuring  a 
neutrality (98).  However,  further  developing  green 
skills remains key,  also for the implementation of 
REPowerEU.  Italy’s  recovery  and  resilience  plan 
(RRP) outlines crucial reforms and investments for 
a 
the 
territorial  just transition  plans  of  Taranto  (Apulia), 
and Sulcis-Iglesiente (Sardinia), as well  as actions 
supported  by  the  European  Social  Fund  Plus 
(ESF+). 

transition,  complementing 

fair  green 

fair 

Workers in transforming sectors need active 
support  as  labour  shortages  are  increasing. 
In  20223,  employment  in  Italy’s  energy-intensive 
industries  represented  3.3%  of  total  employment 
(3.5%  in  the  EU).  Employment  in  mining  and 
quarrying  has  fallen  by  11.7%  since  2015  (to 
around 30 100 workers in 2023). The job vacancy 
rate in construction (see Graph A8.2), a key sector 
for  the  green  transition,  is  below  the  EU  average 
(3.2%  vs  3.6%  in  EU  in  2023),  although  this 
contrasts  with  the  perception  of  small  and 
medium-sized  enterprises  (SMEs)  in  the  sector, 

(96)  Workforce-related calculations are based on the EU Labour 
Force Survey. Note, in the 2023 country report for Italy, such 
indicators were calculated based on employment statistics in 
the national accounts. This may result in limited 
comparability across the two reports. 

(97)  Mining and quarrying (NACE B), chemicals (C20), minerals 

(C23), metals (C24) and automotive (C29). 

(98)  The 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. 

50 

in 

back 

them 

general 

(ELA) (100), 

where  71%  reported  that  skills  shortages  are 
business 
holding 
activities (99).  According  to  the  European  Labour 
Authority 
labour  shortages  were 
reported in 2023 for a number of occupations that 
required specific skills or knowledge for the green 
transition (101), 
related 
electricians,  electrical  mechanics  and  fitters,  and 
house builders. 

including  building  and 

Graph A8.1: Fair transition challenges in Italy 

Source: Eurostat, EU Labour Force Survey, EMPL-JRC GD-
AMEDI/AMEDI+ and DISCO(H) projects (see Table A8.1). 

Upskilling  and  reskilling  in  energy-intensive 
industries  slightly  increased,  but  shortages 
remain,  causing  bottlenecks.  Skills  are  key  for 
smooth  labour  market  transitions  and  preserving 
jobs  in  transforming  sectors.  In  energy-intensive 
industries,  workers’  participation  in  education  and 
training  increased  from  6.0%  in  2015  to  9.6%  in 
2023, but it is still below the EU average (10.9%). 
In Italy, 43% of SMEs think that the skills required 
for greening business activities are becoming more 
important  (EU:  42%) (97).  If  Italy  matches  its 
projected contribution to the EU’s 2030 renewable 
energy  target  between  25 800  and  33  800 
additional  skilled  workers  will  be  needed  for 
deployment  of  wind  and  solar  energy,  which  may 
require an investment in skills of EUR 199.2-249.0 
million (102). The  Just  Transition  Fund  provides 
training  for  workers  in  regions  affected  by  the 

(99)  Eurobarometer on skills shortages, recruitment, and retention 

strategies in small and medium-sized enterprises. 

(100) Based on the European Labour Authority 2024 EURES Report 
on labour shortages and surpluses 2023, i.e., data submitted 
by the EURES National Coordination Offices. 

(101) Skills and knowledge requirements are based on the 

European Skills Competences and Occupations (ESCO) 
taxonomy on skills for the green transition. 

(102) EMPL-JRC AMEDI+ project. 

0.00.51.01.52.0Greenhouse gasemissions per workerEmployment inEnergy-IntensiveIndustriesEducation & trainingin Energy-IntensiveIndsutriesEnergy povertyTransport poverty(proxy)Carbon inequalityIT Latest vs EU LatestEU LatestIT 2015 vs EU Latest 
 
 
  
 
 
Table A8.1:  Key indicators for a fair transition in Italy 

Source: Eurostat (env_ac_ainah_r2, lfsa_egan2d, ilc_mdes01), EU Labour Force Survey (break in time series in 2021), EMPL-JRC 
GD-AMEDI/AMEDI+ and DISCO(H) projects. 

transition, particularly in Taranto, home to a large 
steel plant, and in Sulcis-Iglesiente, which hosts a 
coal mine. Approximately 14% of ESF+ funding in 
Italy contributes to green skills, jobs and the green 
economy.  For  instance,  the  ‘New  Skills  Fund’ 
provides support to companies to cover the hours 
their  workers  spend  on  training,  including  firms 
with  structural  reskilling  needs  linked  to  the  twin 
transition.  Italy’s  new  REPowerEU  chapter  of  the 
revised  RRP 
reform  and  one 
investment  related  to  green  skills.  The  pilot 
investment 
‘Crescere  Green’  will  offer  short 
training  courses  on  green  skills  aimed  at 
unemployed  workers.  The  revised  Plan  for  New 
Skills  ensures  that  the  national  training  offer  is 
linked  with  labour  market  needs,  by  involving  the 
private  sector  in  dedicated  pacts  for  skills  and 
improves the recognition and certification of skills. 

includes  one 

Graph A8.2: Job vacancy rate in transforming 
sectors and mining and quarrying 

B - Mining and quarrying 
C - Manufacturing 
D - Electricity, gas, steam and air conditioning supply 
E - Water supply; sewerage, waste management and 
remediation activities 
F - Construction 
H - Transportation and storage 
Source: Eurostat jvs_a_rate_r2. 

Energy  poverty  indicators  have  improved 
significantly in  Italy, but the  spike  in energy 
prices  has  worsened  the  situation. The  share 
of  the  population  unable  to  keep  their  homes 
adequately  warm decreased  from  17.0% in  2015 
the  EU  average 
to  8.8% 

in  2022,  below 

51 

(9.3%) (103).  However,  the  indicator  increased  by 
0.7  percentages  points  between  2021  and  2022 
on  the  back  of  energy  price  increases  due  to 
supply  constraints  caused  by  the  COVID-19 
pandemic  and  the  war  in  Ukraine,  despite  the 
emergency  measures  implemented  in  Italy.  In 
particular,  17.6%  of  the  population  at  risk  of 
poverty  (AROP)  (EU:  20.1%)  and  9.7%  of  lower 
middle-income households (in deciles 4-5) in 2022 
(EU:  11.6%)  were  unable  to  keep  their  home 
adequately  warm.  On  the  other  hand,  in  January 
2023,  52.3%  of  the  population  at  risk  of  poverty 
spent  a  considerable  proportion  of  their  budget 
(more  than  6%)  on  private  transport  fuels  (EU: 
37.1%) (104). The  RRP 
to 
promote  the  renovation  of  residential  dwellings. 
These  are  expected  to  achieve  energy  savings, 
generate  employment  and  support  low-income 
households. 

includes  measures 

Environmental  inequalities  remain  a  critical 
issue  in  Italy  and  are  above  EU  average.  In 
2021,  the  average  emissions  per  capita  for  20% 
of the population with the highest income were 3.4 
times  higher  than  those  of  the  poorest  20% (105) 
(EU:  2.7).  For  richest  20%  of  households,  the 
consumption  footprint  is  highest  for  food  and 
mobility,  while  for  poorest  households  it  is  food 

(103) 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. 

(104) Affordability of private transport fuels is one key dimension 

of transport poverty. The indicator has been developed in the 
context of the EMPL-JRC GD-AMEDI/AMEDI+ projects. 
Methodology explained in Economic and distributional effects 
of higher energy prices on households in the EU. 

(105) Developed in the context of the EMPL-JRC DISCO(H) project. 

Methodology explained in Joint Research Centre, 
2024. Carbon and environmental footprint inequality of 
household consumption in the EU. JRC137520. Household 
income data is not available for IT in the HBS, therefore the 
data presented here is based on household expenditure for IT 
as well as the EU average. 

0,0%0,5%1,0%1,5%2,0%2,5%3,0%3,5%4,0%BCDEFHEU 2023IT 2023IT 2016IndicatorDescriptionIT 2015ITEUGHG per workerGreenhouse gas emissions per worker – CO2 equivalent tonnes15.213.9 (2022)14.3 (2022)Employment EIIEmployment share in energy-intensive industries, including mining and quarrying (NACE B), chemicals (C20), minerals (C23), metals (C24) and automotive (C29)3.3%3.3% (2023)3.5% (2023)Education & training EIIAdult participation in education and training (last 4 weeks) in energy-intensive industries6.0%9.6% (2023)10.9% (2023)Energy povertyShare of the total population living in a household unable to keep its home adequately warm17.0%8.8% (2022)9.3% (2022)Transport poverty (proxy)Estimated share of the AROP population that spends over 6% of expenditure on fuels for personal transport47.8%52.3% (2023)37.1% (2023)Carbon inequalityRatio between the consumption footprint of the top 20% vs bottom 20% of the income distribution3.43.4 (2021)2.7 (2021) 
 
   
 
 
 
  
 
and housing., The average levels of air pollution in 
2021  stood  above  the  EU  average  (13.9  vs  11.4 
µg/m3 PM2.5), with 94% of the population living in 
regions exposed to critical levels of air   
pollution (106), leading to around 46 800 premature 
deaths  annually (107).  The  health  benefits  of 
implementing  the  National  Air  Pollution  Control 
Programme  for  Italy  are  estimated  at  EUR  29.7 
billion by 2030 (using a 2010 baseline)  or 1.84% 
of  2010  GDP,  reaching  3.4%  of  regional  GDP  in 
Lombardy in the polluted Po river basin (108). 

Italy is starting to take steps towards a fair 
transition,  although  greater  focus  on  the 
specific challenges posed by the transition is 
still  needed.  Italy  is  aware  of  the  need  to 
increase  the  employability  of  its  labour force, 
address the mismatch between labour supply and 
demand  and  increase  upskilling  and  reskilling 
policies  with  a  focus  on  green  skills.  The  GOL 
programme  and  the  reforms  of  Italy’s  National 
Agency  for  Labour  Policies  (ANPAL)  are  important 
steps,  although  a  stronger  focus  on  green 
upskilling and reskilling policies is still needed. The 
research  network  of  Italy’s  National  Institute  for 
Insurance against Accidents at Work (INAIL), which 
aims to assess emerging risks from the digital and 
green  transitions  is  another  organisation  that  can 
provide assistance in this area. Further efforts are 
needed  to  improve  data  collection  on  green  jobs 
and  skills  and  provide  efficient  tax  incentives  to 
green businesses (109). 

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

Quality Guidelines (annual exposure of 5µg/m3). 

(107) EEA- Air Quality Health Risk Assessment 

(108) The Italian NAPCP: Air Quality, Health Impact and Cost 

Assessment, Atmosphere 2021, 12, p. 96, Piersanti A. et al. 

(109) Based on the monitoring review of the Council 

Recommendation on ensuring a fair transition towards 
climate neutrality, which took place in October 2023. 

52 

 
 
 
PRODUCTIVITY 
ANNEX 9: RESOURCE PRODUCTIVITY, EFFICIENCY AND CIRCULARITY 

The green transition of industry and the built 
environment,  in  particular  decarbonisation, 
resource  efficiency  and 
is 
Italy’s 
essential 
competitiveness (110).  The  priority  for  Italy  is  to 
increase  the  use  of  circular  materials  in  industry 
and construction. 

circularity, 

boost 

to 

Italy  is  on  track  to  achieve  the  EU  Circular 
Economy  Action  Plan  goals,  thanks  to  high 
recycling  and  material  reuse  rates.  Italy’s 
material  footprint  dropped  to  10.2  tonnes  per 
capita  in  2020  and  started  increasing  again  in 
2021. It reached 12.78 tonnes per capita in 2022, 
remaining  below  the  EU  average  of  14.83  tonnes 
per  capita.  Total  waste  production  per  capita  has 
increased  as  well  and  measured  2.9  tonnes  per 
capita  in  2020,  still  below  the  EU  average.  Since 
2022, Italy has a circular economy strategy and a 
national  waste  programme 
in  place,  both 
supported by its recovery and resilience plan (RRP). 
However, 
system 
introduced in 2023 to improve waste traceability is 
currently not operational (111). 

registration 

RENTRI 

the 

Graph A9.1: ETS emissions by sector since 2013 

Source: European Commission 

In  2023,  the  sectors  covered  by  the  EU 
emissions  trading  system  (ETS) (112)  emitted 
19%  less  greenhouse  gases  (GHG)  than  in 
2019.  52%  of  GHG  emitted  by  Italian  ETS 
installations  came  from  power  generation,  a  bit 
below  the  EU  average  (57%).  Of  the  total 
emissions  from  all  industrial  sectors,  29%  came 

(110) See also Annexes 6, 7 and 12. 

(111) MASE, 3.6.2023. 

from  refineries,  23%  from  cement  and  lime 
production,  16%  from  the  metals  industry,  5% 
from  the  chemical  industry,  and  28%  from  other 
industries.  Since  2019,  the  power  sector  has 
reduced its emissions by 22%; the industry sectors 
have  seen  an  14%  decrease.  The  metals  industry 
saw  the  largest  decrease  (25%).  Since  2013, 
greenhouse  gas  emissions  from  the  chemical 
sector  have  dropped  by  40%,  while  emissions 
from the remaining industries (113) have decreased 
by a modest 11%.  

There  is  room  for  boosting  Italy’s  efficiency 
in  using  resources  in  the  industrial  sector. 
Italy  is  among  the  countries  with  the  highest 
secondary  material  use  rate.  This  rate  decreased 
between  2019  and  2022,  reaching  18.7%,  but  is 
still  above  the  EU  average.  Resource  productivity 
steadily increased during the last few years, above 
the  EU  average.  In  2022,  it  stood  at  3.71  pps/kg. 
Improving resource productivity can help minimise 
negative  impacts  on  the  environment  and  reduce 
dependence  on  volatile  raw  material  markets.  In 
2022,  Italy  was  dependent  on  imports  for  46.8% 
of  materials  used,  making  it  rank  5th  of  all  EU 
countries in terms of vulnerability (114). 

Strong  eco-innovation  performance  has 
helped  to  develop  a  highly  competitive 
environmental  goods  industry.  Italy  was  listed 
among  the  eco-innovation  leaders  on  the  2022 
Eco-Innovation  Scoreboard,  where  the  country 
scored 129.4. Furthermore, as of September 2023, 
Italy  totalled  464  awarded  EU  Ecolabel  licences 
and  14 138  products  with  the  EU  Ecolabel.  These 
figures  have  steadily  increased  in  the  last  few 
years.  Italy  is  the  first  country  in  the  EU  for  both 
licences and product uptake.  

There  is  room  for  improvements  to  meet  all 
EU  recycling  targets  for  2025.  The  municipal 
waste recycling rate stood at 51.9% in 2021, and 
the country is on track to meet the 2025 target for 
both  packaging  and  municipal  waste.  The  EU 
target  envisages  50%  of  recycling  by  2025,  but 
overall,  plastic  packaging  waste  generation  is 

(112) This analysis excludes air travel. For more details and the 
data sources, see Weitzel, M; van der Vorst, C. (2024), 
Uneven progress in reducing emissions in the EU ETS, JRC 
Science for policy brief, JRC138215, Joint Research Centre. 

(113) Other than cement and lime production, chemicals, metals, 

refineries, and power generation. 

(114) Eurostat, EU average: 22.4%. 

53 

00.20.40.60.8102040608010012014016020132014201520162017201820192020202120222023Emissions relative to 2013Mt CO2eCement & LimeChemicalsMetalsRefineriesPower generationOtherItaly (both axes) 
 
 
      
 
 
 
increasing in Italy – it stood at 54.8% in 2021 (115). 
In  the  last  few  years,  Italy  has  decreased  its 
dependence on landfilling. It is on track to achieve 
the EU landfilling target of a maximum of 10% by 
2035.  Furthermore,  87.1%  of  e-waste  was 
recycled in 2021, above the EU average of 81.3%. 
There  are  still  large  regional  differences  in  waste 
management  performance,  as  well  as  in  waste 
infrastructure  (see  Annex  17)  and  the  north  is 
generally  more  advanced.  Waste  management  is 
highly  fragmented,  leading  to  diseconomies (116). 
The  number  of  new  patents  on  waste  and 
recycling  equalled  22  in  2020,  confirming  Italy’s 
leading position in circular economy innovation. 

Graph A9.2: Treatment of municipal waste 

metals (cadmium, mercury, nickel, and lead) as the 
only  exceptions.  Specific  environmental  concerns 
remain for the former Ilva steel works in Taranto. 
In  2020, 
the  country  produced  168 kg  of 
hazardous  waste  per  capita  –  well  below  the  EU 
average of 214 kg per capita – and treated 44.1%.  

There  is  still  room  to  improve  resource 
efficiency  in  the  built  environment.  In  2020, 
the residential floor area per capita was above the 
EU average – 66.4 versus 52.3 m2 per capita – and 
grew  faster  than  the  average.  By  contrast,  the 
non-residential floor area per capita was just over 
half  the  EU  average.  Italy  shows  water  leakages 
above  the  current  EU  average  (see  Annex  6).  In 
2018,  the  soil  sealing  index stood  just  below  the 
EU  average,  106.4  versus  108.3.  However,  Italy’s 
sealed  area  per  capita  is  well  above  the  EU 
average.  Soil  sealing  affects  3.49%  of  the  total 
area,  versus  an  EU  average  of  1.86%  (see 
Annex 6).  

Construction and demolition waste remains a 
source  of  concern.  Between  2010  and  2020, 
waste generated from construction and demolition 
activities  per  capita  increased  and  surpassed  the 
EU  average.  The  proportion  of  backfilling  has 
remained  low  since  2014  and  stood  at  0.7%  in 
2020 (EU  average  9.9%).  Italy’s  recovery  rate 
equalled  98%  in  2020,  achieving  the  Waste 
Framework Directive’s backfilling target (75%). 

Source: Eurostat 

Industrial pollution is still cause for concern. 
Between  2010  and  2021,  the  industrial  sector 
decreased  its  emissions  into  the  air  of  all  main 
pollutants,  and  Italy  was  among  the  top  5  for 
PM10 reduction. A similar trend can be observed in 
reduction  of  emissions  into  water,  with  heavy 

Table A9.1:  Circularity indicators 

(115) It equalled 2 271 000 tonnes in 2021, rising after a drop in 

2020. 

(116) Utilitas, Green Book 2023. 

Source: Eurostat, European Environment Agency 

54 

4995034874950010020030040050020182019202020212022Kg per capita Waste treatment to be determinedLandfill/disposalTotal incineration (including energy recovery)Composting and digestionMaterial recyclingEU-27201820192020202120222023EU-27Latest yearIndustryResource productivity (purchasing power standard (PPS) per kilogram)3.63.63.73.63.7-2.52022Circular material use rate (%)18.818.820.619.018.7-11.52022Eco-innovation index (2013=100)127.1117.7121.6125.3129.4-121.52022Recycling of plastic packaging (%)43.444.751.254.8--40.72021Cost of air emissions from industry (EUR bn)35.432.731.732.0--352.72021Built environmentRecovery rate from construction and demolition waste (%)98.0-98.080.7--89.02020Soil sealing index (base year = 2006)102.4-----103.42018Non-residential floor area (m2 per capita)11.111.311.5---18.02020Waste backfilled (%)0.4-0.7-0.6-9.92020 
     
 
 
 
 
 
 
        
 
ANNEX 10: DIGITAL TRANSFORMATION 

infrastructure/connectivity 

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 25.6% of its total RRP budget 
to  digital  (EUR 47 billion) (117)).  Under  Cohesion 
Policy,  an  additional  EUR  5.5  billion  (13%  of  the 
is 
country’s 
allocated 
digital 
transformation (118). 

total  Cohesion  Policy 
the 

country’s 

funding) 

and 

to 

The  Digital  Decade  Policy  Programme  sets 
out  a  pathway  for  EU’s  successful  digital 
transformation  by  2030. 
Italy’s  national 
roadmap outlines the actions it intends to take to 
reach the objectives and targets at national  level. 
The first Report on the State of the Digital Decade 
highlighted the need to accelerate and deepen the 
collective efforts to reach the EU-wide targets and 
objectives (119).  Among  others,  a  digitally  skilled 
population 
the  development  and 
adoption  of  digital  technologies  and  leads  to 
productivity  gains  and  new  business  models.  It 
also  leads  to  higher  inclusion  and  participation  in 
an environment increasingly shaped by the digital 
transformation (120). 
technologies, 
infrastructure  and  tools  all  play  a  role 
in 
addressing 
the  current  structural  challenges, 
including  strategic  dependencies,  cybersecurity 
and climate change. 

increases 

Digital 

(117) The share of financial allocations that contribute to digital 
objectives has been calculated using Annex VII to the 
Recovery and Resilience Facility Regulation. 

(118) This amount includes all investment specifically aimed at or 
substantially contributing to digital transformation in the 
2021-2027 Cohesion Policy programming period. The source 
funds are the European Regional Development Fund, the 
Cohesion Fund, the European Social Fund Plus, and the Just 
Transition Fund. 

(119) European Commission (2023): Report on the State of the 

Digital Decade 2023, 2023 Report on the state of the Digital 
Decade | Shaping Europe’s digital future (europa.eu). 

(120) 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) and OECD (2019): Going Digital: 
Shaping Policies, Improving Lives – Summary, 
https://www.oecd.org/digital/going-digital-synthesis-
summary.pdf. 

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 (46% 
vs 56% at the EU level) and only 4.1% of people in 
employment are ICT specialists vs. an EU average 
of 4.8%. 

in 

increase 

is  observable 

regards  digital 

infrastructure  and 
As 
connectivity, although Italy scores high on 5G 
and  recorded  remarkable  progress,  the 
country  needs  to  increase  its  very  high-
capacity  network  (VHCN)  coverage,  including 
in  remote/rural  areas.   In  the  last  few years, a 
significant 
the 
percentage  of  households  covered  by  very  high 
capacity  network  (VHCN)  and  by  fibre  to  the 
premises (FTTP). For both indicators, the household 
coverage rate rose from 44% to 60% from 2021 
to  2023.  However,  it  remains  considerably  below 
the EU average (79% for VHCN and 64% for FTTP). 
For  5G,  the  overall  coverage  reaches  99%  of 
populated  areas  in  the  country  and  the  coverage 
on the 3.4-3.8 GHz spectrum band reaches 88% of 
populated areas (compared to only 51% at the EU 
level). The RRP includes measures, currently being 
implemented, supporting 5G deployment and fixed 
gigabit connectivity throughout the country, on top 
of  the  digital  investments  financed  by  cohesion 
policy funds. 

Most Italian companies have a basic level of 
digital  intensity,  and  the  country  performs 
well on the uptake of cloud computing, while 
room  for  improvement  remains  as  regards 
artificial intelligence and data analytics. Most 
Italian  SMEs  have  at  least  a  basic  level  of  digital 
intensity (61% vs 58%  at  the  EU level)  and most 
of  enterprises  make  use  of  cloud  services,  AI  or 
data  analytics  (63%  vs  55%  at  the  EU  level). 
However, looking at these technologies separately, 
while the share of enterprises using cloud services 
is particularly high (55% vs 39% in the EU), Italy’s 
performance remains below the EU average in the 
use of data analytics and of artificial  intelligence. 
In  this  area,  the  main  measure  supported  by  the 
RRP  is  ‘Transition  4.0’,  expected  to  support  the 
uptake  by  enterprises  of  digital  technologies 
through  tax  credits  for  the  purchase  of  tangible 
and intangible goods. In 2022, 3.1% of enterprises 
ICT  service  outage  due  to 
in 
cyberattacks  (e.g.  ransomware  attacks,  denial  of 
service  attacks).  Over  the  same  year,  29.7%  of 
enterprises developed or reviewed their ICT  

Italy  reported 

55 

 
 
 
 
security policy within the previous 12 months. 

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  the  EU  average.  In 
particular,  on  digital  public  services  for  citizens, 

Italy scores 68 vs 79 at EU level; on digital public 
services  for businesses,  this  score  is  76  vs  an  EU 
average  of  85.  Moreover,  the  online  interaction 
with  public  authorities  is  now  below  the  EU 
average (69% of internet users vs the EU average 
of  75%).  Italy’s  performance  on  the  access  to 
electronic  health  records  is  in  line  with  the  EU 
average with a score of 83 out of 100. The ‘Italia 

Table A10.1:Key Digital Decade targets monitored by the Digital Economy and Society Index indicators 

Source: Digital Economy and Society Index 

56 

EUDigital Decade target by 2030 2022202320242024(EU)Digital skillsAt least basic digital skills46%46%46%56%80%% individuals20212021202320232030ICT specialists (1)3.8%3.9%4.1%4.8%20 million% individuals in employment aged 15-7420212022202320232030Digital infrastructure/connectivityFixed very high capacity network (VHCN) coverage44%54%60%79%100%% households20212022202320232030Fibre to the premises (FTTP) coverage (2)44%54%60%64%-% households2021202220232023Overall 5G coverage (3)100%100%99%89%100%% populated areas20212022202320232030Digitalisation of businessesSMEs with at least a basic level of digital intensity60%NA61%58%90%% SMEs2021202320232030Data analyticsNANA27%33%-% enterprises20232023Cloud52%52%55%39%-% enterprises2021202120232023Artificial intelligence6%6%5%8%-% enterprises2021202120232023AI or cloud or data analytics (4)NANA63%55%75%% enterprises202320232030Digitalisation of public servicesDigital public services for citizens67686879100Score (0 to 100)20212022202320232030Digital public services for businesses79757685100Score (0 to 100)20212022202320232030Access to e-health recordsNA718379100Score (0 to 100)2022202320232030(4) 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.(3) The variation does not reflect a change in coverage, but it is the consequence of small refinements in criteria adopted to estimate the coverage.Italy(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. 
 
   
 
the 

number 

of  measures, 

Digitale  2026’  plan  is  expected  to  modernise 
public  administration  and  services,  with  RRP 
support.  A 
being 
implemented,  support  the  interoperability  of  data 
platforms, 
citizens’ 
experience,  the  migration  to  cloud  and  the 
digitalisation 
public 
main 
administrations. 
electronic 
identification  (eID),  provided  via  two  schemes 
notified  under  the  eIDAS  Regulation,  continued  to 
increase. 

central 
of 

improvement 

uptake 

The 

of 

of 

57 

 
 
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  transition  and  ensuring  long-
term competitiveness. 

students in Italy being below EU average (127) with 
adverse  effects  on  the  internationalisation  of  the 
research  system.  The  share  of  international  co-
publications  remains 
the  EU 
average (128). 

in  fact  below 

‘moderate 

remains  a 

Italy 
innovation 
performer’,  according  to  the  2023  European 
Innovation  Scoreboard (EIS) (121).  While  overall 
the  country’s  performance  has  slowly  improved 
since 2016, it stands at 90.3% of the EU average. 
Additionally,  regional  differences  persist,  with 
northern regions and Lazio outperforming the rest 
of  the  country  and  the  south  lagging  behind  in 
innovation capacity (ref. Map A17.1) (122). 

Low  public  R&D  investment  continues  to 
impact the availability of human capital and 
skills  in  science,  technology  and  innovation: 
these  two  elements  hinder  the  innovation 
potential  of  the  country.  Despite  a  rising  and 
above-EU  average  share  of  scientific  publications 
that  are  most  cited,  an  indicator  of  scientific 
excellence,  Italy’s  scientific  potential  is  not  fully 
leveraged.  Public  R&D  intensity (123)  is  low  and 
stagnant,  standing  at  0.53%  of  GDP  in  2022, 
below the EU average (0.73%) (124) (Graph A11.1). 
In addition, while the number of new graduates in 
science  and  engineering  is  catching  up  with  EU 
levels,  the  share  of  the  population  aged  25-34 
who  have 
tertiary 
education  remains  very  low,  at  only  30.6%  in 
2023 (125).  Research  careers  in  Italy  do  not  seem 
as  attractive  as  those  abroad (126),  resulting  in  a 
twofold  effect:  first,  an  exacerbation  of  the  brain 
drain, and second, the number of foreign doctorate 

successfully 

completed 

(121) 2023 European Innovation Scoreboard, country profile: Italy 
https://ec.europa.eu/assets/rtd/eis/2023/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). 

(122) Source: Regional Competitiveness Index 2022, Innovation 

sub-index. 

(123) Defined as gross domestic public expenditure on research 

and development (R&D) as a percentage of GDP. 

(124) Source: DG R&I, based on Eurostat. 

Graph A11.1: Public R&D intensity 2013-2022 

Source: DG R&I, based on Eurostat, 2013-2022. 

Italy’s recovery and resilience plan (RRP) will 
help  alleviate  these  challenges  through  a 
major  mobilisation  of  financial  resources. 
Additionally,  it  has  introduced  measures  to 
improve  the  attractiveness  of  research 
careers.  Investments  such  as  projects  of  major 
interest (129)  and  support  for  young 
national 
researchers  and 
innovative  doctorates  are 
designed to enhance scientific research and widen 
the pool of human capital in R&I. Furthermore, an 
RRP  reform (130)  aims  to  support  the  mobility  of 
high-skilled  R&I  professionals  between  the  public 
and  the  private  sector,  while  simplifying  the 
management of research funds and improving the 
career  path  of 
the 
structural 
impact  and  sustainability  of  these 
measures and of these additional resources will be 
fundamental  for  assessing  their  effectiveness  in 
addressing this persistent weakness. On top of the 
RRP  investments,  cohesion  policy  funds  make 
available in 2021-2027 more than EUR 6.3 billion 

researchers.  Monitoring 

(127) Source: EIS 2023. Foreign doctorate students as a 

percentage of all doctorate students. Italy’s performance is 
87.9% of the EU average. 

(128) Source: EIS 2023. Number of scientific publications with at 
least one co-author based abroad per million population. 
Italy’s performance is 88.2% of the EU average. 

(125) EU average: 43.1%. Source: Eurostat. 

(129) Progetti di Rilevante Interesse Nazionale (PRIN). 

(126) ‘Relazione sulla Ricerca e l’innovazione in Italia’ – Third 
edition (2021) by the Italian National Research Council. 

(130) RRP reform ‘Implementation of R&I support measures to 

promote simplification and mobility’. 

58 

0,40%0,50%0,60%0,70%0,80%2013201420152016201720182019202020212022ITEU 
 
 
   
 
 
 
Table A11.1:Key innovation indicators 

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

to support research and innovation, notably in the 
South of Italy. 

knowledge 

valorisation 

Science-business  linkages  as  a  means  to 
boost 
need 
strengthening to fully leverage the country’s 
innovation  potential.  While  the  number  of 
public-private  scientific  co-publications  is  above 
the  EU  average,  business  enterprise  expenditure 
on R&D was low in 2022. Also, public expenditure 
on  R&D  financed  by  business  enterprise  lags 
behind  EU  levels  and  science-business  linkages 
remain  under-exploited,  notably  for  SMEs,  while 
knowledge  exchange  and  collaboration  activities 
still  need to have a more prominent role in Italy’s 
higher education system (131). 

(131) European Commission/Ministry of Universities and 

Research/OECD Technical Support Instrument project 
ITA.CON: ‘Improving the system of Knowledge Exchange and 
Collaboration between universities and society in Italy’ 
(2024). 

59 

of 

the 

abolition 

The RRP includes measures with the potential 
to  reinforce  science-business  linkages.  The 
much-awaited 
‘professor 
privilege’ (132)  in  the  reformed  Industrial  Property 
Code  is  expected  to  have  positive  impacts  on 
fostering 
innovation,  along  with  funding  the 
enhancement of industrial-property activities, such 
as proof of concept programmes. Other measures 
aim  at  strengthening  technology  transfer  centres 
and  at  supporting  the  creation  of  ‘national  R&D 
leaders’ on key enabling technologies. To complete 
this  process,  the  OECD, in  a  recent  study (133), 
recommended among other things that the role of 
further 
technology 

transfer 

offices 

be 

(132) The rule that gives academics rather than universities 

ownership over any patents they create. 

(133) European Commission/Ministry of Universities and 

Research/OECD Technical Support Instrument project 
ITA.CON: ‘Improving the system of knowledge exchange and 
collaboration between universities and society in Italy’ 
(2024). 

EU2022average (1)R&D intensity (GERD as % of GDP)1,221,341,511,431,332,24Public expenditure on R&D as % of GDP0,520,520,550,540,530,73Business enterprise expenditure on R&D (BERD) as % of GDP0,660,780,930,860,781,48Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 10,110,611,4::9,6Patent Cooperation Treaty (PCT)  patent applications per billion GDP (in PPS)2,02,32,3::3,4Public-private scientific co-publications as % of total publications6,87,98,18,38,77,6Public expenditure on R&D financed by business enterprise (national) as % of GDP0,0120,0120,0280,030:0,054New graduates in science & engineering per thousand pop. aged 25-346,510,815,116,4:16,9Total public sector support for BERD as % of GDP0,0510,1060,1210,120:0,204R&D tax incentives: foregone revenues as % of GDP0,0040,0510,0580,068:0,104Share of environment-related patents in total patent applications filed under PCT (%)12,310,811,6::14,7Venture capital (market statistics) as % of GDP0,0070,0040,0150,0190,0270,085Employment share of high growth enterprises measured in employment (%):10,812,2::12,5Green innovation Finance 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)Italy2010201520202021 
 
 
 
   
 
institutionalised  in  order  to  strengthen  knowledge 
exchange and collaboration activities. 

60 

 
ANNEX 12: INDUSTRY AND SINGLE MARKET 

in 

been 

Since  the  start  of  the  COVID-19  pandemic, 
short-term  productivity  dynamics  in  Italy 
have 
by  marked 
characterised 
volatility.  Since  the  outbreak  of  COVID-19, 
Italy  have  been 
productivity  patterns 
significantly  volatile,  largely  as  a  result  of  the 
sizeable  fluctuations  observed  in  both  its  output 
and  labour  determinants  in  the  years  2020  to 
2022.  GDP  per  hour  worked,  for  instance,  was 
significantly  impacted  by  the  variation  in  the 
number  of  hours  worked,  resulting  in  an  increase 
at  the  height  of  the  pandemic  (+3.1%  year-on-
year in 2020), and in a subsequent decrease when 
economic  activity  caught  up  (-1.7%  and  -0.2%  in 
2021  and  2022  respectively).  GDP  per  person 
employed,  instead,  reflected  in  the  short  run  the 
impact  of  temporary  job  protection  schemes, 
which  shielded  employment  from  the  drop  in 
output  and  allowed  for  relative  stability  in  the 
number  of  employed  persons  throughout  the 
pandemic.  As  a  result,  labour  productivity  per 
employed  person  tended  to  follow  more  closely 
the  developments  of  GDP,  falling  in  2020  and 
recovering in the following years.  

such 

short-term 

Despite 
fluctuations, 
however, Italy’s productivity growth remains 
structurally  weak  in  the  longer  run.  Over  the 
two  decades  up  to  2019,  labour  productivity  in 
Italy grew by only 0.16 percentage points per year 
on average – well below the performance of peer 
countries  over  the  same  period (134).  Total  factor 
productivity (TFP) also showed a similar trend, with 
negative average TFP growth in Italy in the 2000-
2019  period,  as  opposed  to  positive  growth  rates 
in  the  major  EU  economies (135).  As  shown  e.g.  in 
Graph  A12.1,  over  the  years  such  structurally 
subdued productivity growth resulted in a widening 
gap not only compared to peer countries, but also 
vis-à-vis  the  EU  average  levels.  Marked  regional 
in  productivity  growth  were  also 
differences 
reported 
(see  Annex  17,  Table  A17.1),  with 
southern regions and islands performing far below 
the national average and the north of the country. 
Despite 
productivity 
performance,  Italy  remains  one  of  the  few  EU 

unsatisfactory 

such 

Member  States  without  a  national  productivity 
board. 

Graph A12.1: Labour productivity (GDP per hour 
worked) 2010 = 100 

Source: Eurostat 

than 

the  case  e.g.  for 

From a sectoral perspective, heterogeneity in 
productivity performance remains high (Graph 
A12.2).  For  instance,  while  the  industrial  sector 
faced a productivity decline of -2.8% in 2023 (well 
below  the  EU  average  of  -1.7%),  other  segments 
in  comparable 
did  significantly  better 
the 
countries.  This  was 
construction  sector,  which  likely  benefited  from 
the generous support measures introduced by the 
government.  In  the  wholesale  and  retail  trade, 
transport,  accommodation  and  food  services 
sector,  productivity  growth  outperformed  the  EU 
average in 2021 and 2022, in conjunction with the 
rebound  of 
the  post-pandemic 
in 
years (136), but cooled down in the course of 2023. 
Financial and insurance activities, as well as other 
service  activities,  instead,  have  shown  a  less 
positive  dynamic  throughout  the  past  years, 
by 
whereas 
structurally weak productivity. 

agriculture 

affected 

remains 

tourism 

(134) For example, 1 percentage point (pp) per year in Germany, 

0.89 pp per year in France, 0.83 pp per year in Spain. Banca 
d’Italia, A structural analysis of productivity in Italy: a cross-
industry, cross-country perspective, 2023. 

(135) Banca d’Italia, A structural analysis of productivity in Italy: a 

cross-industry, cross-country perspective, 2023. 

(136) The tourism sector experienced strong recovery in the course 
of 2022, with the expenditure of foreign travellers in Italy 
more than doubling compared to the previous year, and 
approaching pre-pandemic levels by the end of 2022. See: 
Banca d’Italia, Indagine sul turismo internazionale, 2023. 

61 

95100105110115European Union - 27 countries (from 2020)GermanySpainFranceItaly 
 
 
     
 
 
 
Graph A12.2: Labour productivity by sector (GDP 
per hour worked) 2015 = 100 

Source: Eurostat 

The Italian production system has weathered 
relatively  well  the  multiple  crises  that  have 
hit  it  over  the  past  few  years,  although 
several  factors,  linked  inter  alia  to  the 
current  economic  situation,  weigh  on  its 
overall  competitiveness.  Compared  to  before 
the  pandemic,  for  instance,  the  number  of  active 
firms has fallen only marginally (largely due to the 
significant  amount  of  public  support  provided), 
while  the  number  of  people  employed  has  even 
increased  slightly.  Bankruptcies  also  remain  well 
below  the  EU  average.  Nevertheless,  several 
factors  linked  inter  alia  to  the  present  economic 
conjuncture hamper the competitiveness of Italian 
firms.  Energy  prices  and  inflation,  for  instance, 
while  significantly  lower  than  the  peaks  observed 
in  2022,  remain  largely  above  the  averages  of 
recent years, continuing to affect firms’ production 
costs and, in turn, their competitiveness and profit 
margins. According to the Italian national institute 
of  statistics,  between  2021  and  2022  industrial 
production  prices  in  Italy  increased  by  34.4%, 
while in most economic sectors over half of firms 
experienced 
operating 
margins (137).  Similarly,  supply  chain  disruptions 
and the availability of key input materials continue 
to  play  an  important  role:  although  the  share  of 
firms reporting material  shortages is still  lower in 
the  major  EU  manufacturing 
Italy 
economies,  it  increased  about  17-fold  between 
2019  and  2023,  and  is  now  almost  at  the  same 
level  as  the  EU  average.  In  addition,  the  recent 

declines 

gross 

than 

in 

in 

(137) Istat, Rapporto sulla competitività dei settori produttivi, 

2023. 

62 

developments  in  the  Red  Sea  area  have  the 
potential to pose additional threats to logistics and 
supply chains already under pressure, and they are 
therefore  likely  to  affect  –  should  they  become 
protracted – countries like Italy that rely heavily on 
the  Suez Canal  for  their maritime  trade (138).  At  a 
time  when  the  need  to  move  towards  a  net-zero 
economy (139)  will  increasingly  require  access  to 
several  materials,  particularly  those  key  to  the 
strategic 
manufacturing 
technologies (140), it will be important for Italy, as a 
manufacturing  country  with  the  potential  to 
develop  net-zero  supply  chains,  to  ensure  stable 
and  sufficient  access  to  such  materials,  so  as  to 
sustain its competitiveness and resilience amid the 
twin transitions. 

net-zero 

of 

despite 

challenging, 

The  business  environment  in  Italy  remains 
overall 
some 
improvements. The percentage of firms reporting 
business  regulation  as  a  major  obstacle  remains 
above the EU average (24% in 2023), although it 
is  declining  over  time.  When  businesses  were 
asked  as  part  of  the  IMD  World  Competitiveness 
Ranking  to  indicate  the  top  attractiveness  factors 
of  the  Italian  economy,  business  environment 
elements  were  mentioned  much  less  frequently 
than  in  peer  countries:  for  instance,  an  effective 
legal  environment  was  cited  by  only  11.1%  of 
respondents (vs 71.7% in Germany), a competitive 
tax  regime  by  only  2.7%  (well  below  EU  peers), 
and  a  business-friendly  environment  by  26.4% 
(below  both  France  and  Spain,  although  above 
Germany) (141).  The  Italian  recovery  and  resilience 
plan 
reforms  and 
includes  numerous 
investments that have the potential to significantly 
improve the quality of the business environment in 
Italy.  Among  them  are  measures  to  digitalise 
public  administration  and  simplify  administrative 
procedures  (including  permitting  for  renewable 
energy  projects).  Properly 
implementing  such 
reforms  and  investments  therefore  represents  an 

(RRP) 

(138) Istituto per gli Studi di Politica Internazionale (ISPI), 

Commercio: dopo Suez, quale futuro per la globalizzazione?,  
https://www.ispionline.it/it/pubblicazione/commercio-dopo-
suez-quale-futuro-la-globalizzazione-29866. 

(139) See e.g. Net-Zero Industry Act, COM(2023) 161 final. 

(140) Among which, for instance, lithium for battery production, 
rare earth elements for wind mill motors, silicon for 
electronics, inter alia. See.: European Commission, Study on 
the Critical Raw Materials for the EU, 2023. 

(141) 2023 IMD World Competitiveness Ranking. 

9095100105110115201520162017201820192020202120222023Agriculture, forestry and fishingIndustry (except construction)ConstructionWholesale and retail trade, transport, accommodation and food serviceactivitiesInformation and communicationFinancial and insurance activitiesProfessional, scientific and technical activities; administrative and supportservice activities 
     
 
 
important  opportunity  to 
quality of the business environment in Italy. 

improve  the  overall 

The  situation  of  payment  delays  remains 
overall  challenging,  although  improvements 
have been observed, and significant potential 
will  derive  from  the  correct  implementation 
of  the  reforms  envisaged  under  the  RRP. 
According  to  the  latest  data  from  Intrum,  the 
payment  gap  in  public  administration-to-business 
transactions  (i.e.  the  difference  between  the 
initially agreed payment time, and the actual time 
taken by a firm to receive payment from a debtor 
public administration) is still above the EU average 
(at  18  days  in  2023,  vs  EU  average  of  16  days), 
although  a  significant  improvement  has  been 
observed compared to 2022. Such results are also 
broadly corroborated by the data collected by the 
Italian  authorities  in  the  context  of  the  ongoing 
infringement  procedure (142), which  show  payment 
times well above the legal limits in several sectors 
of  the  Italian  public  administration,  particularly  at 
the  central  and  local  level.  For  what  concerns 
business-to-business  transactions, 
instead,  the 
payment gap was 16 days in 2023, i.e. still 1 day 
above the EU average (Intrum). Italy’s RRP includes 
an  ambitious  reform  aimed  at  strengthening  the 
capacity of the Italian public administration to pay 
within  the  deadlines  set  by  the  Late  Payments 
Directive (143):  fully  implementing  such  reform,  as 
well  as  maintaining  sound  payment  performance 
over  time,  therefore  remains  crucial  to  allow  for 
the predictability of cash flows and sound liquidity 
management in businesses, particularly in SMEs. 

For  what  concerns  access  to  finance,  Italy’s 
performance  is  broadly  in  line  with  EU 
benchmarks,  although  the  recent  tightening 
of  interest  rates  had  an  impact  on  firms’ 
financing costs, and non-traditional forms of 
finance  remain  relatively  underdeveloped. 
Italy  maintained  an  above-average  score  in  the 
2022  EIF  SME  Access  to  Finance  composite 
indicator,  which  provides  a  snapshot  of  the  state 
of  external  financing 
in  EU  Member  States. 
Nonetheless,  the 
interest  rate  hikes  recently 
introduced to cope with high inflation have already 
had  a  negative  impact  on  the  cost  of  credit  for 
businesses,  with  an  estimated  EUR  10.3  billion 
increase  in  financing  costs  for  Italian  firms  over 

the past year, and a parallel reduction in the stock 
of loans by -6.2% yearly (144). In addition, business 
financing remains largely loan-based, and the use 
of  equity  or  non-traditional  forms  of  finance  is 
comparatively low (e.g. venture capital investment 
represented  0.0036%  of  GDP  in  2022,  which  is 
only about half of the EU average). 

the 
full 

increasing 

Italy is making significant efforts to improve 
the  efficiency  of  its  public  procurement 
system. Beyond introducing a new Code of Public 
Contracts  in  2023,  Italy  is  proceeding  with  the 
implementation  of  the  ambitious  reform  of  the 
public procurement framework included in its RRP. 
inter  alia,  at  simplifying 
Such  reform  aims, 
procedures, 
and 
digitalisation 
professionalising  public  buyers,  and  it  is  expected 
to improve the speed, competitiveness and overall 
Italian  public  procurement 
efficiency  of 
system.  The 
implementation  of  RRP 
commitments therefore remains crucial to achieve 
such  objectives. 
In  some  areas,  however, 
challenges  persist,  such  as  e.g.  in  the  case  of 
single bid procedures, which still made up 37% of 
total  bids  in  2023  (well  above  the  EU  average  of 
28.6%). Italy is instead one of the most advanced 
countries  in  the  EU  when  it  comes  to  the  use  of 
public  procurement  to  achieve  green  objectives 
of  minimum 
(e.g.  with 
environmental 
(Criteri  Ambientali 
Minimi)).  It  also  made  some  progress  in  using 
to  spur 
public  procurement  as  a 
innovation, e.g. through the launch of the ‘Smarter 
Italy’  programme,  which  aims  at  stimulating  the 
development  of  innovative  solutions  by  market 
operators that participate in procurement bids. 

introduction 

standards 

leverage 

the 

is  well 

Italy 
into  the  single 
integrated 
market, although barriers remain. Italy’s intra-
EU  trade  in  goods  reached  over  EUR 300  bn  for 
both  imports  and  exports  in  2022,  one  of  the 
largest  Member  State  contributions  on  both 
indicators.  However,  challenges  persist,  notably  in 
the  area  of  services.  For  what  concerns  the 
regulation of professions, for instance, the level of 
restrictiveness remains overall high, although Italy 
recently  announced  actions  that,  if  implemented, 
have  the  potential  to  partially  improve  the  status 
quo. This is the case e.g. for architects and certain 
categories  of  engineers,  where  reforms  to  access 

(142) INFR(2014)2143. 

(143) Directive 2011/7/EU. 

(144) Confindustria, Rapporti di previsione, Centro Studi 

Confindustria – L'economia italiana torna alla bassa 
crescita?, Autumn 2023. 

63 

 
 
 
the 

criteria  and  other 
requirements  have  been 
announced.  Similarly,  for  real  estate  agents, 
preliminary  exchanges  are  ongoing  to  determine 
the nature of future entry requirements, while for 
lawyers  some 
types  of 
restrictions  on 
associations have already been lifted. Access rules 
have also been amended for patent agents. Long-
standing  challenges  persist  also  in  specific  areas, 
such as the procedures for the award of maritime, 
lakeside  and  riverside  concessions  for  leisure  and 
touristic activities (‘beach concessions’): the delays 
transparent  and 
in 
the 
such 
for 
competitive 
concessions,  as  well  as  their  lack  of  profitability 
for  public  authorities,  remain  sources  of  concern, 
in  particular  given  that  the  initial  improvements 
made  with  the  2021  Annual  Competition  Law 
appear  to  have  been  hampered  by  subsequent 
legislative interventions. 

implementation  of 

procedures 

award 

In  terms  of  compliance  with  single  market 
rules,  Italy  performs  better  than  the  EU 
average  as  regards  the  transposition  of 
directives,  with  the  number  of  non-transposed 
directives  falling  below  both  the  EU  average  and 
the European Council’s 1% target. Italy instead has 
a  slightly  above-average  number  of  incorrectly 
transposed directives, although such a figure is in 
line  with  peer  countries  as  France  and  Spain.  The 
SOLVIT  network,  which  provides  support  for 
problems linked with the implementation of single 
market  rules,  is  also  performing  comparatively 
well  in  Italy,  with  91%  of  the  cases  handled  as 
lead centre being solved (against an EU average of 
88.3%). 

also 

reached 

successfully 

Italy 
the 
production stage with the implementation of 
the  Once-Only  Technical  System  (OOTS) (145). 
the  Single  Digital  Gateway 
As  part  of 
Regulation (146), 
the 
the  system  will  enable 
automated  cross-border  exchange  of  evidence 
between  competent  authorities,  improving  online 
access  to  information,  administrative  procedures 
and  assistance  within  the  EU.  The  onboarding  of 
the Italian competent authorities is crucial for the 
system  to  function  smoothly  and  to  reduce 
administrative burden. 

(145) Implementing Regulation (EU) 2022/1463. 

(146) Regulation (EU) 2018/1724. 

64 

 
 
 
Table A12.1:Industry and the Single Market 

Source: (1) AMECO, (2) Eurostat, (3) Single Market Scoreboard, (4) OECD, (5) ECFIN BCS, (6) COMEXT and Commission 
calculations, (7) EIB Investment Survey, (8) Intrum Payment Report, (9) SAFE survey, (10) EIF SME Access to Finance Index 
* Own Commission calculations for the EU27 average 

65 

POLICY AREAINDICATOR NAME20192020202120222023EU27 average*Net Private investment, level of private capital stock, net of depreciation, % GDP10,8-0,82,23,83,63,8Net Public investment, level of public capital stock, net of depreciation, % GDP1-0,4-0,40-0,10,51,2Real labour productivity per person in industry (% yoy)2-0,8-9,513,3-1,6-2,8-1,24Cost competitivenessNominal unit labour cost in industry (% yoy)22,13-2,2569,83Single Market integrationEU Trade integration, % (Average intra-EU imports + average intra EU exports)/GDP216,115,317,419,919,442,9Transposition deficit, % of all directives not transposed30,70,41,20,70,40,7Conformity deficit, % of all directives transposed incorrectly31,41,71,81,51,41,1SOLVIT, % resolution rate per country396,096,396,898,691,088,3Number of pending infringement proceedings3474950464325,9RestrictionsEEA Services Trade Restrictiveness Index40,060,060,060,060,060,05Single bids, % of total contractors3323135373728,6Direct Awards, %3777558,1Material Shortage (industry), firms facing constraints, %51,11,010,318,017,117,2Labour Shortage using survey data (industry), firms facing constraints, %52,01,22,96,19,023,3Vacancy rate, % of vacant posts to all available ones (vacant + occupied)21,40,91,82,32,32,5Concentration in selected raw materials, Import concentration index based on a basket of critical raw materials60,160,150,160,170,190,22Installed renewables electricity capacity, % of total electricity produced20,30,30,50,550Investment obstaclesImpact of regulation on long-term investment, % of firms reporting business regulation as major obstacle740,034,934,334,024,022,2Bankruptcies, Index (2015=100)275,751,661,248,752,2105,6Business registrations, Index (2015=100)294,478,489,083,584,8120,2Payment gap - corporates B2B, difference in days between offered and actual payment8-211161615Payment gap - public sector, difference in days between offered and actual payment8-1011221816Share of SMEs experiencing late payments in past 6 months, %956,958,246,652,454,348,7EIF Access to finance index - Loan, Composite: SME external financing over last 6 months, index values between 0 and 1100,730,800,600,65-0,49EIF Access to finance index - Equity, Composite: VC/GDP, IPO/GDP, SMEs using equity, index values between 0 and 110 0,120,090,120,13-0,17ItalyHEADLINE INDICATORSEconomic StructureSINGLE MARKETCompliancePublic procurement ECONOMIC STRUCTUREShortagesStrategic dependenciesBUSINESS ENVIRONMENT - SMEsBusiness demographyLate paymentsAccess to finance 
 
 
     
 
ANNEX 13: PUBLIC ADMINISTRATION 

competitiveness  by, 

Italy’s  public  administration  is  essential  for 
in 
the  economy’s 
particular,  shaping  the  conditions  for  the 
twin  transitions  and  creating  a  favourable 
slight 
business  environment.  Despite  a 
improvement  from  last  year,  the  perception  of 
government  effectiveness  in  Italy  remains  below 
the EU average (147). Weak administrative capacity, 
level  of 
an  ageing  workforce  and  a 
digitalisation  continue  to  be  obstacles  to  better 
performance. In the revised recovery and resilience 
plan  (RRP),  the  government  reform  agenda  for 
public administration maintained a strong focus on 
strengthening  administrative  capacity,  improving 
the recruitment and management of public sector 
employees,  fostering  digitalisation  and  ensuring 
In  addition,  new 
administrative  simplification. 
measures  aim  to  equip  local  government  civil 
servants with green skills. 

low 

legal 

framework 

Recent  measures 
the 

Italy continues to address challenges related 
to  ageing,  low  capacity  and  skills  in  public 
include 
administration. 
for 
to 
amendments 
recruitment  aimed  at  shortening  the  timeline  and 
new  apprenticeship  and  on-the-job 
training 
contracts, employer-branding campaigns to attract 
initiatives  to  boost 
young  professionals,  and 
mobility.  As  part  of  the  RRP,  Italy  has  made 
progress  in  introducing  strategic  human  resource 
management  practices.  The  launch  of  a  single 
recruitment  portal  (Inpa)  aims  to  help  match 
supply  and  demand  for  all  public  bodies  and  is 
also  expected  to  promote  mobility.  Regulatory 
changes  are  under  way  to  promote  vertical 
mobility  and  strengthen  senior  management 
capacity.  A  new  portal  called  Syllabus  aims  to 
improve  civil  servants’  participation 
in  adult 
learning. Adult learning, alongside gender parity in 
senior civil service positions, remain below the EU 
average (Table A13.1A13.1). 

Italian  administration,  notably 

the 
developed regions. 

in 

less 

the  RRP,  strengthening 

The  policymaking  process  has  undergone 
several changes in the areas of coordination 
Italy  has  revised  the 
and  implementation. 
governance  of 
the 
coordinating  role  of  the  Presidency  of  Council  of 
Ministers  and  allowing  public  entities  responsible 
for RRP measures to reorganise their structure for 
better management. A parliamentary discussion on 
regional asymmetric autonomy law is ongoing. On 
evidence-informed  policymaking,  Italy’s  different 
administrations  continue  to  have  highly  different 
and  informal  approaches  as  there  is  no  law  on 
policy  advice  bodies,  except  for  the  National 
Council for Economics and Labour. Impact analysis 
of  regulatory  acts  is  carried  out  annually,  with  a 
slight increase in the percentage of acts subjected 
to ex ante impact assessments compared to 2019. 
However,  the  use  of  ex post  impact  assessment 
tools is still moderate. 

the 

efforts 

coordination 

Italy’s  overall  e-government  maturity,  the 
use  of  e-government,  and  digital  skills  are 
below  the  EU  average  (Graph  A13.1).  Gaps  in 
the  strategic  management  of  e-government  and 
of 
prevent 
its 
administrations  at  all  levels  from  reaching  a 
higher level of digital maturity. Some progress has 
been  made  in  the  digital  economy  and  society 
connectivity  has 
dimensions.  For  example, 
advanced  with  an  increase  in  5G  coverage  in 
populated  areas.  There  use  of  selected  digital 
technologies has also increased; for instance, 95% 
of SMEs are using e-invoices. Initiatives set out in 
the  RRP  (such  as  the  National  Digital  Data 
Platform  and  the  National  Strategic  Hub)  and 
recent  strategies  addressing  cloud,  blockchain, 
the 
artificial 
telecoms 
Italy’s 
performance in the coming years. 

intelligence,  cybersecurity  and 

improve 

sector 

aim 

to 

Strong  regional  differences  characterise  the 
capacity  of  the  Italian  public  administration 
to  deliver  public  services  (see  Annex  17).  The 
southern 
lower 
regions 
administrative  and  technical  capacities  than  the 
rest  of  the  country.  A  dedicated  2021-2027 
cohesion  policy  programme  is  investing  EUR 1.3 
billion  to  improve  the  administrative  capacity  of 

still  have 

Italian 

the 

justice  system 
The  efficiency  of 
continues  to  face  challenges (148).  The  main 
issue  is  the  length  of  proceedings,  where  only 
slight 
them  were 
recorded. The quality of the justice system is good 
overall.  New  measures  that  introduce  specific 
arrangements  for  child-friendly  proceedings  have 
been  implemented.  The  level  of  digitalisation  is 

improvements 

in  reducing 

(147) Worldwide Governance Indicators, 2022. 

(148) For more details, see the 2024 EU Justice Scoreboard and 
the Commission’s 2024 Rule of Law Report (forthcoming). 

66 

 
 
 
 
 
generally  advanced,  but 
remain 
regarding  the  digitalisation  of  criminal  courts  and 
prosecution  services. On  judicial  independence,  no 
systemic deficiencies have been reported. 

challenges 

Graph A13.1: a) Use of public authorities’ websites or apps (left side); b) e-government maturity (centre); 
c) share of individuals with basic or above basic overall digital skills (right side) 

(1) 2023 data. Indicators a and c: % of people who used the internet in the last year. 
Source: Eurostat and e-government benchmark report. 

Table A13.1:Public administration indicators 

(1) High values denote a good performance, except for indicator # 6. (2) 2023 value. If unavailable, the latest value available 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: E-government activities of individuals via websites, 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). 

67 

IT20192020202120222023EU-27(2)1n/an/an/a76.368.575.02n/a64,460,961,361,875,830,80,90,90,90,90,8429.330.232.1 (b)34.137.252.959.78.514.5 (b)13.717.017.9624,224,235,829,033,89,270.80.80.9 (b)0.90.91.580,80,80,80,8n/a0,792,22,22,22,2n/a1,410n/an/a2,55n/an/a1,7Medium-term budgetary framework indexIndicator (1)E-government and open government dataShare of internet users within the last year that used a public authority website or appE-government benchmark overall score (3) Open data and portal maturity indexEducational attainment level, adult learning, gender parity and ageingShare of public administration employees with higher 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 governance20%40%60%80%100%Interacting withauthoritiesDownloading  /printing officialformsMaking anappointmentReceive officialcommunications / documentsSubmit onlinetax declarationRequestdocuments,benefitsa) E-government usersITEU-2748%50%52%54%56%58%60%62%ITEU-27c) Digital skills202320210102030405060708090100ITEU-27b) E-government benchmark scoreUser centricityTransparencyKey enablersCross-border services2022 
 
 
  
 
   
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 the EU headline and national targets for 2030 
on employment, skills and poverty reduction. 

Table A14.1:Social Scoreboard for Italy 

(1) Update of 27 October 2023. Members States are 
categorised based on the Social Scoreboard according to a 
methodology agreed with the EMCO and SPC Committees. 
Please consult the Annex of the Joint Employment Report 
2024 for details on the methodology.  
Source: Eurostat. 

The  Italian  labour  market  registered  some 
improvements  in  2023,  however  there  are 
continuing  structural  challenges.  Despite  a 
slowdown  in  economic  growth,  the  employment 
rate fully recovered from the COVID-19 crisis and 
reached  66.3%  in  2023,  above  pre-pandemic 
levels (63.5% in 2019). Despite this improvement, 
the  employment  rate  is  still  one  of  the  lowest  in 
the EU (EU average 75.3%) and well below Italy’s 
2030 employment rate target of 73%. The activity 
rate  (71.7%)  was  also  one  the  lowest  among  EU 
countries (the  EU  average  is  80.0%).  Employment 
rates  nonetheless  vary  significantly  across  the 
country (75.8% in the North-East vs 51.5% on the 
islands  in  2022).  While  remaining  well  above  the 
EU average (of 6.1%), in 2023, the unemployment 

68 

in  employment  nor 

rate fell to its lowest level (7.7%) since 2009. The 
labour  market  situation  of  young  people  and 
women  merits  continued  attention.  The  share  of 
young  people  neither 
in 
education  and  training  (NEETs)  further  decreased 
to  16.1%  in  2023,  but  remains  5.1  percentage 
points  (pps)  above  the  EU  average.  In  2023,  the 
female  employment  rate  was  56.5%  (against  an 
EU  average  of  70.2%),  resulting  in  a  very  high 
gender employment gap of 19.5 pps. This gap was 
even  wider  in  the  South  and  the  islands.  The 
gender  pension  gap  (30.1%)  and  the  gender 
pension  coverage  gap  (14.3%)  were  among  the 
highest  in  the  EU  in  2022,  also  because  of  the 
gender  employment  gap.  Under  its  recovery  and 
resilience  plan  (RRP),  Italy  passed  an  ambitious 
reform  of  the  Public  Employment  Services  that 
focuses  on  upskilling  and  reskilling  initiatives. 
Unemployed  workers  and  vulnerable  or  poor 
workers  will  benefit  from  the  creation  of  the 
National 
the  Guaranteed 
Employability  of  Workers.  The  implementation  of 
these  measures  will  need 
to  be  carefully 
monitored,  anticipating  potential  governance 
challenges  and  ensuring  homogenous  services 
across the regions. 

Programme 

for 

Increasing  participation  in  early  childhood 
education  and  care  could  help  boost  female 
employment. The share of children under the age 
of  3  in  formal  childcare  was  30.9%  in  2022  vs 
35.9% in the EU. It was even lower for those from 
a  disadvantaged  socio-economic  background.  
Childcare  coverage  in  the  school  year  2021/22 
varied  from  40%  in  Umbria,  Emilia-Romagna  and 
in  Campania  and 
to  12% 
Valle  d’Aosta 
Calabria (149). 
the 
implemented, 
fully 
If 
construction of new childcare places, as outlined in 
the  RRP,  could  help  address  this  challenge.  The 
ESF+  supports 
the 
European  Child  Guarantee  with  a  total  budget  of 
over EUR 1.1 billion.  

implementation  of 

the 

In  Italy,  low  wages  and  low  work  intensity 
linked to non-standard forms of work lead to 
an  at-risk-of-poverty  rate  of  people  in  work 
that is among the highest in the EU (11.5% vs 
8.5%).  Between  2013  and  2022,  the  purchasing 

(149) ISTAT, I servizi educativi per l’infanzia in un’epoca di profondi 

cambiamenti, 2022. 

2910.545.816.119.55.666.37.74.294.224.428.525.83146.630.91.8Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic labour markets and fair working conditionsEmployment rate(% of the population aged 20-64, 2023)Unemployment rate(% of the active population aged 15-74, 2023)Long term unemployment(% of the active population aged 15-74, 2023)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2022)Social protection and inclusionAt risk of poverty or social exclusion (AROPE) rate (% of the total population, 2022)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2022)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2022)Disability employment gap (percentage points, population aged 20-64, 2022)Housing cost overburden (% of the total population, 2022)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2022)Self-reported unmet need for medical care (% of the population aged 16+, 2022)Better than averageBest performersPolicy areaHeadline indicatorEqual opportunities and access to the labour marketAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Early leavers from education and training(% of  the population aged 18-24, 2023)Share of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Young people not in employment, education or training(% of the population aged 15-29, 2023)Gender employment gap(percentage points, population aged 20-64, 2023)Income quintile ratio (S80/S20, 2022) 
 
 
 
     
 
 
 
power of wages in Italy fell by 2% compared to an 
EU-wide increase of 2.5% (150). This is exacerbated 
by  recent  inflation:  in  2022,  gross  disposable 
household 
income  fell  and  real  wages  are 
projected to further decline by 2.6% in 2023. Low-
earning workers in Italy also face a higher risk of 
poverty as they relatively often live in households 
where  other  family  members  have  low  work-
intensity or are not employed. This is linked to one 
of the highest shares of temporary employment in 
the EU (16.9%) as well as a prevalence of single-
earner  families  (linked  to  the  low  employment 
rates  of  women  and  young  people) (151).  The 
Commission’s  Joint  Research  Centre  estimates 
that about 17% of workers in Italy, particularly in 
the  South  and  the  islands,  would  be  affected  by 
the introduction of a minimum wage of EUR 9 (152).  

2022 to 34% in 2035, though still, however, below 
labour  market  demand (154).  Vocational 
the 
education  and  training  (VET)  systems  with  work-
based learning are critical to improve occupational 
outcomes.  However,  those  who  have  undergone 
vocational education and training are less exposed 
to  work-based  learning  (25.9%)  than  their  EU 
peers  (60.1%).  The  reform  and  the  on-going 
expansion  of  the  tertiary  non-academic  sector  is 
improving  young  people’s  educational 
key  to 
attainment and employment prospects.  

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

in 

the 

context 
challenges 
and 
job  vacancy  rate 

Investments  in  tertiary  education,  upskilling 
and  reskilling  are  key for  Italy’s  growth and 
of 
competitiveness 
demographic 
labour 
shortages.  The 
in  2023 
remained  below  the  EU  average,  but  at  2.3%  is 
historically high. Labour market tightness is mainly 
driven  by  services;  at  the  end  of  2023,  almost 
40%  of  firms  in  this  sector  declared  labour  a 
factor  limiting  production  (against  an  average  of 
30%  for  the  EU).  The  projected  decline  of  the 
working-age  population  by  0.7%  by  2030  and 
14.1%  by  2050  significantly  increases  the  risk  of 
labour  shortages. (153)  At  the  same  time,  Italy has 
a  low  proportion  of  young  adults  with  a  tertiary 
education  (30.6%),  while  adult  participation  in 
education  and  training  (25-64)  has  fallen  from 
33.9%  in  2016  to  only  29%  in  2022,  well  below 
the  2030  national  target  of  60%.  Furthermore, in 
2023  only  45.75%  of  Italian  adults  had  at  least 
basic digital skills compared to 55.51% in the EU. 
level  of 
The  share  of  people  with  a  high 
qualifications is expected to increase from 25% in 

(150) ISTAT, Rapporto Annuale, 2023. 

(151) Banca d’Italia, Questioni di Economia e Finanza N.806, 

2023. 

(152) Estimations performed by the European Commission, Joint 

Research Centre, based on the EUROMOD model, I6.0+. This 
is a ‘day-after’ static simulation obtained by increasing low 
wages to 9 EUR in the model which does not account for 
potential negative impacts on employment. The EUR 9 
threshold is used as a reference because it is the level 
currently being discussed following a proposal by opposition 
parties. 

(153) European Commission, Employment and Social 

Developments in Europe Report, 2023. 

(1) Adult Education Survey, adults in learning in the past 12 
months, special extraction excl. guided on-the-job training. 
(2) Change in the number of persons at risk of poverty or 
social exclusion (AROPE), reference year 2019. 
Source: Eurostat, DG EMPL 

The  risk  of  poverty  or  social  exclusion 
remains high in a context where inflation has 
eroded  the  purchasing  power  of  low-income 
families. Even though the share of people at risk 
of  poverty  or  social  exclusion  (AROPE)  decreased 
slightly  to  24.4%  in  2022,  it  remained  above  the 
EU average (21.6%) and is particularly high among 
children (28.5%). Since 2021, absolute poverty has 
increased  by  0.8  pps  in  the  context  of  high 
is  now  affecting  9.7%  of 
inflation,  and 
individuals (155).  The  risk  of  poverty  is  higher 
among  the  self-employed  and  people  in  non-
standard  forms  of  work.  Further  efforts  are 
needed  to  reach  the  2030  poverty  reduction 
target. Access to social protection remains limited 
for  some,  especially  the  self-employed.  There  is 
still  a  high  level  of  inequality:  the  income  of  the 
richest 20% of the population is 5.62 times higher 
than  that  of  the  poorest  20%  (EU  average:  4.74) 
and  the  impact  of  social  transfers  (excluding 
pensions) on reducing inequalities is below the EU 
average (31% vs 37% in 2022).  

(154) Cedefop, 2023 skills forecast Italy, 2023. 

(155) ISTAT, LA POVERTÀ IN ITALIA, 2023. 

69 

IndicatorsLatest dataTrend            (2016-2023)2030 targetEU target 66.3(2023)29.0(2022)-498(2022)Employment (%)7378Adult learning1 (%)6060Poverty reduction2 (thousands)-3200-15000 
 
 
  
 
 
The  existence  of  a  well-functioning  and 
adequate  minimum  income  scheme  is  key  to 
reducing  social  disparities.  From  2024,  the 
minimum  income  scheme  no  longer  determines 
eligibility  only  by  means-testing,  but  identifies 
eligible  households  based  on  demographic 
categories.  A  similar  scheme  to  the  previous 
‘Reddito  di  cittadinanza’,  now  called  ‘Assegno  di 
Inclusione’, will continue to be provided based on a 
set  income  threshold,  but  only  to  households 
whose  adult  members  are  considered  unable  to 
work  as the family includes children, persons with 
disabilities or people over 60. Households that are 
below  the  threshold  but  not  included  in  these 
categories will receive a monthly payment of 350 
EUR  for  the  time  they  participate  in  a  training 
course and for a maximum duration of 12 months. 
Simulations  by  the  Bank  of  Italy  suggest  that, 
among  households  whose  members  hold  Italian 
citizenship,  the  new  minimum  income  scheme 
would  reduce  the  number  of  recipient  families  by 
40% 
(and  66%  among  households  whose 
members  hold  a  different  citizenship) (156).  On 
average,  the  incidence  of  absolute  poverty  is 
expected  to  be  0.8  pps  higher  and  child  poverty 
0.5  pps  higher.  The  available  quantitative  and 
qualitative  evidence  and  the  policy  response 
undertaken  and  planned  analysed  in  the  second-
the  Social  Convergence 
stage  analysis  of 
Framework of May 2024 (SWD(2024)132) point to 
challenges  for 
Italy  that  may  affect  social 
convergence  in  relation  to  the  labour  market, 
social  protection  and  inclusion  and  education  and 
skills. 

(156) Banca d’Italia, La revisione delle misure di contrasto alla 

povertà in Italia, 2023, p.11. Note this model is static, i.e. it 
does not account for labour supply responses to the reform, 
and does not account for the introduction of the fixed 
support for training (Supporto alla Formazione e Lavoro). 

70 

 
 
 
ANNEX 15: EDUCATION AND TRAINING 

This  Annex  outlines  the  main  challenges  of 
Italy’s  education  and  training  system  based 
on  the  2023  Education  and  Training  Monitor  and 
the  2022  OECD  Programme  for  International 
Student Assessment (PISA) results. 

The 

share 

competitiveness. 

target  of  15%  set  for  2030. 

Almost  a  third  of  15-year-olds  lack  basic 
skills  in  mathematics,  and  more  than  one  in 
five in reading and science. This hampers the 
formation of human capital as well as Italy’s 
future 
of 
underachieving  students  as  measured  by  the 
Programme  for  International  Student  Assessment 
(PISA) in 2022 has remained stable since 2018 in 
science and reading but increased in mathematics 
(Graph A15.1). The rate in the first two domains is 
slightly below the EU average, although above the 
EU-level 
In 
mathematics,  however,  the  share  increased  by 
5.8 pps between 2018 and 2022 (EU 6.6 pps) and 
reached 29.6% in 2022 (EU 29.5%), almost double 
the  EU  target.  The  share  of  top-performing 
students  is  below  the  EU  average  in  all  three 
domains,  which  could  negatively  affect  Italy’s 
competitiveness  and  its  capacity  for innovation in 
the  future.  About  half  of  foreign-born  students 
(48.1%)  do  not  reach  the  minimum  proficiency 
level in mathematics and the gap with native-born 
students stands at 20.6 pps. The difference shrinks 
by  more  than  half,  to  8.2 pps.  in  case  of  native-
born students with foreign-born parents.  

Graph A15.1: Underachievement rates by field, 
PISA 2012, 2018 and 2022 

Source: OECD (2023). 

The socio-economic gap in underachievement 
in mathematics  has  widened  since  2018.  The 
increase (+6 pps) has been driven by a rise by 8.5 
pps  of  the  underachievement  rate  of  students 
from  the  bottom  quarter  of  the  socio-economic 
distribution. The rate now stands at 47.6%, in line 
with the EU average (48.0%). By contrast, the rate 

has  remained  stable  for  students  from  the  top 
quarter  since  2012.  The  share  of  top  performers 
among  disadvantaged  students  decreased  by  1.7 
pps,  in  line  with  the  EU  trend.  The  share  of  top 
performing students is below the EU average in all 
three domains.  

A shortage of qualified teachers is fuelling a 
steady increase in the number of teachers on 
temporary  contracts.  In  recent  years,  only  half 
of the vacant posts available at the start of each 
school  year  could  be  filled  with  permanent 
appointments, due to a lack of candidates with the 
required  qualifications  in  some  subjects.  In  the 
school  year  2021/2022,  the  number  of  teachers 
on  temporary  contracts  reached  225 000,  or 
almost a quarter of the total, up from 135 000 in 
the  school  year  2017/2018.  Most  temporary 
teachers  have  no  automatic  right  to  fill  the  same 
post  in  the  following  school  year.  Consequently, 
the turnover rate is high, which negatively impacts 
teaching  continuity.  A  recent  reform  of  initial 
training  and  recruitment  for  secondary  school 
teachers (157)  aims  to  address  some  of  these 
issues  by  introducing  a  specific  initial  training  for 
aspiring  secondary  school  teachers  and  a  clear 
path to tenure. 

Participation  in  early  childhood  education  is 
declining  and  now  stands  below  the  EU 
average.  In  2021,  91%  of  children  between  the 
age  of  3  and  the  starting  age  of  compulsory 
primary  education  participated  in  early  childhood 
education,  compared  with  the  EU  average  of 
92.5%.  Participation  of  children  below  3  years  of 
age remains below the EU average (see Annex 14). 

to 

strengthen 

Under Italy’s national recovery and resilience 
plan  (NRRP),  several  measures  are  being 
learning 
implemented 
outcomes and reduce territorial disparities. In 
2023,  the  Ministry  of  Education  and  Merit 
launched the Agenda SUD project. This is aimed at 
overcoming the gap in learning outcomes between 
northern  and  southern  Italy  through  targeted 
actions in primary and secondary state  schools in 
southern and island regions, with support from EU 
cohesion  policy  funds  and  the  Recovery  and 
Resilience  Facility.  From  September  2023,  a  new 
system  of  individualised  orientation  and  guidance 
was launched in secondary schools with the aim of 

(157) Decree Law n. 36/2022. 

71 

05101520253035ITEUITEUITEUMathematicsReadingScience%2012201820222030 EU target 
 
   
 
 
 
Table A15.1:EU-level targets and other contextual indicators under the European Education Area 
strategic framework 

Notes: b = break in time series; d = definition differs; e = estimated; p = provisional; u = low reliability; : = data not available. 
Source: 1,3,4,5,7,8,9,10,12=Eurostat; 11= Eurostat, Adult Education Survey; 2,6=OECD, PISA. 

for 

reducing  early  school  leaving  -  which  stood  at 
10.5%  in  2023  compared  with  an  EU  average  of 
9.5% - and raising tertiary attainment. In addition, 
the  Ministry  of  Education  and  Merit  has  issued 
guidelines 
strengthening  mathematical, 
scientific,  technological  and  digital  skills  through 
innovative teaching methodologies at all education 
levels.  The  aim  is  to  raise  achievement  and 
encourage 
science, 
technology,  engineering  and  mathematics  (STEM) 
curricula, in particular for women. 

enrolments 

tertiary 

in 

educational 

qualification 

remains  below 

The  proportion  of  young  adults  with  a 
tertiary 
is 
the  EU 
increasing  but 
average.  In  2023,  30.6%  of  Italian  25-34-year-
olds  had  a  tertiary  educational  qualification 
compared  with  the  EU  average  of  43.1%.  The 
tertiary educational attainment rate is particularly 
low among the foreign population, whether born in 
the  EU  (15,5%)  or  outside  (13.1%),  reflecting  a 
continued  difficulty  in  attracting  highly  qualified 
people.  Women  are  more  likely  to  hold  a  tertiary 
qualification  than  men  (37.1%  vs  24.4%),  in  line 
with  the  rest  of  the  EU,  but  with  a  slightly  wider 
gender gap (12.7 pps compared with 11.1 pps). 

The  proportion  of  tertiary  students  enrolling 
in STEM is slightly above the EU average, but 
few choose to pursue a degree in ICT. In 2021 
30%  of  new  entrants  into  tertiary  education 
enrolled  in  STEM,  as  compared  to  an  EU  average 
of 28.1%. However, only 2.3% enrolled in ICT, less 
than half the EU average of 4.9%. 

72 

96%97.3%201391.8%201393.6%92.2%91.0%202192.5%2021,dReading< 15%19.5% 18.0%23.3% 22.5%21.4%202226.2%2022Mathematics< 15%24.7% 22.1%23.8%22.9%29.6%202229.5%2022Science< 15%18.7% 16.8%25.9%22.3%23.9%202224.2%2022< 9 %17.3%12.6%14.3%b10.5%10.5%9.5%Men20.2%14.5%16.3%b12.1%13.1%11.3%Women14.3%10.6%12.1%b8.7%7.6%7.7%Cities17.8%b11.2%14.8%b9.4%11.4%8.6%Rural areas17.7%b14.0%14.6%b11.0%10.1%9.9%5By country of birthNative14.8%11.3%11.9%b9.2%9.1%8.2%EU-born35.9%26.2%32.4%b22.4%20.9%21.0%Non EU-born39.9%30.1%36.1%b23.0%27.0%21.6%6Socio-economic gap (percentage points)26.9:27.429.533.4202237.220227Exposure of VET graduates to work-based learning≥ 60% (2025) ::: :25.9% 64.5%45%22.5%34.1%27.9%b38.7%30.6%43.1%Men17.5%29.1%21.6%b33.3%24.4%37.6%Women27.4%39.2%34.2%b44.2%37.1%48.8%Cities28.3%b43.5%34.0%b49.0%37.9%53.3%Rural areas18.2%b24.8%22.6%b27.7%23.9%31.7%Native24.8%35.4%30.9%b39.7%34.0%44.2%EU-born11.2%29.3%13.5%b36.7%15.5%40.2%Non EU-born10.6%24.2%13.6%b31.0%13.1%37.1%11Participation in adult learning (age 25-64)≥ 47% (2025) ::33.9%201637.4%201629.0%202239.5%202237.2%201322.7%201336.3%23.8%36.2%202124.5%2021Tertiary educational attainment (age 25-34)8Total8By gender9By degree of urbanisation10By country of birth12Share of school teachers (ISCED 1-3) who are 55 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 urbanisation201220182023IndicatorTargetItalyEU-27ItalyEU-27ItalyEU-27 
 
 
  
 
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. 

level.  Overall, 

Italy has one of the highest life expectancies 
at  birth  in  the  EU,  though  with  significant 
regional  differences.  After  a  significant  drop  in 
2020,  life  expectancy  rebounded  in  2021  and 
2022,  partially  explained  by  a  reduction  in  the 
COVID-19  mortality (158),  but  it  is  still  lower  than 
Italy  has 
the  pre-pandemic 
comparatively  low  rates  for  treatable  mortality, 
regional  differences  can  be 
but  significant 
observed 
is  the  case  for  most  health 
indicators).  In  2021,  the  leading  causes  of  death 
were  diseases  of 
system 
the 
(‘cardiovascular diseases’, notably ischaemic heart 
diseases)  followed  by  cancer  and  COVID-19. 
Screening rates for some types of cancer (such as 
cervical cancer) are below the EU average. 

circulatory 

(as 

Graph A16.1: Life expectancy at birth, years 

and 

regional  taxes.  Main  spending  categories  were 
inpatient  care,  followed  by 
outpatient  care, 
pharmaceuticals 
devices. 
medical 
Approximately  two  thirds  of  all  pharmaceutical 
spending  in  2021  was  in  hospitals,  one  of  the 
highest percentages among EU countries despite a 
lower  than  EU  average  density  of  hospital  beds. 
Private  health  spending  (accounting  for  a  higher 
share  of  total  health  spending  than  the  EU 
average)  mainly  takes  the  form  of  out-of-pocket 
payments  (90%)  and  to  a  lesser  extent  voluntary 
health  insurance.  The  main  drivers  for  out-of-
pocket  payments  are  outpatient  specialist  care 
consultations,  purchased  to  gain  faster  access  to 
medical 
outpatient 
pharmaceuticals. Much of the private spending on 
outpatient  pharmaceuticals  (73%)  is  on  brand 
name  medicines  despite  policies  to  promote 
greater  use  of  generics;  paradoxically 
this 
spending  appears  to  be  concentrated  in  the 
southern  regions,  where  the  average  disposable 
income  per  capita  is  lower.  Based  on  the  age 
profile of the Italian population, public expenditure 
on  health 
increase  by  0.6 
percentage points of GDP by 2070, in line with the 
EU average (see Graph 16.2 and Annex 21). 

is  projected 

specialists, 

and 

to 

Graph A16.2: Projected increase in public 
expenditure on healthcare over 2024-2070 

Source: Eurostat 

In  2021  Italy’s  health  spending  was  below 
the  EU  average,  both  in  per  capita  terms 
(nearly one third below) and relative to GDP. 
In 2021, total healthcare spending was at 9.2% of 
GDP,  compared  to  an  EU  average  of  10.9%.  This 
represents  a  decline  from  9.6%  in  2020,  as  the 
rebound  in  GDP  outpaced  the  growth  in  health 
spending.  Provisional  data  suggest  that  in  2022 
total  healthcare  spending  fell  further  to  8.8%  of 
GDP.  Around  three  quarters  of  total  health 
expenditure  is  publicly  funded  (lower  than  the  EU 
average),  under  mechanisms  comprising  a  mix  of 
national  taxes  (playing  an  equalisation  role)  and 

(158) Based on data provided directly by Member States to the 

European Centre for Disease Prevention and Control, under 
the European Surveillance System. 

Baseline scenario 
Source: European Commission / EPC (2024) 

In  2021,  spending  on  prevention  in  Italy 
amounted  to  6.8%  of  total  spending  on 
healthcare,  compared  to  6.0%  for  the  EU 
overall.  Between  2019  and  2021,  spending  on 
preventive care in Italy increased by  around 45%, 
compared  to  a  106%  increase  for  the  EU  overall. 
Provisional data for 2022 indicate a drop to 6.5% 
of  total  health  spending  going  to  preventive  care. 
Total  antibiotic  consumption  is  still  above  the  EU 
the  use  of  broad-spectrum 
average,  and 
antibiotics (WHO ‘watch’ list) is a matter of public 
health concern. 

73 

83,183,483,682,382,782,880,981,081,380,480,180,6201720182019202020212022ItalyEU6,65,80,60,602468EUItaly% of GDP20242070increase 
 
   
 
     
 
Table A16.1:Key health indicators 

Note: The EU average is weighted for all indicators except for doctors and nurses per 1 000 population, for which the EU simple 
average is used. Doctors’ density data refer to practising doctors in all countries except Greece, Portugal (licensed to practise) and 
Slovakia (professionally active). Nurses’ density data refer to practising nurses in all countries except Ireland, France, Portugal, 
Slovakia (professionally active) and Greece (hospital only). 
Source: Eurostat Database; except: * OECD, ** Joint Questionnaire on non-monetary healthcare statistics, *** ECDC, **** Council 
Recommendation on stepping up EU actions to combat antimicrobial resistance in a One Health approach. 

Historical  differences 
in  policies  and 
financing  have  created  marked  regional 
imbalances  in  the  availability  of  resources 
(infrastructure  and  workforce)  taking  a  toll 
on the supply and quality of health services. 
High  regional  variability  in  the  level  of  unmet 
needs  for  medical  care  can  be  linked  to  waiting 
times  and  longer  distances  to  travel  to  access 
health  services,  as  Italy  has  managed  to  reduce 
the  income  gap  for  unmet  needs  in  medical  care. 
Access to health services can be hampered by lack 
of  local  availability,  with  uneven  geographical 
distribution  and  growing  shortages  of  doctors 
practising  in  public  hospitals  and  within  primary 
care, even though the overall density of practising 
doctors is slightly above the EU average. As more 
than 55% of doctors in Italy are aged 55 or above 
(and  over  a  quarter  will  reach  retirement  age  by 
2027),  shortages  in  some  specialties,  such  as 
emergency medicine, will likely persist due to their 
limited  attractiveness  among  medical  graduates. 
The  most  pressing  shortages  are  in  primary  care 
(partly due to a significant reduction in the number 
of  general  practitioners  in  2020-2021).  While 
primary  care  is  well  developed,  it  is  under-
resourced and most general practitioners still work 
in  ‘solo’  practices,  with  limited  opportunities  for 
team-working  or  sharing  diagnostic  technologies. 
Recent  developments 
training  are 
expected to ensure a sufficient replenishment rate 
for nurses, as Italy has a historically low density of 
nurses  (well  below  the  EU  average).  The  growing 
burden of chronic diseases in an ageing population 
will increase demand for better integration of care 
levels  (especially  in  regions  with  higher-than-
average 
comorbidities  and  non-
communicable  diseases)  and  better  cooperation 
between national and local authorities. 

rates  of 

in  nurse 

to 

(RRP), 

Italy  plans 

Historically,  investments  in  healthcare  have 
lagged  behind  in  Italy,  but  EU  funds  provide 
substantial  support.  Among  EU  countries,  Italy 
has  had  a  comparatively  low  percentage  of  GDP 
allocated to investment in gross capital formation 
in  healthcare.  Through  its  recovery  and  resilience 
plan 
invest  around 
EUR 16.1 billion  to  build  health  system  resilience 
and  improve  quality  of  care.  The  RRP  envisages 
reforms and investment to strengthen community-
based specialised structures, boost digitalisation of 
healthcare  services,  upgrade  hospital  equipment 
and  infrastructure,  and  improve  human  resources 
in health. Significant funding for healthcare is also 
planned  under  the  EU  cohesion  policy  funds  in 
2021-2027. Italy will invest close to EUR 1.8 billion 
in  health  equipment, 
infrastructure  upgrades, 
mobile  health  assets,  digitalisation  of  healthcare, 
the 
and 
accessibility, effectiveness and resilience of health 
services  in  the  less  developed  regions  of  the 
country,  with  a  focus  on  health  workforce  and 
improving access for vulnerable groups (159). 

in  various  measures 

improve 

to 

(159) The EU cohesion policy data reflect the status as of 13 May 

2024. 

74 

20182019202020212022EU average (latest year) Treatable mortality per 100 000 population (mortality avoidable through optimal quality healthcare)65,263,766,564,5NA93.3 (2021)Cancer mortality per 100 000 population235,5230,9227,0221,5NA235.4 (2021)Current expenditure on health, % GDP 8,78,79,69,28,810.9 (2021)Public share of health expenditure, % of current health expenditure73,973,775,975,5NA81.1 (2021)Spending on prevention, % of current health expenditure 4,74,75,46,86,56.0 (2021)Available hospital beds per 100 000 population315316319312NA525 (2021)Doctors per 1 000 population4,04,14,04,14,24.1 (2021)*Nurses per 1 000 population5,86,26,36,2NA7.9 (2021)Total consumption of antibacterials for systemic use, daily defined dose per       1 000 inhabitants per day ***21,421,718,417,521,919.4 (2022) 
 
 
  
 
ANNEX 17: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL 

Annex 17 showcases the economic and social 
regional  dynamics  in  Italy.  It  provides  an 
analysis  of  economic,  social  and 
territorial 
cohesion  in  the  Italian  regions  and  assesses 
investment  and  subnational  reform 
emerging 
social 
needs 
development and competitiveness in the country. 

foster  economic  growth, 

to 

of 
Overview 
performance at regional level 

economic 

and 

social 

The Italian economy is characterised by slow 
growth  compared  to  the  EU  average  as  well 
as  by  a  persistent  North-South  divide.  Over 
the last 20 years all regions, except Bolzano, have 
been  steadily  losing  ground  compared  to  the  EU 
average in terms of GDP per capita. 

Regional  disparities  across  the  North-South 
are  deep  and  entrenched.  Between  2007  and 
2022,  regional  gaps  increased  in  Italy.  Overall, 
GDP  fell  considerably  in  the  southern  regions  (-
10%)  and  in  the  centre  of  the  country  (-6.2%) 
while  it  increased  moderately  in  the  north-west 
(+0.8%),  and  north-east  (+1.7%)  (Banca  d’Italia, 
2023) (160). In 2022, 6 southern regions had a GDP 
per  capita  in  purchasing  power  parity  below  75% 
of  the  EU  average  (Table  A17.1).  The  country 
experienced a strong recovery in GDP per capita in 
the  2  years  following the outbreak  of the  COVID-
19  pandemic.  However,  in  2022,  the  public  debt- 
to-GDP  ratio  remained  at  141.7%,  whereas  the 
GDP growth is expected to have slowed down in all 
Italian regions in 2023. 

The  economic  impact  of  tighter  financial 
conditions  has  particularly  hit  the  southern 
regions. A restrictive macroeconomic environment 
and the gap in fiscal  capacity between South and 
North  translate  into  important  public  spending 
divergences  that  fuel  the  increasing  South-North 
regional  divide.  In  2021,  total  public  spending 
(current and capital spending) ranged from EUR 36 
200 per capita in Valle d’Aosta to EUR 13 800 per 
capita in Campania (Graph A17.1). The economy of 
the southern regions is highly dependent on public 
spending,  but  municipalities  in  the  south  of  Italy 
have lower spending capacities than in the rest of 
the  country  and  are  characterised  by  higher  dept 
levels.  These  limit  their  capacity  to  invest  and  to 
provide  public  services.  Under  public  spending 

(160) Banca d’Italia, 2023, L’economia delle regioni italiane: 
Dinamiche recenti e aspetti strutturali page 63). 

southern 

programmes, 
regions  are  usually 
compelled to allocate a higher proportion of funds 
on 
actions 
while northern regions have more margin to focus 
on new infrastructures (ARERA, 2023) (161). 

extraordinary 

maintenance 

Graph A17.1: Total public spending pro-capita vs 
GDP pro-capita per Italian region (2021) 

(1) Orange dot: Italian average 
Source: Eurostat (GDP per capita), Conti Pubblici Territoriali 
(public spending per capita), DG REGIO elaborations 

to 

regional  water  operators 

A wide public service divide persists between 
the  southern  and  centre-northern  regions. 
This happens in sectors managed at national level 
(i.e.  education  and  justice)  as  well  as  in  sectors 
managed at regional and local level such as water, 
waste,  urban  transport  and  risk  prevention,  in 
which southern regions have a lower performance. 
Water  leakages  remain  high  at  42%  and  above 
50%  in  the  south (162)  in  2022.  The  slow  pace  of 
reform 
(Piani 
d’Ambito)  hinders  efficient  management.  Many 
regions in the south suffer significant delays both 
in terms of governance and investments, technical 
and  administrative  capacities  of  local  bodies, 
lengthy  public  works,  and  a  high  presence  of  EU 
infringement 
850 
procedures. 
in  breach  of  the  Urban 
agglomerations  are 
Wastewater  Treatment  Directive,  affecting  over 
26.7  million  population  equivalent,  two  thirds  in 
the  south.  From  2015  to  2024,  Italy  paid  more 
to 
than  EUR  730  million 
infringements 
and  water 
management sectors alone. 

the  waste 

in  fines 

related 

Over 

in 

(161) ARERA, 2023, Relazione annuale -Stato dei servizi 2022, 

file:///U:/LIBRARY%20ITALY/2021-
2027/Country%20report/2024/ARERA%20RA23_volume_1.p
df (pages 435, 436). 

(162) ISTAT Le statistiche dell'ISTAT sull'acqua 2020-2023, 2024 

75 

40608010012014016011000160002100026000310003600041000Total public spending pro-capita in axis X (national, regional, local; current + capital spending; euro at 2015 prices) vs GDP pro-capita in axis Y (PPS; EU27 = 100) per Italian region (2021) 
 
 
     
 
 
 
income 

scheme 

Welfare  assistance  measures  such  as  the 
(‘reddito  di 
minimum 
cittadinanza’)  helped  reduce  poverty,  which 
nevertheless remains high, particularly in the 
South.  During  the  COVID-19  pandemic,  the 
number  of  people 
living  under  the  absolute 
poverty  line  increased  by  250  000  in  the  south, 
against  a  decline  of  170  000  in  the  centre-
north (163).  The  incidence  of  households  in  energy 
poverty  reached  13%  in  the  continental  south, 
17.6%  in  Sardegna  and  Sicilia,  but  it  was  lower 
than  6%  in  the  centre-north  regions  (average 
2017-2021) (164). 

Graph A17.2: Weight of southern regions in Italian 
population per category of age (1 January, yearly 
data 2001-2022) 

Source: Eurostat, DG REGIO elaboration 

Population decline in the south, especially as 
regards young and skilled people, was one of 
the  main  factors  behind  weak  growth.  The 
south  represents  a  declining  share  of  the  Italian 
population for all age categories except for people 
aged  65  years  or  more  (Graph  A17.2).  In  the 
centre-north  regions,  the  number  of  people  aged 
between  0  and  17  years  increased  from  5.5 
million  in  2001  to  6  million  in  2022,  whereas  in 
the south there was a decline of 1.1 million: from 
4.3 to 3.2 million people over the same period for 
the  same  age  category.  According  to  the  Istituto 
(ISTAT)  projections 
Nazionale  di  Statistica 
(2023) (165), in 2061 people aged 70 years old and 
more  are  expected  to  represent  30.7%  of  the 
southern  population  against  18.5%  in  the  centre-
north. 

Disparities  in  GDP  per  capita  are  closely 
linked  to  large  and  even  widening  labour 
productivity  gaps  between 
the  more 
developed  northern  regions  and  the  rest  of 
the country. The poor path in labour productivity 
has  been  continuous  and  particularly  pronounced 
over  the  last  two  decades.  In  2022,  labour 
productivity ranged from 136% of the EU average 
in  Bolzano  to  only  81%  in  Calabria,  was  above 
107% in all northern regions and Lazio, but below 
95% in all southern regions, Marche and Umbria. 

Low  productivity  is  combined  with  weak 
employment  rates  in  southern  Italy.  In  2022, 
less  than  half  of the  population  aged  20–64  was 
employed  in  Sicily  (46.2%),  Calabria  (47.0%)  and 
Campania  (47.3%).  From  2005  to  2022,  the 
number of employed people aged 20-64 increased 
in  the  centre-north  regions  by  783  000  people 
while  it  fell  by  307  500 people  in the  south. Low 
employment  rates  also  explain  higher  income 
inequality in the south (166). 

High regional disparities in employment rates 
are related to the employment gaps recorded 
for  women  and  young  people.  In  2023,  there 
were 10 regions in the EU where less than half of 
women aged 20–64 years were in employment. 6 
of  these  were  located  in  southern  Italy,  with  the 
lowest  rates  in  Calabria  (35.2%),  Campania  (33.8 
%) and Sicily (35.5%) (167). 

The  largest  regional  disparities  in  the  EU  in 
employment rates for recent graduates were 
observed for Italy (% of population aged 20-34 
years):  Sicily  (42.0%)  had the  lowest  employment 
rate  in  the  EU  while  Bolzano  had  a  rate  twice  as 
high (85.4%) and above the EU average (168). 

The  southern  Italy  economy  is  still  affected 
by limited educational attainment. There were 
high  numbers  of  early  school  leavers,  a  lower 
proportion  of  people  with  tertiary  education  or 
employed in science and technology (Table A17.1). 
Even if in recent years, the propensity to enrol for 
university  studies  has  increased  in  the  South 

(163) SVIMEZ, 2023, Rapporto: L’economia e la società del 
Mezzogiorno, https://lnx.svimez.info/svimez/wp-
content/uploads/2023/12/rapporto_2023_slides_sito.pdf 

(164) Banca d’Italia, 2023, L’economia delle regioni italiane 

Dinamiche recenti e aspetti strutturali 

(166) Banca d’Italia, 2023, L’economia delle regioni italiane 

Dinamiche recenti e aspetti strutturali 

(167) Eurostat, 2023 data 

(165) ISTAT, 2023, I giovani del Mezzogiorno: l’incerta transizione 
all’età adulta, https://www.istat.it/it/files//2023/10/Focus-I-
giovani-del-mezzogiorno.pdf 

(168) Eurostat, 2023, Regions in Europe – 2023 edition, 
https://ec.europa.eu/eurostat/web/interactive-
publications/regions-2023. 

76 

44%35%38%36%30%32%34%36%38%40%42%44%2001200220032004200520062007200820092010201120122013201420152016201720182019202020212022Weight of Southern regions in Italian population by category of age0-1718-3435-6465 and over 
     
 
 
Table A17.1:Selected indicators at regional level in Italy 

Source: Eurostat, EDGAR database 

compared  with  the  North,  southern  graduates 
present  a  higher  mobility  rate,  measured  as  the 
share  of  graduates  moving  outside  their  area  (in 
this case, move from the south to the centre-north 
or abroad), equal to 39.8%, against rates of 5.8% 
in the north and 21.4% in the centre (169). 

Educational  attainment,  ability  to  innovate 
and  sectoral  specialisation  of  the  business 
important  factors  behind  the 
base  are 

(169) ISTAT, 2023, I giovani del Mezzogiorno: l’incerta transizione 
all’età adulta, https://www.istat.it/it/files//2023/10/Focus-I-
giovani-del-mezzogiorno.pdf 

77 

observed  productivity  and  employment 
trends.  This  points  to  a  reduced  capacity  of  the 
country,  especially  its  less  developed  regions,  to 
capture  growth  trends  in  dynamic  and  advanced 
sectors. 

The share of employment in high tech sectors 
is  close  to  the  EU  average  in  the  northern 
and central regions, but less than half in the 
southern  and  island  regions.  National  R&D 
the  business  sector  as  a 
expenditure  by 
percentage  of  GDP  is  significantly  lower  than  the 
EU  average 
less  developed  regions. 
Innovation  capacity  (Map  A.17.1)  in  southern  and 
insular  Italian  regions  is  markedly  lower  than  in 

the 

in 

RegionEU27 = 100 [2022]EU27 = 100 [2022]Average % change on the preceding year [2013-2022]Average % change on the preceding year [2013-2022]Average annual change per 1000 residents [2011-2022]% of total population [2023]% of population aged 25-64 [2023]% of GDP [2021]% of GDP [2021]% of total employment [2022]EU27 = 100 [2022]European Union (27 MS)1001000.71.61.963.835.12.31.54.9100Italia97106.50.20.56-0.263.521.61.50.9484.1Nord-Ovest120119.70.40.770.56322.81.51.14.897.8Sud6586.60.10.26-2.564.518.410.52.667.5Isole6287.8-0.1-0.25-1.963.717.30.90.32.461.8Nord-Est115113.70.50.970.463.2221.61.13.392.2Centro (IT)103105.1-0.20.23263.225.61.70.85.588.8Piemonte101106.70.50.52-2.361.920.92.11.64.490.1Valle d’Aosta/Vallée d’Aoste129125.7-0.3-0.66-462.920.80.60.381.3Liguria105111.80-0.13-2.860.523.51.60.93.785.6Lombardia130125.70.40.992.263.923.51.315.2103.2Abruzzo8090.5-0.1-0.37-2.262.822.21.10.53.277.2Molise7395.1-0.4-0.07-7.162.821.910.6269.9Campania638700.33-1.865.717.81.30.63.368.4Puglia6584.300.5-2.463.917.50.90.4267.1Basilicata83100.71.21.52-6.163.919.70.50.12.168.1Calabria57810.5-0.31-463.6190.60.1258.8Sicilia5989.10-0.31-1.763.916.80.90.32.660.1Sardegna7184.7-0.3-0.11-2.563.418.60.80.11.967.1Provincia Autonoma di Bolzano/Bozen161136.50.21.345.164.318.90.80.51.885.5Provincia Autonoma di Trento130126.50.51.071.763.323.51.50.63.790.2Veneto109109.60.30.9-0.363.620.51.30.83.392.6Friuli-Venezia Giulia106110.70.70.92-2.161.7221.70.92.989.6Emilia-Romagna117114.10.60.981.263.223.72.21.63.693.6Toscana103107.700.47-0.162.222.41.60.93.886.9Umbria8390.10.1-0.25-2.461.623.810.42.985Marche9194.5-0.10.32-3.962.223.210.62.285.6Lazio110108.2-0.40.125.164.428.420.78.191.4EU Regional Competitiveness Index 2.0 - 2022 editionPopulation aged 25-64 with high educational attainmentR&D expenditureR&D expenditure in the business enterprise sector (BERD)Employment in high-technology sectorsPopulation growthPopulation aged 15-64GDP per head (PPS)Productivity (GVA (PPS) per person employed)Real productivity growthGDP per head growth 
 
 
  
 
the rest of Italy, with only Lombardy above the EU 
average. 

Map A17.1:  Regional Innovation Index 2022 

Source: DG REGIO, JRC 

Investment  and  subnational  reform  needs 
ahead 

Administrative  and  technical  capacities  of 
public  administrations  remain  a  critical 
bottleneck  for  the  development  of  southern 
regions.  The  Association  for  the  development  of 
industry  in  the  South  (SVIMEZ)  assessed  that  the 
southern municipalities lag behind in issuing public 
tenders  and  awarding  works  compared  to  centre-
(for  Recovery  and  Resilience  Funds 
north 
resources) (170). Similar trends have been observed 
for the implementation of investment co-financed 
by  cohesion  policy  funds.  In  2022,  investment 
spending  of  local  bodies  increased  by  5%  in  the 
centre-north and by 3% in the south (171). 

Graduates in science, technology, engineering 
and  mathematics  are  not  attracted  to  the 
public  sector  as  possible  employer  (Formez, 
Italian  Court  of  Auditors (173) 
2022) (172).  The 

(170) SVIMEZ, 2023, Rapporto: L’economia e la società del 
Mezzogiorno, https://lnx.svimez.info/svimez/wp-
content/uploads/2023/12/rapporto_2023_slides_sito.pdf 

(171) Banca d’Italia, 2023, L’economia delle regioni italiane 

Dinamiche recenti e aspetti strutturali 

to 

level, 

increase 

observed  that  the  number  of  scientists  and 
engineers  in  public  administrations  in  several  EU 
countries  have  shown  significant  increases  in 
recent years while the number is stable in Italy. At 
subnational 
the 
in  order 
attractiveness  of  the  public  sector,  retain  skilled 
human capital and improve the role of universities 
in  the  south,  Italy  could  set  up  agreements 
involving  local  universities,  public  bodies  and 
service  providers  in  order  to  meet  the  needs  for 
skilled  staff  of  public  administrations  and  public 
service  providers.  A  systemic  action  would  be 
beneficial  in  particular  for  recruiting  and  training 
of  staff  with  specific  skills 
linked  to  those 
environmental services and green transition, which 
are managed in Italy at the regional and municipal 
level. 

The  adoption  of  a  performance-based  public 
service  delivery  into  funding  instruments, 
based  on  measurable  results,  could  be 
beneficial  especially 
less  developed 
regions  given  the  North-South  public  service 
divide. The Italian Regulatory Authority for Energy, 
Networks  and  Environment  (ARERA)  has  already 
put  in  place  incentive  mechanisms  with  bonuses 
and penalties based on results in the provision of 
water services and municipal waste. 

in 

Public action is also important at subnational 
level  to  improve  public  services  governance. 
For  the  water  sector,  provisions  of  the  Italian 
National  Recovery  and  Resilience  Plan  (NRRP)  are 
expected  to  complete  the  transition  towards 
integrated water services in compliance to national 
provisions,  resulting  in  a  more  effective  regional 
governance,  less  fragmented  market  structures 
and  more  efficient  water  management.  This  is 
relevant  especially  in  the  south,  given  the  delays 
occurred  in  some  regions,  such  as  Calabria  and 
Sicily  while  Puglia  has  one  operator  in  charge  of 
the water management system. Overall, in sectors 
such as municipal  waste and water management, 
private-public 
mid-sized 
companies  are  expanding  in  the  centre-north, 
often 
oriented  multi-utility 
companies  dealing  with  different  environmental 
services.  However,  in  the  south,  services  continue 
to  be  mostly  provided  by  small  operators,  mostly 
publicly  owned,  which 
to  gather 
specialised  technical  skills,  recommending  a  swift 

large  mixed 

efficiency 

struggle 

and 

as 

(172) Formez PA (2022) La selezione di personale per le pubbliche 

(173) Corte dei Conti Italiana, 2023, Relazione sullo stato di 

amministrazioni, Rapporto Formez PA 2022 

attuazione del PNRR 

78 

 
 
 
 
 
 
incentives 

pandemic. Despite the overall increase, allocations 
for  the  most  ambitious  measures  concerning 
research  and  innovation,  technology  transfer  and 
university-business  cooperation  have  decreased. 
The  persistent  preponderance,  notably 
in  the 
for  productive 
south,  of  generic 
investment and the more limited use of ambitious 
targeted  measures  for  research  and  innovation  is 
a  factor  behind  the  scarce  results  on  R&D 
spending  as  a  share  of  GDP.  It  also  accounts  for 
the  slow 
limited 
patents/trademarks, few innovative start-up, small 
integration  with  international  supply  chains,  and 
ultimately  on  productivity  gaps.  Italy  could  also 
benefit  from  facilitating  investments  in  net-zero 
technologies,  making  use  of  the  opportunities  of 
the  Strategic  Technologies  for  Europe  Platform 
initiative. 

technological  development, 

in 

the 

is  also 
National  and  subnational  action 
current 
reducing 
important 
fragmentation  between  innovation  bodies 
(clusters, districts, innovation poles, consortia, etc.) 
in order to reflect the real needs in each region. In 
is 
addition,  the  functioning  of  these  bodies 
expected  to  depend  on  market-oriented  initiatives 
and  effective  public-private  partnerships,  rather 
than on public support. Setting up  a clear division 
innovation  and  business 
of  competences  on 
support  especially  between 
the  central  and 
regional  levels  may  help  to  eliminate  inefficient 
existing 
overlapping 
innovation  structures  and  bodies,  focus  on  fewer, 
more  strategic  measures  and  sectors  at  national 
and regional level. 

rationalise 

initiatives, 

public  action  to  accelerate  the  modernisation 
processes. 

It  is  important  to  speed  up  investment  for 
the  digitalisation  of  water  infrastructure.  In 
terms  of  supply  and  distribution  networks,  only 
55%  of  infrastructures  in  the  south  are  digitally 
geo-referenced against a national average of 79% 
while for the sewer network, the rate of digitalised 
geo-reference is equal to 20% in the south against 
74.7% at national level (174). It is also essential to 
carry  out  investment  on  wastewater  treatment 
also  to  reduce  the  number  of  EU  infringements 
and  investment  to  improve  the  efficiency  of  the 
water cycle, notably in the south. 

Italy  continues  to  experience  significant 
regional  disparities 
infrastructure  for 
in 
waste  management,  suggesting  a  need  for 
the  calibration  of  regional  policies  to  better 
match  waste  production  and  infrastructure 
capacity  by  both  reducing  waste  upstream 
and  facilitating  the  regional  self-sufficiency 
inefficient 
weak 
downstream. 
infrastructure  network  implies  that  90%  of  the 
additional  costs  for  exporting  waste  relies  in 
centre-southern  regions  of  Italy.  On  average,  a 
southern  Italian  household  pays  25%  more  in 
regional  waste  taxes  and  gets  in  return  a  lower 
quality service. 

and 

A 

Investments  are  also  important  to  reduce 
energy  poverty  in  the  south,  which  has  been 
growing also as consequence of inflation. EU 
funds such as the European Regional Development 
Fund (ERDF) provide an opportunity to improve the 
energy  efficiency  performance  of  social  housing 
and to help to deploy renewable energy sources to 
handle this issue.  

regions. 

Decisive  action  is  envisaged  to  promote 
focused  investment  in  research,  innovation 
and  business  support  in  the  less  developed 
Italian 
2014-20 
programming period, ERDF allocations to research, 
innovation  and  business  policies  increased  from 
EUR  4.1  billion  to  7.2  billion.  This  was  also  the 
result  of  additional  resources  under  REACT-EU  to 
respond  to  the  crisis  generated  by  the  COVID 

During 

the 

(174) ARERA, 2023, Relazione annuale -Stato dei servizi 2022, 

file:///U:/LIBRARY%20ITALY/2021-
2027/Country%20report/2024/ARERA%20RA23_volume_1.p
df. 

79 

 
 
 
MACROECONOMIC STABILITY 
ANNEX 18: KEY FINANCIAL SECTOR DEVELOPMENTS 

(roughly  92%  of 

Italy  has  a  predominantly  bank-based 
financial  sector.  The  banking  sector  is  primarily 
domestically  owned 
total 
largest 
banking-sector  assets),  with  the  five 
banking  groups  accounting  for  51%  of  banking-
sector assets. With EUR 3.8 trillion in assets at the 
end  of  2023,  the  Italian  banking  sector  remains 
among  the  largest  in  the  EU.  The  largest  banking 
groups 
(IntesaSanPaolo  and  UniCredit)  have 
substantial  international  operations,  primarily  in 
central,  eastern  and  south-eastern  Europe. 
Following  reforms  in  the  cooperative  sector  since 
2015, the fragmentation of the banking sector has 
gradually reduced and its efficiency has increased. 

sector 

banking 

improved 

Italy’s 
its 
performance  in  2023.  The  capital  adequacy 
ratio for the Italian banking sector stood at 19.7% 
in Q3-2023, the highest level in years and slightly 
above  the  EU  average  of  19.6%.  The  quality  of 
capital  has  also  improved,  with  a  common  equity 
tier  1  ratio  of  15.7%  compared  to  14.5%  a  year 
ago,  boosted  by  a  reduction  in  risk-weighted 
assets  and  improved  internal  capital  generation. 
The latter is the result of a jump in profitability, as 
the  return  on  equity  of  Italian  banks  improved  to 
12.7% in September 2023 (EU average: 9.9%), up 
from 5.7% in 2021. This was due to strong growth 
in  net  interest  income,  as  well  as  lower  loan-loss 
provisions and good cost control, with the cost-to-
income ratio falling to 49.8% in September 2023. 
Italian  banks’  liquidity  coverage  ratio  fell  to 
175.8%  in  September  2023  from  180.6%  in 
reflected  significant 
September  2022.  This 

repayments  of  funding  from  the  ECB’s  targeted 
long-term  refinancing  operations  (TLTRO  III),  with 
central  bank  liquidity  falling  to  4.8%  of  total 
liabilities  in  December  2023  from  10.8%  at  end-
2022.  However,  the  banks’ 
liquidity  position 
remains  comfortable,  as  their  aggregate  excess 
liquidity  held  at  the  Italian  Central  Bank  exceeds 
future repayments of outstanding TLTRO III loans. 
Moreover,  Italian  banks’  net  bond  issuance  in 
recent  quarters  testifies  to  their  ability  to  raise 
new  funding  on  the  markets  to  replace  ECB 
funding. 

its  decline,  and  fell  to  2.8% 

Higher  inflation  and  interest  rates  have  had 
a  limited  impact  on  banks’  asset  quality  so 
far.  The  gross  non-performing  loan  (NPL)  ratio 
continued 
in 
September 2023 (EU average 1.8%), supported by 
NPL disposals.  According to the European Banking 
Authority  data,  the  share  of  Stage  2  loans  and 
advances  to  total  gross  loans  and  advances  fell 
11.5%  in  December  2023  compared  to  12.2%  a 
year before, with an improved cash coverage ratio. 
Interest  rate  hikes  have 
led  to  the  upward 
repricing  of  variable-rate  mortgage  loans  (which 
account  for  roughly  35%  of  the  outstanding 
mortgage  stock).  This  has  started  to  put  pressure 
on  the  quality  of  household  loans,  although  new 
loan  defaults  as  a  share  of  the  performing  loan 
book  remain  low.  On  the  corporate  side,  the 
interest-only  grace  period  for  corporate  loans 
covered  by  state-guarantees  granted  during  the 
pandemic has now ended and borrowers have now 
had to start repaying principal for these loans. This 

Table A18.1:Financial soundness indicators 

(1) Last data: Q3 2023. 
(2) Data are annualised. 
(3) Data available for EA countries only, EU average refers to EA area. 
Source: ECB, Eurostat 

80 

2017201820192020202120222023EUMedianTotal assets of the banking sector (% of GDP)214.0207.1207.2231.6218.6203.8184.6257.0184.6Share (total assets) of the five largest banks (%)43.445.647.949.351.650.5--69.6Share (total assets) of domestic credit institutions (%)192.091.893.192.591.691.291.3-62.9NFC credit growth (year-on-year % change)0.41.5-1.88.31.80.1-3.9-2.4HH credit growth (year-on-year % change)2.82.82.62.43.73.3-1.3-1.4Financial soundness indicators:1        - non-performing loans (% of total loans)11.28.46.74.53.52.92.81.81.8- capital adequacy ratio (%)16.816.117.219.318.819.219.719.620.1- return on equity (%)27.15.84.91.05.79.112.79.913.2Cost-to-income ratio (%)165.165.965.568.363.259.049.852.844.9Loan-to-deposit ratio (%)1102.197.194.477.073.375.879.393.380.2Central bank liquidity as % of liabilities8.48.17.211.713.410.84.8-0.7Private sector debt (% of GDP)109.4107.7106.0118.4111.3105.5-133.0118.4Long-term interest rate spread versus Bund (basis points)179.6221.4220.4167.9118.4201.4184.9107.7104.2Market funding ratio (%)31.634.035.235.437.338.0-50.839.8Green bonds outstanding to all bonds (%)3---0.41.21.72.54.02.71-34-1011-1718-2424-27Colours indicate performance ranking among 27 EU Member States. 
 
 
 
 
 
  
 
loans 

these 

(circa  2%  year-on-year 

has led to a rise in the corresponding default rate 
in 
for 
December  2023),  which  nevertheless  remains 
moderate.  Relatively  low  levels  of  indebtedness 
and 
leverage  for  firms  and  households  are 
supportive of banks’ asset quality. 

The  bank-sovereign  nexus  has  deepened 
following the pandemic and remains sizeable. 
Outstanding  loans  backed  by  pandemic-related 
government  guarantees  made  up  about  one  fifth 
of  bank  loans  to  firms  as  of  June  2023.  This 
further deepens the nexus between banks and the 
Italian sovereign, even though an increasing share 
of  these  loans’  principal  was  repaid  in  2023.  In 
addition, 
Italian  banks’  exposure  to  domestic 
sovereign  debt  amounted  to  9.5%  of  total  assets 
at  the  end  of  2023,  one  of  the  highest  shares 
among  euro  area  peers,  albeit  lower  than  the 
10.9% at the end of 2020. To shield their balance 
sheets  from  volatility  in  sovereign  yields,  banks 
have  booked  a  large  part  of  their  sovereign  bond 
portfolio  at  amortised  cost  (66%  as  of  December 
2023).  However,  the  recent  rise  in  interest  rates 
has  led  to  an  increase  in  unrealised  losses  in  the 
fixed  income  securities  held  in  the  amortised 
portfolios,  albeit  so  far  with  limited  potential 
impact, net of hedging, on banks’ capital ratios.  

interest  rates  and  a 

In  spite  of  the  banking  sector’s  resilience, 
pockets of vulnerability persist. The impact of 
less  favourable 
higher 
economic outlook remains limited so far. However, 
it  may  affect  the  future  repayment  ability  of 
borrowers,  particularly  those  with  high  debt-to-
income  ratios  and  a  large  share  of  variable-rate 
loans. This increases the risk that a larger share of 
loans  currently  classified  as  unlikely-to-pay,  and 
constituting  more  than  half  of  the  NPL  stock  in 
Italy at the end of 2022, may default in the future. 
Moreover,  while  the  bulk  of  NPLs  has  exited  the 
banks’ balance sheets, freeing up capital  for new, 
healthy  lending,  the  stock  of  NPLs  still  to  be 
remains 
reabsorbed 
substantial (175).  The  cost  of  funding  may  also 
increase  for  the  banks  that  still  have  to  repay 
TLTRO  III  or  that  had  had  to  issue  eligible 
instruments  to  meet  their  minimum  requirement 
liabilities  as  of 
for  own  funds  and  eligible 

economy 

the 

by 

1 January 2024. The recently introduced bank levy 
appears  to  be  manageable  for  the  banking 
sector (176).  Italian  banks  have  taken  measures  to 
reduce  their  exposure  to  Russia  to  manageable 
levels from a capital perspective.  

Lending 
to  households  and  corporates 
declined  in  2023.  Lending  to  the  private  sector 
slowed  down  in  the  second  half  of  2022  and  in 
2023, turning negative on a 12-month basis since 
May  2023,  against  the  backdrop  of  tighter 
monetary  conditions  and  declining  credit  demand. 
For  households,  credit  growth  was  negative  (-
1.3%) in the 12 months ending in December 2023, 
mainly  driven  by  a  slowdown  in  mortgage  loans 
due  to  higher  interest  rates.  On  the  back  of  the 
economic  slowdown,  high  financing  costs  and 
greater  use  of  own  funds,  credit  to  non-financial 
corporations  contracted  significantly  in  2023  (-
3.9%  year-on-year  in  December  2023).  The  trend 
was  strengthened  by  increased  repayments  of 
public-guaranteed 
the 
pandemic.  A  high  share  of  variable-interest-rate 
loans  for  firms  facilitated  the  pass  through  of 
rising interest rates, which reached an average of 
5.1%  in  Q3  2023,  up  from  3.1%  at  the  end  of 
2022.  

loans  granted  during 

Graph A18.1: Evolution of credit activity 

Adjusted loans for sales and securitisations 
Source: ECB 

The  real-estate  market  is  cooling  down  but  
there  are  no  signs  of  overvaluation.  House 

(175) According to Banca IFIS, the outstanding stock of NPLs in the 
economy still amounted to EUR 306 billion in 2022, lower 
than its EUR 361 billion 2015 peak but much higher than the 
pre-financial crisis level of EUR 78 billion. 

(176) Law 136/2023 introduced an extraordinary tax on banks’ net 
interest income. Banks can opt-out from paying the tax if 
they set up a non-distributable capital reserve worth no less 
than 2.5 times the tax amount in 2023 financial statements. 

81 

-8-6-4-20246810200920102011201220132014201520162017201820192020202120222023Total privateNFCHH% 
 
  
 
prices  in  Italy  continued  to  grow  year-on-year  in 
the  first  half  of  2023,  albeit  more  slowly  than  in 
2022 and well below inflation. There was a decline 
in the number of residential sales in the first half 
of  2023,  as  financing  conditions 
tightened. 
However,  house  sales  returned  to  growth  in  the 
second  half  of  2023  and  real  residential  prices 
recorded  a  positive  twelve-month  change  for  the 
first time in two years at the end of 2023. In the 
commercial  real  estate  (CRE)  sector,  the  drop  in 
prices  moderated  and  sales  volumes  remained 
stable  in  the  first  half  of  2023  and  returned  to 
growth  in  the  second  half.  According  to  the 
European  Banking  Authority,  loans  collateralised 
by CRE accounted for about 20% of total loans to 
non-financial  corporations  as  of  December  2023. 
These  are  mostly  variable-rate  loans  and  have  a 
higher, albeit decreasing, share of non-performing 
loans  than  other  sectors  (6.5%  as  of  December 
2023 vs an overall NPL ratio of 3.9% for business 
loans).  Noting  no  signs  of  overvaluation  of  real-
estate  prices,  the 
Italian  Central  Bank  has 
maintained  the  countercyclical  capital  buffer  at 
zero (177). 

The  rise  in  interest  rates  and  prices  has 
affected  insurers’  profits,  but  the  sector 
remains resilient. Assets of Italian insurers were 
to  48.4%  of  GDP  as  of  end-
equivalent 
September 2023 
(EU  average  54.3%).  The 
solvency  ratio  at  end-September  2023  remained 
robust  and  in  line  with  the  EU  average.  The 
increase in surrenders (178) and fall in premiums in 
life insurance, particularly from unit-linked policies, 
have  led  to  losses  for  the  life  insurance  segment 
in  2022  for  the  first  time  in  10  years (179).  The 
non-life segment has performed better, as the rise 
in  claims  due  to  inflation  was  partly  offset  by 
rising  premiums.  Higher 
interest  rates  have 
resulted  in  a  rise  in  net  unrealised  losses  in 
insurers’ bond holdings. However, fewer companies 
in the first half of 2023 than in 2022 made use of 
the 
legislation  allowing  them  to  temporarily 
suspend  the  effects  of  unrealised  losses  on 

(177) However, the Bank of Italy decided on 26 April 2024 to apply 
a Systemic Risk Buffer to all banks authorized to operate in 
Italy equal to 1.0% of credit and counterparty risk-weighted 
exposures to Italian residents. The target rate of 1.0 per cent 
will be phased-in gradually, 0.5% by 31 December 2024 and 
the remaining 0.5% by 30 June 2025. 

(178) Life insurance contracts are typically equipped with a 

surrender option that allows the policyholder to terminate 
the contract prior to maturity. 

insurers’  profitability.  The  recent  failure  of  a 
medium-sized  insurance  company,  Eurovita,  has 
inspired  the  introduction  of  a  new  insurance 
guarantee scheme for life insurance policy holders, 
which will be privately funded and governed by the 
insurance  industry.  Italy  has  one  of  the  highest 
insurance  protection  gaps  in  Europe  for  natural 
hazards, particularly earthquakes (180). This led the 
Italian  authorities  to  adopt  in  December  2023  a 
mandatory  requirement  for  firms  to  be  insured 
against  natural  hazards,  with  partial  reinsurance 
by SACE, a state-owned entity. 

Legislative 
initiatives  are  underway  to 
facilitate  access  to  non-bank  financing.  The 
market-funding  ratio  in  Italy  stood  at  38%  in 
2022, the highest level since 2017, but lower than 
the  EU  average  of  51.8%.  Access  to  non-bank 
finance  remains  limited  for  businesses,  while 
annual  IPOs  and  corporate  bond  issuances  as  a 
share of GDP were lower in 2022 than 2021. In an 
effort  to  further  promote  non-bank  financing,  a 
legislative proposal has been adopted in February 
2024 that aims to stimulate the Italian IPO market 
and  incentivise  investors  to  invest  in  companies 
listed  in  Italy,  while  at  the  same  time  making 
changes  to  the  corporate  governance  framework 
and promoting financial literacy.  

(180) See EIOPA’s dashboard on the insurance-protection gap for 

(179) Italian Insurance Supervisory Authority, 2022 Annual Report. 

natural catastrophes in a nutshell (europa.eu). 

82 

 
 
 
ANNEX 19: TAXATION 

This  Annex  provides  an 
indicator-based 
overview  of  Italy’s  tax  system.  It  includes 
information on the tax structure (the types of tax 
that  Italy  derives  most  of  its  revenue  from),  the 
tax  burden  on  workers,  and  the  progressivity  and 
the redistributive effect 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  2022  and 
have  been  at  a  stable  level  in  recent  years.  The 
shares  of  labour  and  environmental  taxes  as  a 
share  of  GDP  were  slightly  above  the  EU 
aggregate.  Revenues  from  consumption  taxes 
were close to the EU aggregate as a share of GDP, 
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. Outdated  cadastral  values have not 
been  revised  to  bring  them  closer  to  market 
values.  There  was  a  large  drop  in  environmental 
tax  revenues  between  2021  and  2022  (from  3% 
of  GDP  to  2.2%).  Furthermore,  pollution  and 
resources  taxes  only  accounted  for  1.4%  of 

Table A19.1:Taxation indicators 

to 

environmental  taxes  in  2022,  which  are  key  for 
the application of the ‘polluter pays’ principle. Italy 
is  nevertheless  one  of  the  most  advanced 
countries  when 
implementing 
it  comes 
environmental  taxes  and  already  applies  five  of 
the six main types of pollution and resources taxes 
(i.e. taxes on NOx emissions, waste landfilling and 
incineration,  discharge  of  waste 
into  water, 
pesticides,  and  plastic  products).  There  remains 
scope to implement the sixth main type (i.e. taxes 
on fertilisers). 

The  labour  tax  burden  in  Italy  remains  high 
despite recent reforms. Italy’s labour tax burden 
is also relatively progressive thanks to the current 
structure of tax brackets. Graph A19.2 shows that 
the labour tax wedge for Italy in 2023 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. In addition, the tax wedge for 
second earners at 67% of the average wage was 
higher than the one for single persons at the same 
level.  The  changes  to  personal  income  taxation 
introduced  in  2023  may  have  reduced  the  tax 
burden  for  low-  and  medium-income  earners,  but 
the  tax  wedge  remained  above  the  EU  average. 
The reduction of income inequality through the tax 
and  benefit  system 
the 
corresponding  change  in  the  Gini  coefficient)  was 

(as  measured  by 

(1) Forward-looking effective tax rate (OECD). 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2022, if available. For more details on the VAT gap, see European Commission, Directorate-General for 
Taxation and Customs Union, 2023, VAT gap in the EU, https://data.europa.eu/doi/10.2778/911698. 
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, 
https://ec.europa.eu/taxation_customs/taxation-1/economic-analysis-taxation/data-taxation_en. 
Source: European Commission and OECD 

83 

IT2010202020212022202320102020202120222023Total taxes (including compulsory actual social contributions) (% of GDP)41.242.542.542.737.940.040.440.2Labour taxes (as % of GDP)21.522.221.420.720.021.320.720.3Consumption taxes (as % of GDP)10.610.711.311.110.810.711.211.0Capital taxes (as % of GDP)9.29.69.810.87.18.08.68.9Of which, on income of corporations (as % of GDP)2.82.52.43.42.42.53.03.4Total property taxes (as % of GDP)1.82.42.42.41.92.32.22.1Recurrent taxes on immovable property (as % of GDP)0.61.51.41.31.11.21.11.0Environmental taxes as % of GDP2.83.13.02.22.42.22.32.0Tax wedge at 50% of average wage (Single person) (*)40.736.335.633.832.633.931.732.131.831.7Tax wedge at 100% of average wage (Single person) (*)47.246.945.445.045.141.040.139.940.040.2Corporate income tax - effective average tax rates (1) (*)20.214.415.519.519.019.0Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)5.96.68.07.98.68.18.27.9Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)213.6199.940.935.5VAT Gap (% of VAT total tax liability, VTTL)(**)26.521.510.89.29.75.4Tax structureProgressivity & fairnessTax administration & complianceItalyEU-27 
 
 
 
 
 
   
 
Graph A19.1: Tax revenues from different tax types, % of total revenue 

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

at  the  EU  average  in  2022.  Regarding  corporate 
taxation,  the  average  forward-looking  effective 
corporate income tax rates were below the EU-27 
average in 2022 at 15.5%.  

Graph A19.2: Tax wedge for single and second 
earners as a % of total labour costs, 2023 

gap  (the  gap  between  revenues  actually  collected 
and the theoretical tax liability) remains at 10.8% 
and  thereby  above  the  EU-wide  gap  of  5.4%. 
Outstanding tax arrears have slightly decreased by 
13.7 pps to 199.9% 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  the  writing-off  of  arrears  that  are 
considered  as  uncollectable,  while  the  share  of 
‘collectable arrears’ is very low in Italy  (182). 

The second earner tax wedge assumes a 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 

Several  measures  have  been  enacted  in 
recent  years  to  encourage  tax  compliance, 
but tax evasion remains high. Recent measures 
included the compulsory use of electronic invoicing 
and  government  incentives  to  encourage  the  use 
of  electronic  payments.  According 
to  data 
published  by  the  Ministry  of  Economy  and 
Finance  (181)  the  ‘propensity  to  evade’  indicator 
decreased from 21.0% in 2016 to 17.2% in 2020 
and 15.3% in 2021. However, the VAT compliance 

(181) See Aggiornamento_relazione_2023_finale_h1710.pdf 

(mef.gov.it). 

(182) See OECD, 2023, Tax Administration 2022, Comparative 
Information on OECD and other Advanced and Emerging 
Economies, (900b6382-en.pdf (oecd-ilibrary.org)). 

84 

32.638.445.153.840.820253035404550556050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - ITSingle earner - EU averageSecond earner -  ITSecond earner -  EU average50.627.322.148.626.025.3Tax revenue shares in 2022, Italy (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital3.83.91.30.90.10.23.12.52.52.70123456Italy -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) NIIP excluding direct investment and portfolio equity shares. 
Source: Eurostat and ECB as of 2024-5-17, where available; European Commission for forecast figures (Spring forecast 2024). 

85 

2004-072008-122013-2020212022202320242025Real GDP (y-o-y)1.4-1.4-0.68.34.00.90.91.1Potential growth (y-o-y).-0.10.00.01.21.11.01.1Private consumption (y-o-y)1.2-1.1-0.75.54.91.20.21.4Public consumption (y-o-y)0.3-0.4-0.11.41.01.20.50.8Gross fixed capital formation (y-o-y)1.8-4.90.420.38.64.71.30.7Exports of goods and services (y-o-y)5.9-0.90.414.110.20.22.43.1Imports of goods and services (y-o-y) 5.3-2.91.315.612.9-0.50.93.7Contribution to GDP growth:Domestic demand (y-o-y)1.2-1.7-0.47.14.72.00.51.1Inventories (y-o-y)0.1-0.20.01.1-0.2-1.3-0.10.0Net exports (y-o-y)0.10.6-0.20.1-0.60.30.5-0.1Contribution to potential GDP growth:Total Labour (hours) (y-o-y).-0.30.0-0.40.70.70.50.5Capital accumulation (y-o-y).0.3-0.10.20.40.50.50.4Total factor productivity (y-o-y).-0.10.10.20.10.00.10.1Output gap2.1-1.2-2.9-1.41.31.11.01.0Unemployment rate7.38.511.19.58.17.77.57.3GDP deflator (y-o-y)2.31.51.01.33.65.32.21.8Harmonised index of consumer prices (HICP, y-o-y)2.22.40.51.98.75.91.61.9HICP excluding energy and unprocessed food (y-o-y)2.02.10.70.84.05.52.42.0Nominal compensation per employee (y-o-y)2.61.10.16.34.82.43.82.9Labour productivity (real, hours worked, y-o-y)0.20.00.6-1.7-0.2-1.4-0.10.5Unit labour costs (ULC, whole economy, y-o-y)2.32.11.1-0.92.53.33.62.2Real unit labour costs (y-o-y)0.00.50.1-2.2-1.0-1.81.40.4Real effective exchange rate (ULC, y-o-y)0.90.3-0.80.4-0.9-3.8-1.0-0.2Real effective exchange rate (HICP, y-o-y)0.6-0.4-0.4-0.2-1.41.7..Net savings rate of households (net saving as percentage of net disposable income)8.64.63.97.91.60.3..Private credit flow, consolidated (% of GDP)9.92.90.93.32.9...Private sector debt, consolidated (% of GDP)99.7121.3112.8111.3104.6...of which household debt, consolidated (% of GDP)34.142.441.942.540.6...of which non-financial corporate debt, consolidated (% of GDP)65.578.970.968.864.0...Gross non-performing debt (% of total debt instruments and total loans and advances) (1)4.48.39.32.72.2...Corporations, net lending (+) or net borrowing (-) (% of GDP)-0.20.63.55.76.26.96.15.4Corporations, gross operating surplus (% of GDP)23.021.321.522.524.124.924.424.2Households, net lending (+) or net borrowing (-) (% of GDP)2.40.92.55.61.21.60.11.1Deflated house price index (y-o-y)3.7-1.6-1.61.0-3.6-3.7..Residential investment (% of GDP)5.55.44.15.86.66.4..Current account balance (% of GDP), balance of payments-1.1-2.22.62.4-1.60.51.71.7Trade balance (% of GDP), balance of payments-0.2-0.73.12.1-1.61.7..Terms of trade of goods and services (y-o-y)-1.4-1.01.5-4.7-8.58.01.30.0Capital account balance (% of GDP)0.10.10.10.10.50.8..Net international investment position (% of GDP)-17.9-21.0-9.57.54.77.4..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (2)-9.4-22.4-9.05.61.76.5..IIP liabilities excluding non-defaultable instruments (% of GDP) (2)94.5113.9125.7135.2125.1118.8..Export performance vs. advanced countries (% change over 5 years)..-5.1-2.7-5.1-0.9..Export market share, goods and services (y-o-y)-2.6-5.8-0.7-1.1-2.5-0.9-1.1-0.5Net FDI flows (% of GDP)0.81.00.11.4-0.8-0.2..General government balance (% of GDP)-3.1-3.7-3.3-8.7-8.6-7.4-4.4-4.7Structural budget balance (% of GDP)-4.7-3.3-1.8-8.4-9.6-8.3-5.0-5.3General government gross debt (% of GDP)105.6117.6137.6147.1140.5137.3138.6141.7forecast 
 
 
 
  
 
 
 
ANNEX 21: DEBT SUSTAINABILITY ANALYSIS 

This  annex  assesses  fiscal  sustainability 
risks  for  Italy  over  the  short,  medium  and 
long  term. 
It  follows  the  multi-dimensional 
approach  of  the  European  Commission’s  2023 
Debt Sustainability Monitor, updated based on the 
Commission 2024 spring forecast. 

1  –  Short-term  risks  to  fiscal  sustainability 
low.  The  Commission’s  early-detection 
are 
indicator  (S0)  does  not  point  to  any  major  short-
term  fiscal  risks  (Table A21.2) (183).  Government 
gross  financing  needs  are  expected  to  slightly 
increase  to  around  27%  of  GDP  on  average  over 
2024-2025  (Table A21.1, Table 1).  The  sovereign 
credit  rating  remains  above  the investment  grade 
for  all  four  major  rating  agencies  by  the  cut-off 
date of this report. 

2  –  Medium-term  fiscal  sustainability  risks 
appear high.   

The DSA baseline shows that the government 
debt ratio is expected to increase and remain 
at  a  high  level  in  the  medium  term  (at 
around 168% of GDP in 2034) (Graph 1, Table 
1) (184). The debt increase is driven by the assumed 
structural  primary  deficit  (excluding  changes  in 
cost  of  ageing)  of  1.1%  of  GDP  as  of  2024. 
Compared to historical data, this appears plausible 
as  most  of  the  past  fiscal  positions  were  more 
stringent  than  the  one  assumed  in  the  baseline 
(Table  A21.2) (185).  The  debt  dynamics  are  also 

(183) The S0 is a composite indicator of short-term risk of fiscal 
stress. It is based on a wide range of fiscal and financial-
competitiveness indicators that have proven to be a good 
predictor of emerging fiscal stress in the past.  

(184) The assumptions underlying the Commission’s ‘no-fiscal 

policy change’ baseline include in particular: (i) a structural 
primary deficit, before changes in ageing costs, of 1.1% of 
GDP from 2024 onwards; (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 ahead); (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; (iv) real GDP growth rates 
from the Commission 2024 spring forecast, followed by the 
EPC/OGWG ‘T+10 methodology projections between T+3 and 
T+10 (average of 0.5%); (v) ageing costs in line with the 
2024 Ageing Report (European Commission, Institutional 
Paper 279, April 2024). For information on the methodology, 
see the 2023 Debt Sustainability Monitor (European 
Commission, Institutional Paper 271, March 2024). 

(185) This assessment is based on the fiscal consolidation space 

indicator, which measures the frequency with which a tighter 
fiscal position than assumed in a given scenario has been 
observed in the past. Technically, this consists in looking at 

driven by an unfavourable and increasing snowball 
effect  of  1.4%  of  GDP  annually  on  average  over 
2025-2034,  mainly  reflecting  projected  increases 
in interest payment expenditure.  

four 

The  baseline  projections  are  stress-tested 
against 
deterministic 
alternative 
scenarios to assess the impact of changes in 
key  assumptions  relative  to  the  baseline 
(Graph 1).  Under  the  historical  structural  primary 
balance  (SPB)  scenario  (i.e.  the  SPB  returns  to  its 
historical 15-year average) the debt ratio would be 
lower than under the baseline by around 17 pps. in 
2034. However, under the adverse interest-growth 
rate  differential  scenario  (i.e.  the  interest-growth 
rate  differential  deteriorates  by  1 pp.  compared 
with the baseline), the debt ratio would be  higher 
than  under  the  baseline  by  around  15 pps.  in 
2034.  Under  the  financial  stress  scenario  (i.e. 
interest  rates  temporarily  increase  by  3.9 pps. 
compared with the baseline) the government debt 
ratio  would  be  higher  by  around  5 pps.  in  2034. 
Finally, under the lower structural primary balance 
cumulative 
scenario 
improvement  in  the  SPB  over  2023-2024  is 
halved) the debt ratio would be higher than under 
the baseline by about 19 pps. in 2034. 

projected 

(i.e. 

the 

to 

plausible 

The  stochastic  projections  indicate  high  risk, 
pointing  to  the  high  sensitivity  of  these 
projections 
unforeseen 
events (186). These stochastic simulations indicate 
an  81%  probability  that  the  debt  ratio  will  be 
higher  in  2028  than  in  2023,  implying  high  risks 
given  the  high  debt  level.  At  the  same  time,  the 
the  baseline  debt 
uncertainty 
projections 
the  difference 
between  the  10th  and  90th  debt  distribution 
percentiles) is medium, reaching around 34 pps. of 
GDP in five years’ time) (Graph 2).  

surrounding 
(as  measured  by 

3  –  Long-term  fiscal  sustainability  risks 
appear  overall  medium.  This  assessment  is 
based  on  the  combination  of  two  fiscal  gap 
indicators,  capturing  the  required  fiscal  effort  to 

the percentile rank of the projected SPB within the 
distribution of SPBs observed in the past in the country, 
taking into account all available data from 1980 to 2023. 

(186) The stochastic projections show the joint impact on debt of 

10,000 different shocks affecting the government’s 
budgetary position, economic growth, interest rates and 
exchange rates. This covers 80% of all the simulated debt 
paths and therefore excludes tail events. 

86 

 
 
 
 
 
 
 
sector.  On  the  other  hand,  risk-mitigating  factors 
are  related  to  the  structure  of  the  debt.  In 
particular,  the major  share  of  government  debt  is 
still  held  by  domestic  lenders.  Moreover,  the  fact 
that public debt is completely denominated in euro 
risks.  The  favourable  net 
excludes  currency 
international investment position further mitigates 
fiscal risks.  

stabilise  debt  (S2  indicator)  and  bring  to  60%  of 
GDP  (S1  indicator)  over  the  long  term (187).  This 
assessment  is  driven  by  the  unfavourable  initial 
budgetary  and  debt  position,  partly  offset  by  the 
projected  decline  in  ageing  costs.  Hence,  these 
results are conditional on the country maintaining 
a  sizeable  SPB  over  the  long  term,  and  fully 
implementing  sustainability-enhancing  pension 
reforms.  

indicator  points  to 

The  S2 
low  fiscal 
sustainability  risks.  The  indicator  shows  that, 
relative  to  the  baseline,  the  SPB  would  need  to 
improve  by  1.2  pps.  of  GDP  to  ensure  debt 
stabilisation  over  the  long  term.  This  result  is 
underpinned  by  unfavourable  initial  budgetary 
position  (contribution  of  2.3 pps.),  partly  offset  by 
the  projected  decline 
in  ageing-related  costs 
(-1.1 pps.). Ageing cost developments are primarily 
driven  by  a  projected  decrease  in  public  pension 
expenditure  (-1.5 pps.)  and  education  spending  (-
0.7 pp.), which is only partly offset by a projected 
increase  in  health-care  (0.6  pps.)  and  long-term 
care spending (0.5 pps.) (Table A21.1, Table 2).  

The  S1  indicator  points  to  medium  fiscal 
sustainability risks. The indicator shows that the 
country needs to further improve its fiscal position 
by  3.6  pps.  of  GDP  to  reduce  its  debt  to  60%  of 
GDP  by  2070.  This  result  is  mainly  driven  by  the 
current  unfavourable  initial  budgetary  position 
(contribution of 2.2 pps.) and the large distance of 
the  Italian  government  debt  ratio  from  the  60% 
reference value (1.5 pps.)  (Table A21.1, Table 2).  

4  –  Finally,  several  additional  risk  factors 
need to be considered in the assessment.  On 
the one hand, risk-increasing factors are related to 
the  share  of  short-term  government  debt. 
Contingent liability risks continue to stem from the 
share  of  non-performing  loans  in  the  banking 

(187)The S2 fiscal sustainability indicator measures the 

permanent SPB adjustment in 2025 that would be required 
to stabilise public debt in the long term. It is complemented 
by the S1 indicator, which measures the permanent SPB 
adjustment in 2025 to bring the debt ratio to 60% 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 % of GDP, ‘medium risk’ 
if it is between 2% and 6% of GDP, and ‘low risk’ if the effort 
is negative or below 2% of GDP. The overall long-term risk 
classification combines the risk categories derived from S1 
and S2. S1 may notch up the risk category derived from S2 if 
it signals a higher risk than S2. See the 2023 Debt 
Sustainability Monitor for further details. 

87 

 
 
Table A21.1: Debt sustainability analysis - Italy 

Source: Commission services. 

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

Source: Commission services. 

88 

Table 1. Baseline debt projections20212022202320242025202620272028202920302031203220332034Gross debt ratio (% of GDP)147.1140.5137.3138.6141.7143.3145.7148.1150.6153.5156.7160.3164.2168.0Changes in the ratio-7.8-6.6-3.21.33.11.62.42.42.52.93.23.63.93.8of whichPrimary deficit5.24.33.60.50.50.71.11.21.31.41.61.81.92.0Snowball effect-10.2-6.3-4.5-0.20.30.91.31.21.21.41.71.92.01.8Stock-flow adjustments-2.9-4.6-2.31.12.30.00.00.00.00.00.00.00.00.0Gross financing needs (% of GDP)25.422.925.325.727.326.026.727.427.928.629.430.331.132.0S1S2Overall index  (pps. of GDP)3.61.2of which Initial budgetary position2.22.3Debt requirement1.5Ageing costs0.0-1.1of which    Pensions-0.4-1.5     Health care0.50.6     Long-term care0.40.5Education-0.5-0.7Table 2. Breakdown of the S1 and S2 sustainability gap indicators608010012014016018020020212022202320242025202620272028202920302031203220332034Graph 1. Deterministic debt projections Historical SPB scenarioLower SPB scenarioFinancial stress scenarioAdverse 'r-g' scenarioBaseline% of GDPp10p20p40p60p80p9045556575859510511512513514515516517520212022202320242025202620272028% of GDPGraph 2. Stochastic debt projections 2024-2028MedianBaselineBaselineHistorical SPBLower SPBAdverse 'r-g'Financial stressOverallHIGHHIGHHIGHHIGHHIGHHIGHDebt level (2034), % GDP168.0150.7186.7182.6173.0Debt peak year20342034203420342034Fiscal consolidation space72%54%93%72%72%Probability of debt ratio exceeding in 2028 its 2023 level81%Difference between 90th and 10th percentiles (pps. GDP)33.4Source: European Commission (for further details on the Commission's multidimensional approach, see the 2023 Debt Sustainability Monitor)Short termMedium term - Debt sustainability analysis (DSA)Long termOverall                               (S0)Overall Deterministic scenariosStochastic projectionsS2S1Overall(S1 + S2)(1)Debtlevelin2034.Green:below60%ofGDP.Yellow:between60%and90%.Red:above90%.(2)Thedebtpeakyearindicateswhetherdebtisprojectedtoincreaseoveralloverthenextdecade.Green:debtpeaksearly.Yellow:peaktowardsthemiddleoftheprojectionperiod.Red:latepeak.(3)Fiscalconsolidationspacemeasurestheshareofpastfiscalpositionsinthecountrythatweremorestringentthantheoneassumedinthebaseline.Green:highvalue,i.e.theassumedfiscalpositionisplausiblebyhistoricalstandardsandleavesroomforcorrectivemeasuresifneeded.Yellow:intermediate.Red:low.(4)Probabilityofdebtratioexceedingin2028its2023level.Green:lowprobability.Yellow:intermediate.Red:high(alsoreflectingtheinitialdebtlevel).(5)thedifferencebetweenthe90thand10thpercentilesmeasuresuncertainty,basedonthedebtdistributionunder10000differentshocks.Green,yellow and red cells indicate increasing uncertainty. (For further details on the Commission's multidimensional approach, see the 2023 Debt Sustainability Monitor)LOWHIGHLOWMEDIUMMEDIUM