COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Italy
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Italy, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, labour market, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.6.2025  SWD(2025) 212 final  COMMISSION STAFF WORKING DOCUMENT 2025 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION  on the economic, social, employment, structural and budgetary policies of Italy {COM(2025) 212 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

Growth and inflation bottom out, 
prospects affected by uncertain 
global developments 

resilience  plan 

consumption,  despite 

Economic growth remains moderate amid 
the  current  global  uncertainty,  with  the 
recovery  and 
(RRP) 
supporting  investment.  Real  GDP  growth 
stabilised  at  0.7%  in  2024,  as  households’ 
desire  to  rebuild  their  savings  held  back 
private 
favourable 
employment  and  wage  dynamics.  After  three 
years  of  rapid  expansion  fuelled  by  housing 
renovation  incentives,  investment  increased 
slightly,  primarily  due 
to  non-residential 
construction  activity  financed  by  the  RRP. 
Exports  of  goods  declined,  while  tourism 
spurred  strong  growth  in  exports  of  services. 
As  imports  of  goods  contracted  even  more 
sharply  than  exports,  net  external  demand 
made  a  positive  contribution  to  GDP  growth. 
During  the  period  2025-26,  economic  activity 
is  expected  to  continue  expanding  slowly, 
driven  by  increasing  household  consumption 
and  by  corporate  investment,  including  in 
equipment,  supported  by  RRP  funding  and 
lower interest rates. However, developments in 
trade  policy  and  the  surrounding  uncertainty 
are likely to be a drag on economic growth, as 
the  US  accounts,  directly  and  indirectly,  for  a 
significant share of Italy’s exports of goods. 

is  expected  to  stabilise  at 
Inflation 
around  the  ECB  reference 
level.  The 
decrease  in  global  energy  commodity  prices 
in  2023  was  passed  on  to 
that  began 
domestic markets during last year, resulting in 
a  sharp  drop  in  headline  inflation.  Excluding 
volatile  energy  and  food  prices,  core  inflation 
slowed to 2.2% in 2024, with industrial goods 
experiencing  weaker  price  dynamics  than 
services.  While  the  energy  component  of 

recent 

following 

headline  inflation  is  expected  to  rebound  this 
year 
international  price 
dynamics, the other main components are set 
to  remain  contained,  also  thanks  to  expected 
moderate  wage  growth.  As  a  result,  both 
headline  and  core  inflation  are  forecast  to 
stand at around 2% in 2025-26. 

out 

under 

found 

review 

carried 

Italy  still 

High  public  debt  and  weak  productivity 
growth  are  still  vulnerabilities.  The  in-
depth 
the 
macroeconomic  imbalance  procedure  earlier 
faces 
that 
this  year 
vulnerabilities  relating  to  high  government 
debt and weak productivity growth (1). Sizeable 
debt servicing costs as a result of a high public 
debt  ratio,  and  rising  pension  costs  in  the 
medium term due to demographic trends, will 
restrict  the  government's  ability  to  adopt 
growth-enhancing 
policies.  Weak 
fiscal 
productivity  growth  persists,  largely  due  to 
insufficient investment in R&D and innovation, 
relatively  low  –  albeit  growing  –  tertiary 
education  attainment,  and  despite  recent 
improvements  still  under-developed  venture 
capital  financing,  which  hamper  the  adoption 
of  new  technologies,  particularly  by  smaller 
conditions 
firms.  While 
improved  further,  participation  rates  remain 
low,  especially  among  women  and  young 
people.  Although  Italian  banks  significantly 
increased  their  asset  quality  and  profitability, 
vulnerabilities remain, though receding, due to 
continued  exposure  to  sovereign  debt  and  a 
sizeable  stock  of  state-guaranteed 
loans. 
While some previous policies, including actions 
these 
under 
vulnerabilities, 
effective 
implementation  of  reforms  and  investments 
together  with  a  prudent  fiscal  stance  remain 
crucial. 

the  RRP,  already 
further 

labour  market 

tackled 

(1)  SWD (2025) 122 final.  

2 

 
 
 
Improvements to the primary 
budget balance, but public debt-
to-GDP ratio on an upward trend, 
with policies unchanged 

no 

reduction 

Italy’s  primary  budget  balance  turned 
positive,  while 
in 
government  debt  is  expected  over  the 
coming  years.  Italy’s  government  deficit  fell 
to  3.4%  of  GDP  in  2024,  from  7.2%  in  the 
previous year, resulting in a primary surplus of 
0.4%  of  GDP,  the  first  since  2019.  This 
improvement was mainly achieved through the 
cutback  in  housing  renovation  tax  credits 
(around  3.5%  of  GDP),  the  phase-out  of  high 
energy price mitigation measures (1% of GDP), 
and  buoyant  personal  income  tax  revenues. 
The  government  deficit  is  forecast  to  further 
decrease to 3.3% of GDP in 2025 and 2.9% of 
GDP in 2026, based on unchanged policies. At 
the  same  time,  the  decreasing  trend  in  the 
public  debt-to-GDP  ratio  up  to  2023  reversed 
course in 2024 and is expected to rise further 
through  2026.  This  increase  is  driven  by 
sizeable borrowing needs linked to the lagged 
fiscal  impact  of  past  tax  credits  for  housing 
renovations.  

Net  expenditure  growth  is  set  to  be 
recommended 
marginally  below 
the 
maximum  growth  rate. 
In  2024,  net 
expenditure (2) in Italy decreased by 2.2% (see 
Annex 1). This decrease is mainly driven by the 
phase-out  of  sizeable  tax  credits  for  housing 
renovations  and  support  measures  related  to 
the  energy  crisis.  At  the  same  time,  the 
revenue-decreasing  impact  of  discretionary 
revenue  measures,  which  include  the  cuts  to 
the  labour  tax  wedge,  is  deducted  from  net 
expenditure,  thus  partly  counterbalancing  the 
decrease  in  primary  expenditure.  In  2025,  net 

expenditure  is  forecast  by  the  Commission  to 
grow  by  1.2%,  which  is  below  the  maximum 
growth  rate  recommended  by  the  Council  (3) 
The cumulative growth rate of net expenditure 
in 2024 and 2025 taken together is projected 
at  -1.0%,  which  is  below  the  maximum  rate 
recommended  by  the  Council.  Taking  into 
account the information provided by Italy in its 
Annual  Progress  Report,  all  the  reforms  and 
investments  underpinning  an  extension  of  the 
fiscal adjustment to 7 years (4) that were due 
by  30  April  have  been  implemented  or  are 
currently under assessment in the context of a 
payment request under the RRF.  

Substantial  fiscal  pressures  weigh  on 
public finances. In recent years, tax revenues 
were  pushed  up  by  strong 
inflation  and 
favourable economic developments, supported 
by  improvements  in  tax  compliance.  However, 
over the years to come, it is uncertain whether 
high tax revenues can be sustained, given that 
nominal  growth  is  expected  to  be  moderate. 
Meanwhile  significant  fiscal  pressures  remain, 
including rising costs relating to the ageing of 
the  population  More  specifically,  public 
spending  in  Italy  is  skewed  towards  social 
protection (in 2024, 20.3% of GDP and 43.6% 
of  primary  expenditure)  which  is  hard  to 
contain in the face of demographic pressures. 
Moreover,  Italy’s  pension  spending  is  among 
the highest  in the EU  (16.1% of GDP in 2024 
compared  to  the  EU  average  of  11.6%,  see 
Annex  1),  making  it  more  challenging  to 
contain  public  expenditure.  Although  the  full 
implementation  of  the  2011  pension  reform 
will  gradually  reduce  the  burden,  it  is  still 
expected  to increase in the medium term due 
to  demographic  trends  and  the  effect  of 

(3)  Council Recommendation with a view to bringing an end 
to  the  situation  of  an  excessive  deficit 
Italy 
(C/2025/5035)  and  Council  Recommendation  of  21 
January  2025  endorsing  the  national  medium-term 
Italy  (OJ  C,  C/2025/651, 
fiscal-structural  plan  of 
10.2.2025, ELI: http://data.europa.eu/eli/C/2025/651/oj). 

in 

(4)  According 

to 

the 

the  Regulation, 

required  fiscal 
adjustment (in particular, to put or keep the government 
debt ratio on a plausible downward path by the end of 
the adjustment period or keep it at prudent levels below 
60% of GDP and to bring or maintain the deficit below 
3% of GDP over the medium term) should be completed 
in four years but may be extended over a period to up 
seven years if the Member State commits to a relevant 
set of reforms and investments. 

expenditure, 

(2)  Net expenditure is defined in Article 2(2) of Regulation 
(EU)  2024/1263  as  government  expenditure  net  of  (i) 
revenue 
(ii) 
interest 
measures, (iii) expenditure on programmes of the Union 
fully  matched  by  revenue  from  Union  funds,  (iv) 
national  expenditure  on  co-financing  of  programmes 
funded  by 
(v)  cyclical  elements  of 
unemployment  benefit  expenditure,  and  (vi)  one-off 
and other temporary measures. 

discretionary 

the  Union, 

3 

 
 
 
recent  early  retirement  schemes.  As  a  result, 
fiscal  sustainability  risks  are  expected  to  be 
high  in  the  medium  term  and  medium  in  the 
long  term.  A  concerted  effort  is  needed  to 
improve  the  efficiency  and  effectiveness  of 
public  spending,  building  on  the  measures 
planned  by  Italy  in  its  medium-term  fiscal-
structural plan. 

Sustained growth in permanent 
jobs, but low participation and 
skills mismatches persist  

Employment  growth  strengthens  labour 
market activation. Employment continued to 
grow  robustly  in  2024,  outpacing  real  GDP 
growth,  though  it  slowed  down  considerably 
towards  the  end  of  the  year.  An  uptick  in  the 
number  of  hours  authorised  for  the  wage 
supplementation scheme, to the equivalent of 
290 000  full-time  jobs  (50 000  more  than  in 
2023),  reflects  the  expectation  of  temporary 
difficult  economic  conditions  by  firms 
in 
specific  manufacturing  sectors.  Overall,  the 
number  of  employees  with  open-ended 
contracts increased further, as did the number 
of  self-employed  workers,  while  the  use  of 
fixed-term contracts decreased. The sustained 
post-Covid  expansion  in  jobs  led  to  record-
level  employment  rates  for  both  men  and 
women, though still far below the EU average. 
As labour force participation did not rise in line 
with employment, the unemployment rate  fell 
to an average of 6.5% in 2024, even falling to 
below 6% at the turn of the year. Employment 
and  participation  rates  differ  significantly 
between  northern  and  southern  regions  and 
are  structurally  lower  for  young  people  and 
women.  They  also  tend  to  reflect  the  greater 
difficulties  faced  by  low-skilled  workers  – 
particularly younger generations  – and people 
of  migrant  background 
(see  Section  4). 
Employment is forecast to rise further over the 
period  2025-2026,  though  eventually  falling 
below  GDP  growth.  The  resulting  increase  in 
productivity is  likely  to  remain modest,  in line 
with  the  sluggish  performance  over  recent 
decades (see Section 2). 

Skills  mismatches  restrict  employment 
and  productivity  growth.  The  job  vacancy 
rate  stabilised  at  around  2%,  a  historically 
high 
level,  corroborating  employer  survey 
findings  that  it  is  increasingly  difficult  to  find 
suitable  workers  for  vacant  jobs.  The  most 
sought-after  profiles  include  scientific  and 
technical  skills,  not  only  at  tertiary  education 
insufficient  numbers  of 
level,  for  which 
workers are available. As well as having one of 
the lowest tertiary attainment rates in the EU, 
Italy does not produce enough graduates with 
vocational skills and has very low participation 
in  adult 
limiting  upskilling  and 
reskilling  opportunities  for  both  existing  and 
prospective  workers. 
fast-ageing 
population  will  reduce  future  labour  supply, 
unless  ongoing  policy  efforts  succeed 
in 
integrating inactive  people  into  the  workforce. 
In  the  agriculture  and  healthcare  sectors  in 
particular, labour shortages appear more acute 
given  the  skill  profiles  needed  and  could  be 
alleviated through reliance on regular migrant 
inflows,  supported  by  social  integration  and 
the  recognition  or  upgrading  of  skills.  Further 
enhancing  active  labour  market  policies  could 
ensure  that  labour  shortages  do  not  become 
widespread. 

learning, 

Italy’s 

Wage  moderation  has  kept  Italian  firms 
competitive  but  has 
long  restrained 
households’  purchasing  power.  In  2024, 
per-capita pay of employees rose by 3.4%, 0.5 
pp.  more  than  in  2023  and  well  above 
consumer  price  inflation,  enabling  a  recovery 
in real wages. The wage moderation  expected 
during  2025  and  2026  (3.4%  and  2.5%, 
respectively)  suggests  a  further  marginal 
increase in real wages. While this allows for a 
growth  in  unit  labour  costs  that  does  not 
price 
substantially 
competitiveness, 
in 
households’  purchasing  power  only  partly 
offsets past losses (see Annex 10). 

hamper 
the 

recovery 

firms’ 

small 

Main macroeconomic and 
competitiveness challenges ahead 

High public debt is a drag on investment, 
as it both crowds out private investment and  

4 

 
Box 1: 

UN Sustainable Development Goals (SDGs)  

Italy is making progress on all the SDGs related to competitiveness (SDG 4, 8, 9) and 
macroeconomic stability (SDGs 8, 16, 17), though overall performance remains below 
the  EU  average.  In  particular,  outcomes  for  decent  work  and  economic  growth  (SDG  8)  and 
global partnerships (SDG 17) lag significantly behind, largely due to investment levels and high 
public debt. Italy also underperforms on innovation, industry and resilient infrastructure (SDG 9), 
with  fewer  patent  applications,  limited  freight  transport  infrastructure  and  a  lower  share  of 
households with high-speed internet. 

Italy is improving on most of the SDGs related to sustainability (SDGs 2, 7, 9, 11, 12, 
13, 14) and all those to social fairness (SDGs 1, 3, 4, 5, 7, 8, 10), but at the same time 
the  indicators  on  clean  water  and  sanitation  and  life  on  land  show  negative  trends 
(SDGs  6,  15).  Land  degradation  is  worsening,  the  impact  of  droughts  on  ecosystems  is 
increasing  and  the  areas  at  risk  of  severe  soil  erosion  are  expanding  (SDG  15).  While  health 
indicators remain above the EU average and self-perceived health has improved slightly, obesity 
rates and antibiotic use are on the rise (SDG 3) (see Annex 15). 

limits  room  for  public  investment.  However, 
the  sustainability  of  fiscal  policy  would  be 
ensured by compliance with the EU rules which 
allow  for  extended  support  for  investment 
once RRF-funding expires. 

Sluggish  productivity  growth  is  mainly 
innovation  capacity, 
due  to  reduced 
investment,  and  scarce 
limited  R&D 
supply  of  high-level  skills.  The  RRP 
addresses  some  of 
the  most  pressing 
bottlenecks 
in  the  R&D  governance  and 
education  system.  Greater  involvement  by 
business  in  R&D  financing,  and  of  retail 
investors  in  the  funding  of  new  ventures  and 
risk capital, appear to be necessary. 

Improvements  in  the  quality  of  jobs 
available to new entrants in the labour market 
would help to attract high-skilled people from 
abroad  and  retain  talented  young  people  in 
Italy. This requires strengthening recent efforts 
to  ensure  a  better  work-life  balance  for 
women  (through  expanded  care  services)  and 
clearer opportunities to transition from school 
to  work  and  from  fixed-term  to  open-ended 
contracts.  It  also  calls  for  reinforcing  and 
extending  efforts  under  the  RRP 
in  the 
upskilling  and  reskilling  of  adults,  through 
further improvements to active labour market 
policies 
(ALMP)  and  by  promoting  firms’ 
training activities. 

Further improvements in the efficiency of 
public  administration, the  justice  system, 

5 

public 

increased  competition,  simplification,  a 
procurement 
more  modern 
framework  and  digitalisation  are  still 
needed  to  boost  Italy’s  competitiveness. 
Over  recent  years  Italy  has  adopted  several 
measures in these areas, in particular through 
the  RRP.  These  include  the  reform  to  reduce 
the length of judicial proceedings, the adoption 
of annual competition laws, the reforms of the 
industrial  property  code,  public  administration 
and  public  procurement,  the  simplification  of 
several  administrative  procedures  and  a 
the 
number  of 
digitalisation  of  private  firms  and  public 
administrations.  Further  efforts  are  expected 
to address the remaining challenges.  

investments 

increase 

to 

R&D 

including 

large  firms 

Boosting  innovation  and  research  would 
support competitiveness. Italy’s private and 
public 
by 
expenditure, 
universities,  is  below  the  EU  average.  The 
limited  number  of 
restricts 
potential  private  investment  in  R&D.  Italy's 
R&D  tax  incentives  are  more  limited  and  less 
generous than those of its EU peers. The over-
reliance  of  Italian  firms  on  bank  credit  places 
a  particular  constraint  on  smaller,  newer  and 
firms.  Moreover,  strengthening 
innovative 
recent  initiatives  to  reduce  inefficiency  in  the 
university system would  allow to increase the 
current 
the 
commercialisation of research and enhance its 
innovative potential. It would also be crucial to 
foster  investment  in  innovative  technologies 

incentives 

limited 

for 

 
 
and technology transfer, particularly for SMEs, 
to streamline business incentives for R&D and 
innovation and to invest in critical technologies 
through  the  Strategic  Technologies  Platform 
role  of 
(STEP).  Finally, 
for  Europe 
technology  transfer  offices  (TTOs)  in  enabling 
knowledge 
public 
procurement  in  stimulating  innovation  should 
be further improved.  

valorisation 

and 

the 

of 

A strong productivity gap persists across 
the  country,  including  due  to  the  South’s 
lower specialisation in innovative sectors. 
The  post-COVID  growth  convergence  of  the 
South  is  mainly  due  to  the  services  and 
construction  sectors,  while  significant  gaps  in 
industry  remain.  It  is  also  affected  by  the 
decline  in  the  automotive  and  oil  refinery 
sectors.  A  clear  and  strategic  definition  of 
industrial  policy  is  lacking,  both  at  national 
level and for the South.  

Tax evasion remains high, as does the tax 
burden  on  labour.  The  labour  tax  wedge  in 
2024  remains  significantly  above  the  EU 
average. Tax evasion remains high, despite the 
ambitious  countermeasures  taken  in  recent 
years.  Other  inefficiencies  in  the  tax  system 
remain, such as in tax expenditure. 

Italian manufacturing depends heavily on 
imports  of  critical  raw  materials.  Italy  is 
also  critically  dependent  on  the  import  of 
semiconductors,  which  are  needed  for  the 
green and digital transitions. Given that a high 
proportion of material inputs in manufacturing 
are imported, Italy is particularly vulnerable to 
supply chain disruptions. 

High  electricity  prices  weaken  industrial 
competitiveness. Wholesale electricity prices 
in Italy are considerably higher than in its peer 
countries.  This  is  mainly  due  to  the  electricity 
mix and the composition of final prices. 

Italy  is  among  the  EU  Member  States 
most exposed to climate risks. The annual 
costs  of  climate  change  for  infrastructure  in 
Italy are high. SMEs are particularly vulnerable, 
with 
a 
significant  impact  on  their  productivity  and 
competitiveness. 

climate-related 

having 

events 

Despite  measures  implemented  in  recent 
years,  Italy faces a significant structural 
mismatch  in  skills.  Although  RRF-supported 
actions  have  expanded  the  supply  of  green 
and  digital  skills,  Italy  has  one  of  the  highest 
levels  of  skills  mismatch  in  the  EU.  Sectors 
such  as  construction,  healthcare  and  ICT  face 
recruitment  challenges,  even  though  the  job 
vacancy  rate  does  not  reflect  widespread 
labour shortages. 

it  has 

recently  decreased, 

Atypical  contracts  remain  widespread  in 
together  with  stagnant  wage 
Italy, 
growth  paired  with  low  work  intensity. 
Though 
the 
proportion  of  fixed-term  employees  in  Italy 
remains  among  the  highest  in  the  EU.  Fixed-
term  employment  is  more  common  among 
vulnerable  groups.  A  large  proportion  of  part-
time  work  is  involuntary.  Italy’s  structurally 
labour  productivity  growth  constrains 
low 
wage  growth.  For  these  reasons, 
in-work 
poverty 
increased,  and  are 
particularly  high  among  part-time  and  fixed-
term workers. 

risks  have 

6 

 
 
Box 2: 

Barriers to private and public investment 

Investment prospects have been dampened by the high global uncertainty, despite RRF 
support.  In  the  longer  term,  the  opportunities  for  expanding  corporate  investments 
are  constrained  by  the  remaining  structural  weaknesses.  The  uncertain  outlook  for 
exports  due  to  renewed  global  trade  tensions  and  low  growth  in  important  markets,  such  as 
Germany,  means  that  companies are  holding  back  their  investment  decisions.  According  to  the 
EIB’s 2024 survey, the three main obstacles to Italian companies investing are uncertainty about 
the future (79%, with 49% considering it a major obstacle), high energy costs (70%) and labour 
market regulations (59%) (5). In addition, a large share of Italian firms consider corruption to be 
an obstacle to doing business (50% compared to 36% for the EU).  

In  recent  years,  Italy  has  made  progress  in  a  number  of  challenging  policy  areas,  in  particular 
through RRP reforms and investments. These include: 

• 

• 

• 

• 

• 

in the area of justice, the recruitment of staff in order to reduce the length of judicial 
proceedings; 

improving the effectiveness of the  public administration, including through strategic 
management of human resources; 

reducing  late payments  by  public  administrations, where  actions  have  been  taken  to 
improve  the  payment  performance  of  central  and  local  administrations,  including  by 
improving monitoring and transparency; 

increasing competition in a number of key sectors (including electricity, gas, transport 
and local public services); 

reforming the Industrial Property Code; 

•  modernising the public procurement framework, including  by  simplifying  procedures, 
increasing  qualification/professionalisation  of  contracting  authorities  and  introducing 
measures to reduce the time taken to award contracts.  

Despite the positive developments, these areas would still benefit from further efforts. Moreover, 
the  following  factors  contribute  to  the  holding  back  of  investment  and  productivity 
growth: 

• 

• 

• 

the availability of adequate staffing, including in terms of skills, for local public 
administrations  remains  a  challenge  for  the  implementation  of  national  and  EU-
funded  investment.  Lessons  need  to  be  learned  from  previous  experiences,  including 
under the RRP, and also as regards the pooling of resources; 

current  public  expenditure for  R&D  and  universities  is not  sufficient  to  promote 
synergies between public and private investment in innovation; 

the  lack  of  a  clear  industrial  strategy,  also  aimed  at  boosting  the  economy  of 
lagging  regions,  that  takes  into  account  new  market  trends,  technologies  and 
decarbonisation.  A  comprehensive  approach 
industrial  needs  with 
infrastructural planning and labour market policies would also be advisable;  

integrating 

•  weak  provision  of  high-level  skills.  Italy  is  poorly  endowed  with  highly-skilled 
people,  particularly  in  the  ICT  and  scientific  domains,  which  are  most  conducive  to 
starting innovative businesses or to the take-up of new technology by existing firms; 

(5)  EIB Investment Survey 2024 Country Overview: Italy 

7 

 
 
 
 
 
Box 2: 

• 

firms’ over-reliance on bank credit limits private financing in support of innovation 
as banks often lack the expertise to effectively screen innovative firms and their largely 
intangible  collateral.  Further  development  of  the  venture  capital  and  private  equity 
ecosystems,  including  the  promotion  of  this  asset  class  for  institutional  and  retail 
investors, appear warranted; 

• 

the high tax burden on firms and the complexity of the tax system. 

The  implementation  of  Italy’s  RRP  is  facing  several  challenges  and  delays.  At  present,  the 
country has fulfilled 43% of the milestones and targets in its RRP. Enhancing administrative 
capacity,  notably  at  local  level,  and  improving  the  timely  detection  and  resolution  of 
potential delays would support the effective execution of the plan. 

It remains important to accelerate the implementation of cohesion policy programmes. The 
mid-term review offers opportunities to speed up progress and better address EU strategic 
priorities  related  to  competitiveness,  defence,  housing,  water  resilience  and  the  energy 
transition. 

While  Italy  has  leveraged  the  Strategic  Technologies  for  Europe  Platform  (STEP)  to 
reallocate  some  Cohesion  Policy  resources  towards  this  priority,  it  can  further  support  the 
development or manufacturing of critical technologies in the areas of digital and deep tech, 
clean and resource efficient technologies, and biotechnologies. 

8 

 
 
 
 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

includes  measures  to  simplify  at  least  600 
administrative  procedures  concerning  citizens’ 
and  businesses’ 
interaction  with  public 
administrations  by  2026.  Keeping  up  the  RRP 
efforts to implement the public administration 
reforms 
digitalise 
simplify 
administrative  procedures  remain  crucial  to 
improving Italy’s business environment. 

and 

and 

The  Italian  justice  system  maintains  the 
positive  trend  in  improving  efficiency. 
Although  the  expected  duration  of  civil  and 
commercial  trials  remains  the  highest  in  the 
EU (see Annex 4), the duration of trials and the 
backlog  in  court  cases  continue  to  decrease. 
During  2024,  as  envisaged  in  the  RRP,  the 
for 
recruitment  or  extension  procedures 
temporary  staff  of  trial  offices  and  for 
technical  administrative  staff  have  been 
completed.  This  was  accompanied  by  the 
implementation of specific measures aimed at 
reducing  the  disposition  time  and  civil  justice 
backlog. Overall, the measures included in the 
RRP  for  civil,  criminal  and  administrative 
courts,  also  making  use  of  digital  tools,  are 
expected  to  further  improve  the  efficiency  of 
justice  and 
fight  against 
the  effective 
corruption. 

the  ambitious 

Italy  is  making  significant  efforts  to 
its  public 
improve  the  efficiency  of 
challenges 
system  but 
procurement 
persist.  Beyond  introducing  a  new  Code  of 
Public  Contracts  in  2023,  Italy  is  progressing 
with 
reform  of  public 
procurement  set  out  in its  RRP  (see  Annex  4). 
This  reform  is  set  to  simplify  procedures, 
increase  digitalisation  and  professionalise 
public  purchasers,  and  is  expected  to improve 
the speed, the competitiveness and the overall 
efficiency  of  the  Italian  public  procurement 
system. 

The deployment of connectivity networks 
is  progressing.  Italy's  5G  coverage  stood  at 
it  recorded  an  11 
99.5% 

in  2023  and 

Making business easier 

step 

towards 

(see  Annex  4).  The 

The  RRP’s  annual  competition  laws  are  a 
positive 
increasing 
competition 
in  a  number  of  sectors, 
including services. Obstacles to the opening-
up  of  markets  and  over-regulation 
in 
businesses’  daily  operations  hinder  economic 
growth.  This  is  particularly  evident  in  the 
low 
services  sector 
productivity  of  this  macro  sector (6)  is  partly 
explained  by  its  specialisation,  but  it  also 
stems  from  the  sector’s  remaining  barriers to 
competition, especially at retail level. Ensuring 
the  competitive  award  of  concessions  and 
contracts,  including  in  network  industries  and 
in  local  and  regional  services,  is  key  to  the 
effective  and  efficient  delivery  of  public 
services  to  businesses  and  consumers.  While 
the  adoption  of  the  annual  competition  laws 
so  far  included  in  the  RRP  is  a  positive  step, 
their  swift  implementation  is  key  to  actually 
reducing entry barriers in several sectors. 

A  more  effective  public  administration 
and  more  simplification  will  benefit 
Italy’s  business  development.  When  asked 
how trust in Italy’s public administration could 
increased,  61%  of  citizens  suggested 
be 
reducing  bureaucracy  (EU  average:  52%)  and 
49% called for better-skilled civil servants (EU 
average:  30%) 
(see  Annexes  4  and  6). 
Furthermore,  according  to  the  EIB  investment 
survey, the proportion of firms with over 10% 
of 
regulatory 
staff  working  on 
requirements  stood  at  24%,  above  the  EU 
average  of  17%  (see  Annexes  4  and  6).  In 
2024 
the 
comprehensive  reform  of  public  employment 
adopted in 2022 under the RRP. The plan also 

Italy  continued 

implement 

their 

to 

(6)  OECD Economic Survey Italy 2024(2024). 

9 

 
 
 
in  very  high-
increase 
percentage-point 
capacity  network  (VHCN)  and  fibre  to  the 
premises  (FTTP)  coverage  compared  to  2022 
(see Annex 4). However, the urban-rural divide 
persists,  with  coverage  in  rural  areas  lagging 
behind at 37.7% (the EU average is 55.6% for 
VHCN  and  52.7%  for  FTTP).  Cybersecurity 
awareness  appears  to  be  widespread,  with 
92.9%  of  firms  having  some  ICT  security 
measures in place (EU average of 92.8%), and 
62.7%  making  their  employees  aware  of  ICT 
security-related issues (EU average of 60%). 

Rethinking investment in 
innovation 

in  R&D. 

Italy’s innovation and growth potential is 
hampered  by  limited  private  and  public 
investment 
In  2023,  business 
expenditure  on  R&D  was  half  the  EU  average 
(0.76% and 1.9% respectively).  From 2001 to 
Italy’s  share  of  registered  patents 
2020, 
decreased  both  at  the  United  States  Patent 
and  Trademark  Office  (USPTO),  from  1.0%  to 
0.9%, and at the European Patent Office (EPO), 
from  3.76%  to  3.34%.  Italian  patents  are 
concentrated  in  traditional  industries,  with 
limited  presence  in  high-tech  sectors  with 
more growth opportunities. 

Measures  to  facilitate  the  growth  of 
firms  and  better-targeted 
incentives 
would benefit R&D investment. The limited 
number  of 
large  firms  restricts  potential 
private  investment  in  R&D,  resulting  in  Italian 
firms  accounting  for  just  0.4%  of  the  top 
2 000  global  R&D  investors'  expenditure,  well 
below  peer  EU  countries  such  as  Germany 
(8.9%) or France (2.7%). Moreover, Italy’s R&D 
tax  incentives  are  more  limited  and  less 
generous  than  those  of  EU  peers,  meaning 
that  it  has  a  less  effective  framework  for 
stimulating 
in 
innovation (7).  The  Law  on  the  rationalisation 
of firms’ incentives (8) adopted under the RRP, 

investment 

private 

(7)  Bank of Italy: Innovazione e politiche di sostegno 
pubblico: un’analisi comparata (December 2024). 

and  the  commitment  to  redefine  the  national 
industrial  strategy,  offer  an  opportunity  to 
focus public support on innovative firms, which 
play  a  greater  role 
job  creation  and 
economic  growth (9),  and  on  promoting  firms’ 
mergers. 

in 

to 

of 

and 

offer 

firms 

less  well-suited 

Boosting  Italy’s  capital  markets  would 
channel  more  savings  into  innovative 
investments 
an 
alternative source of financing.  Banks are 
generally 
financing 
innovative  companies  as  they  often  lack  the 
expertise to effectively screen innovative firms 
and their largely intangible collateral. In 2023, 
bank  lending  accounted  for  27.6%  of  the 
sources  of  financing  for  Italian  non-financial 
firms,  while  listed  shares  and  bonds  only 
represented  13.3%,  compared  to  the  EU 
some 
23.8%. 
average 
improvements  in  recent  years,  Italy’s  market-
funding  ratio  stood  at  38.9% 
in  2023, 
significantly  below  the  EU  average  of  49.6%. 
The  Italian  stock  exchange  (Borsa  Italiana) 
remains small by EU standards, with a limited 
number  of  new  listings  in  the main  market in 
recent  years.  In  2023,  market  capitalisation 
stood at 29.1% of GDP, while the EU average 
was 68%. Recent efforts to reform the capital 
market  framework  are  however  a  step  in 
fostering  capital  market  efficiency,  providing 
financing  and  facilitating  the  scale-up  of 
innovative  firms,  also  by  improving  the  exit 
options  for  earlier-stage  venture  capital  and 
private equity investors. 

Despite 

in 

The  considerable  savings  of 
Italian 
households  are  an  untapped  potential 
source  of  support  for  innovation.  Retail 
Italy  exhibit  a  conservative 
investors 
investment approach (see Annex 5). They also 
prefer  investment  funds  rather  than  listed 
equity,  which  remains  low  by  EU  standards 
(see Annex 5). Considering the low government 
investment  in  innovation  and  the  fact  that 
investment funds and insurers in Italy tend to 
have  a  higher  share  of  bonds  investment, 
further  direct  or 
involvement  by 
indirect 
households  in  the  equity  market,  for  example 

(9)  Bank of Italy: High growth young firms in Italy (October 

(8)  Law No 160 of October 2023. 

2024). 

10 

 
 
 
by  strengthening  the  Individual  Savings  Plans 
(PIR),  could  provide  a  significant  boost  to 
innovation. 

The  Italian  venture  capital  market  is 
growing but is still limited in size. Venture 
capital  (VC)  is  essential  for  innovation  as  it 
provides  high-risk,  long-term  funding,  along 
with  strategic  support,  skills  and  managerial 
capabilities  that  enable  start-ups  to  develop 
and  scale  up  groundbreaking  ideas.  Despite  a 
recent  decline  due  to  the  macroeconomic 
interest  rate),  with 
context  (inflation  and 
venture capital and private equity dropping to 
0.03% and 0.3% of GDP in 2023, the average 
VC  investment  has  seen  a  nearly  five-fold 
increase  from  2011-2013  to  2021-2023. 
Since  2020,  CDP  Venture  Capital,  the  State-
owned  financial  vehicle  for  innovation,  has 
been pivotal in the development of the market, 
in  assets  and 
managing  EUR 3.35  billion 
planning  investments  in  50-70  new  venture 
capital funds by 2028. As part of the recovery 
and  resilience  plan,  the  recent  Competition 
Law  will  also  further  support  start-ups  by 
pushing  institutional  investors  into  the  VC 
market  (see  Annex  5).  Despite  these  efforts, 
the market  remains  fragmented,  with  a  focus 
on  early  stages,  highlighting  the  need  for 
enhanced  support  for  late-stage  investments, 
including  suitable  exit  options  for  investors, 
stock 
and 
ownership  frameworks.  Finally,  there  is  room 
to  strengthen  corporate  venture  capital,  a 
segment  of  the  VC  market  in  which  Italy’s 
large  corporations  and  institutional  investors 
are  reluctant  to  invest.  In  this  area,  existing 
incentives for in-house R&D could be adjusted 
to cover investments where the R&D activity is 
outsourced  to  a  start-up  or  is  in  partnership 
with a university. 

improvements 

employee 

in 

Public procurement procedures could play 
a  key  role  in  fostering  demand  for 
innovative  solutions.  However,  in  terms  of 
its innovation procurement policy frameworks, 
Italy  is  only  a  moderate  performer (10).  The 
legal  framework  supports  various 
existing 

(10)  Italy’s  score 

is  only  37%,  well  below  the  best 
performing  score  of  Finland  with  70%  -  Benchmarking 
of  innovation  procurement  investments  and  policy 
frameworks across Europe. 

types of procurement but lacks comprehensive 
definitions  and  national  action  plans 
to 
promote  innovation  procurement.  Challenges 
remain  in  fostering  competition,  transparency 
regional 
and 
initiatives, 
such  as  Lombardy's  binding 
spending  target,  promote  innovation  in  public 
procurement procedures. 

capacity-building, 

while 

Unlocking research potential 

In 

in 

Italian 

resources 

strengthen 

innovation, 

inefficiencies 

Relatively low public expenditure for R&I 
and 
the  national 
university  system  are  further  barriers  to 
innovation. 
public 
2023, 
expenditure  on  R&I  stood  at  0.52%  of  GDP, 
below  the  EU  average  (0.72%).  The  RRP 
to  boost 
provided  additional 
business 
R&I 
infrastructures,  finance  basic  and  applied 
research.  Resources  are  allocated  to  higher 
education  through  the  annual  budget,  with  a 
performance-related  share.  These  resources 
are  complemented  by  the  launch  of  national 
competitive  calls  for  projects,  but  they  have 
been  irregularly  held  and  have  failed  to 
provide  a  clear  and  predictable  environment 
for  the  actors  involved (11).  Overall,  public 
for  R&I  by  higher  education 
funding 
institutions still represented just 0.33% of GDP 
in  2023,  compared  to  the  EU  average  of 
0.48% (12). 

Job  uncertainty  and  an  unclear  career 
progression  hamper  the  ability  of  the 
public  research  sector  to  attract  and 
retain  talent.  The  use  of  short-term  non-
tenure-track  contracts  for  researchers  is  very 
researchers  hired  by 
common 
career 
and 
universities 

(65%  of 
in 

2022) (13), 

(11)  Consiglio Nazionale delle Ricerche,2023, Relazione sulla 
Ricerca e L’innovazione In Italia, Analisi e dati di politica 
della  scienza  e  della  Tecnologia,  Quarta  Edizione 
Relazione_sulla_ricerca_e_innovazione_in_Italia_2023.
pdf. 

(12)  Eurostat (2023), 

https://ec.europa.eu/eurostat/databrowser/view/tsc0000
1/default/bar?lang=en&category=t_scitech.t_rd. 

(13)  This  figure  includes  researchers  hired  as  assegnista  di 
ricerca,  researchers  of  type  A  and  B  and  long-term 

11 

 
 
 
 
National  Research  Council  (CNR),  there  is  a 
significant  gap  between  Italy  and  other  peer 
Member  States  in  terms  of  staffing  and 
financial  allocation (17).  While 
the  RRP 
accelerated the establishment of TTOs, further 
effort is needed to increase the scale of TTOs 
and  to  foster  networking  activities  that  focus 
on high-impact sectors. To this end, promoting 
the  aggregation  of  TTOs  by  thematic  area  or 
by territorial  dimension and strengthening the 
link  with  national  venture  capital  investors 
would be beneficial. 

Develop a national industrial 
strategy to boost competitiveness 
and unlock the potential of the 
South 

A strong productivity gap persists across 
the  country,  including  due  to  the  South’s 
lower specialisation in innovative sectors. 
Although  the  RRP,  together  with  Cohesion 
Funds, has supported southern regions and, in 
general,  national  growth 
in  recent  years, 
regional  economic  and  social 
significant 
disparities  remain.  In  the  South,  the  post-
COVID  growth  convergence  is  mainly  due  to 
the  services  and  construction  sectors,  while 
industry. 
considerable  gaps 
Moreover, the South is affected by the decline 
of  the  industries  in  which  it  specialised  (e.g. 
automotive, oil refinery). 

remain 

in 

In 

The  competitiveness  of  southern  regions 
is  held  back  by  a  lack  of  certain  key 
recent 
factors  of  attractiveness. 
decades,  public  investment  in  the  South  has 
been subdued, despite attempts to dedicate a 
quota  of  investment  to  southern  regions  that 
is  at  least  proportional  to  its  population  (e.g. 
the clause dedicating at least 34% of ordinary 
public capital spending to the South, and later, 
the 40% national commitment for investment 

(17)  Full time equivalents employed in technology transfer 
offices is significantly lower in Italy then in reference 
cases in Europe: Italy (5-10 FTE) vs Belgium, France, UK 
(70-120 FTE). 
Relazione_sulla_ricerca_e_innovazione_in_Italia_2023.
pdf 

progression  is  slow  and  uncertain,  particularly 
for  young  researchers.  From  2012  to  2022, 
the average age of teaching staff with tenure-
track  and  long-term  positions  increased,  with 
more than 56% of university professors being 
over  50  years  old  (compared  to  the  EU  and 
OECD  average  of  about  40%)  and  with  no 
tenure-track  researcher  being  younger  than 
30 (14).  These  factors,  coupled  with  relatively 
low  wages (15),  make  the  Italian  research 
sector less attractive to talent (see Annex 3). 

The  Italian  university  system  provides 
limited 
incentives  to  focus  on  the 
commercialisation of research. On the one 
hand,  only  a  very  small  fraction  of  the  30% 
the  annual 
performance-based  quota  of 
ordinary  funding  is  allocated  based  on  the 
valorisation  of  research  (representing  only 
1.5%  of  the  total  funding) (16).  On  the  other, 
transfer  of  knowledge 
valorisation  and 
activities  are  not 
into 
account 
in  the  career  advancement  and 
performance  evaluation  of  researchers  and 
professors.  The  current  system  still  relies 
heavily  on  publication  results  rather  than 
valorising  outcomes  such  as  entrepreneurship 
initiatives, patents and spin-offs. 

taken  adequately 

recent  progress, 

technology 
Despite 
remain  undersized, 
transfer  offices 
links  to 
fragmented  and  with  poor 
institutional  investors.  Technology  transfer 
offices (TTOs) are instrumental to establishing 
partnerships  with  firms  and  venture  funds. 
They  advise  researchers  on  the  patenting  of 
specific 
seed 
financing  for  spin-offs.  According  to  the 

technologies  and  provide 

researchers.  ANVUR,  2023,  Rapporto  sul  sistema  della 
formazione superiore e della ricerca, Rapporto biennale 
| ANVUR. 

(14)  ANVUR,  2023,  Rapporto  sul  sistema  della  formazione 
superiore e della ricerca, Rapporto biennale | ANVUR. 

(15)  Civera,  A.,  Lehmann,  E.  E.,  Meoli,  M.,  &  Paleari,  S.  P. 
(2023).  The  Attractiveness  of  European  Higher 
Education  Systems:  A  Comparative  Analysis  of  Faculty 
Remuneration 
Paths.  
Career 
https://escholarship.org/uc/item/08x00432 

and 

(16)  OECD,  2024,  Knowledge  exchange  and  collaboration 
between  universities  and  society  in  Italy:  The  ITA.CON 
collaboration 
Project,  Knowledge  exchange  and 
between universities and society in Italy | OECD. 

12 

 
 
 
with a territorial destination). Southern regions 
are  performing  below  the  national  average  in 
a  number  of  sectors  and 
infrastructural 
indicators  (see  Annex  17).  The  ‘brain  drain’ 
towards  better-performing  regions  and  an 
inability  to  attract  qualified  workforce  further 
reduce their competitiveness (see Annex 17). 

identifies  four  main 

A  new  industrial  policy  is  needed  to 
identify  key 
investments  and  policy 
actions  beyond  2026.  The  government 
recently adopted the Green Book for a national 
industrial  strategy  and  the  Strategic  Plan  for 
the  Single  Special  Economic  Zone  (SEZ).  The 
publication  of  the  ‘Made  in  Italy  2030’  Green 
Book by the Ministry of Enterprises and Made 
in Italy (MIMIT) aims to kick-start a debate on 
the  need  for  a  new  industrial  strategy.  The 
Green  Book 
topics: 
strengthening  the  national  industrial  identity, 
promoting  the  triple  transition  (green,  digital 
and  geo-political),  redefining  the  role  of  the 
State  in  the  economy  and  developing  the 
international  dimension  of  Italy’s  industrial 
policy. Each of these topics is associated with 
a  strategic  action  and  15  objectives. 
In 
parallel,  the  SEZ  plan  aims  to  introduce  an 
industrial  strategy  for  the  whole  southern 
territory,  identifying  several  broad  sectors  as 
strategic,  mostly  focusing  on  those  that 
already have an already established presence, 
agri-food, 
namely 
electronics  &  ICT,  and  quality  Made  in  Italy 
(e.g.  fashion,  wood-furniture  sector).  Four 
additional  strategic  supply  chains  have  been 
their  competitive 
identified 
performance:  chemical  and  pharmaceuticals, 
shipbuilding  and  naval,  aerospace  and 
railways. Finally, the plan also aims to develop 
cross-cutting  technologies,  in  line  with  the 
sectors  identified  by  the  STEP  programme: 
digital  technologies,  cleantech  and  biotech. 
Italy is already making a considerable effort in 
this direction, allocating nearly EUR 3 billion to 
STEP 
policy 
programmes. 

priorities  within 

automotive, 

light  of 

cohesion 

tourism, 

in 

is  hampered  by 

The  development  of  a  clear  industrial 
policy 
fragmented 
governance.  The  SEZ  and  the  national  plans 
are  developed  according  to  two  separate 
governance  systems:  the  former  managed  by 
the  SEZ  mission  structure  and  the  latter  by 

MIMIT,  in  an  already  fragmented  national 
industrial  policy  context.  At  central 
level, 
financial  support  measures  for  research  and 
innovation are split among different ministries. 
At  sub-national  level,  regions  also  engage  in 
their  own  innovation  strategies  and  support 
schemes  with  minimal  national  coordination. 
Finally, while the centralised governance of the 
SEZ  through  a  single  mission  structure  can 
ensure  good  coordination  across  the  whole 
southern area (compared to the previous eight 
locally  defined  SEZs),  dedicated 
regional 
departments  for  investment  and  innovation 
(such  as  that  of  the  Campania  region)  could 
provide  the  necessary  territorial  reference  to 
attract investment. 

A  more  concrete  and  modern  strategic 
plan  is  needed.  Strategic  sectors  need  to  be 
better  identified,  taking  into  account  new 
industrial  trends  and  technologies,  in  order  to 
target  policy  measures  more  effectively  and 
integrate them with infrastructural investment, 
and concrete actions are also needed. The SEZ 
plan  aims  to  identify  the  area's  industrial 
specialisation.  However,  it  lacks  a  territorial 
dimension and a development strategy for the 
key  industrial  districts  identified.  Specifically, 
strategic value chains are selected from a list 
of  traditional  sectors  that  does  not  take  into 
account the development of new technologies 
and  hence  the  creation  of  new  value  chains 
(e.g. renewable energies, digital infrastructures 
and  AI).  A  better  ex ante  definition  of  value 
chains 
the  process  of 
identifying  those  that  are  strategic.  Moreover, 
there  is  a  temporal  mismatch  between  the 
plan's  longer  horizon  and  the  incentives  to 
promote  the  attraction  of  new  investments 
that are only envisaged for one year. The plan 
would  benefit  from  a  mapping  of  priority 
investments and the identification of concrete 
actions and targeted long-term goals. 

improve 

could 

A more growth-friendly tax system 

The  efficiency  of  Italy’s  tax  system  has 
improved,  but  some  weaknesses  remain 
in relation to the tax mix and evasion. Tax 
revenues  to  GDP  declined  marginally  in  2023 
thanks  to  a  general  tax  reform,  but  remain 

13 

 
relatively  high  compared  to  the  EU  average, 
with  the  largest  contribution  coming  from 
labour taxation. The labour tax wedge declined 
markedly  in  2023  thanks  to  the  measures 
taken. In 2024, the tax wedge further declined 
at most income levels, while for single earners 
at average wage it increased substantially, as 
the average wage rose above the threshold for 
reduced  social  security  contributions.  Overall, 
despite the measures adopted, the tax  wedge 
in  Italy  remains  significantly  above  the  EU 
average.  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,  which 
are  less  detrimental  to  growth,  would  help  to 
raise  economic  potential.  Furthermore,  taxes 
on  energy  are  not  designed  to  encourage  the 
transition  to  clean  technologies.  Finally,  tax 
evasion  remains  high,  though  the  ambitious 
countermeasures 
recent  years, 
taken 
including under the RRP, are bearing fruit (see 
Annex  1).  At  the  same  time,  recent  measures 
similar  to  tax  amnesties  risk  being  counter-
productive  in  terms  of  tax  compliance,  while 
the  system  of  prior  agreement  between  the 
administration  and  small  businesses  on  their 
tax  liabilities  (concordato  preventivo  biennale) 
warrants  close  monitoring.  Cadastral  values 
are still not in line with current market values, 
since 
fully  and 
comprehensively updated. 

they  have  yet 

to  be 

in 

to 

the 

Italy 

committed 

reduction  of 

In its medium-term fiscal-structural plan 
(MTFSP), 
new 
measures  on  taxation.  These  include  a 
permanent 
tax  wedge, 
additional tax administration targets, a review 
of  the  scope  of  tax  expenditures  and  the 
updating  of  cadastral  values  for  certain 
properties,  which  would  partly  address  past 
country-specific  recommendations.  However, 
more  effort  is  needed  to  fully  address  the 
challenges  faced  by  the  taxation  system. 
Some MTFSP commitments have already been 
implemented  via  the  2025  budget,  including 
the permanent cut of the tax wedge and a first 
reduction in tax expenditures. 

14 

 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

Italy’s clean tech edge and raw 
material challenge 

of 

PV 

solar 

Italy  is  one  of  the  European  leaders  in 
clean  technologies,  with  a  significant 
and  wind 
number 
manufacturing  facilities.  Italy  accounts  for 
14%  of  the  EU’s  manufacturing  capacity  for 
solar  PV,  4%  for  wind  power  and  a  negligible 
share  for  battery  and  storage  technologies. 
Italy is also home to at least 50 factories that 
specialise in the manufacturing of heat pumps, 
further 
its  manufacturing 
portfolio. It is also an EU and global leader in 
the  production  of  cables  and  systems  for 
power transmission and distribution. 

diversifying 

the 

investments 

investments  and  policies  to 
Several 
strengthen Italy’s strategic autonomy are 
ongoing.  As  part  of 
recovery  and 
resilience  plan,  Italy  is  participating  in  several 
important  projects  of  common  European 
interest  (IPCEIs)  in  the  areas  of  batteries, 
microelectronics  and  hydrogen.  Other  key 
industrial 
Italy’s 
capacity  to  manufacture  strategic  products, 
such as solar panels and semiconductors, have 
received grants from the RRF. Finally, the RRP 
also  invests  in  the  recovery  and  recycling  of 
electrical  and  electronic  waste  (WEEE)  and  of 
the 
critical 
improvement 
the 
construction  of  new  WEEE  plants,  and  urban 
mining and eco-design. 

raw  materials,  by 
existing 

financing 
plants, 

increase 

of 

to 

Italian manufacturing depends heavily on 
imports of the critical raw materials and 
semiconductors needed for the green and 
digital  transitions,  such  as  microchips, 
lithium,  cobalt  and  rare  earths,  which  are 
essential  for  producing  high-tech  products, 
including  electric  vehicles,  wind  turbines  and 
electronics.  This  creates significant  challenges 
in  terms  of  sustainability  and  resilience,  such 
as 
environmental 
degradation and social concerns. With 48% of 
in  manufacturing  being 
material 
imported  in  2022  (EU  average:  22%),  Italy  is 
particularly 
chain 
disruptions. 

vulnerable 

supply 

supply 

inputs 

chain 

risks, 

to 

Italy  is  a  top  performer  in  the  circular 
economy, including critical raw materials, 
partly mitigating the risk of supply chains 
disruptions.  The  rate  of  circular  use  of 
materials  was  20.8%  in  2023  (EU  average: 
11.8%), making it one of the top EU countries 
in  that  regard.  The  recycling  rate  for  e-waste, 
a key source of critical raw materials, is above 
the EU average, at 88.9% in 2021. 

15 

Boosting the decarbonisation of 
Italian industry 

Italy’s manufacturing sector has a similar 
intensity  of  greenhouse  emissions  as the 
EU  overall,  but  its  share  of  energy-
related  emissions  is  significantly  higher. 
Around  22%  of  Italy’s  total  greenhouse  gas 
emissions  come  from  the  manufacturing 
sector,  as  in  the  EU  overall  (see  Annex  7). 
Since  2017,  the  greenhouse-gas  intensity  of 
Italy’s manufacturing industry  fell by just 4%, 
well  below  the  EU  average  (20%).  At  more 
than  two-thirds  in  2023,  Italy’s  share  of 
energy-related  greenhouse  emissions  from 
industry  (as  opposed  to  emissions  related  to 
industrial  processes  and  product  use)  is  the 
highest  in  the  EU,  where  this  share  stands  at 
57% overall. 

Compared  to  the  EU  overall, 
Italy’s 
manufacturing  sector  is  less  intensive  in 
terms  of  emissions  from  processes  and 
product  use.  Between  2017  and  2022,  the 

 
 
price 

long-term 

This would allow renewables to meet demand 
more  consistently,  increasing  the  likelihood 
that  these  cheaper  electricity  sources  set  the 
marginal  price,  particularly  during  peak 
periods.  The  ‘Simplification  of  authorisation 
procedures for renewable plants’ reform under 
the  RRP  facilitates  these  investments.  In  the 
meantime, 
stabilisation 
mechanisms, such as contracts for differences 
and  power  purchase  agreements  (PPAs),  can 
shield  both  renewable  energy  producers  and 
industrial  consumers  from  gas-driven  price 
volatility,  provided  they  do  not  undermine 
electricity market liquidity. A reform under the 
REPowerEU  chapter  of  the  RRP  establishes  a 
guarantee  scheme 
risk 
associated  with  renewable  PPAs  and  promote 
their  uptake.  Faster  uptake  of  renewables  in 
the  energy  mix  would  moreover  help  to  meet 
the Effort Sharing Regulation target. 

to  mitigate 

the 

Addressing climate risks 

climate 

events (18). 
change 

Italy  is  among  the  EU  Member  States 
most  exposed  to  climate  risks,  which 
weighs  on  Italy’s  economic  performance. 
Between  1980  and  2023, 
Italy  recorded 
21 822  fatalities  and  almost  EUR 134  billion 
in  economic  losses  caused  by  weather  and 
The 
extreme 
climate-related 
annual 
for 
of 
costs 
infrastructure  in  Italy  are  estimated  to  be 
around  EUR 2  billion  in  2030 (19).  Projections 
suggest a cumulative negative impact on GDP 
per  capita  of  3.7%  in  2050  and  8.5%  in 
2080 (20).  SMEs  are  particularly  vulnerable, 
a 
with 
significant  impact  on  their  productivity  and 
competitiveness.  A  study  by  the  Bank  of  Italy 
found  that  Italian  SMEs  affected  by  extreme 
events  face  a  4.8%  higher  bankruptcy  risk 
than  other  firms,  with  surviving  companies 
seeing  a  fall  in  turnover  and  employment  of 
4.2% and 1.9% respectively, over the following 

climate-related 

having 

events 

(18)  EEA, 2024, European Climate Risk Assessment. 

(19)  MIMS  2022,  Cambiamenti  climatici,  infrastrutture  e 

mobilita, Link. 

(20)  Ronchi,  E.  2019,  Relazione  sullo  stato  della  green 

economy, Link. 

intensity  of  energy-related  GHG  emissions 
from manufacturing in Italy fell by 13%, which 
is  similar  to  the  EU  average.  Over  the  same 
period,  the  intensity  of  process-  and  product-
use-related  emissions  fell  by  23%  (as  in  the 
EU  overall),  just  62%  of  the  EU  total.  In  that 
period, the share of electricity and renewables 
in  final  energy  consumption  in  manufacturing 
was  broadly  stable,  at  around  41%.  This  was 
also  the  case  with  the  energy  intensity  of 
Italian manufacturing, which fell by about 5%. 

Lowering electricity prices and 
reducing volatility for industrial 
competitiveness 

the  electricity  mix  and 

High  electricity  prices  stifle  industrial 
competitiveness. 
2024,  wholesale 
In 
electricity  prices  in  Italy  exceeded  those  in 
Germany,  by  60%,  in  Spain,  by  99%  and  in 
France,  by  116%.  Two  main  factors  explain 
this  gap: 
the 
composition  of  final  prices.  First,  costly  gas-
fired  power  generation  accounts  for  41%  of 
the electricity mix (the second largest share in 
the  EU)  and  sets  the  electricity  market  price 
around  60%  of  the  time.  Second,  final 
electricity prices are inflated by high taxes and 
levies,  which  presents  a  particular  challenge 
for  energy-intensive  industries  (see  Annex  8). 
For 
taxes 
these  users,  non-recoverable 
account  for  19%  of  the  final  electricity  price 
(compared  to  the  EU  average  of  12%),  while 
gas 
(around  2% 
compared 
the  EU  average  of  9%), 
disincentivising electrification. 

tax-exempt 

is  nearly 

to 

Renewable  electricity  needs 
to  be 
deployed  more  quickly  to  increase  its 
share  in  the  energy  mix  and  mitigate 
prices.  A  more  transparent  and  accessible 
legislative  framework  for  permitting  could 
accelerate  deployment.  In  this  regard,  the 
collection,  compilation  and  consolidation  of 
existing permitting rules under the REPowerEU 
chapter of the RRP will be crucial. Investments 
in storage and demand response mechanisms 
are  essential  to  increase  system  flexibility, 
enabling it to cope with the intermittent nature 
of  renewable  energy  sources  (see  Annex  8). 

16 

 
 
three  years (21).  Increasing  the  use  of  nature-
based strategies would help to mitigate floods, 
heatwaves,  droughts  and wildfires  (see  Annex 
9). 

hydrogeological 

Italy’s 
vulnerability 
exacerbates  these  risks,  making  climate 
adaptation a pressing priority, as well as 
increasing  water  efficiency,  conservation 
and  resilience.  According  to  the 
Italian 
Alliance  for  Sustainable  Development  (ASviS), 
Italy’s  annual  expenditure  on  damage  from 
hydrogeological  risks  tripled  to  EUR 3.3  billion 
between  2010  and  2023 (22).  There  is  ample 
room  to  improve  the  effectiveness  of  climate 
adaptation  policies  and  water  management, 
beyond  the  actions  included  in  the  recovery 
and  resilience  plan  and  those  financed  under 
cohesion  policy.  Reducing  the  fragmentation 
between different authorities and bodies, both 
at national and local  level, would  improve  the 
implementation  of 
analysis,  planning  and 
mitigation  measures,  as  well  as 
the 
management of critical events. In principle, all 
of  these  actions  would  be  under  the  remit  of 
the observatory on climate change adaptation, 
provided  for  under  the  National  Adaptation 
is 
Plan 
however  not  yet  operational.  Sustainable 
water  management 
a  major 
environmental  issue,  particularly  in  terms  of 
governance,  surface  water  body  rehabilitation 
and water efficiency. 

in  2023,  which 

(NAP),  approved 

remains 

range  from  EUR 8.22  to  EUR 10.06  billion (23). 
Furthermore,  at  EU  level,  Italy  suffers  from 
one  of  the  highest  levels  of  agricultural 
productivity  loss  due  to  soil  erosion,  with  an 
estimated  crop  productivity  loss  of  EUR 619 
million per year (24). 

Italy’s  high  exposure  to  climate  risk  is 
insurance 
not  balanced  by  sufficient 
coverage.  Only  4%  of  the  losses  due  to 
weather  and  climate-related  events 
that 
occurred  between  1980  and  2023  were 
covered by insurance. This is well below the EU 
average  (18.9%) (25).  Considering  the  high 
proportion  of  companies  and  households 
exposed  to  climate  risk  and  that  extreme 
events  are expected  to increase  in  the  future, 
insurance  protection  gap  has 
the  wide 
significant 
for 
individuals,  enterprises  and  public  finances 
recovering from the effects of climate-related 
disasters. The effective implementation of the 
recently  adopted  provisions  for  mandatory 
company  insurance  for  extreme  events  and 
natural disasters would be a first step towards 
filling  this  gap.  Current  legislation  does  not 
provide  for  a  mandatory  or  semi-voluntary 
insurance scheme for housing. 

implications 

economic 

Soil 
loss,  degradation  and  sealing 
continue  to  worsen,  increasing  the  need 
for actions to improve soil resilience. This 
would help to reduce hydrogeological risk and 
maintain  productivity.  National 
statistics 
showed that 20 hectares of soil per day were 
converted to artificial land cover (land take) in 
2023.  The  estimated  annual  economic  losses 
from the decline in ecosystem services due to 
land  consumption  between  2006  and  2023 

(21)  Bank  of  Italy,  2022,  Gli  effetti  del  cambiamento 
climatico  sull’economia  italiana.  Un  progetto  di  ricerca 
della  Banca  d’Italia,  Occasional  Paper  728,  p. 50, 
QEF_728_22.pdf. 

(22)  Italian  Alliance  for  Sustainable  Development  (ASviS), 
2023, Rischio idrogeologico in Italia, senza prevenzione 
costi triplicati in 13 anni. 

(23)  ISPRA, 2024,  Consumo di suolo, dinamiche territoriali e 
servizi  ecosistemici.  Edizione  2024  –  SNPA  –  Sistema 
nazionale protezione ambiente, pp.199-200 & p. 343. 

(24)  Panagos  P.  et  al.  Cost  of  agricultural  productivity  loss 
due to soil erosion in the European Union, 2018, Table 6 
Land  Degradation  &  Development  |  Environmental  & 
Soil Science Journal | Wiley Online Journal. 

(25)  EEA,  2024,  Economic 

losses  from  weather-  and 

climate-related extremes in Europe. 

17 

 
 
 
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

faces 

market 

Despite  rising  employment  rates,  Italy’s 
stagnant 
labour 
productivity  growth  and  significant  skills 
mismatches,  hindering  competitiveness. 
Amid  weak  productivity  dynamics,  the  robust 
employment  growth  of  recent  years  has  not 
been  matched  by  real  GDP  gains.  Italy’s 
inability  to  raise  productivity  growth  stems 
from  various  mutually  reinforcing  structural 
factors.  Notwithstanding  some  advancements 
achieved  through  recent  RRP  measures,  the 
structural  weakness  of  the  education  and 
training  system  hinders  talent  development, 
leaves  demand  for  skilled  labour  unmet  and 
discourages investment in innovative ventures. 
In  turn,  Italy’s  predominance  of  low-tech  jobs 
and  low  job  quality  fail  to  provide  adequate 
returns  on  education,  depressing  labour  force 
participation  and 
talented  young 
leading 
people  to  emigrate.  To  meet  current  and 
future  labour  market  demands  and  enhance 
productivity,  skills  levels  should  be  improved 
throughout  the  life  cycle,  while  job  quality 
raised. 

Lifelong skills development is 
crucial for Italy’s competitiveness 

in 

Italy’s  declining  performance  in  basic 
science  and 
skills  development 
mathematics,  calls  for  strengthening  its 
education  system.  The  OECD  PISA  2022 
basic  skills  survey  highlighted  the  continued 
declining  trend  in  basic  skills  performance, 
especially in mathematics and science, placing 
Italy behind the EU average. Additionally, PISA 
results  highlight  persistent  underperformance 
of  pupils  from  disadvantaged  socio-economic 
in 
backgrounds  and  of 
vocational  education 
the 
reform efforts promoted through the RRF, the 
country  still  struggles  with  structural  teacher 
shortages  in  certain  fields  and  regions.  To 

tracks.  Despite 

those  enrolled 

18 

experienced 

equip  the  greatest  number  of  young  people 
with  adequate  basic  competences,  on  which 
they  can  build  more  advanced  and/or  labour-
oriented  skills,  the  worst-performing  schools 
and  lower-achieving  students  need  targeted 
teachers 
support.  Offering 
financial  incentives  to  move  to  the  most 
disadvantaged  schools  could 
improve  the 
proficiency  of  those  schools’  pupils.  Extending 
school  time  (tempo  pieno)  in  schools  that  do 
not  currently  offer  it  could  help,  as  would  a 
general  roll-out  of  the  Piano  Estate  summer 
school  initiative.  An  improved  system  of  in-
service  training  for  teachers  has  also  been 
introduced. 
and 
structurally innovate teaching methods, with a 
focus  on  STEM  subjects,  could  help  improving 
performance in basic skills development.  

Assessing 

impact 

its 

and 

healthcare 

Skills  demand  in  the  short  term  requires 
strengthening  the  vocational  education 
and  training (VET) system and increasing 
provision  of  work-based  learning.  Italy 
faces  a  significant  structural  skills  mismatch. 
In  2024,  it  recorded  the  second-highest  level 
of  macroeconomic  skills  mismatch  in  the  EU, 
and  40%  of  workers  employed  in  jobs  not 
matching their field of study. While the current 
job  vacancy  rate  of  2.1%  does  not  reflect 
widespread  labour  shortages,  sectors  such  as 
construction, 
face 
recruitment  challenges.  This  suggests  that, 
while  a  broader  underlying  problem  of  skills 
mismatch  persists,  current  labour  shortages 
are  relatively  minor  and  limited  to  specific 
medium-skilled professions, requiring targeted 
short-term  solutions.  A  further  focus  on  VET, 
including  sustained  investment  in  successful 
RRF 
technical 
(ITS  Academies)  and  ensuring 
institutes 
curricula  align  with  both  the  technical  and 
transversal  skills  demanded  by  the  labour 
labour 
market 
high-demand 
shortages, 
professions  and  high-growth  sectors,  across 
all  supply  chain  functions,  including  highly 

initiatives  such  as  higher 

respond 
in 

could  help 

particularly 

ICT 

to 

 
 
construction  workers.  Beyond 
specialised 
national  successful  initiatives  such  as  Fondo 
Nuove Competenze, continued and predictable 
access  to  investment  in  adult  learning  in  the 
future  is  crucial.  Specifically,  as  in-company 
training  proves  highly  effective,  incentives  for 
employers providing work-based learning, with 
an emphasis on short-term training and micro 
credentials, can help to address skills gaps. 

in 

for 

key 

boosting 

Forming and attracting high-skilled talent 
is 
economic 
competitiveness. Italy has the second-lowest 
share  of  young  tertiary  graduates  in  the  EU 
and  faces  a  persistent  net  brain  drain  (see 
Annex 12). While current labour shortages are 
in  non-tertiary  occupations, 
concentrated 
focusing  on  high-skilled  workers 
the 
medium to long term is essential, as they drive 
innovation.  A  competitive 
productivity  and 
economy  demands  a  high-skilled  workforce 
equipped  with  transversal  skills  and  higher-
order cognitive skills, including critical thinking 
and  continuous  learning  -  competences  that 
are significantly strengthened at tertiary level. 
Addressing  this  challenge  requires  structural 
improvements  to  the  quality  and  accessibility 
of  higher  education.  Beyond  RRP  investments 
in  scholarships  for  tertiary  education,  Italy 
could  expand  both  the  availability  and  the 
level  of  financial  support,  to  match  peer 
countries such as France and Spain. Promoting 
STEM/ICT  programmes,  modernising  tertiary 
curricula  with  a  forward-looking  approach  to 
skills  development  and  complementing  the 
theoretical  academic  model  with 
current 
transversal 
work-oriented 
knowledge,  are  also  crucial.  Furthermore, 
Italy’s  persistent  net  brain  drain  further 
constrains  the  pool  of  high-skilled  workers. 
Expanding  the  Decreto  Flussi 
immigration 
quotas for entrepreneurs, start-up workers and 
high-skilled workers in strategic sectors, could 
help to address these gaps. Leveraging the EU 
Blue  Card  and  simplifying  qualification 
recognition for non-EU nationals would further 
support 
to  attract  high-skilled 
individuals. 

efforts 

skills 

and 

Integrating  adult  learning  strategies  and 
for 
industrial 
innovation  and  growth  in  Italy.  Italy’s 
rapidly  ageing  workforce,  characterised  by 

essential 

policy 

is 

lower  digital  skills  and  adaptability  levels, 
hampers  productivity  growth.  In  2024,  adult 
learning was among the lowest in the EU and 
declining.  In  this  context,  strengthening  the 
adult  learning  system  and  aligning  it  with 
industrial  strategy  through  a  forward-looking 
approach to training is crucial. Building on, the 
recently  developed  national  portal  for  job 
matching  (SIISL)  and  continuing  successful 
initiatives  under  the  RRF  such  as  the  Dual 
System, the GOL employability guarantee, and 
the  Individual  Learning  Accounts,  capitalising 
on  the  lessons  learnt,  could  help  to  counter 
those 
trends  beyond  2026.  Combining 
incentives  for  R&D  investments  with  training 
policies  has  proven  more  effective 
in 
maximising  innovation  potential.  Linking  tax 
incentives  for  hiring  such  as  ‘Bonus  Giovani’, 
‘Bonus  ZES’,  and  ‘Bonus  Donna’  to  mandatory 
workplace training and targeting firms in high-
growth  sectors,  (e.g.  Transizione  4.0  and  5.0) 
could  boost  employment  and  productivity, 
maximising  the  multiplier  effect  of  public 
spending. Strengthening collaboration between 
government  bodies  responsible  for  under 
Active  Labor  Market  Policies  (ALMPs)  and 
those  responsible  for  industrial  development 
and  aligning  Regional  Skills  Plans  under  the 
RRF  with  national  industrial  strategies  (e.g. 
Libro Bianco) could further support this effort. 

Addressing labour market 
segmentation, job quality and care 
challenges 

Labour  market  segmentation  and  job 
quality  remain  key  factors  for  retaining 
talent  in  Italy,  while  expanding  care 
services  would  help  boost  labour  supply 
amid  demographic  challenges.  Stable 
contracts,  together  with  adequate  wages, 
improve  job  quality  and  are  key  to  attracting 
and  retaining  workers,  and  to  improving  the 
attractiveness  of  sectors  and  professions 
is 
suffering  from 
particularly 
the 
demographic  challenge  and  the  intensified 
outflow  of  talent,  as  many  young  graduates 
emigrate  in search of  better career and wage 
prospects  abroad.  Meanwhile,  an  adequate 

labour  shortages.  This 

important 

light  of 

in 

19 

 
social safety net is crucial to reducing poverty 
and  preserving  human  capital  during  career 
transitions.  Finally,  to  curtail  the  impact  of  a 
declining workforce, it is imperative to harness 
the  full  potential  of  women’s  labour  market 
participation,  which  is  currently  limited  by 
insufficient care services for children and older 
people. 

Despite improvements, including a rise in 
permanent  contracts,  atypical  contracts 
remain  widespread,  reducing  job  security 
and  work  intensity.  The  use  of  stable  and 
full-time  employment  contracts  helps 
to 
reduce  earnings  instability,  increases  work 
intensity  and  incentivises  companies  to  invest 
in  workers’  skills.  The  share  of  fixed-term 
employees  decreased  from  16.0%  in  2023  to 
14.7%  in  2024  but  remained  among  the 
highest  in  the  EU.  Fixed-term  employment  is 
more  common  among  women,  young  people 
and  those  from  a  migrant  background.  While 
temporary-to-permanent  job  transitions  were 
more closely in line with the EU average during 
the recovery from COVID-19, over recent years 
they  have  been  at  significantly  lower  levels 
and  well  below  the  EU  averages  (18.2%  in 
2024). More than 50% of part-time and 10% 
of 
involuntary, 
reflecting  the  potential  to  increase  labour 
supply  through  stable  contracts.  Although 
slowly  declining  over  the  last  decade,  the 
share  of  self-employed  workers  remains  high 
compared  to  the  rest  of  the  EU,  and  in  some 
cases  shows  elements  of  subordination, 
employment 
masking 
relationships (26). Together with the high share 
of  self-employed  and  informal  work,  these 
widespread  non-standard  forms  of  work 
in 
inequality  and 
contribute  to 
earnings,  while  reducing  the  average  number 
of  hours  worked.  Besides  having  a  negative 
impact  on  the  development  of  firm-specific 
human  capital  and  reducing  job  security,  this 
decreases  the  attractiveness  and  quality  of 
jobs amid demographic change. 

temporary  contracts  were 

dependent 

instability 

Stagnant  wage  growth  paired  with  low 
work  intensity  contributes  to  high  in-

low 

Italy’s 

structurally 

work  poverty  risks  and  weighs  on  job 
quality. 
labour 
productivity  growth  constrains  wage  growth. 
Together  with  low  work  intensity,  inadequate 
wages contribute to high in-work poverty risks 
and  reduce  the  attractiveness  of  certain 
occupations.  Against  this  background,  and 
having  declined  in  the  previous  year,  in-work 
poverty  risks  increased  again  in  2024,  to 
10.2%.  They  were  particularly  high  among 
part-time  and  fixed-term  workers.  More  than 
one  in  three  (36.3%)  of  those  who  worked 
between 20-45% of their full-time potential in 
the  previous  year  were  living  in  poverty. 
Enhancing  collective  bargaining, 
including 
second-level 
collective  agreements,  and 
strengthening unions’ representativeness could 
contribute to improving pay conditions. 

Non-standard  employment  contributes  to 
de  facto  gaps  in  social  protection,  while 
the  new  minimum  income  scheme  has  a 
lower  poverty-alleviating  effect.  Among 
lower 
part-time  and  fixed-term  workers, 
protection is due to benefits being directly tied 
to  wages  and 
length  of  employment. 
Furthermore,  the  self-employed  are  covered 
by  separate  systems  from  employees,  which 
often  do  not  provide  equivalent  protection, 
particularly for unemployment and sickness. In 
2023,  only  11.7%  of  the  self-employed 
received  any  social  benefits  compared  to 
45.4%  among  employees  in  general,  and  in 
2022,  most  of  the  (close  to)  5  million  self-
employed were not covered by unemployment 
(79%)  or  sickness  benefits  (69%),  as  only 
economically  dependent  self-employed, 
i.e. 
‘para-subordinate workers’, are covered for the 
latter (27).  At  the  same  time,  by  targeting 
the  new 
specific  demographic  groups, 
minimum 
di 
income 
Inclusione (AdI) led to significant cost savings. 
However,  coverage  dropped  by  around  40% 
and  the  poverty-reducing  effect  of  the  AdI  is 
significantly  lower  than  that  of  the  previous 
system  (see  Annex  11).  Both  the  diminished 
poverty-reducing  effect  of  the  reform  and  its 
labour  market 
incentivising 

scheme  Assegno 

effect 

on 

(26)  6%  of  self-employed  workers  presented  at  least  one 
element  of  external  control  over  their  activities,  and 
6.5% also declared to be dependent on only one client. 

(27)  See  European  Commission  and  Social  Protection 
Committee, Access to social protection for workers and 
the self-employed, 2024. 

20 

 
 
 
participation  will  require  close  monitoring. 
Meanwhile inequality increased again, with the 
income  quintile  share  ratio  rising  from  5.3  in 
2023  to  5.5  in  2024.  Adopting  policies  to 
provide for adequate income replacement and 
improve  access  to  social  protection  increases 
financial security and improves job quality. 

reflects 

labour  market 

Further  expanding  childcare  and  long-
term  care  (LTC)  services  could  increase 
women’s 
labour  market  participation. 
Women’s  participation  in  the  labour  market 
remains  low,  particularly  in  the  South,  where 
the  gap  in  female  employment  compared  to 
men is nearly  twice the national  average. The 
employment  gap  also 
important 
shortages  in  early  childhood  education  and 
care 
(ECEC),  as  well  as  LTC  services, 
collectively  acting  as  a  significant  barrier  to 
women’s 
participation. 
Expanding  LTC  is  crucial  to  boosting  female 
participation and meeting rising care demands 
amid  demographic  changes.  Italy  spends  less 
on LTC than the EU average, with most funds 
going  to  financial  transfers  rather  than  direct 
care  services.  Labour  shortages  in  healthcare 
hinder  the  expansion  of  services,  and  may 
worsen as many  workers approach retirement 
(see  Annex  14).  Under  the  RRF,  Italy  is 
delivering  on  important  investments  in  ECEC 
and  on  a  reform  of  services  for  non-self-
sufficient  older  people.  However,  given 
persisting 
to 
increase  ECEC  and  LTC  should  be  more 
targeted  at 
low  coverage. 
regions  with 
Furthermore,  emphasising  active  ageing  and 
work-life  balance  policies,  along  with  funding 
the  ‘Active  Ageing’  Law  33/2023,  could  help 
sustain the LTC system. 

regional  disparities,  efforts 

Addressing  these  challenges  will  help 
Italy  boost  upward  social  convergence. 
The  second-stage  analysis  in  line  with  the 
to 
Social  Convergence  Framework  points 
challenges  for  Italy  that  may  affect  social 
convergence  in  relation  to  its  labour  market, 
education  and  skills,  as  well  as  its  social 
situation (28). 

Addressing regional inequalities 

in 

to 

the 

regional  disparities 

Persistent  regional  inequalities  call  for 
policy attention. Although in recent years the 
RRP,  together  with  Cohesion  Funds,  have 
supported  southern  regions,  and  economic 
growth  for  the  whole  country  in  general, 
finance  current 
municipalities’  ability 
expenditure, 
to  operate  new 
including 
infrastructure,  places  a  constraint  on  capital 
investment, especially in the South. This partly 
explains 
the 
provision  of  ECEC,  which  is  managed  at 
municipal  level.  For  instance,  in  the  South, 
ECEC  coverage  is  only  16.5%,  compared  to 
more  than  30%  in  the  Centre-North,  showing 
wide  gaps  between  municipalities  in  terms  of 
minimum 
(LEP).  Most 
significantly 
southern 
underperforming  in  the  implementation  of 
essential 
in 
levels  of  assistance 
healthcare, which aim to guarantee a range of 
health  services  to  all  citizens  across  the 
territory  (Svimez,  2023)  (see  Annex  14).  As 
regards  LTC  services,  provision  is  highest  in 
the  North-East,  with  10  beds  per  1 000 
residents,  compared  to  three  beds  in  the 
South.  The  South  also  experienced  a  more 
pronounced  decrease 
the  number  of 
employees  of  municipalities,  compared  to  the 
Centre-North (Svimez, 2024). 

levels  of  services 
regions  are  also 

(LEAs) 

in 

In  December  2024, 

The implementation of the differentiated 
is  pending  further 
autonomy  reform 
clarification. 
the 
Constitutional Court ruled that several aspects 
of  the  framework 
implementing  the 
law 
reform  were  unconstitutional,  and  efforts  are 
ongoing  to  address  the  Court’s  concerns.  The 
differentiated 
implementation 
autonomy 
the 
affect 
government’s  ability  to  steer  economic  and 
fiscal 
possible 
while 
fragmentation  of  legislative  frameworks  at 
regional level could create new bottlenecks for 
private and public investments. 

the 
reform  might 

policies, 

the 

of 

(28)  European  Commission,  SWD(2025)95.  The  analysis 
relies  on  all  the  available  quantitative  and  qualitative 

evidence  and  the  policy  response  undertaken  and 
planned. 

21 

 
 
 
 
Re-thinking affordable housing 

While  housing  does  not  seem  to  be  a 
major issue at macro level, certain social 
and  employment  aspects  warrant  closer 
attention.  While  on  average,  across  the 
different  categories  of  tenure,  the  housing 
cost  overburden  rate  is  lower  than  the  EU 
average, it is slightly higher for renters in the 
free market (21.9% compared to 20.3% in the 
EU  in  2023).  Compared  to  other  Member 
States,  for  a  sizeable  proportion  of  Italian 
households housing costs are shared between 
a  larger  number  of  people,  as  also  shown  by 
relatively  high  housing  overcrowding 
the 
indicator (see Annex 11). Moreover, the severe 
housing deprivation rate is higher than the EU 
average,  in  particular  for  tenants  at  market 
prices  (11.5%  compared  to  6.5%  in  2023). 
Homelessness  also  remains  an  issue  (see 
Annex  11).  The  low  housing  overburden  rate 
could  be  seen  as  a  result  of  delayed  family 
formation, due to weaker and unstable income 
prospects for young people and more difficult 
(the  share  of  the 
access  to  mortgages 
is  13.7% 
population  with  a  mortgage 
compared to the EU average of 24.9%). 

Housing  accessibility  and  affordability 
issues  also  constrain  labour  mobility  in 
some  cities.  According  to  Confindustria,  in 
more  productive  areas  such  as  large  urban 
centres, labour productivity dynamics have not 
kept  up  with  housing  price  growth,  and  hence 
the average salary is not proportionate to the 
average dwelling cost (Istat 2022). Large cities 
such  as  Milan,  and  the  Centre-North  more 
generally,  where  labour  demand  is  higher, 
struggle to attract  skilled workers also due to 
housing  costs.  The  relatively  high  share  of 
outright homeowners (75.2% compared to the 
EU average of 62.9%) may also be a potential 
barrier  to  labour  mobility.  This  contributes  to 
an  inefficient  allocation  of  the  labour  force. 
Students  who move to  larger  cities  for  higher 
education are negatively impacted as well.  

There is room to re-think housing-related 
policies  and  well-being  where  they  are 
most needed, including support for labour 
mobility. Public spending on housing over the 

decade  2010-2020  was  in  line  with  the  EU 
average (between 0.4% and 0.6% of GDP) (29). 
However, it skyrocketed to the highest value in 
the  EU (4.3%  of  GDP)  in 2023  due  to the tax 
credit to support energy-efficiency renovations 
of  residential  buildings  (Superbonus).  Rental 
subsidies  are  limited  in  Italy.  Regulated  rent 
only  plays  a marginal  role.  Indeed,  data  show 
that the share of tenants who rent at reduced 
market  prices  in  Italy  is  lower  than  the  EU 
average  (8.1%  compared  to  10.2%  in  2023), 
even  among  the  poorest  (14.0%  vs  22.6%). 
Moreover,  the  share  of  the  stock  of  public 
housing  decreased  to  2.4%  in  2022  (from 
4.2%  in  2010),  due  to  the  budget  constraints 
faced by local administrations and the sale of 
residential  real  estate  assets  owned  by  social 
security institutions. By contrast, a large share 
of  homeowners benefits  from  low  taxation  of 
property, as first residences are exempted and 
cadastral  values  not  aligned  with  market 
values. The stock of housing units available for 
long-term  renting  is  negatively  impacted  by 
the  high  number  of  short-term 
rentals, 
particularly  in  touristic  destinations.  Further 
efforts  on  sectoral  regulation  are  needed  to 
rebalance  this  allocation  and  reduce  the 
pressure  on  prices  for  residents.  In  cities  and 
densely  populated  municipalities,  about  1.8 
million  homes  are  unoccupied.  The  newly 
presented Italian Housing Plan tackles housing 
disadvantage  and  supports  public  and  social 
housing,  including  by  making  use  of  unused 
buildings  and  rehabilitating  derelict  ones. 
However, the plan is not yet operational. As a 
recently 
complementary  measure, 
adopted a decree (known as Caivano) to tackle 
disadvantage 
in  a  number  of  urban 
peripheries, in particular where there is a high 
presence  of  public  housing.  Private  entities 
also  contribute  to  the  affordable  housing 
stock,  through  housing  cooperatives  (87 000 
new  homes  built  between  2015  and  2024) 
(Confcooperative  Habitat  2024)  and  private 
funds such as the FIA (Fondo Investimenti per 
l’Abitare),  with  the  aim  of  attracting  private 
and  public  funds  for  the  creation  of  19 000 
affordable  social  housing  units  (with  11 633 
already built) (Cassa depositi e prestiti). 

Italy 

(29)  COFOG category ‘Housing and community amenities’. 

22 

 
 
KEY FINDINGS 

To  boost  competitiveness,  sustainability  and 
social fairness, Italy would benefit from: 

offices would increase the contribution 
to 
made  by  academic 
innovation; 

research 

swiftly 

•  accelerating  the  implementation 
of the  RRP,  including  the  REPowerEU 
implementing 
chapter; 
cohesion policy, taking advantage of 
the  opportunities  under  the  mid-term 
review;  and  making  optimal  use  of 
EU  instruments,  including  InvestEU 
and STEP, to improve competitiveness; 

• 

•  simplifying 

the 

increasing 

business 
environment  by 
the 
efficiency of the public administration, 
by  further  supporting  a  strategic 
management  of  human  resources, 
increasing the efficiency of the justice 
the 
system  by 
further 
backlog 
time, 
enhancing  competition  as  well  as 
supporting  digitalisation,  including  by 
speeding-up  the  roll-out  of  very  high-
capacity digital networks; 

disposition 

reducing 

and 

• 

• 

innovative 

taking targeted actions to support 
high-growth 
firms, 
investment  in  R&D  and  access  to 
capital.  Productivity  and  business 
dynamism  would  be  boosted  by 
rostering  the  aggregation  of  firms,  in 
particular SMEs, focusing incentives on 
accelerating  business  R&D  spending, 
promoting innovation procurement and 
expanding access to non-bank finance, 
institutional 
including  by  attracting 
investors; 

improving 
the  efficiency  and 
attractiveness  of  the  university 
system,  to  boost  its  innovative 
potential.  Regular  and  predictable 
national  competitive  research  funding, 
stronger 
the 
commercialisation  of  research  and 
more  effective  technology  transfer 

incentives 

for 

for 

with 

Plan 

implementing 
innovation-driven 
industrial  policy.  In  relation  to  the 
Strategic 
the  Special 
Economic Zone, this includes the better 
identification  of  strategic  sectors, 
taking account of new industrial trends 
and  technologies,  to  promote  better 
targeting of policy measures and their 
infrastructural 
integration 
investment.  With  respect  to  the  new 
national  industrial  strategy,  a  clear 
and  efficient  governance  will  be 
correct 
ensure 
central 
implementation. 
the 
national  industrial  strategy  should  be 
coordinated with the Strategic Plan for 
the  SEZ  and  should  identify  strategic 
sectors  and  effective  instruments  to 
promote them; 

Moreover, 

its 

to 

• 

remaining 
the 
tackling 
weaknesses  in  the  tax  system  by 
shifting the current high tax burden on 
labour to other under-used sources of 
taxation 
revenue,  gearing  energy 
towards  the  green  transition,  and 
further combating tax evasion; 

•  mitigate  the  effects  on  potential 
growth  and  fiscal  sustainability. 
This  includes  policies  to  improve  the 
efficiency  and  effectiveness  of  public 
spending,  limiting  the  use  of  early 
retirement schemes, as well as policies 
to 
demographic 
the 
including  the  attraction 
challenges, 
and 
productive 
workforce; 

retainment 

address 

of 

• 

increasing 
renewables 
generation 

the 
in 

through 

share 

of 
electricity 
simple  and 

23 

 
 
knowledge 

higher 
oriented 
education  and  improving  basic  and 
transversal 
the 
education cycle.  

throughout 

skills 

in 

storage 
and 

legislation, 
consolidated  permitting 
investments  in  the  electricity  grid  (in 
particular 
and 
demand-
interconnectivity) 
to  promote 
response  mechanisms 
non-fossil  fuel  sources,  also  with  the 
aim  of  mitigating  energy  prices  and 
meeting  the  Effort  Sharing  Regulation 
target; 

among 

•  mitigating  climate  risks  and  their 
economic impact, including by: better 
different 
coordination 
authorities  and  bodies,  particularly  in 
the  management  of  hydrogeological 
and  water  resources;  wider  use  of 
habitat 
nature-based 
restoration 
soil 
management  to  prevent  soil  loss  and 
degradation;  measures  to  tackle  the 
climate insurance coverage gap; 

sustainable 

solutions, 

and 

• 

• 

upward 
boosting 

social 
to 
support 
labour 
convergence, 
market  participation,  especially  of 
women,  by  further  expanding  the 
provision  of  childcare  and  long-term 
care services, particularly in the South; 

reducing 
market 
labour 
segmentation  and  improving  job 
stable  employment 
quality  and 
contracts; 

short-term 
including 

•  addressing 
skills 
by 
demand, 
strengthening 
vocational 
education  and  training  and  in-
by 
work 
expanding  the  ITS  academy  and  by 
learning, 
work-based 
fostering 
focusing  on 
technical  and 
the 
transversal skills currently in demand; 

particularly 

training, 

retaining  a 

•  enhancing  labour  productivity  and 
innovation  by  building,  attracting 
high-skilled 
and 
workforce,  including  by  aligning  the 
education  and  training  system  with 
investments  in  high-growth  sectors 
with  a 
strengthening 
transversal  skills  –  including  relevant 
digital  and  green  skills  –  and  work-

focus  on 

24 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

Fiscal 

A1.  Fiscal surveillance and debt sustainability 

A2.  Taxation 

Productivity 

A3. 

Innovation to business 

A4.  Making business easier 

A5.  Capital markets, financial stability and access to finance 

A6.  Effective institutional framework 

Sustainability 

A7.  Clean industry and climate mitigation 

A8.  Affordable energy transition 

A9.  Climate adaptation, preparedness and environment 

Fairness 

A10.  Labour market 

A11.  Social policies 

A12.  Education and skills 

A13.  Social Scoreboard 

A14.  Health and health systems 

Horizontal 

A15.  Sustainable development goals 

A16.  CSR progress and EU funds implementation 

A17.  Competitive regions 

LIST OF TABLES 

General government balance and debt 
Net expenditure growth 
Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the recommendation 
Defence expenditure 

A1.1. 
A1.2. 
A1.3. 
A1.4. 
A1.5.  Macroeconomic developments and forecasts 
A1.6. 
A1.7. 
A1.8. 
A1.9. 

General government budgetary position 
Debt developments 
RRF – Grants 
RRF - Loans 

27 

30 

30 

40 

44 

44 

50 

56 

64 

69 

69 

76 

83 

89 

89 

94 

99 

103 

104 

107 

107 

110 

117 

31 
31 
32 
32 
33 
33 
34 
34 
35 

 
 
 
Implementation of reforms and investment underpinning the extension 

A1.10. 
A1.11.  Projected change in age-related expenditure in 2024-2040 and 2024-2070 
A1.12.  Fiscal Governance Database Indicators 
A2.1. 
Taxation Indicators 
A3.1. 
Key innovation indicators 
A4.1.  Making Business Easier: indicators. 
A5.1. 
A6.1. 
A6.2. 
A7.1. 
A8.1. 
A9.1. 
A13.1.  Social Scoreboard for Italy 
A14.1.  Key health indicators 
A16.1.  Selected EU funds with adopted allocations - summary data (million EUR) 
A16.2.  Summary table on 2019-2024 CSRs 
A17.1.  Selection of indicators at regional level in Italy 

Financial indicators 
Italy. Indicators on administrative burden reduction and simplification 
Key Digital Decade targets monitored through the Digital Economy and Society Index 
Key clean industry and climate mitigation indicators: Italy 
Key Energy Indicators 
Key indicators tracking progress on climate adaptation, resilience and environment 

LIST OF GRAPHS 

A2.1. 
A2.2. 
A3.1. 
A3.2. 

Tax revenue shares in 2023 
Tax wedge for single and second earners, % of total labour costs, 2024 
Public R&D intensity 2014-2023 
Top 3 sectors for R&D investment of Italian companies among top 2 000 global R&D investing companies in 2023 (% 
share, Italy vs worldwide) 

Greenhouse gas emissions from the effort sharing sectors, 2005 and 2023 
Retail energy price components for household and non-household consumers, 2024 

Italy's installed renewable capacity (left) and electricity generation mix (right) 
Direct dependency(1) on ecosystem services(2) of the gross value added generated by economic sector in 2022 
Investment needs and gaps in EUR million, in 2022 constant prices 

A4.1.  Making Business Easier: selected indicators. 
A5.1. 
Net savings-investment balance 
A5.2. 
Italy's international investment position 
A5.3. 
Capital markets and financial intermediaries 
A5.4. 
Composition of NFC funding as a % of GDP 
A5.5. 
Composition of households' financial assets per capita and as a % of GDP 
A6.1. 
Trust in justice, regional / local authorities and in government 
A6.2. 
Indicators of Regulatory Policy and Governance (iREG) 
A7.1. 
GHG intensity of manufacturing and energy-intensive sectors, 2022 
A7.2.  Manufacturing industry production: total and selected sectors, index (2021 = 100), 2017-2023 
A7.3. 
A8.1. 
A8.2.  Monthly average day-ahead wholesale electricity prices and European benchmark natural gas prices (Dutch TTF) 
A8.3. 
A9.1. 
A9.2. 
A10.1.  Key labour market indicators 
A10.2.  Labour market outcomes of young people 
A10.3.  Employment by type (y-o-y change) 
A11.1.  AROPE and its components 
A11.2. 
In-work-at-risk-of-poverty rates 
A12.1.  Basic skills among adults in Italy 
A14.1.  Life expectancy at birth, years 
A14.2.  Treatable mortality 
A15.1.  Progress towards the SDGs in Italy 
A16.1.  Distribution of RRF funding in Italy by policy field 
A16.2.  Distribution of cohesion policy funding across policy objectives in Italy 
A17.1.  Population dynamics 
A17.2.  Youth migration from Mezzogiorno to Centre-North 
A17.3.  Capital expenditure in Centre-North and Mezzogiorno 
A17.4.  Revenues of regional and local public sector 

37 
38 
39 
41 
49 
55 
63 
65 
66 
75 
82 
88 
103 
104 
113 
114 
119 

40 
42 
45 

46 
51 
56 
57 
57 
59 
60 
64 
64 
71 
72 
72 
76 
76 
79 
86 
87 
89 
90 
93 
94 
95 
101 
104 
104 
107 
111 
111 
118 
120 
121 
122 

28 

 
 
 
LIST OF MAPS 

A17.1.  Real GDP per head growth (2019-2023) 
A17.2.  Accessibility indices based on connection times 
A17.3.  Technical quality of water services, 2023 
A17.4.  Costs of climate-related vulnerability 

117 
120 
121 
122 

29 

 
 
 
 
FISCAL 
ANNEX 1: FISCAL SURVEILLANCE AND DEBT SUSTAINABILITY 

This Annex contains a series of tables relevant for the assessment of the fiscal situation in Italy, including 
how  Italy  is  responding  to  Council  recommendations  issued  under  the  reformed  Economic  Governance 
Framework. 

The  reformed  framework,  which  entered  into  force  on  30  April  2024  (30),  aims  to  strengthen  debt 
sustainability  and  promote  sustainable  and  inclusive  growth  through  growth-enhancing  reforms  and 
priority investments. The medium-term fiscal-structural plans (hereinafter, MTPs or plans) constitute the 
cornerstone  of  the  framework,  setting  the  budgetary  commitment  of  Member  States  over  the  medium 
term. The latter is defined in terms of net expenditure growth, which is the single operational indicator for 
fiscal surveillance.  

Italy  submitted  its  plan  on  15  October  2024.  The  plan  covers  the  period  until  2029,  and  presents  an 
extended fiscal adjustment over seven years, which is underpinned by a set of reforms and investments 
to  which  Italy  committed  with  the  aim  of  improving  potential  growth  and  fiscal  sustainability.  On  21 
January 2025, the Council adopted the Recommendation endorsing Italy’s plan (31). On 21 January 2025 
the Council also adopted a Recommendation under Article 126(7) TFEU to correct the excessive deficit in 
Italy(32).  The  corrective  net  expenditure  path  recommended  by  the  Council  under  the  excessive  deficit 
procedure is consistent with the path set out in the plan.  

The assessment of the implementation of the Council Recommendations to correct the excessive deficit 
and endorsing Italy’s plan is carried out on the basis of outturn data from Eurostat and the Commission 
Spring 2025 Forecast, and taking into account the Annual Progress Report (APR), that Italy submitted on 
30 April 2025. Furthermore, in the context of the Commission Communication of 19 March 2025(33), on 
accommodating defence expenditure within the Stability and Growth Pact, the Annex reports the projected 
increase in defence expenditure based on the Commission Spring 2025 Forecast.  

The Annex is organised as follows. First, developments in government deficit and debt are presented 
based  on  the  figures  reported  in  table  A1.1.  Then,  the  assessment  of  the  implementation  of  the 
Council Recommendation to correct the excessive deficit and of the Council Recommendation 
endorsing  the  plan  follows,  based  on  the  relevant  figures  presented  in  Tables  A1.2  to  A1.9,  including 
data  on  defence  expenditure.  Further  on,  the  progress  made  in  the  implementation  of  the  set  of 
reforms and investments underpinning the extension of the fiscal  adjustment period (34) is assessed, 
taking into account the information presented in Table A1.10. 

The Annex also provides information on the cost of ageing and the national fiscal framework. Fiscal 
sustainability risks are discussed in the Debt Sustainability Monitor 2024 (35). 

(30)  Regulation (EU) 2024/1263 of the European Parliament and of the Council (EU) on the effective coordination of economic policies 
and on multilateral budgetary surveillance, together with the amended Regulation (EC) No 1467/97 on the implementation of the 
excessive deficit procedure, and the amended Council Directive 2011/85/EU on the budgetary frameworks of Member States are the 
core elements of the reformed EU economic governance framework. 

(31)  OJ C, C/2025/651, 10.2.2025, ELI: EUR-Lex - 32025H00651 - EN - EUR-Lex.  

(32)  Council Recommendation with a view to bringing an end to the situation of an excessive deficit in Italy (C/2025/5035).  

(33)  Communication  from  the  Commission  accommodating  increased  defence  expenditure  within  the  Stability  and  Growth  Pact of  19 

March 2025, C(2025) 2000 final. 

(34)  According to the Regulation., the required fiscal adjustment (in particular to put or keep the government debt ratio on a plausible 
downward path by the end of the adjustment period or keep it at prudent levels below 60% of GDP; and to bring or maintain the 
deficit below 3% of GDP over the medium term) should be completed in four years but may be extended over a period to up seven 
years if the Member State commits to a relevant set of reforms and investments. The adjustment period of Italy has been extended 
to seven years based on the set of reforms and investments laid out in detail in Annex II of the Council recommendation  endorsing 
the plan of Italy. 

(35)  European Commission (2025) ‘Debt Sustainability Monitor 2024,’ European Economy-Institutional Papers 306. 

30 

 
 
 
 
 
Developments in government deficit and debt  

Italy’s government deficit amounted to 3.4% of GDP in 2024, sharply down from 7.2% in 2023 due to the 
phase-out  of  sizeable  tax  credits  for  housing  renovations  and  support  measures  related  to  the  energy 
crisis,  together  with  buoyant  tax  revenues,  while  interest  expenditure  rose.  Based  on  the  Commission 
Spring 2025 Forecast, it is projected to marginally decrease to 3.3% of GDP in 2025 and 2.9% of GDP in 
2026, based on unchanged policies. The government debt-to-GDP ratio amounted to 135.3% at the end 
of 2024 (it was around 134% just before the pandemic) and, according to the Commission, it is projected 
to increase to 136.7% at end-2025. This debt increase, in a context of a return to primary surplus, is due 
to sizeable borrowing needs related to the lagged cash impact of the tax credits for housing renovations 
that affected previous years’ deficits, while the interest-growth-differential is less favourable than after 
the pandemic and now weighs on debt developments (‘snow-ball’ effect in Table A1.7).  

Table A1.1:  General government balance and debt 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Developments in net expenditure  

The  net  expenditure  (36)  growth  of  Italy  in  2025  is  forecast  by  the  Commission  (37)  to  be  below  the 
recommended  maximum.  Considering  2024  and  2025  together,  the  cumulative  growth  rate  of  net 
expenditure is also projected to be below the recommended maximum cumulative growth rate.  

Table A1.2:  Net expenditure growth 

* The cumulative growth rates are calculated by reference to the base year of 2023.  
Source:  Council Recommendation to correct the excessive deficit in Italy, Annual Progress Report (APR) and Commission's 
calculations based on Commission Spring 2025 Forecast (COM). 

General government defence expenditure in Italy amounted to 1.4% of GDP in 2021 and 1.2% of GDP in 
both 2022 and 2023 (38). According to the Commission 2025 Spring Forecast, expenditure on defence is 
projected at 1.3% of GDP in 2024 and 2025. 

(36)  Net expenditure is defined in Article 2(2) of Regulation (EU) 2024/1263 as government expenditure net of (i) interest expenditure, 
(ii) discretionary revenue measures, (iii) expenditure on programmes of the Union fully matched by revenue from Union funds,  (iv) 
national  expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of  unemployment  benefit 
expenditure, and (vi) one-off and other temporary measures.  

(37)  Commission Spring 2025 Forecast, European Economy-Institutional Paper 318, May 2025. 

31 

2024OutturnAPRCOMAPRCOM1General government balance% GDP-3.4-3.3-3.3-2.8-2.92General government gross debt% GDP135.3136.6136.7137.6138.2Variables20252026RECAPRCOMRECAPRCOM2024n.a.-2.1%-2.2%n.a.n.a.n.a.20251.3%1.3%1.2%-0.7%-0.9%-1.0%20261.6%n.a.1.5%0.9%n.a.0.5%AnnualCumulative*Growth rates 
 
 
 
 
 
 
 
 
Table A1.3:  Net expenditure (outturn and forecast), annual and cumulated deviations vis-à-vis the 
recommendation 

* The growth rate for 2024 is not a recommendation but serves to anchor the base, as the latest year with outturn data when 
setting the net expenditure path is year 2023.  
Source: Commission Spring 2025 Forecast and Commission's calculations 

Table A1.4:  Defence expenditure 

Source:  Eurostat (COFOG), Commission Spring 2025 Forecast 

(38)  Eurostat, government expenditure by classification of functions of government (COFOG).  

32 

2023202420252026OutturnOutturnCOMCOM1Total expenditurebn NAC1150.01108.41149.71175.62Interest expenditurebn NAC77.885.287.992.23Cyclical unemployment expenditurebn NAC-2.3-4.5-5.9-5.94Expenditure funded by transfers from the EUbn NAC24.67.718.224.25National co-financing of EU programmesbn NAC3.13.05.87.76One-off expenditure (levels, excl. EU funded)bn NAC0.70.70.30.37=1-2-3-4-5-6Net nationally financed primary expenditure (before discretionary revenue measures, DRM)bn NAC1046.11016.41043.41057.28Change in net nationally financed primary expenditure (before DRM)bn NAC-29.727.113.89DRM (excl. one-off revenue, incremental impact)bn NAC-6.714.6-2.010=8-9Change in net nationally financed primary expenditure (after DRM) bn NAC-23.012.415.911Outturn / forecast net expenditure growth% change-2.20%1.2%1.5%12Recommended net expenditure growth*% change-1.9%1.3%1.6%13=(11-12) x 7Annual deviationbn NAC-3.1-0.8-0.814 (cumulated from 13)Cumulated deviationbn NAC-3.1-3.9-4.815=13/17Annual balance% GDP-0.10.00.016=14/17Cumulated balance% GDP-0.1-0.2-0.217p.m. Nominal GDP  bn NAC2131.42192.22256.12316.2Variables2021202220232024202520261Total defence expenditure% GDP1.41.21.21.31.31.32of which: gross fixed capital formation% GDP0.40.30.30.40.40.4 
 
 
                              
 
 
 
 
 
 
 
Table A1.5:  Macroeconomic developments and forecasts 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

Table A1.6:  General government budgetary position 

Source: Commission Spring 2025 Forecast (COM), Annual Progress Report (APR) 

33 

2024OutturnAPRCOMAPRCOM1=7+8+9Real GDP% change0.70.60.70.80.92Private consumption% change0.41.01.21.01.13Government consumption expenditure% change1.11.50.90.50.94Gross fixed capital formation% change0.50.60.81.51.55Exports of goods and services% change0.40.10.92.01.76Imports of goods and services% change-0.71.21.72.92.4Contributions to real GDP growth 7- Final domestic demandpps0.50.91.01.01.18- Change in inventoriespps-0.20.0-0.10.10.09- Net exportspps0.4-0.3-0.2-0.2-0.210Output gap% pot GDP1.00.70.60.60.711Employment % change1.60.60.90.70.312Unemployment rate%6.56.15.95.95.913Labour productivity% change-0.90.0-0.30.10.614HICP % change1.12.11.81.91.515GDP deflator% change2.12.32.22.21.716Compensation of employees per head% change3.42.53.42.92.517Net lending/borrowing vis-à-vis the rest of the world% GDP0.9n.a.1.6n.a.2.020252026Variables2024OutturnAPRCOMAPRCOM1=2+3+4+5Revenue47.147.547.7n.a.47.9of which:2- Taxes on production and imports14.114.014.0n.a.13.93- Current taxes on income, wealth, etc.15.715.215.2n.a.15.14- Social contributions12.813.413.5n.a.13.55- Other (residual)4.64.95.0n.a.5.38=9+16Expenditure 50.650.851.0n.a.50.8of which:9- Primary expenditure46.746.947.1n.a.46.8of which:10- Compensation of employees 9.08.98.9n.a.8.711- Intermediate consumption5.85.95.9n.a.6.012- Social payments22.722.822.8n.a.22.713- Subsidies1.71.51.3n.a.1.414- Gross fixed capital formation3.53.63.8n.a.3.915- Other4.04.24.4n.a.4.016- Interest expenditure3.93.93.9n.a.4.018=1-8General government balance-3.4-3.3-3.3-2.8-2.919=1-9Primary balance0.40.70.6n.a.1.120Cyclically adjusted balance-4.0n.a.-3.6n.a.-3.221One-offs0.20.10.1n.a.0.122=20-21Structural balance-4.1-3.8-3.7n.a.-3.423=22+16Structural primary balance-0.30.20.2n.a.0.6Variables (% GDP)20252026 
 
 
 
 
 
 
 
 
 
Table A1.7:  Debt developments 

* End of period. ** The 'snow-ball' effect captures the impact of interest expenditure on accumulated general government debt, as 
well as the impact of real GDP growth and inflation on the general government debt-to-GDP ratio (through the denominator). The 
stock-flow adjustment includes differences in cash and accrual accounting (including leads and lags in Recovery and Resilience 
Facility grant disbursements), accumulation of financial assets, and valuation and other residual effects. 
Source: Commission Spring 2025 Forecast and Commission's calculation (COM), Annual Progress Report (APR) 

Table A1.8:  RRF – Grants 

Source: Annual Progress Report 

34 

2024OutturnAPRCOMAPRCOM1Gross debt ratio* (% of GDP)135.3136.6136.7137.6138.22=3+4+8Change in the ratio (pps. of GDP)0.71.31.3n.a.1.5Contributions**3Primary balance-0.4-0.7-0.6n.a.-1.14≈5+6+7'Snow-ball' effect0.20.10.1n.a.0.4of which:5- Interest expenditure3.93.93.9n.a.4.06- Real growth effect-1.0-0.8-0.9n.a.-1.37- Inflation effect-2.8-3.0-3.0n.a.-2.38'Stock-flow' adjustment1.01.81.9n.a.2.220252026VariablesRevenue from RRF grants (% of GDP)20202021202220232024202520261RRF grants as included in the revenue projectionsn.a.0.20.60.80.20.50.92Cash disbursements of RRF grants from EUn.a.0.51.00.60.20.30.820202021202220232024202520263Total current expenditure0.00.00.00.10.10.20.34Gross fixed capital formationn.a.0.00.00.10.10.20.45Capital transfersn.a.0.10.60.60.00.10.16=4+5Total capital expendituren.a.0.20.60.70.10.30.620202021202220232024202520267Reduction in tax revenuen.a.n.a.n.a.n.a.n.a.n.a.n.a.8Other costs with impact on revenuen.a.n.a.n.a.n.a.n.a.n.a.n.a.9Financial transactionsn.a.n.a.n.a.n.a.n.a.n.a.n.a.Expenditure financed by RRF grants (% of GDP)Other costs financed by RRF grants (% of GDP) 
 
 
                              
 
 
 
 
                              
 
 
Table A1.9:  RRF - Loans 

Source: Annual Progress Report 

Implementation of the set of reforms and investments underpinning the 
extension of the adjustment period  

Table  A1.10  includes  information  on  progress  towards  implementation  of  the  set  of  reforms  and 
investments  underpinning  the  extension  of  the  adjustment  period  that  Italy  committed  to  deliver  in  its 
medium-term fiscal-structural plan as endorsed by the Council. 

Taking into account the information provided by Italy in its Annual Progress Report, the Commission finds 
that  the  reforms  and  investments  underpinning  an  extension  that  were  due  by  the  30  April  have  been 
implemented or are currently under assessment in the context of a payment request under the RRF (for 
details, see Table A1.10).  

The set of reforms and investments underpinning the extension of the adjustment period is composed of 
several  commitments  from  the  RRP,  as  well  as  some  new  reforms  and  investments.  The  R&Is 
underpinning  an  extension  of  the  adjustment  period,  in  addition  to  those  included  in  the  RRP,  include 
reforms aimed at ensuring the implementation of the insolvency reform and improving the efficiency of 
the overall justice system. An improvement of the business environment is expected thanks to measures 
which  are  aimed  at  increasing  R&D  expenditure,  rationalising  incentives  for  firms,  adopting  annual 
competition  laws  and  strengthening  the  legal  framework  for  SMEs.  The  reinforcement  of  the  quality  of 
public  spending  is  expected  to  be  achieved  by  strengthening  the  framework  for  the  control  of  public 
expenditure  for  central  public  administrations.  The  effectiveness  of  the  public  administration  at  central 
and  local  levels  is  expected  to  be  improved  by  enhancing  human  capital  management,  simplifying 
administrative procedures and digitalising public services. In the area of childcare, the commitments are 
aimed  at  increasing  yearly  public  expenditure  to  cover  for  operating  costs,  improving  the  availability  of 
childcare  places  and  their  affordability.  In  the  area  of  taxation,  measures  are  aimed  at  aligning  the 
taxation  system  with  the  objectives  of  supporting  family  burdens,  economic  growth,  and  ecological 
transition  within  a  multi-year  perspective  and  at  reducing  the  tax  burden  on  low-and  middle-income 
families and support for employment. Concerning tax compliance, commitments are aimed at increasing 
revenues from prevention and enforcement activities. 

All the milestones and targets included in the RRP which were due by 30 April  have been implemented. 
More specifically, legislation entered into force which strengthened the trial offices, including by means of 
incentives to attract and retain the units of personnel hired, to support less efficient courts in reducing the 
civil justice backlog and to reward judicial offices that achieve the specific annual objectives of reducing 

35 

Cash flow from RRF loans projected in the Plan (% of GDP)20202021202220232024202520261Disbursements of RRF loans from EUn.a.0.10.20.40.61.32.42Repayments of RRF loans to EUn.a.0.91.11.10.71.01.020202021202220232024202520263Total current expenditure0.00.00.00.00.10.10.24Gross fixed capital formation0.00.10.10.20.40.71.65Capital transfers0.00.00.00.10.20.50.56=4+5Total capital expenditure0.00.10.10.30.61.12.120202021202220232024202520267Reduction in tax revenuen.a.n.a.n.a.n.a.n.a.n.a.n.a.8Other costs with impact on revenuen.a.n.a.n.a.n.a.n.a.n.a.n.a.9Financial transactionsn.a.n.a.0.00.00.00.00.1Expenditure financed by RRF loans (% of GDP)Other costs financed by RRF loans (% of GDP) 
 
 
                              
 
the number of pending cases in the civil justice system. At the end of 2023, the government adopted its 
annual competition law further liberalizing several sectors, including electricity, antitrust (merger control), 
retail activities and pharmaceuticals. Italy set up and is implementing a tool for scanning and monitoring 
administrative  capacity  gaps  at  all  levels  of  the  government,  created  a  platform  for  the  reskilling  of 
existing  civil  servants,  and  streamlined  the  recruitment  process  of  new  ones  through  standardised  job 
profiles and a single recruitment platform. The spending review framework was revised and the spending 
review  for  the  year  2023  has  been  completed.  Several  provisions  for  encouraging  tax  compliance  and 
improving tax audits and controls have been introduced, the number of “compliance letters” together with 
the  corresponding  revenues  generated  have  been  increased  while  the  number  of  “false  positive” 
compliance  letters  has  declined,  and  the  operational  capacity  of  the  tax  administration  has  been 
improved. Reforms and investments in new areas compared to the RRP are properly advancing. In the area 
of taxation, the 2025 budget already introduced some provisions well in advance of the first deadline in 
Q4 2026. In particular, the 2025 budget made permanent the labour tax wedge cut introduced in 2024. In 
relation to the review of the scope of tax expenditures, some personal income tax deductions have been 
revised in a selective manner — by limiting them for high income earners — and tax credits for business 
investments have been amended. Finally, the government is working on updating property records through 
the  new  Integrated  Land  System  (SIT)  and  has  begun  identifying  and  registering  previously  unlisted 
buildings, aiming for completion by 2027. It is also preparing to adjust cadastral values for properties that 
have undergone improvements, especially those subsidised by public funds. In the area of tax compliance, 
the 2025 budget already introduced some provisions well in advance of the Q4 2026 deadline. Namely, 
those provisions are related to the mandatory inclusion of property identification codes for tourist rentals, 
compulsory integration of electronic payments with digital cash registers, and requirements for traceable 
payments to qualify for certain tax deductions. 

36 

 
Table A1.10:Implementation of reforms and investment underpinning the extension 

37 

RRP milestones and targets related to M1C1.R1.4 - Reform of civil justice*Q4-2021;                   Q1-2024;                   Q4-2024;                      Q2-2026Reported as completed – under assessment**Take actions to ensure and strengthen the implementation of the insolvency reformQ2 2027Carry out an impact assessment and adopt corrective actions where neededQ4 2027Reduction of backlog cases for the Civil Ordinary Courts (first instance) Q4 2028Reduction of backlog cases for the Civil Court of Appeal (second instance) Q4 2028Reduction in the length of civil proceedingsQ4 2028Ensure adequate personnel for the office of trial and the technical administrative personnel Q4-2026;                   Q4-2027;                   Q4-2028;                      Q4-2029RRP milestones and targets related to M1C1.R1.12 - Reform of the tax* administrationQ4-2021;                     Q2-2022;                    Q4-2022;                       Q2-2023;                        Q4-2023;                      Q2-2024;                      Q4-2025;                    Q2-2026CompletedAchievement of annual performance targets that progressively ensures a reduction in VAT repayment times Q4-2025;                     Q4-2027;                Q4-2029Achievement of annual performance targets that progressively ensures higher revenues from prevention and enforcement activities Q4-2027;                Q4-2029.Strengthen the fight against tax evasion resulting from omitted declarations, by (i) in the event of detected tax evasion, removing tax advantages (“compensazione orizzontale”, “rimborsi di imposte”, “regimi premiali”) and, where relevant, suspending the exercise of the public concessions; (ii) integrating national short-term rental codes into the databases for tax risk analyses conducted by the Revenue Agency; (iii) introducing compulsory connections between automatic cash registers and electronic payments for all businesses; (iv) requiring traceable means of payments for the tax deductibility of expenses related to transport, food and accommodation Q4 2026RRP milestones and targets related to M1C2.R2 - Annual Competition Laws*Q4 2022;                      Q4 2023;                       Q4 2024;                        Q4 2025Reported as completed – under assessment**Increase public R&D spendingQ4 2025;                      Q4 2026;                       Q4 2027;                        Q4 2028;                         Q4 2029Rationalization and simplification of incentives for firms, following up on reform M1C2-R3 in the RRP Q2 2028Adoption of Annual Competition Laws Q4 2026;                       Q4 2027;                              Q4 2028;                            Q4 2029Adoption of a framework law on SMEs on annual basis, based on an impact assessment, and entry into force of the implementing instrumentsQ4 2026;                         Q4 2027;                        Q4 2028RRP milestones and targets related to M1C1.R1.9 - Reform of the public administration*Q2-2021;                    Q4-2021;                      Q2-2022;                      Q4-2022;                     Q2-2023;                      Q4-2023;                      Q2-2024;                      Q4-2024;                    Q2-2025;                Q2-2026Reported as completed – under assessment**Implementation of vertical mobilityQ4 2026Implementation of horizontal mobilityQ4 2026Valorization of performance-based frameworkQ4 2026Ensure adequate financial coverage for operating available childcare facilitiesQ4 2027Ensure adequate supply of childcare services in line with the Barcelona Target and the national target for 2027, taking into account regional disparitiesQ4 2027Increase the affordability of childcareQ4 2027RRP milestones and targets related to M1C1.R1.13 - Reform of the spending review framework*Q4 2021;                         Q2 2022;                        Q4 2022;                       Q4 2023;                                Q2 2024;                         Q2 2025;                        Q2 2026CompletedImplementation of yearly spending reviews based on the national legal frameworkQ2 2027;                         Q2 2028;                        Q2 2029Strengthened competence of the Ministry of Economy and Finance to conduct inspections on public spending management of all entities receiving public support, including subnational authorities and state-owned enterprisesQ1 2028Reform of the framework for the control of public expenditure for central public administrations, providing for enhanced financial responsibility of administrations for the management of resources as well as strengthened programming and enhanced monitoring and evaluation of policy outputs and impactsQ1 2026;                         Q1 2028Simplify the tax system through the review of the scope of tax expendituresQ4 2028Reduction of the labour tax wedge Q4 2026(a) Mapping properties that are not included in cadastral register; (b) Updating cadastral values for property taxes for buildings that have undergone energy efficiency and/or structural improvement interventions, financed in whole or in part by public funds, since 2019.Q2 2027;                         Q2 2028Reforms and investment in the area of rationalization of state-owned enterprisesTake actions to ensure and strengthen the implementation of the legal framework on State Owned Enterprises Q4 2027MeasureKey stepsRecommended implementation dateStatus(COM's assessment)Reforms and investment in the area of justiceAdding to RRP milestones and targets related to M1C1.R1.4 - Reform of civil justiceReforms and investment in the area of tax administrationAdding to RRP milestones and targets related to M1C1.R1.12 - Reform of the tax administrationReforms and investment in the area of business environmentAdding to RRP milestones and targets related to M1C2.R2 - Annual Competition LawsReforms and investment in the area of public administration and childcareAdding to RRP milestones and targets related to M1C1.R1.9 - Reform of the public administrationReforms and investment in the area of public expenditureAdding to RRP milestones and targets related to M1C1.R1.13 - Reform of the spending review frameworkReforms and investment in the area of taxation 
 
   
The progress status of each backward-looking key step (i.e. those planned to be achieved by 30 April) can be classified as either 
‘completed’ or ‘not completed’. The status of forward-looking key steps can be classified as ‘completed’, ‘on track’, or ‘delayed’. 
* These measures are included in Italy’s RRP.  
** These key steps correspond to milestones and targets of Italy’s RRP. For milestones and targets which were due by Q4 2025 
the assessment is still pending in the context of the 7th payment request under the RRF and the table does not prejudge its 
assessment. 
Source: Italy's Annual Progress Report and the Commission's assessment  

Cost of ageing  

Total  age-related  spending  in  Italy  is  projected  to  rise  from  about  27%  of  GDP  in  2024  to 
around 28% in 2040 but decline to around 25% by 2070 (see Table A1.11). The overall decrease by 
2070 is driven by pension and education spending, which together more than offset the expected increase 
in healthcare and long-term care spending. As a result, total age-related spending, which was about 3 pps 
of GDP higher than the EU average in 2024, would be similar to the EU average in 2070.  

Public  pension  spending  is  projected  to  increase  in  the  medium  term  but  start  to  decline 
steadily thereafter. In 2024, Italy had the highest pension expenditure-to-GDP ratio in the EU and this 
ratio would rise by an additional 1 pp by 2040. In the longer term, spending would fall, though, to below 
the current level, with a projected decrease of 2.4 pps by 2070 compared to the 2024 level. 

Public healthcare (39) expenditure is projected at 5.8% of GDP in 2024 (below the EU average 
of 6.6%) and is expected to increase by 0.5 pps by 2040 and by a further 0.1 pp by 2070. The 
overall increase is driven by an ageing population but is significantly constrained by a legislated constant 
nominal growth path for public healthcare expenditure until 2026.  

Public expenditure (40) on long-term care is projected at 1.5% of GDP in 2024 (slightly below 
the  EU  average  of  1.7%)  and  is  expected  to  increase  by  0.3 pps  of  GDP  by  2040  and  by  a 
further 0.3 pps of GDP by 2070. The projected increase is due to an ageing population and budgetary 
cost containment measures included in the projections until 2026. 

Table A1.11:Projected change in age-related expenditure in 2024-2040 and 2024-2070 

Source: 2024 Ageing Report (EC/EPC). 

(39)  Key performance characteristics, recent reforms and investments are discussed in Annex 11 ‘Health and health systems’.   

(40)  The quality and the accessibility of the Italian long-term care system are covered in Annex 9 ‘Social policies’. 

38 

IT27.11.00.50.3-0.61.128.3ITEU24.30.50.30.4-0.30.925.2EUIT27.1-2.40.60.6-0.7-1.925.3ITEU24.30.20.60.8-0.41.325.6EUage-related expenditure 2024 (% GDP)change in 2024-2040 (pps GDP) due to:age-related expenditure 2040 (%GDP)pensionshealthcarelong-term careeducationtotalage-related expenditure 2024 (% GDP)change in 2024-2070 (pps GDP) due to:age-related expenditure 2070 (%GDP)pensionshealthcarelong-term careeducationtotal 
 
 
  
 
 
 
National fiscal framework 

The  Parliamentary  Budget  Office  (PBO)  of  Italy  is  a  relatively  well-resourced  independent 
fiscal  institution  (IFI)  with  a  broad  mandate.  It  endorses  the  macroeconomic  forecasts  of  the 
government,  and  the  government  has  to  justify  publicly  any  deviations  from  the  fiscal  institution's 
forecasts. In addition, The PBO assesses the budgetary forecasts before the adoption in the Parliament of 
the budgetary planning documents. However, despite a number of Memoranda of Understanding, the PBO 
still  reports  issues  with  access  to  information.  In  contrast  to  the  PBO’s  participation  in  parliamentary 
hearings, which tend to attract media attention, the policy dialogue with the government often takes place 
informally, giving no particular media echo. The PBO leadership regularly gives interviews and since 2016, 
it  has  a  spokesperson,  acting  as  a  press  officer.  It  also  has  a  well-organised  website  with  some 
infographics. 

Table A1.12:Fiscal Governance Database Indicators 

The Country Fiscal Rule Strength Index (C-FRSI) shows the strength of national fiscal rules aggregated at the country level based 
on i) the legal base, ii) how binding the rule is, iii) monitoring bodies, iv) correction mechanisms, and v) resilience to shocks. The 
Medium-Term  Budgetary  Framework  Index  (MTBFI)  shows  the  strength  of  the  national  MTBF  based  on  i)  coverage  of  the 
targets/ceilings  included  in  the  national  medium-term  fiscal  plans;  ii)  connectedness  between  these  targets/ceilings  and  the 
annual budgets; iii) involvement of the national parliament in the preparation of the plans; iv) involvement of independent fiscal 
institutions in their preparation; and v) their level of detail. A higher score is associated with higher rule and MTBF strength. 
Source: Fiscal Governance Database 

39 

2023ItalyEU AverageCountry Fiscal Rule Strength Index (C-FRSI)19.4114.52Medium-Term Budgetary Framework Index (MTBFI)0.780.73 
 
 
 
 
 
ANNEX 2: TAXATION 

This  annex  provides  an 
indicator-based 
overview  of  Italy’s  tax  system.  It  includes 
information on: (I) the tax mix; (ii) competitiveness 
and  fairness  aspects  of  the  tax  system;  and  (iii) 
tax collection and compliance.  

the 

relatively  high,  with 

Italy’s  tax  revenues  as  a  percentage of  GDP 
are 
largest 
contribution  coming  from  labour  taxation. 
Table  A2.1  shows  that  Italy’s  tax  revenues  as  a 
percentage of GDP were above the EU average in 
2023  and  have  been  at  a  stable  level  in  recent 
years. Labour taxes expressed as a percentage of 
GDP  were  also  slightly  above  the  EU  average. 
However,  revenues  from  consumption  taxes  as  a 
share  of  GDP  were  close  to  the  EU  aggregate  in 
2023, despite relatively low VAT revenues in Italy 
due  to  the  widespread  use  of  reduced  VAT  rates 
and VAT exemptions. Expressed as a percentage of 
GDP,  Italy’s  revenues  from  recurrent  taxes  on 
least 
property,  which  are  among  the  taxes 
detrimental  to  growth,  were  above  the  EU 
aggregate.  However,  first  residences  are  exempt 
for  almost  all  property  taxation  and  the  values 
taxation  have  not  been 
used  for  property 
systematically updated, so to bring them closer to 
market values. Environmental tax revenues slightly 
increased between 2022 and 2023 (from 2.3% of 
GDP 
to  2.5%).  Furthermore,  pollution  and 
resources  taxes  only  accounted  for  1.1%  of 
environmental 
though 
pollution  and  resources  taxes  are  key  for  the 
application  of  the  ‘polluter  pays’  principle.  Italy  is 
implementing  environmental  taxes,  and  already 
applies  taxes  on  NOx  and  SO2  emissions,  aircraft 
noise,  waste  landfilling  and  incineration.  Italy 
applies  fees  for  food  safety,  wastewater,  and 
water  extraction  rather  than  environmental  taxes 
stricto  sensu.  The  tax  on  the  single  use  plastics 
has  been  delayed  until  July  2026.  There  remains 
scope  to  implement  taxes  on  fertilisers  and 
pesticides.  The  Italian  government  estimates  that 
the  level  of  environmentally  harmful  subsidies 
(EHS) in Italy reached EUR 24.2 billion in 2022, of 
which 
fossil-fuel 
subsidies (41).  The  reduction  of  these  subsidies  is 
Italy’s  recovery  and 
in 
one  of  the  reforms 

in  2023,  even 

billion  were 

EUR  17.1 

taxes 

resilience plan, which aims to reduce their value by 
at least EUR 2 billion in 2026 and by a further EUR 
3.5 billion at least by 2030. The 2025 budget law 
addresses  two  EHSs:  the  reduced  VAT  rate  on 
waste  disposal  and the  taxation  of  company  car 
fringe benefits. The total economic value of these 
removed subsidies is estimated at EUR 1.34 billion. 
The  2025  budget  law  provides  for  the  gradual 
phase  out  of  the  differential  tax  treatment 
between  diesel  and  gasoline,  which  is  set  to  be 
enacted by an implementing decree. 

Graph A2.1: Tax revenue shares in 2023 

Source: Taxation Trends Data, DG TAXUD 

Corporate-tax  revenues  as  a  share  of  GDP 
have increased in the last 20 years, despite a 
decline  in  the  corporate-tax  rate  over  this 
period.  Italy’s  top  statutory  corporate-income-tax 
(CIT) rate of 24% (+3.9% of IRAP)(42) is among the 
highest  in  the  EU  (where  the  average  CIT  rate  is 
around  21%).  Italy’s  forward-looking  effective 
average tax rate (EATR) (23.9%) is also above the 
EU  average  of  around  19%.  A  tax  benefit 
temporarily  introduced  for  2024  in  December 
2023 has now been extended for the period 2025-
2027  with  the  2025  Budget  Law.  This  benefit 
includes  a  greater  tax  deduction  for  the  cost  of 
‘dependent’ workers, ranging from 120% to 130% 
depending  on 
the  category  of  newly  hired 
employees  (e.g.  women,  young  workers,  former 
beneficiaries  of  the  citizenship  income  benefit). 
Additionally, a reduction in the CIT rate from 24% 
to  20%  is  applicable  to  CIT  taxpayers  that  meet 
two  specific  conditions.  The  first  condition  is  that 
at  least  80%  of  profits  registered  for  2024  must 

(41)  MASE,  Relazione  alle  Camere  e  al  CITE 

-  Esiti 
dell'aggiornamento  del  Catalogo  e  le  proposte  per  la 
progressiva eliminazione dei sussidi ambientalmente dannosi 
e  per  la  promozione  dei  sussidi  ambientalmente  favorevoli, 
2024  
https://www.mase.gov.it/sites/default/files/archivio/allegati/sv
iluppo_sostenibile/CSA6_Relazione.pdf), p.22. 

(42)  Italian  corporate  entities  are  subject  to  a  corporate  income 
tax (24%) and to a regional productive activities tax, known 
as imposta regionale sulle attività produttive or IRAP (3.9%), 
where the regions have the right to increase the rate, up to a 
maximum  of  0.92%,  also  differentiating  it  by  sectors  of 
activity or categories of taxpayers. 

40 

51.226.921.948.826.025.2Tax revenue shares in 2023, Italy (outer ring) and EU (inner ring)Taxes on labourTaxes on consumptionTaxes on capital 
 
 
     
 
 
Table A2.1:  Taxation Indicators 

(1) Forward-looking effective tax rate (KPMG) 
(2) A higher value indicates a stronger redistributive impact of taxation. 
(*) EU-27 simple average. 
(**) Forecast value for 2023. For more details on the VAT gap, see European Commission, Directorate-General for taxation and 
Customs Unions, VAT gap in the EU - 2024 Report, https://op.europa.eu/en/publication-detail/-/publication/298d43e2-bd28-11ef-
91ed-01aa75ed71a1/language-en 
Forecasts for the VAT gap need careful consideration. In Italy, the National Independent Commission on Tax Evasion's calculations 
will be reviewed following recent modifications of national accounts by the National Institute of Statistics. 
For more data on tax revenues as well as the methodology applied, see the Data on Taxation webpage, https://taxation-
customs.ec.europa.eu/taxation/economic-analysis/data-taxation-trends_en 
Source: European Commission, OECD 

in place for a long time, appear to have had little 
effect  on  growth  and  innovation,  providing  some 
into  the  effectiveness  of  the  public 
insight 
measures.  

Italy  offers  several  tax  credits  to  support 
the green and digital transition. In 2022, Italy 
released  a  new  ‘patent  box’  relief,  making  it 
possible  to  increase  by  110%  the  deduction  of 
R&D 
creation  and 
development of software, patents and designs.  

incurred 

costs 

the 

in 

Italy  performs  below  average  in  venture-
capital  financing  (as  a  percentage  of  GDP) 
within  the  EU  but  has  experienced  strong 
growth since 2013, especially compared with 
other large EU economies and the US. In 2023 
venture capital financing in Italy was equivalent to 
0.026% of GDP, whilst in 2022, it was equivalent 
to 0.035% of GDP. 

be  retained  in  the  firm  as  reserves.  The  second 
condition  is  that  at  least  30%  of  these  retained 
profits,  and  no  less  than  24%  of  the  profits 
registered  in  2023,  must  be  used  to  finance  new 
investments  in  instrumental  goods  for  productive 
structures  located  in  Italy.  These  goods  must  fall 
under  the  categories  of  ‘Transition  4.0  and  5.0’, 
with  a  minimum  investment  amount  of  EUR 
20 000. 

Italy’s R&D investment as a share of GDP is 
much  lower  than  the  European  average  and 
the  gap  has  been  increasing  over  time.  In 
2023, Italy’s R&D  expenditure as a percentage of 
GDP stood at 1.31% compared with an EU average 
of  2.22%  (43).  Public  funds  support  business 
investments  in  R&D  in  Italy  mainly  through  tax 
credits  and  by  facilitating  access  to  credit  for 
micro,  small  and  medium-sized  enterprises. 
However, these types of policies, which have been 

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

explained/index.php?title=R%26D_expenditure 

41 

ITMedian (EU-27)2010202120222023202420102021202220232024Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)41,242,241,741,437,840,239,739,0Taxes on labour (% of GDP)21,421,320,320,219,820,520,120,0of which, social security contributions (SSC, % of GDP)12,913,112,812,412,913,012,712,7Taxes on consumption (% of GDP)10,711,211,010,810,911,210,910,5of which, value added taxes (VAT, % of GDP)6,06,66,96,66,87,37,47,1Taxes on capital (% of GDP)9,29,710,410,47,18,58,78,5Personal income taxes (PIT, % of GDP)11,212,111,311,88,69,69,49,3Corporate income taxes (CIT, % of GDP)2,31,92,72,72,22,93,23,2Total property taxes (% of GDP)1,82,42,32,11,92,22,11,9Recurrent taxes on immovable property (% of GDP)0,61,41,31,21,11,11,00,9Environmental taxes (% of GDP)2,93,02,32,52,52,42,12,0Effective carbon rate in EUR per tonne of CO2 equivalentsNA102,8NA100,1NA86,0NA84,8Tax wedge at 50% of average wage (single person) (*)40,736,234,433,133,033,931,831,531,531,8Tax wedge at 100% of average wage (single person) (*)47,246,045,645,547,140,939,939,940,240,3Corporate income tax - effective average tax rates (1) (*)27,823,923,923,921,319,319,118,9Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)5,98,07,97,68,68,27,97,7Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)199,9181,035,532,6VAT gap (% of VAT total tax liability, VTTL) (**)10,910,614,76,67,0ItalyEU-27Progressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
 
 
 
  
 
Graph A2.2: Tax wedge for single and second 
earners, % of total labour costs, 2024 

The tax wedge for second earners assumes a first earner at 
100% of the average wage and no children. For the full 
methodology, see OECD, 2016, Taxing Wages 2014-2015. 
Source: European Commission 

The  labour-tax  burden  in  Italy  remains  high 
despite  recent  reforms.  In  2025,  the  2024 
reduction  of  personal-income  tax  brackets  from 
four  to  three  (23%  for  the  lower-income  bracket, 
35% for the medium-income bracket, and 43% for 
the higher-income bracket)  was made  permanent, 
and the basic tax allowance for dependent workers 
was  increased  to  EUR  8 500.  Graph  13.2  shows 
that  the  labour-tax  wedge  (44)  for  Italy  in  2024 
was  still  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. 
The tax wedge for second earners was higher than 
the  tax  wedge  for  single  persons  at  the  same 
level, but this difference was less pronounced than 
for the EU average. According to estimates by the 
Observatory on the Italian Public Accounts (CPI) of 
the Catholic University of Milan (45), in 2022 fiscal 
into  higher  tax 
drag 
brackets,  because 
these 
brackets  have  not  been  adjusted  upwards  to 
account  for  inflation)  accounted  for  0.6%  of  total 
(i.e.  EUR  360 
personal-income  tax  revenues 
million).  For  2023,  the  fiscal  drag  has  been 
estimated to account for EUR 450 million. Overall, 

(i.e.  taxpayers  moving 

thresholds  for 

the 

(44)  The  tax  wedge  is  defined  as  the  sum  of  personal  income 
taxes  and  employee  and  employer 
social-security 
contributions  net  of  family  allowances,  expressed  as  a 
percentage of total labour costs (the sum of the gross wage 
and social-security contributions paid by the employer). 

(45)  Osservatorio Conti Pubblici Italiani 2023. “Gli effetti del 

Fiscal Drag nell’ultimo biennio”. 

42 

Italy’s  labour  tax  burden  is  relatively  progressive. 
In  2023,  the  reduction  of  income  inequality 
through the tax-and-benefit system (as measured 
by 
the  Gini 
coefficient) was the same as the EU average.  

the  corresponding  change 

in 

Tax evasion in Italy remains high, although it 
has  declined  in  recent  years  thanks  to  the 
many  measures  the  government  has  taken. 
Many  measures  promoting  tax  compliance  were 
implemented in 2022 as part of the recovery and 
resilience plan, such as the extension of electronic 
invoicing,  compulsory  acceptance  of  electronic 
payments,  and  interlinked  datasets  for  targeting 
controls. Additional measures have been launched 
with  the  2025  Budget  Law  in  line  with  Italy’s 
medium-term fiscal-structural plan, such as: (i) the 
mandatory  connection  between  automatic  cash 
registers  and  electronic  payments 
for  all 
businesses;  and  (ii)  the  use  of  traceable  payment 
methods  for  the  tax  deductibility  of  expenses 
related to transport, food and accommodation.   

In  2024, 

A  new  scheme  allowing  small  taxpayers  to 
agree  their  tax  liabilities  in  advance  will 
warrant  close  monitoring. 
Italy 
introduced  an  innovative  scheme  (the  Concordato 
Preventivo  Biennale)  (46)  allowing  small  taxpayers 
(both  individuals  and  partnerships)  to  agree  with 
the tax authority their tax liability for the following 
two  years.  For  each  taxpayer,  the  relevant  tax 
liability is proposed by the tax authority based on 
a  variety  of  parameters,  including  sector  analysis 
and  economic  forecasts,  while  eligible  taxpayers 
need to comply with several requirements. Overall, 
the  take-up  of  the  scheme  appears  rather  low  so 
far.  Although  the  scheme  aims  to  improve  the 
certainty of tax obligations, incentivise investment, 
and increase declared income over time, its actual 
impact  on  tax  evasion  will  need  to  be  closely 
monitored (47). To promote tax  compliance among 
medium-to-large taxpayers (those with a turnover 

(46)  “CONCORDATO  PREVENTIVO  BIENNALE”  is  a  system  to 
calculate  tax  base  not  only  for  individual  taxpayers  and 
partnerships but also for limited liability companies. Ltds can 
adhere  to  CPB 
if  their  total  revenues  are  up  to  € 
5.164.569,00.  

(47)  Participation  in  the  Concordato  Preventivo  Biennale  was 
possible  only  until  12  December,  2024.  According  to  the 
preliminary  data,  out  of  the  4.5  million  taxpayers  that 
in  the  scheme,  approximately  only 
expressed 
585 000  taxpayers  (i.e.  those  claiming  the  proportional  tax 
regime and those eligible based on the ISA index) agreed to 
the tax administration's proposal. 

interest 

33.038.147.154.040.420253035404550556050100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - ITSingle earner - EU averageSecond earner -  ITSecond earner -  EU average 
        
 
 
in  2024), 

exceeding  EUR  750  million 
the 
government has also introduced a new cooperative 
tax-compliance  scheme  based  on  a  certified  tax 
control  framework  offering  greater  benefits  than 
the  previous  scheme.  The  perception  of  business 
regulation and taxation as an investment obstacle, 
at 34.1%, is among the highest in the EU. 

Another  indicator  of  the  effectiveness  of 
Italy’s  tax  administration  is  how  it  handles 
dispute  resolution.  Tax  administrations  often 
participate 
in  mutual  agreement  procedures 
(MAPs)  to  resolve  disputes.  The  number  of  MAPs 
that  take  place  in  a  given  Member  State  is 
typically  linked  to  the  size  and  structure  of  the 
economy  but  may  also  indicate  whether  the  tax 
system  of  the  country  is  administered  in  an 
effective way. Italy had one of the highest pending 
MAP cases in the EU in 2023 (436 cases, which is 
considerably  higher 
the  EU  average). 
than 
Although the recommended benchmark for closing 
these  cases  stands  at  24  months,  the  average 
time  taken  in  Italy  is  53  months  which  is  the 
longest in the EU. 

43 

 
PRODUCTIVITY 
ANNEX 3: INNOVATION TO BUSINESS  

innovation 

research  and 

Italy’s 
(R&I) 
potential  remains  untapped,  despite  some 
improvement in recent years. According to the 
2024 European Innovation Scoreboard, Italy is still 
a  ‘moderate  innovator’,  whose  performance  is 
89.6%  of  the  EU  average (48).  The  country’s  R&D 
intensity (49) is decreasing and amounted to 1.31% 
in 2023, far below EU levels (2.24%). Italy recently 
committed  to  increasing  public  R&D  intensity  by 
2029 (50). Although most small and medium-sized 
enterprises  (SMEs)  have  at  least  a  basic  level  of 
intensity (51)  and  most  firms  use  key 
digital 
technologies like cloud services, contributing to the 
country’s  Digital  Decade  targets,  gaps  remain  in 
the  uptake  of  artificial  intelligence  (AI)  (52).  Italy’s 
business  innovation,  underpinned  by  an  economic 
structure  based  on  small  businesses  and 
traditional sectors, still faces challenges to attract 
investment,  notably  in  the  high-tech  segments, 
and  needs  a  stronger  talent  pool  to  bridge  the 
innovation gap. 

Science and innovative ecosystem 

in 

research 

investment 

Despite  good  scientific  performance,  low 
public 
and 
development 
insufficiently 
attractive  research  careers  hamper  Italy’s 
scientific  potential.  The  country’s  share  of 
scientific  publications  among  the  top  10%  most 
cited  ones  worldwide  –  an  indicator  of  scientific 

(R&D) 

and 

in 

Italy  are 

(55)  and  historically  high 

excellence  –  is  above  the  EU  average  (11.2%  of 
total publications of the country vs 9.6% in 2021). 
However,  Italy’s  scientific  potential  is  not  entirely 
exploited  for  different  reasons.  First,  public  R&D 
intensity has remained stagnant in the last decade 
and amounted to 0.52% of GDP in 2023, far below 
the  EU  average  (0.72%),  as  shown  in  Graph 
A3.1 (53).  Additionally,  the  number  of  researchers 
employed by the public sector per capita is still low 
(3.7  researchers  per  thousand  of  the  active 
population  vs  EU  average  of  4.2  in  2023 (54). 
less  attractive 
Research  careers 
compared  to  other  EU  countries  due  to  low 
remuneration 
job 
insecurity (56),  especially  in  the  early  stages  of 
careers.  The  latest  data  on  the  Starting  Grants 
awarded by the European Research Council shows 
that,  while  Italian  grantees  were  the  second  best 
placed  among  all  competitors,  grantees  from 
Italian host institutions were only in fifth place (57). 
The  country’s  recovery  and  resilience  plan  (RRP) 
includes a measure to reform research careers (58) 
as  well  as  investments  to  enhance  the  pool  of 
human  resources  in  science  and  technology  (59), 
and 
fiscal-structural  plan 
contains  a  commitment  to  increase  Italy’s  public 
R&D intensity to 0.6% of GDP by 2029. Additional 
policy  interventions  on  research  careers,  such  as 
improving  job  security  as  well  as  guaranteeing 
adequate  financial  resources  to  public  research, 
long-term 
are 
sustainability of the R&I system beyond the end of 
RRP support in 2026. 

its  medium-term 

important 

ensure 

the 

to 

(48)  2024  European  Innovation  Scoreboard,  country  profile:  Italy 
ec.europa.eu.  The  scoreboard  provides  a  comparative 
analysis of innovation performance in EU countries, including 
the  relative  strengths  and  weaknesses  of  their  national 
innovation systems (also compared to the EU average). 

(49)  Defined  as  gross  domestic  expenditure  on  R&D  as  a 

percentage of GDP. 

(50)  Italy’s medium-term fiscal-structural plan, ‘Italia 2025-2029 
– Piano strutturale di bilancio di medio termine’, approved in 
September 2024. 

(51)  The  Digital  Intensity  Index  is  a  composite  indicator,  derived 
from  the  EU  survey  on  ICT  usage  and  e-commerce  in 
enterprises.  The 
is  calculated  based  on  12 
variables. 

indicator 

(52)  The Digital Decade policy programme sets out a pathway for 
concrete 
transformation, 
the  EU’s  digital 
commitments  from  Member  States  to  commonly  achieve 
objectives  (e.g.  competitiveness,  resilience,  sovereignty)  and 
digital targets by 2030. 

including 

(53)  This data includes the government and the higher education 

sector. 

(54)  Eurostat 

(2023).  Researchers 

(full-time  equivalents) 
employed by the public sector (government+higher education 
institutions) per thousand of the active population. 

(55)  Civera,  A.,  Lehmann,  E.  E.,  Meoli,  M.,  &  Paleari,  S.  P.  (2023). 
The Attractiveness of European Higher Education Systems: A  
Comparative  Analysis  of  Faculty  Remuneration  and  Career 
Paths, https://escholarship.org/uc/item/08x00432. 

(56)  ‘Indagine  conoscitiva  sulla  condizione  studentesca  nelle 
università  e  il  precariato  nella  ricerca  universitaria’,  VII 
Commissione permanente, Senato della Repubblica (2021). 

(57)  The  European  Research  Council,  ‘ERC  Starting  Grants  2024 
https://erc.europa.eu/sites/default/files/2024-

Statistics’, 
09/erc-2024-stg-statistics.pdf, September 2024. 

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

promote simplification and mobility’. 

(59)  Such as the RRP investment on young researchers. 

44 

 
 
 
 
 
 
Italian company is active in digital industries such 
as  software  and  computer  services  or  technology 
hardware and equipment. These sectors represent 
around  35%  of  R&D investment made  by the  top 
2 000  industrial  investors  worldwide.  Italian  top 
R&D  investors  mainly  focus  on  more  traditional 
sectors  such  as  fixed  line  telecommunications, 
banking  and  pharmaceuticals/biotechnology  (the 
last  sector  has  high  value-added),  as  shown  in 
Graph  A3.2 (65).  Italian  R&D  business  expenditure 
in the ICT sector amounted to 15.7% of total R&D 
expenditure  in  2021 (66).  In  2022,  Italian  SMEs 
invested  less  in  R&D  than  their  EU  counterparts 
(0.23% of GDP vs EU average 0.40%). Total public 
sector support for business expenditure in R&D as 
a  percentage  of  GDP  dropped  to  0.11%  in  2022, 
well  below  the  EU  average  (0.20%)  and  far  from 
its 0.26% peak in 2018. Such a decrease is driven 
by  lower  support  through  R&D  tax  incentives (67), 
whose legislative framework has changed multiple 
times since their introduction in 2015 (68). The RRP 
measures  aimed  at  the  rationalisation  of  firms’ 
incentives could be an opportunity to increase the 
efficiency  and  effectiveness  of  public  support  to 
companies  that  perform  R&D  activities.  A total  of 
EUR  17.3  billion  is  mobilised  by  cohesion  policy 
funds dedicated to innovative and smart economic 
transformation in Italy. Out of this, EUR 2.3 billion 
is dedicated to the development or manufacturing 
of  critical  technologies  through  the  Strategic 
Technologies for Europe Platform. 

Graph A3.1: Public R&D intensity 2014-2023 

Source: DG R&I, based on Eurostat, 2014-2023 

Business innovation   

in 

low 

R&D 

private 

innovation 

The 
investment, 
concentrated  in  more  traditional  sectors, 
showcases  the  lack  of  dynamism  in  Italy’s 
economic  structure.  Italy  has  a  significant 
low  productivity  micro 
employment  share 
businesses (60).  Their  small  size  is  often  a  hurdle 
for companies to adopt  new technologies (61). The 
economic  system’s 
is  also 
limited 
accentuated  by  the  North-South  divide (62).  As  a 
result, business enterprise expenditure on R&D  as 
a  percentage  of  GDP  was  only  half  of  the  EU 
average  in  2023  (0.76%  vs  1.49%).  Despite 
accounting for around 12% of the EU economy in 
2023 (63),  Italian  firms  represented  only  2.3%  of 
the R&D expenditure incurred by the 322 European 
firms  ranking  in  the  top  2 000  R&D  investing 
companies  worldwide  and  only  0.4%  of  the  R&D 
expenditure incurred by the whole top 2 000 R&D 
investors, according to the 2024 EU Industrial R&D 
Investment  Scoreboard (64).  Among  this  group,  no 

(60)  OECD  (2024),  OECD  Economic  Surveys:  Italy  2024,  OECD 
Publishing, Paris, https://doi.org/10.1787/78add673-en. 

(61)  ‘Italia  2025-2029  –  Piano  strutturale  di  bilancio  di  medio 

termine’, approved in September 2024. 

Publications  Repository  -  The  2024  EU  Industrial  R&D 
Investment Scoreboard. 

(62)  Regional  Innovation  Scoreboard  2023  –  Regional  profiles  – 

(65)  Ibid. 

Italy. 

(63)  The share of GDP is an elaboration of Eurostat GDP data at 
current prices, European Economic Forecast. Autumn 2024. 

(64)  Elaboration  based  on 
Investment  Scoreboard 

the  2024  EU 
(data 

refers 

Industrial  R&D 
to  2023),  JRC 

(66)  Source: Eurostat. 

(67)  Foregone government tax revenues as a percentage of GDP. 

(68)  ISTAT,  Gli  incentivi  alle  imprese  per  la  ricerca  e  lo  sviluppo, 

September 2023. Focus_incentivi_RS_DEFINITIVO.pdf. 

45 

0.40%0.50%0.60%0.70%0.80%ITEU 
   
 
 
 
Graph A3.2: Top 3 sectors for R&D investment of 
Italian companies among top 2 000 global R&D 
investing companies in 2023 (% share, Italy vs 
worldwide) 

technologically  advanced  tangible  capital  goods 
and,  to a smaller extent, for intangible goods and 
R&I  activities (73).  Additionally,  Italy’s  AI  national 
strategy 2024-2026 includes a series of measures 
to  help  companies  adopt  AI (74).  Other  initiatives 
increasing  the  uptake  of  digital 
range  from 
technologies  by  firms,  including  via  European 
Digital  Innovation  Hubs,  to  the  development  of 
digital  technology  and  infrastructure,  including  in 
strategic  areas  like  semiconductors  and  quantum 
technologies. 

Source: DG R&I, based on 2024 EU Industrial R&D 
Investment Scoreboard data 

levels 

is  far  below  EU 

The lack of dynamism in business innovation 
also  has  an  impact  on  the  number  of 
researchers  employed  by  the  private  sector. 
The  number  of  researchers  employed  in  the 
(3.0 
private  sector 
researchers per thousand of the active population 
vs EU average of 5.7 in 2023) and amounts to less 
than  half  of  the  researchers  employed  in  France 
and  Germany (69).  Although  researchers  employed 
by firms outnumber those employed by the public 
sector  on  average  in  the  EU,  it  is  the  opposite  in 
Italy.  The  Italian  RRP  includes  investments  on  key 
enabling  technologies  and  on  innovative  PhDs  to 
promote  the  hiring  of  researchers  by  firms.  This 
could  benefit  the  R&I  system  if  made  more 
structural. 

The  uptake  of  technologies  among  Italian 
firms,  including  SMEs,  is  in  line  with  the  EU 
average,  while  the  use  of  AI  is  still  limited. 
SMEs with basic digital intensity are slightly below 
EU levels (70.2% vs 72.9%) (70). Italian companies 
also  lag  behind  EU  peers  in  adopting  AI  (8.2%  vs 
13.5%),  with  large  companies  investing  in  this 
technology  proportionately  more  than  SMEs (71). 
The  share  of  firms  that  have  taken  up  cloud 
services  is  significantly  above  the  EU  average 
(55.1% vs 38.9%) (72). Through the ‘Transition 4.0’ 
investment  plan,  Italy’s  RRP  has  provided  tax 
credits  to  businesses,  predominantly  used  for 

(69)  Eurostat 

(2023).  Researchers 

(full-time  equivalents) 
employed by the business enterprise sector per thousand of 
the active population. 

(70)  Source: Eurostat (2024). 

(71)  Ibid.  

(72)  Digital  Decade  2024:  Country  reports  |  Shaping  Europe’s 

digital future, Italy country report. 

in 

Business-science  linkages  remain  weak  and 
hamper  the  ability  to  translate  scientific 
excellence  into  innovation.  The  number  of 
public-private  scientific  co-publications  continues 
to increase and is above the EU average. However, 
public  expenditure  on  R&D  financed  by  the 
business  sector  as  a  percentage  of  GDP  is  still 
around half of the EU average (0.03% vs 0.05% in 
2022).  The  role  of  technology  transfer  offices 
(TTOs)  in  enabling  knowledge  valorisation  has 
improved 
recent  years.  The  Ministry  of 
Enterprises  and  Made  in  Italy  (MIMIT)  launched  a 
programme  on  proof  of  concept  in  2019.  This 
initiative  was  further  supported  by  RRP  funding 
and has helped create a number of spin-offs and, 
more 
business-science 
improve 
linkages (75).  Similarly,  in  2015  the  MIMIT  also 
started  a  programme  aiming 
to  strengthen 
capacity  building  in  TTOs.  Despite  such  progress, 
the 
there  are  still  challenges 
performance of small and medium TTOs, boosting 
their  staffing  numbers  as  well  as  improving  the 
specific  professional  background  of  technology 
transfer  experts (76).  In  2024,  an  OECD  study  put 
forward  a  series  of  recommendations,  such  as 
strengthening 
the  strategic  management  of 
knowledge  exchange  and  valorisation  in  Italian 
universities  and  its  governance  at  the  different 
institutional  levels,  while  bolstering  the  linkages 
between 
innovation 
and 
ecosystems (77). 

improving 

generally, 

TTOs 

local 

in 

(73)  Corte  dei  conti  (2023).  Rapporto  2023  sul  coordinamento 

della finanza pubblica (pp. 356-359). 

(74)  Strategia_italiana_per_l_Intelligenza_artificiale_2024-

2026.pdf. 

(75)  Netval  (2023).  ‘Rapporto  di  analisi  di  impatto  sul  bando 

Proof of concept’, Report_Poc.pdf. 

(76)  19º Rapporto Netval – ‘Ancora a due velocità’, 2024. 

of  Universities 

and 
Instrument  project 

(77)  European 

Commission/Ministry 

Research/OECD  Technical  Support 

46 

0%5%10%15%20%Pharmaceuticals & biotechnologyBanksFixed line telecommunicationsItalyWorldwide 
   
 
 
 
for 

start-ups 

Italy  has  taken  steps  to  reduce  regulatory 
barriers  that  hinder  innovation  and  use 
public  procurement  to  spur 
innovation. 
Through the introduction of Sperimentazione Italia, 
a  regulatory  sandbox,  Italy  aims  to  ease  the 
requirements 
new 
technologies (78).  The  effects  of  this  measure, 
along  with  those  of  the  recent  abolition  of  the 
professor’s  privilege (79),  need 
to  be  further 
monitored.  Despite  some  progress  in  innovation 
procurement  such  as  the  funding  of  the  ‘Smarter 
Italy’  programme,  Italy  could  further  improve  its 
innovation  procurement, 
policy  framework  for 
including  through  sectoral  policies  and  incentives 
(see Annex 4) (80). 

test 

to 

Financing innovation 

Venture  capital  (VC)  investment  in  Italy  has 
increased,  but  remains  far  below  other 
players  such  as  the  USA,  Germany  and 
France.  VC  expenditure  as  a  percentage  of  GDP 
has  doubled  since  2020,  but  was  still  about  one-
third of the EU average in 2023. Additionally, Italy 
lags behind other large EU economies in terms of 
the  share  of  VC  invested  in  deep  tech  (15%  vs 
28%  in  France  and  20%  in  Germany) (81).  The  VC 
market is fragmented, with a prevalence of small 
operators  and  an  offer  that  does  not  fully  cover 
the  different  stages  of  the  enterprise  life  cycle. 
This  creates  a  financing  gap  for  successful  start-
ups  willing  to  scale  up.  The  weakness  of  the  VC 
segment stems from Italy’s low level of innovation 
institutional 
and  the 

limited  participation  of 

ITA.CON: ‘Improving the system of Knowledge Exchange and 
Collaboration  between  universities  and  society  in  Italy’ 
(2024),  Knowledge  exchange  and  collaboration  between 
universities and society in Italy | OECD. 

(78)  Relazione  Annuale  2023  al  Parlamento  sullo  stato  di 
attuazione  delle  policy  in  favore  delle  startup  e  PMI 
innovative, 2024.01.19_-_Relazione_annuale_DEF_2.pdf. 

(79)  The  abolition  of  the  rule  giving  academics  rather  than 
universities  ownership  over  any  patents  they  create  was 
included in the 2023 reform of the Industrial Property Code. 

(80)  EU 

Innovation 

Procurement 

(2024). 
Benchmarking  of  national  policy  frameworks  for  innovation 
procurement, 
Italy  country  profile,  country-report-2024-
policy-benchm-italy.pdf. 

Observatory 

(81)  Dealroom,  The  European  Deep  Tech  Report  2023,  The 
European Deep Tech Report 2023 | Dealroom.co. Data refers 
to the period 2018-2023. 

47 

investors compared to other EU countries (82). The 
National  Innovation  Fund (CDP  Venture  Capital)  is 
the  institutional  entity  in  charge  of  channelling 
public resources into VC, which has also managed 
Italy’s  RRP 
investments  to  finance  start-ups. 
Strengthening the participation of pension funds in 
the  VC  segment  and  other  targeted  amendments 
to  support  start-ups,  as  envisaged  by 
the 
Competition  Law  approved  in  December  2024, 
represent  a  step  forward  to  guarantee  more 
funding  to  Italy’s  innovative  start-ups  (see  Annex 
5).  

Innovative talent 

Italy’s talent pool in sciences and technology 
is  not  adequate  to  sustain  the  country’s 
innovation capacity. Italy has one of the lowest 
tertiary education attainments in the EU (83). While 
the  number  of  new  graduates  in  science  and 
engineering  has  increased  and  is  close  to  the  EU 
average (84), in 2022 Italy ranked last in terms of 
graduates in the field of computing, which is one-
the  EU  average (85).  Furthermore, 
third  of 
according to the Report on the State of the Digital 
Decade  2024,  the  share  of  ICT  specialists  in 
employment  remains  below  average,  although 
demand for these skills is surging (86). In response, 
Italy’s  AI  national  strategy  2024-2026  lays  down 
measures  to  strengthen  training  in  this  field.  This 
includes improving the National PhD Programme in 
Artificial Intelligence (87).  

There  is  room  to  improve  entrepreneurship 
education  in  Italy.  While  there  is  no  dedicated 
national  strategy,  recent  policies  aim  to  increase 
students’  entrepreneurship  competencies.  The 
development  of  entrepreneurship  education  is 
hampered by the lack of national coordination and 

(82)  Banca d’Italia (2024). 2023 Annual Report. 

(83)  Source:  Eurostat  (2024).  Italy’s  data:  31.6%  of  population 

aged 25-34, vs EU average 44.2%. 

(84)  Source:  Eurostat  (2022).  Italy’s  data:  16.5  vs  EU  average: 

17.6 per thousand of the population aged 25-34. 

(85)  Source: Eurostat (2022). Italy’s data: 1.2 vs EU average: 3.6 

per thousand of the population aged 25-34. 

(86)  Report  on  the  state  of  the  Digital  Decade  2024  |  Shaping 
Europe’s digital future, Annex 3 Italy Executive Summary. 

(87)  Strategia_italiana_per_l_Intelligenza_artificiale_2024-

2026.pdf. 

 
 
 
the  notion  of 

lack  of  a  dedicated  strategy,  together  with  the 
absence  of  public  agencies  entrusted  with 
education. 
supporting 
entrepreneurship 
Additionally, 
‘entrepreneurial 
competence’  has  not  yet  been  established  in 
programme  design.  However,  official  guidelines 
issued  in  2018  guide  secondary  schools  in  the 
development  of  students’  abilities  in  the  areas  of 
risk-taking,  idea  generation,  and  planning  and 
managing entrepreneurial projects (88). 

(88)  GEM (2024). ‘L’attivazione imprenditoriale in Italia. Rapporto 

GEM 2023-2024’ FrancoAngeli Series.  

OECD/European  Union  (2019), Supporting  Entrepreneurship 
and  Innovation  in  Higher  Education  in  Italy,  OECD  Skills 
Publishing, 
Studies, 
Paris, https://doi.org/10.1787/43e88f48-en.  

OECD 

48 

 
 
 
Table A3.1:  Key innovation indicators 

(1) EU average for the last available year or the year with the largest number of country data. 
Source: Eurostat, DG JRC, OECD, Science-Metrix (Scopus database), Invest Europe, European Innovation Scoreboard. 

49 

R&D intensity (gross domestic expenditure on R&D as % of GDP)1.261.361.501.411.371.31:2.243.45Public expenditure on R&D as % of GDP0.540.490.550.540.530.52:0.720.64Scientific publications of the country within the top 10% most cited publications worldwide as % of total publications of the country 10.110.311.211.2:::9.612.3Researchers (FTE) employed by public sector (Gov+HEI) per thousand active population2.72.93.33.43.53.7:4.2:International co-publications as % of total number of publications41.047.047.647.648.248.5:55.939.3Business enterprise expenditure on R&D (BERD) as % of GDP0.680.850.930.850.810.76:1.492.70Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.160.310.290.250.23::0.400.30Researchers employed by business per thousand active population1.62.53.13.03.13.0:5.7:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)2.12.12.32.11.7::2.8:Employment share of high-growth enterprises measured in employment (%)9.915.312.2::::12.5:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::69.9:70.272.9:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%):::::26.6:33.2:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%):::51.9:55.1:38.9:Artificial intelligence adoption% enterprises (EU Digital Decade target by 2030: 75%):::6.2:5.18.213.5:Public-private scientific co-publications as % of total number of publications7.17.98.18.38.89.0:7.78.9Public expenditure on R&D financed by business enterprises (national) as % of GDP0.0140.0270.0280.0290.029::0.0500.020Total public sector support for BERD as % of GDP0.0730.2500.1210.1190.110::0.2040.251R&D tax incentives: foregone revenues as % of GDP0.0110.1820.0570.0670.060::0.1020.141BERD financed by the public sector (national and abroad) as % of GDP 0.0610.0680.0630.0520.050::0.1000.110Venture capital (market statistics) as % of GDP, total (calculated as a 3-year moving average)0.0060.0050.0130.0180.0270.028:0.078:Seed stage funding share (% of total venture capital)7.06.08.611.110.911.0:7.3:Start-up stage funding share (% of total venture capital)71.380.539.545.347.453.5:44.0:Later stage funding share (% of total venture capital)21.613.651.943.641.735.5:48.7:New graduates in science and engineering per thousand population aged 25-3411.813.115.116.416.5::17.6:Graduates in the field of computing per thousand population aged 25-340.60.61.01.11.2::3.6:20222021Italy201220172020Headline indicatorScience and innovative ecosystemsR&D investment & researchers employed in businessesPublic support for business innovationInnovation outputsDigitalisation of businessesAcademia-business collaborationFinancing innovationInnovative talent2023EU average (1)USA2024 
 
  
 
ANNEX 4: MAKING BUSINESS EASIER 

to  business 

Italy’s  economy  is  hindered  by  productivity 
innovation-led  growth, 
stagnation.  Weak 
regulatory  barriers  and  bureaucracy  are  a 
challenge 
competitiveness, 
especially for small and medium enterprises. 
Italy’s  business  dynamism 
is  mixed,  with 
competition-related  issues  in  several  sectors.  A 
lack of judicial efficiency and perceived corruption 
are 
affect 
underway to boost foreign investment, and Italy is 
working to improve its public procurement system 
with  a  focus  on  green  and  innovative  objectives. 
The swift implementation of the reforms included 
in  the  recovery  and  resilience  plan  (RRP)  (late 
payments,  public  procurement,  competition  law) 
should  increase  competition  and  transparency, 
while adequately implementing EU regulations. 

development. 

business 

Efforts 

Economic framework conditions 

Stagnation  in  productivity  and  low  growth 
rates have characterised the Italian economy 
in  recent  years.  Weak  innovation-led  growth 
reflects  an  unusually  high  proportion  of 
employment  in  low-productivity  micro  businesses, 
low research spending, and a below-average level 
of  digitalisation.  The  productivity  gap  between 
Italian  and  European  companies 
largely 
explained  by  the  higher  share  of  smaller  firms  in 
Italy  that  play  a  significant  role  in  the  Italian 
production  structure. Italy shows a higher level  of 
productivity  than  in  major  EU  economies  in  the 
medium-sized  enterprise  segment  (from  50-249 
employees),  while  the  figures  are  in  line  with 
German  or  French  counterparts  for  small  (from 
10-49  employees)  and  large  companies  (more 
than 250) (89). However, there is significantly lower 
productivity  in  micro-enterprises  (less  than  10 
employees) (90). 

is 

(89)  ISTAT, Rapporto annuale 2024. 

(90)  OECD shares the same analysis, estimating that while large 
Italian businesses are more productive on average than their 
counterparts  in  other  European  countries,  Italian  micro-
enterprises  are  about 30%  less  productive  than  their  peers. 
At  the  same  time,  the  employment  share  of  micro-
businesses is about 15 percentage points larger than in other 
European  countries  while  the  employment  share  of  highly-
productive  large  businesses  is  about  20  percentage  points 
lower. OECD Economic Surveys, Italy 2024. 

investments 

‘Transition  4.0’ 

Closing  the  productivity  gap  would  require 
the integration of digital technologies in the 
skilled 
production  processes,  a  more 
workforce  and  higher 
in 
intellectual 
intangible  assets.  Investment  in 
property  and  ICT  equipment  have  been  enhanced 
through  the 
investment  plan, 
included in Italy’s RRP (see Annex 3). Initiatives to 
promote clustering and collaboration among small 
firms,  such  as  shared  resources  or  partnerships, 
could also help them achieve economies of scale. 
The  Annual  SME  Law  is  an  important  opportunity 
to increase the productivity of the Italian business 
ecosystem,  providing 
tools  for  simplification, 
aggregation  of  companies  and  the  creation  of 
synergies. 

Investment  conditions  are  expected 
to 
remain  unfavourable  as  economic  activity 
remains  weak  in  Italy  and  in  most  of  the  euro 
area,  especially  in  industry  (91).  The  uncertain 
outlook for exports due to low growth in important 
markets like Germany is a contributing factor. The 
Italian  companies 
three  main  obstacles 
investing  are  uncertainty  about  the  future  (79%, 
49% considering it a major obstacle), high energy 
costs 
regulations 
(59%) (92).  Those  percentages  are  in  line  with  EU 
averages. 

labour  market 

(70%)  and 

to 

The share of businesses facing labour supply 
constraints  is  however  decreasing  (6.6%  in 
2024  against  a  9.1%  in  2023)  and  much  lower 
than in the EU (20.2% in 2024). The vacancy rate 
is slightly below the EU average. Similarly, with the 
easing of supply chain constraints, the percentage 
of firms facing material shortages is now back to 
pre-pandemic levels (3.9% against an EU average 
of 10%). 

Late  payments  remain  an  issue  for  the 
competitiveness  of  Italian  companies.  The 
payment  gap  in  public  administration-to-business 
transactions  (i.e.  the  difference  between  the 
initially agreed payment time and the actual time 
a  firm  receives  payment  from  a  debtor  public 
administration) was still at 18 days in 2024, above 
the  EU  average  of  15  days,  but  a  significant 
improvement  on  2022  (see  Table  A4.1).  Those 
results  are  broadly  corroborated  by  the  data 

(91)  Economic Bulletin No.1, 2025, Bank of Italy, 2025.  

(92)  EIB Investment Survey 2024 Country Overview: Italy, 2025. 

50 

 
 
 
 
 
collected by the Italian authorities in the context of 
an ongoing infringement procedure, which indicate 
that  payment  times  are  still  above  the  legal 
threshold  in  several  sectors  and  levels  of  the 
Italian public  authorities.  For business-to-business 
transactions,  the  payment  gap  was  17.3  days  in 
2024,  still  higher  than  the  EU  average  of  15.5 
days (see Table A4.1). The recovery and resilience 
plan  includes  an  ambitious  reform  aimed  at 
Italian 
strengthening 
administrations to pay within the deadlines set by 
the Late Payments Directive (Directive 2011/7/EU). 
The  swift  implementation  of  this  reform,  along 
with  sustained  sound  payment  performance  over 
time,  is  essential  to  ensuring  predictable  cash 
flows  and  effective  liquidity  management  for 
businesses, especially SMEs. 

capacity 

the 

of 

Graph A4.1: Making Business Easier: selected 
indicators. 

for  FTTP) (93).  However,  the  urban-rural  divide 
persists,  with  coverage  in  rural  areas  dropping  to 
37.7%  (the  EU  average  is  55.6%  for  VHCN  and 
52.7%  for  FTTP).  Italy  achieved  nationwide  5G 
coverage in 2022 and recorded a value of 99.5% 
in  2023.  In  addition,  88.3%  of  Italian  households 
are covered by the 3.4-3.8 GHz band (EU average, 
50.6%),  which  enables  advanced  applications 
requiring  large  spectrum  bandwidth.  The  Italian 
RRP  supports  key  measures  to  advance  the 
deployment  of  connectivity  networks  (notably, 
‘Italia 1 Giga’ and ‘Italia 5G’). 

incidents 

ICT  security 

Cybersecurity  awareness 
in  businesses 
remains broadly stable. The share of firms that 
experienced 
leading  to 
unavailability of ICT services due to external attack 
(e.g. 
ransomware  attacks,  denial  of  service 
attacks) remained at 3.1% in 2022 and 2024, still 
below  the  EU  average  (3.4%  in  2024).  Most 
ICT  security 
(92.9%)  had  some 
businesses 
measures  in  place  (close  to  the  EU  average  of 
92.8%), and 62.7% of businesses had made their 
employees  aware  of  their  obligations  in  ICT 
security  related  issues,  which  is  above  the  EU 
average (60%). 

Regulatory and administrative 
barriers 

Italy’s  business  dynamism  remains  a  mixed 
picture.  While  the  country  has  demonstrated  its 
resilience,  as  evidenced  by  its  vibrant  network  of 
family-owned 
niche-market 
businesses  and 
leaders,  the  business  churn  rate (94)  was  still  one 
of the lowest in EU at 14.6% in 2022, compared to 
EU  average  of  19.2%.  Enterprise  births  in  the 
business  economy  and  deaths  are  both  below  EU 
levels  (7.9%  and  6.7%,  against  EU  values  of 
10.5% and 8.7% respectively) (95). In addition, high 
growth  enterprises  (growth  in  employment  by 

(93)  VHCN  (very  high-capacity  network) 

is  defined  as  the 
combination of FTTP (fibre to the premises) and DOCSIS 3.1. 
In the absence of DOCSIS 3.1 in Italy, the indicator on VHCN 
coverage and the indicator on FTTP coverage coincide. 

(94)  As defined by Eurostat, the business churn rate is the sum of 

enterprise birth and death rates. 

(95)  Recent IMF research finds that the share of zombie firms in 
Italy  remains  much  higher  that  the  pre-crisis  level.  IMF 
Working  paper  2023/125  ‘The  Rise  of  the  Walking  Dead: 
Zombie Firms around the World’. 

51 

Share of (1) enterprises, (2) average intra-EU exports and 
imports in GDP, (3) firms, (4) SMEs. 
Sources: (1) EIB IS, (2) Eurostat, (3) ECFIN BCS, (4) SAFE 
survey. 

On  digital  infrastructure,  Italy  is  making 
progress  in  deploying  connectivity  networks. 
In 2023, VHCN/FTTP7 coverage stood at 59.6%, an 
11%  percentage-point  increase  on  2022  but  still 
below the EU averages (78.8% for VHCN and 64% 

45.113.13.917.816.847.916.61041.624.50102030405060from private entitiesfrom public entitiesMaterial shortages as afactor limiting productionEU Trade IntegrationRegulation as a majorobstacle to investment(4) Late payments(3) Shortages(2) SingleMarket(1) RegulatoryburdenShare (%)EU27IT 
     
 
more than 10%) accounted for 7.4% of companies 
and  8.9%  of  employees  in  Italy  (below  the  EU 
averages of 9.1% and 12.2%). 

Competition in Italy is hindered by obstacles 
to the opening up of markets and restrictions 
on 
the  exercise  of  business  activity, 
especially  in  the  service  sector  (96),  where 
productivity  growth  has  been  particularly  low (97). 
While  this  is  partly  explained  by  specialisation 
within the services sector, including the significant 
contribution  of  tourism,  it  also  reflects  remaining 
barriers  to  competition,  especially  in  managing 
infrastructure  and  local  public  services.  In  this 
sense,  the  award  of  concessions  through  project 
financing procedures (even considering the reform 
made  in  December  2024)  and  acts  extending 
existing 
already 
concluded,  which  puts  off  the  opportunity  for 
competition  (for  example,  by  extending  the  range 
of cases where a public contract can be amended 
without  a  new  tender  procedure  beyond  those 
allowed  under  EU  law)  could  undermine  the 
principles  of  maximum  participation,  equal 
treatment,  transparency  and  proportionality.  The 
swift  application  of  competition 
laws,  key 
measures  in  the  RRP,  is  essential  for  reducing 
entry barriers in services. 

concessions 

contracts 

or 

improvements, 

recent 
of 

the 
Despite 
effectiveness 
public  administration 
(especially the justice system) and perceived 
corruption  remain a  key  barrier for  business 
development (see Annex 6). Judicial  efficiency is 
generally perceived as comparatively low, which is 
reflected  in  Italy  being  seen  as  one  of  the 
countries  with  the  lowest  levels  of  rule  of  law  in 
peer reviews, mostly due to the comparatively long 
duration  of  trials  (98).  While  past  reforms  have 
reduced  the  expected  duration  of  trials  and  the 
backlog  in  court  cases,  the  expected  duration  of 
civil trials remains the highest in the EU. Moreover, 
there  is  some  scope  to  improve  the  transparency 
and accountability of lobbying activities. According 
to  the  EIB  Investment  Survey,  the  share  of  firms 
with over 10% of their staff working on regulatory 
requirements stood at 24%, above the EU average 

of 17%. Simplifying and digitalising administrative 
procedures  as  much  as  possible  could  help  to 
reduce red tape as well as any unjustified officials’ 
discretionary room for manoeuvre. 

Recent government initiatives have aimed at 
boosting  foreign  investment,  especially  in 
high  value  sectors.  These  efforts  came  as  Italy 
faced a slowdown in net foreign direct investment 
(FDI)  inflows  in  2023,  following  a  strong  rebound 
in  2022  after  the  pandemic  crisis  (as  for  other 
major  European  economies).  The  2023  Strategic 
Investment Law aims to attract FDI by simplifying 
the  authorisation  and  execution  process  of 
significant  projects. When a  project  is  declared  of 
‘pre-eminent  strategic  interest’,  it  benefits  from  a 
series  of  bureaucratic  and  procedural  shortcuts. 
The  law  enables  a  project  to  be  assigned  a 
dedicated  person  in  the  administration  and  to 
undergo a single-authorisation process (99). 

Italy  has  one  of  the  most  restrictive  retail 
regulatory frameworks in the EU, as evidenced 
by the OECD’s Product Market Regulation Indicator 
the  Commission  Retail  Restrictiveness 
and 
Indicator,  which  may  hamper  the  functioning  of 
the  sector  and  its  development.  In  addition,  the 
online commerce figures have not improved in the 
recent  years.  In  2024,  the  number  of  online 
shoppers was one of the lowest in the EU (53.6% 
compared  to  an  EU  average  of  71.8%),  just  a 
slight improvement from the 51.5% in 2021 (100). 
introduced  some 
Recent 
simplifications 
in 
particular to clearance sales, promotions and sales 
below  cost.  However,  there  is  still  the  possibility 
for  regional  and  local  authorities  to  restrict  the 
establishment  of  certain  commercial  activities  or 
adopt  measures  to  protect  certain  types  of  small 
shops  and  artisanal  businesses.  The  involvement 
of  operators’  associations  in  such  decisions  could 
potentially  go  against  ensuring  objective  and 
transparent  procedures  and  might  hinder  new 
players from entering the market. 

legislative  changes 
to 

commercial  activities, 

(96)  Relazione  annuale  sull’attività  svolta,  Italian  Competition 

Authority (AGCM), 2024  

(97)  OECD Economic Survey Italy 2024 (2024). 

(99)  The special commissioner is a figure entrusted with specific 
powers to speed up all the procedural steps the investment 
implementation requires. The single authorisation is a special 
permit issued by the special commissioner, which supersedes 
the  patchwork  of authorisations  typically  needed  to  kick-off 
a large-scale project. 

(98)  Rule of law index, 2022.  OECD Economic Survey Italy 2024 

(100) Eurostat  series isoc_ec_ib20,  percentage  of  individuals  who 

(2024). 

made an online purchase in the last 12 months. 

52 

 
 
 
Entrepreneurship  has  a  fairly  low  profile  in 
Italy.  In  2023,  less  than  half  of  the  adult 
population  knew  someone  who  had  recently 
started  a  business,  and  just  one  third  saw  good 
opportunities to start a business locally, one of the 
lowest  figures  of  any  advanced  country (101). 
Furthermore,  around  half  of  those  who  did  see 
good  opportunities  would not  start  a  business  for 
fear it might fail, while just around 10% of those 
not  already  starting  or  running  a  business  were 
expecting to start one within the next three years, 
placing 
list  for 
Italy  at  the  bottom  of  the 
entrepreneurship skills. 

for 

level 

professions. 

Entry  barriers  remain  particularly  high  for 
The 
of 
regulated 
restrictiveness 
several 
is  high  overall 
professional services (accountants, architects, civil 
engineers,  and  real  estate  agents) (102),  although 
Italy announced actions that, if fully implemented, 
have  the  potential  to  partly  improve  the  current 
situation.  However,  ‘fair  compensation’  rules  for 
professional  services  risk  being  perceived  as 
minimum tariffs, damaging market entry and price 
competition.  Removing  them (103)  would  open  the 
market  to  more  productive  businesses  that  could 
set lower rates to increase their market share. 

Single market 

Public procurement 

Italy is well integrated into the single market 
and  is  among  the  world’s  leading  exporters. 
Italy  boasts  a  high  level  of  diversification  in  its 
exported  products,  another  key  factor  behind  its 
success.  However,  performance  in  the  services 
sector  has  been  relatively  weak,  with  a  lack  of 
development  of  knowledge-intensive  and  high 
value-added  activities 
in 
services 
the  EU, 
the 
representing only 2.2% of the GDP in 2023, below 
peer  countries 
like  Germany  or  Spain).  The 
strength of Italian exports lies primarily in around 
9 000  medium  and  large  exporting  companies, 
which  account  for  three  quarters  of  the  country’s 
manufacturing  exports.  Expanding  the  exporting 
base  could  help  to  maintain  the  resilience  and 
competitiveness of Italian external trade. 

is  among 

integration 

lowest 

(trade 

in 

in 

correctly 

Italy’s compliance with single market rules is 
in  line  with  EU  averages.  Italy  performs  better 
than the EU average for transposing single market 
directives,  with  the  number  of  non-transposed 
directives  below  both  the  EU  average  and  the 
European  Council’s  1%  target.  Its  performance  is 
transposing  directives, 
weaker 
mirroring  the  experience  of  countries  like  France 
and  Spain.  The  number  of  pending  single  market 
infringements  is  amongst  the  highest  in  the  EU 
(24th  out  of  27  Member  States),  although  there 
has  been  a  downward  trend  since  2020  (22%). 
Within  the  SOLVIT  rights  resolution  system,  Italy 
solved 84.3% of cases it handled as lead centre in 
2024 (EU average, 84.9%). 

(101) Global Entrepreneurship Monitor 2023/2024 (2024). 

53 

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 
ambitious reform of public procurement set out in 
its recovery and resilience plan (104). This reform is 
aimed  at  simplifying  procedures, 
increasing 
digitalisation  and  professionalising  public  buyers, 
and 
speed, 
competitiveness  and  overall  efficiency  of  the 
Italian public procurement system. 

is  expected 

improve 

the 

to 

Challenges  persist  in  public  procurement 
areas  such  as  single  bid  procedures,  which  still 
made up 34% of total bids in 2024 (above the EU 
average  of  32%).  The  share  of  direct  awards  is 
only  around  3%,  significantly  below  the  EU 
average  (7%).  Indicators  on  SMEs  participation  in 
public  procurement  and  duration  of  the  process 
are also below EU averages (105). 

Italy  is,  however,  one  of  the  most  advanced 
countries  in  the  EU  for  the  use  of  public 
procurement  to  achieve  green  objectives,  as 

(102) OECD Product Market Regulation Indicators, 2024. 

(103) OECD Economic Survey 2024. 

(104) The  Code  was  revised  at  the  end  of  2024  by  legislative 
decree  number  209/2024  (Correttivo)  to  further  strengthen 
the effectiveness of its provisions. 

in 

the 

(105) While  keeping  the  current  focus  on  speeding  up  public 
procurement 
the 
context 
implementation  of  the  RRP  is  relevant,  it  should  also  be 
considered  that  competitive  auctions  tend  to  lead  to  price 
rebates  of  2-4%  relative  to  non-competitive  procurement. 
Bank of Italy (2023), Annual Report. 

of  accelerating 

 
 
 
seen, for example, by its introduction of minimum 
environmental  standards.  It  has  also  made  some 
progress in using public procurement as a leverage 
to  spur  innovation,  through  the  launch  of  the 
‘Smarter  Italy’  programme,  the  aim  of  which  is 
innovative 
the  development  of 
stimulating 
solutions  by  market  operators  taking  part  in 
procurement bids. On the other hand, the focus on 
socially  responsible  public  procurement  has  also 
recently  increased,  especially  in  the  fields  of 
inclusivity and gender equality.  

54 

 
Table A4.1:  Making Business Easier: indicators. 

*Change in methodology in 2024: reporting late payments from public and private entities separately. 
**The 2024 data on single bids is provisional and subject to revision. Please note that approximately 46% of the total data is 
currently missing, which may impact the accuracy and completeness of the information. Due to missing data, the EU average of 
direct awards data is calculated without Romania. 
Sources: (1) ECFIN BCS, (2) Eurostat, (3) EIB IS, (4) Digital Decade Country reports, (5) Intrum Payment Report, (6) SAFE survey, 
(7) OECD, (8) up to 2023: Single Market and Competitiveness Scoreboard, 2024: Public procurement data space (PPDS). 

55 

POLICY AREA20202021202220232024EU-27 average1.010.318.017.13.910.01.23.06.39.16.620.20.91.82.32.32.12.333.830.630.721.718.313.4-44.253.759.3-78.8-44.253.759.3-64.0-99.799.799.5-89.3Regulatory environment34.934.334.123.616.824.51.610.916.216.317.315.610.411.221.817.617.815.1from public or private entities in the last 6 months58.246.652.454.3--from private entities in the previous or current quarter----45.147.9from public entities in the previous or current quarter----13.116.614.916.919.218.517.841.60.0550.0560.0560.0560.0640.0500.41.20.70.40.50.81.71.81.51.41.80.996.396.898.691.084.384.950.046.042.043.039.024.43135373734-775537.0ItalyINDICATOR NAMEInvestment climateShortagesMaterial shortage, firms facing constraints, %1Labour shortage, firms facing constraints, %1Vacancy rate, vacant posts as a % of all available ones (vacant + occupied)2InfrastructureTransport infrastructure as an obstacle to investment, % of firms reporting it as a major obstacle3VHCN coverage, %4FTTP coverage, %45G coverage, %4Reduction of regulatory and administrative barriersImpact of regulation on long-term investment, % firms reporting business regulation as a major obstacle3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment5Payment gap - public sector, difference in days between offered and actual payment5Share of SMEs experiencing late payments, %*6Single MarketIntegrationEU trade integration, % (Average intra-EU imports + average intra EU exports)/GDP2EEA Services Trade Restrictiveness Index7ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, % resolution rate per country8Number of pending infringement proceedings8Competition and transparency in public procurementSingle bids, % of total contractors**8Direct awards, %**8Public procurement 
 
        
 
ANNEX 5: CAPITAL MARKETS, FINANCIAL STABILITY AND ACCESS TO FINANCE 

non-bank 

there 
of 

Against  the  backdrop  of  comparatively  low 
net private savings that are mostly absorbed 
by  the  government’s  financing  needs,  Italy’s 
capital  markets  are 
insufficiently  deep. 
Banks,  which  dominate  the  financial  sector,  are 
robust,  both  in  terms  of  capital  and  liquidity,  and 
are  well  prepared  to  tackle  future  risks.  At  the 
the  future 
is  scope  for 
same 
time, 
financial 
all 
development 
intermediaries,  which  are  underdeveloped 
in 
comparison  to  their  EU  peers.  Italian  firms  have 
only partial access to the above-average wealth of 
Italian  households,  who  prefer  to  invest  in  bonds, 
rather  than  shares,  and  mostly  indirectly.  At  the 
same time, domestic institutional investors also tilt 
their  investment  policies  towards  bonds.  Equity 
investments,  notably  by  investment  funds  relate 
mostly  to  foreign  shares  and  only  marginally  to 
unlisted  equity.  The minor  investments  in  unlisted 
equity  are  a  limiting  factor  for  the  scale-up  of 
innovative  start-ups  with  no  or  low  profitability. 
The domestic venture and growth capital market is 
still small and fragmented. Moreover, the relatively 
less-developed  capital  markets  reduce  the  exit 
options  for  private  equity  and  venture  capital 
investors, further compounding the lack of funding 
sources  for  innovation,  which  is  a  key  ingredient 
for improved competitiveness. 

Availability and use of domestic 
savings 

sector 

Italian 

saves 
private 
The 
comparatively  little  in  net  terms,  despite  a 
pick-up  in  pace  since  2020,  and  does  not 
invest enough in the domestic economy. In the 
last decade, the private savings ratio, net of fixed 
capital consumption, averaged 5.5% of GDP, albeit 
with  a  marked 
increase  since  2020  and 
particularly  in  the  period  2020-2022  (see  Graph 
A5.1).  The  net  private  investment  ratio,  which 
measures the net direct contribution of the private 
sector  to  capital  accumulation  in  the  country, 
fluctuated  around  zero  and  averaged  -1.2%  of 
GDP,  thereby  contributing  to  a  shrinking  capital 
structure  of  the  economy.  At  the  same  time,  the 
rather  sizeable  borrowing  by  the  government, 
which averaged 4.8% of GDP over the last decade, 
absorbed the equivalent of almost 90% of the net 
private  savings.  The 
remaining  average  net 
positive  balance  of  1.9%  of  GDP  resulted  in 
regular  net  lending  to  foreigners,  except  in  2022, 

when the Italian economy borrowed the equivalent 
of  1.2%  of GDP  from  the rest  of  the  world.  Thus, 
overall,  in  the  last  decade  the  net  Italian  private 
savings,  i.e.  after  accounting  for  the  investments 
that are necessary to maintain the existing capital 
the  economy,  were  channelled 
structure  of 
towards  government  and  foreign  projects,  rather 
than domestic private investments. 

Graph A5.1: Net savings-investment balance 

Source: AMECO 

international 

Italy’s  annual  positive 
Consistent  with 
lending  to  the  rest  of  the  world,  the  net 
international  investment  position  (NIIP)  of 
the  country  has  been  increasing.  As  of  Q3 
2024, total assets on foreigners reached 169% of 
GDP,  up  from  148%  at  end-2017,  while  liabilities 
to foreigners stood at 157% of GDP, resulting in a 
positive  net 
investment  position 
(NIIP) equivalent to 12% of GDP (see Graph A5.2). 
The  net  stock  of  foreign  direct  investment  has 
been broadly stable, declining from 6% of GDP at 
end-2017  to  4.7%  as  of  Q3  2024.  Hence,  the 
increase of the NII was driven primarily by the net 
stock of portfolio investments, which increased by 
20 percentage points of GDP, and by the stock of 
official foreign exchange reserves, which expanded 
by  4.9  percentage  points  of  GDP.  Meanwhile,  the 
net liability  of Italy in terms of other investments 
increased  by  4.8  percentage  points  of  GDP.  Thus, 
the Italian economy appears to be well integrated 
in  international  capital  flows  and  has  managed 
lately  to  marginally  strengthen  its  position  as 
recipient of foreign capital. 

56 

-10-50510152025302017201820192020202120222023% of GDPPrivate investment, netLending to the governmentPrivate savings, netPrivate saving, grossBorrowing from the rest of the world 
 
   
 
 
 
Graph A5.2: Italy's international investment 
position 

March  2022.  These  initiatives  led  to  the  adoption 
of  the  Capital  Markets  bill  (Decreto  Capitali,  Law 
21/2024)  in  February  2024.  This  Law  widens  the 
definition  of  SMEs  and  aims  to  stimulate  the 
Italian  IPO  market  and  incentivise  investment  in 
companies  listed  in  Italy,  while  at  the  same  time 
making  changes  to  the  corporate  governance 
framework and promoting financial literacy.  

Source: ECB 

Structure of the capital markets and 
size of the financial sector 

in 

Italy 

Capital  markets 
remain 
underdeveloped  and  insufficiently  deep.  The 
Italian  stock  exchange  (Borsa  Italiana)  forms  part 
of Euronext, a pan-European market infrastructure. 
Its  market  capitalisation  as  a  share  of  GDP  is 
small by EU standards, at 28.5% of GDP vs an EU 
average of 67% as of end-2023 (see Graph A5.3). 
It  is  substantially  smaller  both  as  an  absolute 
figure  and  as  a  share  of  GDP  than  those  of  the 
Paris,  Amsterdam  and  Frankfurt  stock  exchanges. 
Non-financial  corporations  accounted  for  about 
two thirds of that capitalisation. New listings have 
been  limited  in  the  main  market  in  recent  years, 
but  activity  has  been  more  vibrant  in  the  SME 
growth  market.  The  outstanding  volume  of  debt 
securities  reached  151%  of  GDP  at  end-2023, 
which is one of the highest  national  scores in the 
EU. However, marketable debt securities issued by 
non-financial  corporations  (NFCs)  accounted  for 
less  than  6%  of  the  total.  Indeed,  the  domestic 
bond  market  in  Italy  is  entirely  dominated  by 
government securities, which accounted for almost 
74%  of  the  total  as  of  end-2023.  Financial 
institutions,  whether  banks  or  not,  accounted  for 
the remaining 20% of debt securities.  

is 

for 

the 

there 

Banks  dominate  the  financial  sector  in  Italy 
and 
future 
scope 
development  of  all  non-bank  intermediaries. 
After peaking at 230% of GDP in 2020, the size of 
the  banking  sector  declined  to  178%  of  GDP  in 
2023,  which  remains  notably  below  the  EU 
average of 254%. Foreign presence is limited and 
accounts for about 9% in terms of assets. Banking 
concentration appears to be lower than on average 
in  the  EU,  with the top  five  banks  controlling  less 
than  50%  of  the  sector  (EU  average  of  54%). 
Insurance  companies,  with  total  assets  equivalent 
to  49%  of  GDP  at  end-2023,  are  the  most 
developed  non-bank  financial  intermediaries  in 
Italy,  though  their  size  remains  below  the  EU 
average of 55%. Total assets of investment funds 
were  equivalent  to  21%  of  GDP  at  end-2023, 
while pension funds equated to 8% of GDP only. 

Graph A5.3: Capital markets and financial 
intermediaries 

Source: ECB, EIOPA, AMECO 

A  blueprint  for  capital  market  reforms  at 
national  level  already  exists.  Building  on  past 
progress,  the  OECD  prepared  a  capital  market 
review  for  Italy  in  2020,  under  an  EU-funded 
technical  support  project.  This  was  followed  by  a 
green  paper  on  the  competitiveness  of  Italian 
financial  markets  in  support  of  growth,  published 
by the Italian Ministry of Economy and Finance in 

Resilience of the banking sector 

The  Italian  banking  sector 
its 
resilience  in  2024.  The  capital  adequacy  ratio 
for the Italian banking sector stood at 20% as of 
Q3  2024  (see  Table  A5.1),  which  is  its  highest 

improved 

57 

-200-150-100-5005010015020020172018201920202021202220232024-Q3% of GDPForeign Direct Investment, AssetsPortfolio Investment, AssetsOther investment, AssetsOfficial reserve assetsForeign Direct Investment, LiabilitiesPortfolio Investment, LiabilitiesOther investment, LiabilitiesNIIPNon-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds020406080100120140160180200Listed equity                     Bonds                              Assets by sector% of GDP 
   
   
level  and  almost  in  line  with  the  EU  average 
(20.1%). The quality of capital also improved, with 
a common equity tier 1 ratio of 15.9% compared 
to  15.5%  at  end-2023  and  13.9%  at  end-2019. 
Growing  profitability  has  improved  the  internal 
capital generation, as the banks’ annualised return 
on  equity  was  higher  in  the  first  nine  months  of 
2024  than  at  end-2023  (14.1%  vs  12.7%)  and 
above  the  EU  average  of  10%.  Continued  growth 
in net interest income, rising income from fees and 
good  cost  controls  were  the  main  drivers.  The 
government’s plan to boost budgetary revenues by 
postponing  tax  deductions  for  banks  should  not 
affect their profitability materially. 

Though asset quality pressures are expected 
to  persist,  they  remain  modest  by  historical 
standards.  The  gross  non-performing  loan  (NPL) 
ratio  continued  its  downward  path  in  2023  and 
only slightly edged upwards in September 2024, to 
2.8%  (EU  average  of  1.9%),  higher  for  loans  to 
firms (4.4%) than to households (2.6%). Moreover, 
Stage 2 loans as a share of performing loans fell 
to  9.2%  in  September  2024  from  11.5%  in  end-
2023.  Provisioning  levels  also  remain  higher  than 
for  EU  peers,  with  a  coverage  ratio  of  the  non-
performing loans by provisions of 47.8% as of Q3 
2024 (vs 42.1% for the EU). These figures, coupled 
with the solid capital position of Italian banks and 
their  strong  profitability,  imply  no  major  credit 
supply  constraints  for  viable  borrowers,  providing 
further signs that credit growth is currently driven 
by  credit  demand  (see  section  on  sources  of 
business funding). 

Banks’ liquidity position remains solid. Though 
declining to 170.7% as of Q3 2024 from 180.7% 
a  year  ago,  the  liquidity  coverage  ratio  of  the 
significant  institutions  remains  comfortable.  Their 
net  stable  funding  ratio,  which  reached  132%  as 
of  Q3  2024,  was  also  satisfactory  and  rather 
stable  over  the  same  period.  This  is  despite  the 
repayment  of  Eurosystem  funding  from  the 
targeted  long-term  refinancing  operations  (TLTRO 
III),  which  brought  central  bank  liquidity  down  to 
1.5%  of  banks’  total  liabilities  in  August  2024, 
from 4.8% at end-2023 and from 14% at its peak 
in  mid-2021.  The  marginal  cost  of  bank  funding 
also  went  down  to  1.9%  in  September  2024, 
around  20  basis  points  less  than  in  March  2024. 
Yet this level is historically high (106). 

its  peak 

lower  than 

Other areas of vulnerability remain, although 
their  overall 
banks  have  strengthened 
position over the last years. The stock of state-
guaranteed  loans  as  a  share  of  the  loan  book  is 
normalising,  while  banks’  exposure  to  domestic 
sovereign  debt  decreased  to  9.4%  of  total  assets 
in  December  2024, 
in 
December  2020  (10.9%)  but  still  high  both 
historically  and  compared  to  other  Euro  area 
peers.  These  exposures  are  unevenly  distributed 
and  concern  especially  cooperative  banks.  Banks 
classify  them  as  held  at  amortised  cost,  to  limit 
the  impact  of  short-term  market  movements  on 
their  balance  sheets  (107).  Moreover,  pockets  of 
vulnerability  remain  among  the  smaller  credit 
institutions  despite  progress  with  more  effective 
supervisory action. In addition, the effectiveness of 
mechanisms 
for  debt  workouts  and  asset 
disposals remains important, given the legacy debt 
which  has  exited  banks’  balance  sheets  but 
continues to burden the economy. 

Resilience of the non-bank financial 
intermediaries 

tilted 

bonds, 

towards 

The insurance sector remains resilient. Italian 
insurers  had  a  solvency  ratio  of  260%  as  of  Q3 
2024,  broadly  in  line  with  end-2023  and  slightly 
better  than  the  European  Economic  Area  (EEA) 
average  (247%).  Their  investment  portfolio  was 
heavily 
particularly 
government  bonds  with  a  clear  home  bias.  As  of 
losses  on 
October  2024,  the  net  unrealized 
investments  fell  to  EUR  7  billion  from  EUR  13 
billion as of December 2023. A limited number of 
Italian  insurers,  which  account  for  around  5%  of 
the sector's assets, decided to temporarily suspend 
the effects of unrealised investment losses on the 
profitability for the first half of 2024, as permitted 
by law in turbulent market situations. Italy has one 
of the highest insurance protection gaps in Europe 
for  natural  hazards,  particularly  earthquakes.  This 
led  the  Italian  authorities  to  adopt  in  December 
2023  a  mandatory  requirement  for  firms  to  get 
insurance  against  natural  hazards,  with  partial 
reinsurance  by  SACE,  a  state-owned  entity  (see 
Annex 7). 

(106) See  Figure  2.9  in  Bank  of  Italy  Financial  Stability  Report 

November 2024. 

(107) This protection would not extend to a potential forced sale of 
such  holdings,  which  is  however  an  unlikely  scenario  given 
the solid liquidity position of Italian banks.  

58 

 
 
 
area average of 122%) and to the fact that in Italy 
funds  investing  more  than  20%  of  their  portfolio 
in  illiquid  assets  must  be  set  up  as  closed-end 
funds, same as real-estate funds. As for open-end 
AIFs,  asset liquidity  and the  redemption profile  of 
their short-term liabilities are aligned. 

Sources of business funding and the 
role of banks 

less  on  capital 
Italian  companies  rely 
markets  and  more  on  own  profitability  as  a 
source  of  funding  than  their  EU  peers,  with 
bank  lending  being  the  other  main  financing 
source.  As  a  source  of  finance  for  Italian  NFCs, 
loans  were  equivalent  to  49%  of  GDP  as  of  end-
2023, slightly below the EU average of 51% (see 
Graph  A5.4).  Nevertheless,  expressed  as  a 
percentage  of  overall  NFCs  financing, 
loans 
accounted  for  a  slightly  larger  share  of  all 
financing  sources  (27.6%  vs  27.2%  in  the  EU). 
Similarly,  Italian  NFCs’  use  of  listed  shares  and 
bonds  was  also  lower  than  the  EU  average,  both 
expressed  as  a  percentage  of  GDP  (23.9%  vs 
54.8%)  and  as  a  percentage  of  overall  NFC 
financing (13.3% vs 23.8%). This is largely due to 
the small proportion of listed shares in the funding 
mix  (8.6%  of  funding  sources  vs  19.1%  for  the 
EU).  This  suggests  that  own  profitability  plays  a 
somewhat  larger  role  as  a  source  of  funding  for 
Italian firms relative to their EU peers. 

Graph A5.4: Composition of NFC funding as a % of 
GDP 

Insurers’ profitability improved  as  premiums 
recovered  and  the  rise  in  claims  moderated. 
Return-on-equity of life insurers was still negative 
in  the  first  half  of  2024  (-9%)  due  to  capital 
losses  but  better  than  a  year  before,  while  the 
non-life  segment  had  a  return-on-equity  of  8%, 
again  better  than  the  same  period  last  year  (108). 
This improved performance was due to a recovery 
in premium income coupled with a more moderate 
growth  in  claims  and  other  expenses  relative  to 
2023.  The  rise  in  premiums  also  progressively 
lowered  the  ratio  of  surrenders  to  premium 
income  in  life  insurance,  from  94%  in  October 
2023 to 81% in October 2024. At the same time, 
the  liquid  asset  ratio  of  Italian  insurers  remains 
high  and  was  broadly  stable  in  June  2024 
compared to December 2023, with a median value 
of  62%.  As  a  result,  liquidity  risks  have  been 
reduced  although  they  continue to  be material  as 
the ratio of surrenders remains high (109). 

The  pension  funds  sector  continued 
its 
consolidation and has recovered  from losses 
incurred  in  2022.  According  to,  the  supervisory 
authority for pension funds, the number of pension 
funds at the end of 2023 fell to 302 from 332 in 
2022  (and  387  in  2020).  In  2023,  there  were 
positive  returns  on  all  types  of  investment  lines, 
particularly where there was a higher exposure to 
equity,  recovering  losses  incurred  in  2022.  The 
total contributions collected by the Italian pension 
funds  in  2023  amounted  to  EUR  19.2  billion, 
whereas the outflows stood at EUR 11.6 billion. 

Risks  to  financial  stability  from 
Italian 
investment  funds  are  limited  and  stable. 
Borrowing 
financial 
from  banks  and  other 
intermediaries  by  Italian  open-end  investment 
funds is moderate and available credit lines stable. 
The  margins  paid  for  the  use  of  derivatives  are 
also  low  compared  with  available  liquidity,  while 
the  liquidity  risk  stemming  from  particularly  high 
redemption  requests  was stable  between  January 
and  August  2024  for  non-equity  segments.  Risks 
to  financial  stability  from 
Italian  Alternative 
Investment  Funds  (AIFs),  which  represented  close 
to  12%  of  Italian  investment  fund  assets  as  of 
June  2024,  are  considered  low  due  to  a  broadly 
stable  leverage  of  108%  (well  below  the  euro-

(108) See  p.35-36  of  Bank  of  Italy  Financial  Stability  Report, 

November 2024. 

(1) Reference period 2023 
Source: Eurostat 

(109) See p. 33 Bank of Italy Financial Stability Report, November 

2024. 

However,  the  role  of  internal  funding  is  not 
excessive, and firms do not appear to suffer 

59 

050100150200250ITEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equity 
 
  
from  a  broader  lack  of  funding.  According  to 
the  2024  EIB  Investment  Survey,  62%  of  Italian 
firms  responded  that  their  investment  needs  are 
covered  by  internal  funding,  close  to  the  EU 
average  of  66%.  Moreover,  92%  of  Italian  firms 
believe  that  their  investment  activities  over  the 
last  three  years  were  about  the  right  amount, 
higher than the EU average (80%), suggesting that 
there  is  no  material  financing  gap  relative  to 
investment demand. However, this may not be the 
case  for  firms  with  no  or  limited  capacity  for 
internal funding, such as innovative start-up firms 
(see further below). Overall, Italy’s business sector 
invests  less  as  a  share  of  GDP  (11.4%)  than  the 
EU average (13%). 

Bank  lending  to  households  and  corporates 
has  continued  to  contract.  Credit  growth  has 
been  on  a  general  downward  path  since 
September 2022 and turned negative at the start 
of  2023  for  corporates  and  in  July  2023  for 
households, due to a slump in credit demand. This 
trend  continued  throughout  2024,  with  only  timid 
signs  of  recovery  (mostly  for  households),  as  the 
year-on-year  credit  growth  rate  slightly  improved 
from -1.4% for households and -3.9% for NFCs in 
March  2024  to  -0.4%  and  -2.4%  respectively  in 
September 2024. 

The  outlook  is  better  on  the  back  of  easing 
monetary policy, particularly for households. 
This  is  also  confirmed  by  the  January  2025  bank 
lending  survey  conducted  by  the  Bank  of  Italy, 
which confirmed for a second consecutive quarter 
a sharp rise in households’ demand for mortgages, 
reflecting the falling cost of borrowing (110). Firms’ 
demand  for  loans  also  showed  signs  of  recovery, 
rising  in  the  fourth  quarter  of  2024  for  the  first 
time  since  the  third  quarter  of  2022,  reflecting 
investment, 
higher  financing  needs  for  fixed 
inventories and working capital, as well as a lower 
level of interest rates. 

Retail investment in capital markets 

Italian  households  tend  to  invest  their  above-
average wealth in a similar way to their EU peers. 

(110) According  to  the  Bank  of  Italy,  in  the  first  nine  months  of 
2024,  interest  rates  on  new  fixed-rate  and  adjustable-rate 
mortgages  fell  by  about  80  basis  points  (to  3.2%)  and  50 
basis points (to 4.5%) respectively. 

Italian  households  have  a  higher  amount  of 
financial  assets  than  the  EU  average  both  in  per 
capita  terms  and  as  a  share  of  GDP  (see  Graph 
A5.5).  The  share  of  households’  financial  assets 
held in pension and investment funds or directly in 
financial  investment  instruments  is  only  slightly 
below the EU average (43.4% vs 45.3% as of end-
2023). 

Graph A5.5: Composition of households' financial 
assets per capita and as a % of GDP 

(1) Reference period 2023 
Source: Eurostat 

However,  Italian  households  appear  to  be 
risk-averse when it comes to direct exposure 
to  shares.  Compared  to  the  EU  average,  Italian 
households have a higher share of financial assets 
invested in bonds (7.9% vs 2.7%)  and investment 
funds  (13.3%  vs  10%)  and  a  lower  share  of 
financial assets invested in listed shares (2.9% vs 
4.8%) and insurance and pension funds (19.3% vs 
27.8%). Domestic government debt in particular is 
a popular investment for Italian households, which 
hold  13%  of  the  total  outstanding  general 
government debt of Italy in the first half of 2024. 

in 

to 

boost 

capital  markets 

retail 
Further  measures 
participation 
are 
underway. The take-up of past initiatives to boost 
the  level  of  retail  participation,  such  as  the 
creation  of  individual  savings  plans  (PIR),  has 
waned since 2019 (111). However, a comprehensive 
reform of financial legislation planned for the first 

(111) PIRs offer tax incentives to invest savings into Italian or EEA 
companies permanently established in Italy. As of end-2023, 
only 1.6% of the assets under management of open-ended 
and closed-ended funds in Italy were in the form of original 
PIRs and only 0.2% in alternative PIRs. See PIR Observatory, 
May 2024, Assogestioni. 

60 

050100150200250300020406080100ITEUITEUper capita (000 EUR) (lhs)% of GDP GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
 
  
 
of 

authorisation) 

half of 2025 may include: i) using the option under 
legislation (112)  for  a  registration  system 
EU 
(instead 
alternative 
investment  funds,  and  ii)  allowing  retail  investors 
to  invest  in  registered  alternative  funds,  thus 
in  private  equity  and 
facilitating 
venture capital funds. 

investment 

for 

The role of domestic institutional 
investors 

The  Italian  asset  management  industry  is 
quite  developed  with  a  balanced  investment 
profile.  As  of  Q3  2024,  the  assets  under  the 
management  of  investments  funds  run  by  Italian 
management  companies  or  groups  amounted  to 
EUR 629 billion (113).  If  we  add  the  assets  of 
investment funds distributed in Italy and managed 
by  foreign  groups, 
total  assets  under 
the 
management  amounted  to  EUR 1 322 billion,  of 
which  EUR 1 254 billion  (95%)  were  open-ended 
funds (114). Of the open-ended  funds, 31.7% were 
equity  funds,  35.1%  bond  funds,  24.7%  balanced 
or  flexible  funds  and  8.5%  other  types  of  funds. 
According  to  the  European  Fund  and  Asset 
investment 
Management  Association 
funds  managed  by  Italian  groups  tend  to  have  a 
much higher share of their bond holdings invested 
in domestic bonds (42% in 2023 vs an EU average 
of 36.8%) compared to their equity holdings (10% 
vs an EU average of 21.4%) (115). 

(EFAMA), 

funds  play  a  particularly 
Investment 
important  role  in  the  Italian  bond  market, 
especially  for  corporates.  In  the  first  half  of 
2024, the overall exposure of Italian and euro area 
funds  to  the  Italian  bond  markets  increased. 
Investment by these funds plays an important role, 
especially  for  NFCs.  These  funds  hold  about  one 
third  of  outstanding  bonds  in  this  segment,  while 
the  market  for  government 
their  share 
securities is around one tenth (116). 

in 

(112) Directive 2011/61/EU (AIFMD). 

(113) See Bank of Italy, Financial Stability Report November 2024. 

(114) See  Assogestioni,  Mappa  trimestrale  del  Risparmio  Gestito, 

3rd Quarter 2024. 

(115) See  Exhibits  4.4  and  4.5  in  EFAMA  Asset  Management  in 

Europe, facts and figures December 2024. 

(116) See Bank of Italy Financial Stability Report November 2024. 

Italian 

insurers 

investment  portfolio  of 

investment  portfolio  of 

The 
is 
heavily  tilted  towards  bonds.  As  of  Q3  2024, 
the 
insurance 
companies  was  EUR 1 029  billion.  It  was  invested 
primarily  in  government  bonds  (35.6%  vs  an  EU 
average of 19.5%), with a clear home bias (117), in 
corporate bonds (14.7%), mainly issued by foreign 
NFCs,  in  equity  (11.1%),  and  in  investment  funds 
(33.2%) (118),  with  another  2.4%  held  in  cash  and 
deposits. 

Supplementary pension schemes also have a 
conservative investment profile, with modest 
exposure  to  equity.  As  of  end-2023,  the 
resources  accumulated  by  Italy’s  supplementary 
pension  schemes  stood  at  EUR 224.4 billion 
(around  10.8%  of  GDP) (119).  Negotiating  funds 
held  30.2%  of  total  resources,  pre-existing  funds 
29.9%,  open  funds  14.5%  and  personal  pension 
plans  (PIPs)  25.3%.  Pension  fund  assets  were 
invested  as  follows:  14.1%  in  Italian  government 
bonds,  24.6%  in  other  government  bonds,  17.3% 
in other debt securities, 21.4% in equity securities, 
15.8%  in mutual  funds,  5%  in  deposits  and  1.8% 
in  real  estate  investment (120).  This  suggests  that 
there 
increase  equity 
room 
investment  by  the  pension  system.  Encouraging 
the  build-up  of  universal  funded  supplementary 
pension schemes would positively contribute to: (i) 
the  sustainability  and  adequacy  of  pension 
benefits;  (ii)  investment  in  equity;  (iii)  access  to 
finance; (iv) growth; and (v) innovation.  

is  material 

to 

Italian  institutional  investors  still  have  a 
wide margin to increase their contribution to 
start-up funding. A 2024 paper by the Centre for 
European  Policy  Studies  showed  that,  on  average, 
Italian pension funds accounted for 10% of private 
equity  and  venture  capital  funds  raised  annually 

(117) According  to  the  Bank  of  Italy  (Financial  Stability  Report 
November  2024),  based  on  June  2024  data,  two  thirds  of 
the  government  bond  exposure  of  Italian  insurers  is  in 
domestic government bonds. 

(118) See  EIOPA  insurance  statistics,  Q3 2024.  The  investment 
fund  holdings  of  Italian  insurers  were  mainly  split  between 
equity (34.2%) and debt funds (34.1%) but only 1.7% was in 
private equity funds. 

(119) See  COVIP  -  Supplementary  Pension  Funds  in  Italy  at  end 
2023 – Main data. This figure differs from the one reported 
in the ECB portal and included in Table A3.1 below, pointing 
to a wider perimeter of pension funds included. 

(120) See  COVIP  -  Supplementary  Pension  Funds  in  Italy  at  end 
2023  –  Main  data.  The  less  granular  data  reported  in  the 
ECB portal also point to a similar allocation of investments. 

61 

 
 
 
between  2007-2023,  below  the  EU  average  and 
substantially short of the 19% for the Baltic states 
and  20+%  shares  for  Nordic  Member  States (121). 
Although  inflows  in  Italian  private  equity  funds  in 
the first half of 2024 came primarily from Italian 
insurers  and  pension  funds,  only  around  0.5%  of 
the overall investment portfolio of Italian insurers 
and pension funds is invested in unlisted equity. 

invest 

venture 

The new annual competition law has provided 
new  incentives  for  some  types  of  pension 
funds  to 
in  venture  capital.  The 
adoption  of  Law  No 193  of  16 December  2024 
introduced 
investment 
a 
capital 
constraint (122) 
for  existing  private  pension 
schemes  of  freelance  professionals  (Casse  di 
Previdenza), in order to take advantage of the tax 
exemption  under  Law  232/2016  on  capital  gains 
from qualified investments in shares and units of 
collective  investment  vehicles.  This  is  a  first  step 
towards  promoting  pension  fund  investment  in 
venture  capital,  but  further  measures  are  needed 
to make insurers and pension funds more familiar 
with  this 
investment  category  through  cost-
effective and risk-controlled structures. 

The depth of venture and growth 
capital 

The venture and growth capital ecosystem is 
growing.  According 
to  a  private  market 
report (123),  Italian  venture  capital  funds  injected 
EUR 8  billion  into  start-ups  from  2013  to  2023, 
growing at a faster pace than the EU average. The 
Italian  start-up  ecosystem  is  valued  at  around 
EUR 67 billion  (enterprise  value),  having  grown 
twenty-five-fold  in  the  past  10  years.  As  of  June 
2024,  the  assets  managed  by  non-real-estate 
alternative 
(AIFs)  exceeded 
EUR 50 billion,  driven  by  growth  in  private  equity 
funds, which account for almost half of the assets. 

investment  funds 

(121) See  Closing  the  gaping  hole  in  the  capital  market  for  EU 

start-ups – the role of pension funds – CEPS. 

(122) The pension scheme will be able to benefit from tax relief if 
venture  capital  investment  is  at  least  equal  to  5%  from 
2025,  and  10%  from  2026,  of  the  basket  of  qualified 
investments in the previous year. 

(123) See  State  of  Italian  VC:  the  report  realised  by  P101  and 

Dealroom - scaleupitaly. 

At  the  same  time,  the  venture  and  growth 
capital  ecosystem  is  still  fragmented  and 
does  not  fully  meet  the  financing  needs  of 
start-ups.  With  a  prevalence  of  small  operators, 
Italian  venture  capital  offer  does  not 
the 
sufficiently  cover  all  stages  of  the  enterprise  life 
cycle, 
late-stage 
investments.  This  creates  a  financing  gap  for 
successful  start-ups  that  want  to  scale  up.  Italy’s 
employee  stock  ownership  framework,  a  key 
element  to  attract  and  retain  talent,  also  scores 
rather  modestly  relative  to  EU  and  international 
peers (124), suggesting room for improvement. 

particularly 

regarding 

the 

amendments 
supporting 

to 
legal 
Targeted 
framework 
start-ups  were 
recently  adopted.  As  envisaged  by  the  recovery 
and  resilience  plan  (RRP),  the 
latest  annual 
competition  law  has  made  targeted  amendments 
to  the  comprehensive  legislative  framework  in 
(Start-up  Act),  aimed  at 
place  since  2012 
facilitating  the  creation  and  growth  of  start-ups. 
These  amendments 
i)  reviewing  the 
definition  of  start-ups  and  incubators,  ii)  the 
possibility of extending the validity period of some 
benefits for start-ups, iii) a tax credit for registered 
incubators  and  accelerators  on  direct  or  indirect 
investment  in  start-up  equity,  iv)  favourable  visa 
requirements for foreigners investing in innovative 
start-ups  or  venture  capital  funds  in  Italy,  and  v) 
extending the scope of the SME guarantee fund to 
to  venture  capital 
provide  guarantees  also 
investments in start-ups. 

include: 

These actions are complemented by state-led 
initiatives  to  provide  start-up  funding.  The 
state-owned  CDP  Venture  Capital  plays  a  central 
role  in  the  Italian  venture  capital  market,  with 
EUR 3.35 billion of assets under management and 
13  operational  direct  or  indirect  venture  capital 
funds.  According  to  its  2024-2028  business  plan, 
it  intends  to  invest  EUR 2.2 billion  in  50-70  new 
venture  capital  funds.  CDP  Venture  Capital  will 
also manage two public funds envisaged under the 
RRP, 
fund 
digital 
(EUR 400 million)  and  the  green  transition  fund 
(EUR 250 million),  which  will  provide  equity  or 
quasi  equity  support  to  start-ups,  directly  or 
indirectly. 

transition 

the 

i.e. 

(124) According  to 

rankings  provided  by  the  Not  Optional 
campaign,  Italy’s  employee  stock  option  framework  scores 
lower than countries such as the Baltic states, UK, France. 

62 

 
 
 
Table A5.1:  Financial indicators 

(1) Annualised data 
Credit growth and pension funds EU data refer to EA average. 
Source: ECB, ESTAT, EIOPA, DG FISMA CMU dashboard, AMECO. 

Financing the green transition 

Financial literacy 

up 

significantly 

Green  bonds  represent  a  growing  but  still 
small  share  of  total  outstanding  bonds.  The 
face value of green, social  and sustainable bonds 
outstanding in Italy at the end of 2023 amounted 
to  around  EUR 90 billion,  most  of  which  were 
green and sustainable bonds with a face value of 
EUR 80.7 billion, 
from 
EUR 54 billion  the  year  before  but  still  only 
corresponding  to  2.5%  of  all  bonds  outstanding, 
below the euro area average of 4%. More recently, 
in  2024  green  bonds  were  issued  for  more  than 
EUR 10.3 billion. This trend continued into the early 
months of 2025, with the issuance of a new green 
bond  with  a  maturity  of  20  years  and  the 
reopening  via  auction  of  an  already  outstanding 
bond  (with  a  maturity  of  2031)  for  a  total  of 
almost  EUR  7  billion.  Government-issued  bonds 
account for 45% of the total outstanding stock; as 
for  private  bonds,  the  largest  issuers  are  in  the 
financial (33%) and public utilities sectors (15%). 

of 

recent 

is  crucial 

The 
financial 
introduction 
education  as  a  school  subject  may  promote 
further  financial  literacy  in  Italy.  Financial 
literacy 
to  promote  retail-investor 
participation 
in  capital  markets  but  also  to 
to  bank 
familiarise  SMEs  with  alternatives 
financing.  Italy  has  had  a  national  strategy  for 
financial  literacy  in  place  since  2017  and  the 
recently  adopted  capital  markets  bill  introduced 
financial education into the school curriculum. The 
Bank  of  Italy  and  CONSOB  offer  extracurricular 
activities on financial literacy in schools, including 
training for teachers. The level of financial literacy 
in  Italy  is  in  line  with  the  EU  average.  The  2023 
Eurobarometer  survey (125)  shows  that  18%  of 
Italians have a high level of financial literacy, 64% 
a  medium  level,  and  the  remaining  19%  a  low 
level, practically in line with the EU average. 

(125) Source: Monitoring the level of financial literacy in the EU - 

July 2023 - Eurobarometer survey. 

63 

20172018201920202021202220232024-Q3EUTotal assets of MFIs (% of GDP)213.0206.4206.3230.4216.2198.7178.4177.2248.4Common Equity Tier 1 ratio13.412.913.915.515.115.215.515.916.6Total capital adequacy ratio16.816.117.219.318.819.219.420.020.1Overall NPL ratio (% of all loans)11.28.46.74.53.52.92.72.81.9NPL (% loans to NFC-Non financial corporations)18.914.211.77.85.74.54.34.43.5NPL (% loans to HH-Households)9.26.55.14.03.62.82.62.62.2NPL-Non performing loans coverage ratio50.553.052.251.352.250.049.647.842.1Return on equity17.15.84.91.05.79.112.714.110.0Loans to NFCs (% of GDP)45.344.541.847.843.333.930.628.930.0Loans to HHs (% of GDP)37.737.637.741.438.734.632.131.244.5NFC credit annual % growth0.21.5-1.88.51.7-0.2-3.7-2.40.8HH credit annual % growth2.82.82.62.43.73.3-1.3-0.40.7Stock market capitalisation (% of GDP)31.926.630.831.133.625.528.531.569.3Initial public offerings (% of GDP)0.120.130.170.050.300.200.23-0.05Market funding ratio31.734.235.235.237.539.138.9-49.6Private equity (% of GDP)0.230.390.390.330.420.630.32-0.41Venture capital (% of GDP)0.010.010.010.020.020.040.03-0.05Financial literacy (composite)------43.5-45.5Bonds (as % of HH financial assets)7.47.36.35.54.55.27.9-2.7Listed shares (as % of HH financial assets)2.42.12.32.52.82.52.9-4.8Investment funds (as % of HH financial assets)15.714.414.614.414.813.413.3-10.0Insurance/pension funds (as % of HH financial assets)21.922.923.423.622.019.819.3-27.8Total assets of all insurers (% of GDP)52.851.356.565.260.948.749.449.854.8Pension funds assets (% of GDP)--8.49.79.38.28.38.923.41-34-1011-1718-2425-27Colours indicate performance ranking among 27 EU Member States.Banking sectorNon-banks sector 
 
 
  
 
ANNEX 6: EFFECTIVE INSTITUTIONAL FRAMEWORK 

Italy’s institutional framework influences its 
competitiveness. Efforts are being made by Italy 
to  strengthen the  effectiveness  of its  institutional 
framework.  Italy  is  focusing  heavily  on  improving 
digital public services in line with its Digital Decade 
targets.  The  continued  roll-out  of  such  services  is 
crucial.  Despite  progress,  the  justice  system  still 
faces some challenges regarding its efficiency. 

measures  required  good  cooperation  between 
central and local administration.  

Quality of legislation and regulatory 
simplification  

Public perceptions 

Graph A6.1: Trust in justice, regional / local 
authorities and in government 

Performance  in  developing  and  evaluating 
legislation is above the EU average. However, 
it  has  slightly  deteriorated  since  2021.  Overall, 
there is scope for strengthening the requirements 
governing  the  transparency  of  regulatory  impact 
assessments  for  both  primary  and  secondary 
legislation  (Graph  A6.2).  There  is  also  room  for 
for 
further 
regulations.  For  example,  when 
simplifying 
evaluating  primary 
is  no 
requirement to compare the impact of the existing 
regulation to alternative options (Table A6.1).  

the  mechanisms 

strengthening 

legislation, 

there 

Graph A6.2: Indicators of Regulatory Policy and 
Governance (iREG) 

(1) EU27 from 2019; EU28 before 
Source: Standard Eurobarometer surveys 

Public trust in the government has increased 
and  is  in  line  with  the  EU  average  (Graph 
A6.1).  However,  it  is  less  trusted  than  the  justice 
system,  and  regional  and  local  authorities.  While 
the  perceived  quality  of  public  administration  has 
shown a general improvement across the country, 
regional disparities persist (126). When asked about 
ways to boost trust in Italy's public administration, 
61%  of  citizens  suggested  reducing  bureaucracy 
(EU  average:  52%)  and  49%  called  for  better-
skilled  civil  servants  wanted  simpler  interactions 
with  administration  (EU  average:  30%)  (127).  The 
Italian  recovery  and  resilience  plan  (RRP)  has 
helped  to  advance  administrative  reforms.  Many 

(126) Inforegio - European Quality of Government Index 

(127) Understanding Europeans’ views on reform needs - April 
2023 - - Eurobarometer survey, Country Fact Sheet. 

64 

Source: OECD (2025), Regulatory Policy Outlook 2025 and 
Better Regulation across the European Union 2025 
(forthcoming). 

Reforms  under  the  RRP  are  intended  to 
simplify  at 
least  600  administrative 
procedures  by  June  2026  concerning  citizen 
and  business  interactions  with  the  public 
administration. The procedures relate to services 
in  areas  such  as  the  environment,  construction, 
production,  employment,  tourism,  agri-food,  as 
well  as  areas  of  more  direct  interest  to  citizens, 
such as registration services, disability support and 
access to digital services.  

00.10.20.30.40.50.60.7AutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSpringAutumnSummerWinterSummerWinterSpringAutumnSpringAutumn2014201520162017201820192020202220232024Justice,  legal system EU27Justice,  legal system ITRegional or local public authorities EU27Regional or local public authorities ITGovernment  EU27Government  IT0,00,51,01,52,02,53,03,54,0Primary lawsSubordinateregulationsPrimary lawsSubordinateregulationsPrimary lawsSubordinateregulationsIT_StakeholderengagementIT_Regulatory ImpactAssessmentIT_Ex-post evaluation oflegislationMethodologySystematic adoptionTransparencyOversight and quality control2021EU-27 
 
        
 
     
 
 
 
 
Table A6.1:  Italy. Indicators on administrative burden reduction and simplification 

(1) This table presents a subset of iREG indicators focusing on regulatory costs. The indicators refer to primary legislation. 
Source: OECD (2025), Regulatory Policy Outlook 2025 [https://doi.org/10.1787/56b60e39-en] and Better Regulation across the 
European Union 2025 (forthcoming). 

Decree-Laws,  which  are  adopted  by  the 
Government  and  may  be  converted  into  law 
by  the  Parliament  within  60  days,  still 
account  for  over  50%  of  Italy’s  legislative 
output,  diminishing  parliament's  lawmaking  role. 
This  reflects  a  trend  for  governments  to  use 
decree-laws,  which  has  surged  in  the  last  few 
years. 

Social dialogue 

in 

Despite the existence of formal consultation 
mechanisms 
social  partners’ 
Italy, 
influence  on  policymaking  remains  limited. 
Consultations  occur  through  informal  talks  before 
legislative  acts  are  adopted  and  through  formal 
involvement  during  parliamentary  committee 
hearings. Social partners also have representation 
in  the National  Council  for  Economics  and Labour 
(CNEL),  an  advisory  body  established  by  the 
Constitution.  Despite  these  mechanisms,  their 
involvement  is  low  and  largely  influenced  by  the 
political  climate.  CNEL’s  public  debate  and 
legislative 
impact  are  minimal.  The  National 
Programme  Youth  Women  Work  2021-2027 
supports  social  dialogue  by  strengthening  the 

65 

through 

capacity  of  social  partners  and  civil  society 
organisations 
training. 
figures  may  be 
Although  official  density 
overestimated, trade unions represent a significant 
workforce  share.  Nevertheless,  there  have  been 
delays in renewing collective agreements (128). 

specialised 

Efficiency of selected administrative 
procedures 

Proceedings  handled  by 
Italy’s  public 
administration  often  take  a  long  time  to 
complete. For example, the OECD product market 
regulation  indicators  show  that  Italy's  licensing 
system  is  aligned  with  most,  but  not  all,  best 
practices.  Although  the  government  keeps  an  up-
to-date  online  inventory  of  business  permits  and 
licences, there is no requirement for it to regularly 
review  the  inventory  to  determine  if  the  permits 
and  licences  are  still  required  (see  Annex  4). 

(128) For  an  analysis  of  the involvement  of  Italy’s  social  partners 
at national level in the European Semester and the Recovery 
and Resilience Facility, see Eurofound (2025), National-level 
social  governance  of  the  European  Semester  and  the 
Recovery and Resilience Facility. 

Ex ante impact assessment of legislationEx post evaluation of legislationIdentify and assess the impacts of the baseline or ‘do nothing’ option.Is required to consider the consistency of regulations and address areas of duplication.Identify and assess the impacts of alternative non-regulatory options.Is required to contain an assessment of administrative burdens.Quantify administrative burdens of new regulations.Is required to contain an assessment of substantive compliance costs.Quantify substantial costs of compliance of new regulations.Compares the impact of the existing regulation to alternative options.Assess macroeconomic costs of new regulations. Periodic ex post evaluation of existing regulations is mandatory.Assess the level of compliance.Government uses stock-flow linkage rules when introducing new regulations (e.g., one-in one-out).Identify and assess potential enforcement mechanisms.A standing body has published an in-depth review of specific regulatory areas in the last 3 years.In the last 5 years, public stocktakes have invited businesses and citizens to assess the effectiveness, efficiency, and burdens of legislation.When developing new legislation, regulators are required to …Yes /  For all primary laws For major primary laws For some primary lawsNo / Never 
 
 
   
 
 
Table A6.2:  Key Digital Decade targets monitored through the Digital Economy and Society Index 

Source: State of the Digital Decade report 2024 

of 

the 

Additionally,  according  to  a  report  monitoring  the 
Commission 
implementation 
recommendation  and  guidance  on  speeding  up 
permit-granting  procedures  for  renewable  energy 
and  related  infrastructure  projects (129)  there  is 
scope  to  accelerate  national  procedures  for  the 
licensing  of  renewable  energy  projects.  Moreover, 
the  average  time  for  a  decision  by  a  contracting 
authority, i.e. from the deadline for submission of 
offers until the date of the contract award, is 176 
days  in  Italy,  compared  to  an  EU  average  of  99 
days.  This  causes  uncertainty  for  companies. 
Increasing  the  speed  in  the  award  procedures  for 
public contracts is one of the objectives of the RRP 
reform of public procurement.  

Digital public services 

Italy  is  making  progress  in  offering  citizens 
and  businesses  online  access  to  key  digital 
public  services,  although  there  is  still  room 
for  improvement  (Table  A4.2).  In  2023,  Italy 
scored  68.3  for  the  availability  of  digital  public 
services  for  citizens,  compared  to  an  EU  average 
of  79.4.  For  the  availability  of  digital  public 
services  for  businesses,  it  scored  76.3  in  2023, 
which  was  also  below  the  EU  average  (85.4). 
Efforts  undertaken  through  the  RRP  are  expected 
to  increase  the  overall  performance,  while  access 
to  e-health  records  is  a  particular  strength  for 

(129) European 

Commission: 

Directorate-General 

for 
Energy, Monitoring  the  implementation  of  the  Commission 
recommendation  and  guidance  on  speeding  up  permit-
granting  procedures  for  renewable  energy  and  related 
infrastructure  projects  –  Final  report,  Publications  Office  of 
the European Union, 2025, link.  

Italy, which achieved an overall score of 83 out of 
100 in 2023 (EU average of 79).  

Use  of  eID  is  relatively  common  in  Italy.  In 
2023  some  39%  of  individuals  reported  having 
used  their  eID  to  access  online  public  services  in 
Italy,  while  47%  had  used  their  eID  to  access 
online  services  for  private  purposes.  Both  figures 
are  above  the  EU  average  (36%  and  41%, 
respectively) (130).  Italy  has  two  certified digital  ID 
schemes  (SPID  and  CIE)  which  are  widely  used  in 
the  country.  It  has  already  begun  to  deploy  its 
national  IT  wallet,  part  of  the  EU  Digital  Identity 
Wallet,  which  will  allow  people  to  safely  request, 
store  and  share  important  digital  documents  and 
electronically sign or seal documents (131). 

Italy  is  now  closer  to  being  ready  for 
seamless,  automated  exchange  of  authentic 
documents  and  data  across  the  EU.  It  has 
completed  its  first  transactions  using  the  Once-
Only  Technical  System  (132),  part  of  the  EU  Single 
Digital Gateway, and is ready to roll out services to 
citizens  and  business.  However,  Italy  has  not  yet 
set up and notified eID schemes for legal persons 
under  the  eIDAS  Regulation  (133).  This  means  that 
Italian businesses cannot authenticate themselves 
to  access  public  services  provided  by  other 

(130) European Commission. Digital Decade 2024: Country reports 

(131) EU Digital Identity Wallet Home - EU Digital Identity Wallet 

(132) European  Commission,  Once-Only 

Technical  System 

Acceleratormeter 

(133) European Commission, eIDAS Dashboard 

66 

Digital Decadetarget by 20302022202320242024EU-27Digitalisation of public services167686879100Score (0 to 100)20212022202320232030279757685100Score (0 to 100)202120222023202320303na718379100Score (0 to 100)20212022202320232030Digital public services for businessesAccess to e-health recordsItalyEU-27Digital public services for citizens 
 
 
 
  
 
Member  States,  including  those  enabled  by  the 
Once-Only Technical System (134). 

improving  digital  services 

Further 
for 
citizens  is  a  priority  for  Italy.  The  authorities 
have  rolled  out  several  initiatives  to  improve  the 
digital  experience  of  citizens.  These  include  the 
advancement of the ‘Public Digital Identity System’ 
(SPID)  and  the  ‘Electronic  Identity  Card’  (CIE),  the 
adoption  of  a  European  wallet  for  digital  identity, 
which will be preceded by an Italian version known 
as  the  ‘IT  Wallet’.  Additionally,  digital  payment 
systems  such  as  ‘PagoPA’  and  ‘AppIO’  are  being 
adopted,  alongside  the  implementation  of  the 
‘National  Registry  of  Resident  Population’  (ANPR). 
Furthermore,  there  was  significant  progress  in 
developing platforms for the digital notification of 
administrative  acts  (SEND),  the  digitalisation  of 
public  notices  and  innovative  advancement  in  the 
public  transport  sector  through  ‘Mobility  as  a 
(MaaS)  platforms.  These  measures 
Service’ 
simplify  access  to  services  and  aim  to  make 
interaction  with  the  PA  more  immediate  and 
secure. 

Civil service  

Italy  has  the  oldest  public  administration 
workforces  in  the  EU,  with  almost  53%  of  the 
civil  servants  older  than  49  years  (135).  This  was 
caused  in  part  by  a  decade-long  hiring  freeze, 
which  has  also  resulted  in  understaffing  of  the 
public administration. The proportion of women in 
senior  civil  service  posts  was  38.8%,  well  below 
the EU-27 average of 46.5% (136).  

Efforts  are  ongoing  to  address  capacity 
shortages. In 2021, as part of RRP, Italy launched 
the inPA national  recruitment portal to streamline 
and enhance the transparency of the public sector 
resume 
recruitment. 
recruitment  also,  leading  to  a  significant  +12.6% 
annual  increase  in  public  sector  hiring  in  2023 
compared to 2022(137). Italy is professionalising its 

efforts  helped 

These 

civil  service  through  a  combination  of  investment 
and  reform.  In  January 2025,  the  Minister  for 
Public Administration adopted a decree on training 
and  enhancing  human  capital  to  support  the 
development  of  public  sector  personnel.  This  will 
bolster  the  range  of  training  offered  by  the 
Department  of  Public  Administration,  the  National 
School  of  Administration  (SNA),  and  Formez  PA 
(the  training  platform  ‘Syllabus.gov.it’  created  as 
part  of  the  RRP).  Four  local  training  hubs  of  the 
SNA  have  been  established  in  four  Italian  regions 
to  deliver  advanced  training  to 
local  public 
administrations  on  relevant  and  strategic  topics. 
Approximately EUR 20 million have been allocated 
directly to administrations to support professional 
training programmes. 

Integrity 

A  far  higher  percentage  of  companies  than 
the  EU  average  consider  corruption  to  be 
widespread  and  a  problem  when  doing 
business.  In  Italy,  83%  of  companies  consider 
that  corruption  is  widespread  (EU  average  64%), 
while  50%  consider  that  corruption  is  a  problem 
when  doing  business  (EU  average  36%) (138). 
However,  32%  of  companies  believe  that  people 
and businesses caught for bribing a senior official 
are  appropriately  punished,  in  line  with  the  EU 
public 
average 
procurement  continues  to  be  seen  by  many 
stakeholders  as  a  sector  prone  to  high  risk  of 
corruption  (140).  83%  of  companies  (EU  average 
27%)  think  that  corruption  has  prevented  them 
from  winning  a  public 
tender  or  a  public 
procurement  contract  in  the  last  three  years  (141). 
The  digitalisation,  as  of  1  January  2024,  of  the 
entire  lifecycle  of  all  procurement  or  concession 
contracts under the new Public Procurement Code 

Furthermore, 

(31%) (139). 

(134) European Commission, The Once Only Principle System: A 

corruption in the EU (2024).   

(138) Flash Eurobarometer 543 on businesses’ attitudes towards 

breakthrough for the EU’s Digital Single Market 

(135) Eurostat, 2025, European Union Labour Force Survey.  

(139) Ibid. 

(140) 2024 Rule of Law Report, country chapter on the rule of law 

(136) European Institute for Gender Equality (EIGE), link. 

situation in Italy, p. 22. 

(137)https://servizi2.inps.it/servizi/osservatoristatistici/api/getAllega

(141) Flash Eurobarometer 543 on businesses’ attitudes towards 

to/?idAllegato=1048 

corruption in the EU (2024).   

67 

 
 
 
should  ensure  more 
contracts (142). 

transparency  of  public 

There  are  no  comprehensive  lobbying  rules 
for  members  of  parliament.  As  with  most 
Member  States,  Italy  has  put  in  place  rules  on 
lobbying. However, there is no precise definition of 
a lobbyist or rules covering relations and contacts 
between  parliamentarians  and  lobbyists  (143).  This 
level  playing  field  for 
could  help  ensure  a 
companies’ 
policymakers.  No 
to 
parliamentary  debates  took  place  on  any  of  the 
draft  lobbying  laws  tabled  in  either  of  the  two 
chambers. In addition, the draft law on conflicts of 
interest is pending in parliament (144).  

access 

Justice 

Despite progress, the efficiency of the justice 
system  continues  to  face  challenges,  in 
particular  regarding  the  duration  of  judicial 
proceedings.  The  disposition  time  in  civil  and 
commercial  cases  at  first  instance  courts  has 
further  decreased  (from  540 days  in  2022  to 
511 days  in  2023)  but  is  still  very  long.  The 
disposition  time  in  administrative  cases  at  first 
instance  increased  slightly  (from  574 days  in 
2022 
the 
downward trend. The quality of the justice system 
is  considered  to  be  good  overall.  The  level  of 
digitalisation  is  generally  advanced,  but  there  is 
room for improvement regarding the digitalisation 
of  criminal  courts  and  prosecutor  services.  As 
independence,  no  systemic 
regards 
deficiencies have been reported (145). 

in  2023),  reversing 

to  595 days 

judicial 

(142) 2024 Rule of Law Report, country chapter on the rule of law 

situation in Italy, p. 22. 

(143) Ibid., pp. 19-20. 

(144) Ibid., pp. 18-20. 

(145) For more detailed analysis of the performance of the justice 
Italy,  see  the  upcoming  2025  EU  Justice 

system 
Scoreboard and the 2024 Rule of Law Report. 

in 

68 

 
 
SUSTAINABILITY 
ANNEX 7: CLEAN INDUSTRY AND CLIMATE MITIGATION 

production  of  cables  and  systems  for  power 
transmission  and  distribution  –  owing,  in  large 
part, to the presence of the Prysmian Group in the 
country. 

Italy  is  also  investing  in  sustainable  gas 
production  and  uptake.  The  National  Hydrogen 
Strategy  Preliminary  Guidelines  emphasises  the 
need  for  increased  electrolyser  production.  The 
RRP supports significant investment in hydrogen in 
brownfield sites (hydrogen valleys). 

Italy's  recovery  and  resilience  plan 
is 
supporting  the  development  of  net-zero 
technologies.  For  instance,  it  allocates  EUR  3.5 
billion to support investment necessary to promote 
the  transition  to  a  net-zero  economy  -  namely 
companies  producing  batteries,  solar  panels,  wind 
turbines, heat pumps, electrolysers, equipment for 
carbon capture usage and storage, as well as key 
components designed and primarily used as direct 
input. Italy has moreover introduced a government 
aid  scheme  to  support  investment  in  storage 
systems.  

Italy  also  benefits  from  a  conducive  policy 
framework  to  scale  net  zero  manufacturing. 
A  one  one-stop  shop  at  municipal  level  dedicated 
to industrial permitting has been set up. Lastly, the 
New  Skills  Fund  provides  for  upskilling  and 
reskilling  in  net  zero  technologies.  A  smaller  fund 
scheme 
of 
electrolysers  and  sustainable  investment  in  SME. 
Additionally,  legislative  measures  support  biogas 
and  biomethane  production  and  regulate  the 
permanent geological storage of CO2.  

production 

targets 

also 

the 

Transforming the car industry   

Despite  its  significant  economic  importance, 
Italy's  automotive  industry  has  faced  a 
decrease  in  production  volumes.  The  auto 
industry accounts for 4.3% of manufacturing jobs 
in  Italy  (below  the  EU  average  of  8.1%  in  2022), 
employing  directly  around  165 000  people.  Some 
871 000  vehicles  were  made  in  Italy  in  2023 
(around  two  thirds  of  them  cars)  in  24  different 
plants (eight of them dedicated to battery electric 

greenhouse 

Italy  faces  significant  challenges  regarding 
its  clean  industry  transition  and  climate 
mitigation.  Although  Italy  is  a  leader  in  clean 
technologies, its transition to electric vehicles trails 
EU  averages,  and  it  relies  heavily  on  imported 
critical  raw  materials,  leaving  it  vulnerable  to 
supply  chain  disruptions.  The  country's  energy-
related 
in 
manufacturing  are  higher  than  the  EU  average, 
highlighting 
effective 
decarbonisation measures. While progress is noted 
in  circular  economy  practices,  regional  disparities 
in  waste  management  persist,  and  more 
investment  is  needed  to  bolster  Italy's  circularity 
transition. This annex reviews the areas in need of 
urgent attention in Italy’s clean industry transition 
and  climate  mitigation, 
looking  at  different 
dimensions. 

for  more 

emissions 

need 

gas 

a 

Strategic autonomy and technology 
for the green transition  

Net zero industry 

it 

Italy is one of the leading European countries 
in  clean  technologies,  with  a  significant 
number  of  solar  PV  and  wind  manufacturing 
facilities (146). 
participates 
In  addition, 
extensively  in  the  Important  Projects  of  Common 
European  Interest  (IPCEIs)  launched  for  batteries 
and  hydrogen.    Italy’s  manufacturing  capacity 
amounts to between 2.7 and 2.8 GW/y (14% of EU 
capacity)  for  solar  PV,  with  capacity  equally 
distributed  in  modules  (1.2-1.3  GW)  and  cells 
(1.5GW);  between  3.5  and  3.8  GW/y  (4%  of  EU 
capacity)  for  wind  power.  This 
includes  the 
capacity  of  approximately  1–1.1  GW  for  towers 
and 2.5-2.7 GW for blades; between 310 and 325 
MW/y (5-6% of EU capacity) for electrolysers, and 
between  200  and  350  MWh/y  (a  negligible  share 
of  total  EU  capacity)  for  battery  and  storage 
technologies.    Italy  is  also  home  to  at  least  50 
factories that specialise in the manufacturing heat 
pumps,  further  diversifying 
its  manufacturing 
portfolio. It is also an EU and global leader in the 

(146) European Commission: Directorate-General for Energy, The 
net-zero manufacturing industry landscape across the 
Member 2025, Link. 

69 

 
 
 
 
 
 
vehicles)  (147)  –  far  below  2018  when  units 
produced exceeded one million.  

materials in 2023 – one of the lowest levels in the 
EU (152). 

the 

The sector is currently navigating significant 
transformations,  particularly 
shift 
towards  electric  vehicles.  40%  of  the  more 
than  2  000  companies  in  the  sector  specialise 
mainly  in  producing  parts  for  internal  combustion 
engines (148). Furthermore, Italian suppliers are, on 
average,  small  (they  employ  46  employees  on 
average,  compared  to  over  100  for  Czech,  Polish 
and  German  companies),  suffering  from  greater 
difficulty  in  putting  in  place  the  huge  investment 
needed  for  product 
industrial 
conversion  (149).  Finally,  the  Italian  automotive 
system  is  exposed  to  the  choices  of  a  few  large 
companies (150) in sales to German and, to a lesser 
extent,  French  manufacturers,  in  a  context  of 
production  and  sales  contraction  in  Europe  and 
high electricity prices. 

innovation  or 

Italy’s  transition  to  e-vehicles  is  lagging 
behind  EU  averages.  Italy’s  motorisation  rate 
(the  number  of  passenger  cars  per  thousand 
inhabitants) is 694, the highest in the EU in 2023 
(EU  average  is  570).  However,  the  percentage  of 
new zero-emission cars sold in 2023 is still 4.2%, 
well below the EU average of 14.5% in 2023. 

Critical raw materials  

Italy’s  mining  sector  has  seen  a  significant 
decline, (151)  increasing  the  country’s  dependence 
on minerals from other parts of the world, notably 
China,  Africa,  India  and  South  America.  However, 
Italy’s sources are well-diversified, as measured by 
index  of  strategic  dependencies  on  raw 
the 

(147) European  Automobile  Manufacturers’  Association  (ACEA), 
2024, The Automobile Industry Pocket Guide 2024/2025. 

(148) Associazione  Nazionale  Filiera 

Industria  Automobilistica 

(ANFIA), Observatory on components, 2023, Link. 

(149) Eurostat, Structural Business Statistics, referring to 2022. 

(150) For example, the orders of Stellantis, the only  manufacturer 
operating in Italy, that accounts for over 50% of turnover for 
a third of suppliers. 

(151) Italy’s  minerals  production  was  reported  to  be  12.9  million 
metric  tons  in  2022,  i.e.  5.6%  more  than  in  2021  but  less 
than half the all-time high of 26 million metric tons in 2009 
(source: World Mining Data, 2024).  

Italian  manufacturing  depends  heavily  on 
imports  of  critical  raw  materials  needed  for 
the  green  and  digital  transitions,  such  as 
lithium, cobalt, and rare earths, which are essential 
for producing high-tech products, including electric 
vehicles,  wind  turbines  and  electronics.  This 
creates  significant  challenges  for  sustainability 
and 
risks, 
resilience,  such  as  supply  chain 
environmental  degradation  and  social  concerns. 
With  48%  of  material  inputs  in  manufacturing 
production  stemming  from  imports  in  2022  (EU 
average:  22%),  Italy  is  particularly  vulnerable  to 
supply chain disruptions (153).  

Italian  authorities are making positive  steps 
towards  increasing  strategic  autonomy.  In 
June  2024,  the  Italian  government  approved  a 
decree  that  aims  to  ensure  a  secure  supply  of 
critical raw materials, in line with the EU’s Critical 
Raw  Materials  (CRM)  Act.  The  new  legislation 
includes  simpler  permitting  procedures  for  the 
release of mining concessions and seeks to attract 
private investment into the sector (154). 

Italy  is  implementing  policies  to  strengthen 
supply  chains  and  the  uptake  of  circular 
solutions for critical raw materials.  Following 
the  adoption  of  the  EU  CRM  Act,  the  main  Italian 
regulatory  framework  related  to  CRMs  is  the 
legislative  decree  84/2024,  which  governs  the 
secure  and  sustainable  supply  of  strategic  raw 
materials.  Furthermore,  Law  n.  206  of  27 
December 2023 sets up  a ‘National  Made  in Italy 
Fund’ to invest in national strategic supply chains, 
including those related to the supply, recycling and 
re-use of strategic raw materials. The fund had an 
initial  allocation of EUR 700 million for 2023 and 
the  same  for  2024.  Finally,  the  RRP  supports  the 
URBES  project  (URBan  mining  and  Extractive 

(152) Single  Market 

Scoreboard 

significant 
concentration  measures  how  much  a  country  relies  on  a 
limited  number  of  sources  for  a  basket  of  critical  raw 
materials. 

2024. 

The 

(153) National  circular  economy  network,  2025,  7th  report  on 

circular economy in Italy, Link, p.20. 

(154) For  new  mining  projects  involving  the  processing  of  critical 
raw materials, holders of mining concessions will have to pay 
the  state  a  product  royalty  of  between  5%  and  7%.  These 
funds will be allocated to the National Made in Italy Fund to 
support  investment  in  the  supply  chain  for  critical  raw 
materials. 

70 

 
 
 
Waste  Information  System),  which  aims  to  map 
and characterise all potential secondary sources in 
terms  of CRM,  starting  with  abandoned  extractive 
waste. 

The  recycling  rate for  e-waste, a  key  source 
of  critical  raw  materials,  is  above  the  EU 
average,  with  88.9%  in  2021.  The  reuse  and 
recycling  rate  for  end-of-life  vehicles  is  slightly 
below the EU average (86% vs 89% in 2022). This 
points to the need to avoid the leakage of critical 
raw materials, notably as the car industry shifts to 
battery-electric vehicles. 

Climate mitigation  

Industry decarbonisation 

in 

Italy’s  manufacturing  sector  has  a  similar 
level  of  greenhouse  emissions  intensity  as 
the  EU  overall,  but  its  share  of  energy-
is  significantly  higher. 
related  emissions 
Around  22%  of  Italy’s  total  greenhouse  gas 
emissions  come  from  the  manufacturing  sector, 
like  in  the  EU  overall (155).  In  2022,  industrial 
Italy  emitted  270 g  CO2eq  of 
production 
greenhouse  gases  per  euro  of  gross  value  added 
(GVA), in line with the EU average. Since 2017, the 
greenhouse  gas  intensity  of  Italy’s  manufacturing 
industry  declined  by  only  4%,  well  below  the  EU 
average  (20%).  With  more  than  two  thirds  in 
2023,  Italy’s  share  of  energy-related  greenhouse 
emissions  in  industry  emissions  (as  contrasted 
with emissions related to industrial processes and 
product  use)  is  the  highest  in  the  EU,  where  this 
share is at 57% overall.  

Italy’s manufacturing  sector is less  process- 
and  product  use-related  emissions  intensive 
than  the  EU’s  overall  (156).  Between  2017  and 

(155) In  2023.  Manufacturing  includes  all  divisions  of  the  “C” 
section  of  the  NACE  Rev.  2  statistical  classification  of 
economic  activities.  In  the  remainder  of  this  section,  unless 
indicated  otherwise,  data  on  manufacturing  refer  to  the 
divisions  of  the  NACE  section  C  excluding  division  C19 
(manufacture  of  coke  and  refined  petroleum  products),  and 
the  year  2022.  The  source  of  all  data  in  this  section  is 
Eurostat;  data  following  the  UNFCCC  Common  Reporting 
Framework (CRF) are from the European Environment Agency 
(EEA), republished by Eurostat. 

(156) For the GHG emissions intensity of GVA related to energy use 
and  industrial  processes  and  product  use  respectively,  GHG 

the 

2022, 
intensity  of  energy-related  GHG 
emissions  in  Italy’s  manufacturing  declined  by 
13%, to 135 g CO2eq per euro of  GVA, similar to 
the  EU  average.  In  the  same  period,  the  intensity 
of  process  and  product  use-  related  emissions 
declined  by  23%  (like  in  the  EU  overall),  to  62 g 
per euro of GVA, just 62% of the EU total. In that 
period, at around 41%, the share of electricity and 
renewables 
in 
manufacturing  was  broadly  stable.  So  was  the 
energy 
Italian  manufacturing, 
decreasing  by  about  5%  to  1  GWh  per  euro  of 
gross value added. 

final  energy  consumption 

intensity  of 

in 

Graph A7.1: GHG intensity of manufacturing and 
energy-intensive sectors, 2022 

Source: Eurostat. 

industries 

face 
Italy’s  energy-intensive 
challenges  but  have  maintained  stable 
output. Energy-intensive industries (157) accounted 
for  12%  of  Italy’s  manufacturing  gross  value 
added  in  2022.  With  the  exception  of  paper  and 
paper products, greenhouse emission intensities in 
these  industries  are  at  moderate  levels,  by  EU 
industries  are  particularly 
standards.  These 
exposed  to  energy  prices;  electricity  prices  for 

emissions  are  from  inventory  data  in  line  with  the  UNFCCC 
Common  Reporting  Format  (CRF),  notably  referring  to  the 
source sectors CRF.1.A.2 – fuel combustion in manufacturing 
industries and construction and CRF.2  – industrial processes 
and  product  use.  The  CRF.1.A.2  data  broadly  correspond  to 
the NACE C and E sectors, excluding C-19. GVA data (in the 
denominator  for  both  intensities)  are  aligned  with  this 
sectoral  coverage.  Therefore,  they  are  not  fully  consistent 
with the data referred to in other part of this section. 

(157) Notably,  the  manufacture  of  paper  and  paper  products 
(NACE  division  C17),  of  chemicals  and  chemical  products 
(C20),  “other”  non-metallic  mineral  products  (C23;  this 
division includes manufacturing activities related to a single 
substance of mineral origin, such as glass, ceramic products, 
tiles,  and  cement  and  plaster),  and  basic  metals  (C24).  To 
date,  these  industries  are  energy-intensive  –  i.e.  consuming 
much  energy  both  on  site  and/or  in  the  form  of  purchased 
electricity  –  and  greenhouse  gas  emissions  intensive,  in 
various combinations. 

71 

00.511.522.533.54C-C19C17C20C23C24KG CO2eq / €ItalyEU-27 
 
 
  
 
the 

least 

(158).  For 

industry have increased significantly in Italy in the 
innovative 
past  years 
establishments,  such  as  the  ageing  former  Ilva 
steel  mill 
in  Taranto  and  non-ferrous  metal 
processing and other plants in Sardinia (areas that 
Just  Transition  Fund), 
benefited 
insufficient deployment of innovative technologies 
(Direct  Reduction  of  Iron  at  the  former  Ilva  site) 
and  renewable  energy  sources  is  rendering  the 
production  sites  economically  unsustainable.  Still, 
the  energy-intensive 
sectors  as  a  whole 
maintained their output over the last year. 

from 

the 

Graph A7.2: Manufacturing industry production: 
total and selected sectors, index (2021 = 100), 
2017-2023 

Reduction  of  emissions  in  the  effort  sharing 
sectors 

To attain its 2030 effort sharing target, Italy 
needs  to  swiftly  specify  and  implement 
further  climate  mitigation  policies  (159).  In 
2023,  GHG  emissions  from  Italy’s  effort  sharing 
sectors  are  expected  to  have  been  22.3%  below 
those  of  2005.  By  2030,  current  policies  are 
projected  to  reduce  them  by  29.3%  relative  to 
2005  levels.  Additional  policies  considered  in 
Italy’s  final  updated  NECP  are  projected  to  entail 
reductions  by  a  further  11.3  percentage  points. 
This  results  in  a  3.1  percentage  point  shortfall 
regarding  Italy’s  effort  sharing  target  of  -43.7% 
(160). Given the large distance between current and 
additional  measures,  swift  and  steady  adoption 
will  be  critical  for  the  implementation  of  the  full 
set  of  measures.  While  Italy  could  use  domestic 
flexibilities  available  under  the  effort  sharing 
regulation, this would not be sufficient to close the 
gap to target. 

Graph A7.3: Greenhouse gas emissions from the 
effort sharing sectors, 2005 and 2023 

Source: Eurostat 

incentives  with  support 

Italy  has  started  complementing  its  energy 
efficiency 
for 
industry decarbonisation, but more is needed. 
Italy has set up some schemes for power purchase 
agreements,  including  large  agrisolar  plants  as 
suppliers of renewable electricity. Some interesting 
projects on medium- to long-term energy storage, 
including  heat,  can  significantly  contribute  to 
lowering  the  cost  of  industrial  decarbonisation, 
curbing peak-hour electricity tariffs. Further efforts 
are  needed,  however,  to  address  the  high  cost  of 
electricity  and  promote  the  electrification  of 
industry. For example, an incentive framework for 
self-production  and  storage  of  renewable  energy 
would be helpful. 

(158) For a detailed analysis of energy prices, see Annex 8 on the 

affordable energy transition. 

Source: European Environment Agency 

in  Regulation 

(159) The national greenhouse gas emission reduction target is set 
out 
(the  Effort  Sharing 
(EU)  2023/857 
Regulation).  It  applies  jointly  to  buildings  (heating  and 
cooling); road transport, agriculture; waste; and small industry 
(known as the effort sharing sectors).  

(160) The  effort  sharing  emissions  for  2023  are  based  on 
inventory  data.  The  final  data  will  be 
approximated 
review. 
established 
Projections  on  the  impact  of  current  policies  (“with  existing 
measures”,  WEM)  and  additional  policies  (“with  additional 
measures”, WAM) as per Italy’s final updated NECP. 

in  2027  after  a  comprehensive 

72 

7075808590951001052017201820192020202120222023ManufacturingManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of other non-metallic mineral productsManufacture of basic metals05010015020025030035040020052023MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
      
 
      
 
Sustainable industry 

Circular economy transition 

Italy  is  still  on  track  to  achieve  the  EU 
Circular  Economy  Action  Plan  goals,  thanks 
to  high  recycling  and  material  reuse  rates. 
The rate of circular use of materials was 20.8% in 
2023  (EU  average  11.8%),  which  puts  it  among 
the  top  EU  countries.  However,  after  a  steady 
increase  since  2013,  the  rate  has  been  stable 
since  2020.  With  EUR  4.18  generated  per  kg  of 
material  consumed  in  2023,  resource  productivity 
in Italy is well above the EU average of EUR 2.74 
per kg and one of the highest in the EU. This helps 
minimise  negative  environmental  impacts  and 
reduce  dependence  on  volatile  raw  material 
markets.  Furthermore,  the  material  footprint  is 
below  the  EU-27  average  at  10.5  tonnes  per 
person in 2023. 

climate 

circular 

national 

the  market 

for  secondary 

The  2022 
economy 
strategy (161)  provides  a  roadmap  and  defines 
new  administrative  and  fiscal  instruments  to 
strengthen 
raw 
materials.  The  goal  is  to  contribute  to  progress 
objectives  and 
neutrality 
towards 
implement  a  roadmap  of measurable  actions  and 
targets  by  2035 (162).  Many  of  the  actions  are  in 
the  national 
resilience  plan 
recovery  and 
(RRP) (163).    On  2  March  2024,  the  government 
presented      a  decree-law  on  financial  incentives 
for companies investing in sustainability, including 
circular  economy (164).  However,  despite  making 
strides  at  national  level,  the  6th  report  from  the 
national circular economy network shows a higher 
degree  of  best  practices  in  circular  economy 
implemented  in  northern  and  central  regions 
compared  to  southern  regions (165).  Another  2024 
national  report  indicates  that  42%  of  Italian 
companies  have  adopted  at  least  one  circular 

(161) Ministry  for Environment  and  Energy  Security  (MASE),  2022, 

National Circular Economy Strategy, Link. 

(162) A  related  timetable  addendum  (cronoprogramma)  contains 

targets to be achieved by 2027. 

(163) Recovery and resilience plan, 2021 Link. 

(164) Ministry of Enterprise and Made in Italy Link. 

(165) National  circular  economy  network,  2024,  6th  report  on 

economy  practice,  with  recycling  being  the  most 
widespread (166). 

in  2010  to  18% 

Italy  has  seen  a  significant  improvement  in 
waste management. The landfill  rate decreased 
in  2022.  The 
from  46% 
incineration  rate  has  remained  relatively  stable 
and  is  at  19%  in  2022.  The  Italian  government’s 
waste policy intends to increase recycling capacity, 
which, in turn, should reduce the demand for new 
incineration  plants.  Italy  has  a  tax  on  waste 
incineration  of  municipal  solid  waste  without 
energy  recovery  of  EUR  5.16/tonne,  which  is  the 
lowest among the 10 EU countries applying waste 
incineration taxes (167). 

Italy  is  on  target  to  meet  all  EU  recycling 
targets  for  2025  apart  from  the  one  for 
electrical  and  electronic  waste.  The  municipal 
waste recycling rate stood at 53.3% in 2022, with 
a steady increase since 2017. Italy is also on track 
to achieve the EU landfilling target of a maximum 
of 10% by 2035. On the other hand, generation of 
total  waste  increased  between  2018  and  2022 
(from  2.9  kg  per  capita to  3.2  kg  per  capita)  (see 
Annex  15,  SDG  12).  There  are  still  large  regional 
differences  in  waste  management  performance, 
as well as in waste infrastructure, and the north is 
generally  more  advanced  than  the  centre-south. 
Separate  collection  rates  for  municipal  waste  in 
2023  ranged  from  77.7%  in  Veneto  to  54.8%  in 
Calabria (168).  Quantity--based  pricing  is  becoming 
more  widespread 
northern 
regions (169)  but  is  notably  lacking  in  the  centre-
south. Italy is still paying fines for European Court 
landfills  and  waste 
judgments  on 
management  in  Campania.  A  tax  on  single-use 
plastics  goods,  which  was  supposed  to  enter  into 
force  in  2021,  has  been  delayed  until  at  least 
2026.  

especially 

illegal 

in 

in 

investment 

circularity 
Current 
transition  should  be 
is 
Italy 
estimated  to  need  total  additional  investment 
worth  at  least  EUR  3.3  billion  a  year  for  the 
including  waste 
transition, 
circular  economy 

the 
increased. 

(166) Politecnico di Milano, Circular Economy Report 2024, Link. 

(167) EEA, Early warning assessment related to the 2025 targets 
for  municipal  waste  and  packaging  waste  –  country  profile 
Italy, Link. 

(168) Institute  for  Environmental  Protection  and  Research 

(ISPRA), 

Municipal Waste Report 2024, Link, p.49. 

circular economy in Italy, Link, p.91. 

(169) ISPRA, ibid., pp.262-3. 

73 

 
 
 
(weighted by human toxicity factor) in the EU and 
ranks  third  for  emission  intensity  (well  above  the 
EU  average  intensity  of  0.864  kg  /  billion  EUR 
GVA). The main contributors to emissions to water 
in  Italy  are  ‘other  manufacturing’  (mainly  surface 
treatment  of  metals  and  plastics)  for  heavy 
metals, 
industry  and  waste 
management  for  nitrogen,  phosphorous  and  total 
organic carbon. 

chemical 

the 

The costs of pollution remain far higher than 
the  investment  in  pollution  prevention  and 
control. In 2022, about 994 years of life lost per 
100 000 
inhabitants  were  attributed  to  fine 
particulate  matter  (PM2.5)  pollution  in  Italy well 
above  France  with  500  years  of  life  lost;  despite 
being  relatively  high,  there  has  been  a  marked 
improvement  in  Italy  since  2005 (172).  To meet its 
objectives for pollution prevention and control and 
address  the  health  and  economic  costs  of 
pollution,  Italy  needs  an  additional  EUR 1.8  billion 
per  year  (below  0.1%  of  GDP),  mostly  related  to 
air pollution and noise (173). 

management,  representing  0.15%  of  its  GDP.  Of 
this  gap,  EUR  745  million  relates  to  recent 
initiatives,  such  as  the  eco-design  for  sustainable 
products,  packaging  and  packaging  waste, 
labelling  and  digital  tools,  critical  raw  materials 
recycling  and  measures  proposed  under  the 
amendment  of  the  Waste  Framework  Directive.  
EUR  2.1  billion  represent  the  further  investment 
needed 
Italy’s  circular  economy 
potential (170).   

to  unlock 

Zero pollution industry 

Italy has been making considerable progress 
in  reducing  air  pollution,  which 
is  now 
decoupled  from  GDP  growth.  Under  the  National 
Air Pollution Control Programme (NAPCP), Italy has 
made  substantial  progress,  as  the  latest  reported 
data show that the 2020-2029 emission reduction 
commitments  have  been  met  and  that  the  2030 
onwards  emission  reduction  commitments  are 
projected  to  be  reached.  The  health  benefits  of 
implementing the NAPCP are estimated to be 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  Po  river  basin (171).  In 
2023,  exceedances  above  the  limit  values  set  by 
the  Ambient  Air  Quality  (AAQ)  Directive  were 
registered for NO2 in 10 air quality zones; for PM10 
in 19 air quality zones and for PM2.5 in 1 air quality 
zone.  Indeed,  the  European  Court  has  delivered 
two  judgements  confirming  non-compliance  with 
Directive 2008/50/EC, in 2020 for exceedances of 
PM10  limit  values  (C-644/18)  and  in  2022  for 
exceedances  of  NO2  limit  values  (C-573/19).  The 
aim is that appropriate measures are put in place 
to bring all air quality zones into compliance. 

industry 

is  still  releasing 

Italy’s 
large 
amounts of air and water pollutants. Although 
Italy  has  the  fourth  highest  damage  in  the  EU,  it 
ranks  19th  for  emissions  intensity,  below  the  EU 
average of 27.5 EUR/thousand EUR GVA. The main 
contributors of emissions to air are the energy and 
mineral industries for NOX and SO2 emissions, and 
the metals sector and waste management for dust 
emissions and heavy metals. Italy has the highest 
amount  of  emissions  of  heavy  metals  to  water 

(170) European  Commission,  DG  Environment,  Environmental 
investment  needs  &  gaps  assessment  programme,  2025 
update. Expressed in 2022 prices. 

(172) EEA,  2024,  Harm  to  human  health  from  air  pollution  in 

Europe: burden of disease status, 2024, Link. 

(171) Piersanti A, D’Elia I, Gualtieri M, Briganti G, Cappelletti A, Zanini G and 
Ciancarella.L., The Italian NAPCP: Air Quality, Health Impact and Cost 
Assessment, Atmosphere 2021, 12, 196, table 11, Link. 

(173) European  Commission,  DG  Environment,  Environmental 
investment  needs  &  gaps  assessment  programme,  2025 
update. Expressed in 2022 prices. 

74 

 
 
 
Table A7.1:  Key clean industry and climate mitigation indicators: Italy 

Source:  Net zero industry: European Commission: The net-zero manufacturing industry landscape across Member States: final 
report, 2025. Automotive industry transformation: Eurostat. Critical raw materials: Eurostat. Climate mitigation: See 
footnotes in the "climate mitigation" section; reduction of effort sharing emissions: EEA greenhouse gases data viewer; European 
Commission, Climate Action Progress Report, 2024. Sustainable industry: Years of life lost due to PM2.5: Eurostat and EEA, 
Harm to human health from air pollution in Europe: burden of disease status, 2024. Air pollution damage: EEA, EU large industry 
air pollution damage costs intensity, 2024. Emissions covered: As, benzene, Cd, Cr, Hg, NH3, Ni, NMVOC, NOX, Pb, dioxins, PM10, 
PAH, SOX. Water pollution intensity: EEA, EU large industry water pollution intensity, 2024. Releases into water covered from 
cadmium, lead, mercury, nickel. Other indicators: Eurostat. 

75 

Strategic autonomy and technology for the green transitionNet zero industryOperational manufacturing capacity 2023- Solar PV (c: cell, w: wafer, m: module), MW1200-1300 (c), 1500 (m)- Electrolyzer, MW310-325- Wind (b: blade, t: turbine, n: nacelle), MW2500-2700 (b), 1000-1100 (t)- battery, MWh200-350Automotive industry transformation201720182019202020212022202320182021Motorisation rate (passenger cars per 1000 inhabitants), %643652663671675682694539561New zero-emission vehicles, electricity motor, %0.110.270.542.154.553.674.161.038.96Critical raw materials201720182019202020212022202320182021Material import dependency, %50.648.946.547.349.048.024.222.6Climate mitigationTrendIndustry decarbonisation201720182019202020212022202320172022GHG emissions intensity of manufacturing production, kg/€0.280.280.270.280.280.27 0.340.27Share of energy-related emissions in industrial GHG emissions34.434.534.535.434.631.431.544.842.5Energy-related GHG emissions intensity of manufacturing154.2155.8142.6149.0153.7134.7-158.4132.9and construction, kg/€Share of electricity and renewables in final energy consumption41.642.243.044.140.541.341.843.344.2in manufacturing, %Energy intensity of manufacturing, GWh/€1.031.011.011.121.070.980.931.291.09Share of energy-intensive industries in manufacturing production11.97.3GHG emissions intensity of production in sector [...], kg/€- paper and paper products (NACE C-17)0.850.850.800.840.870.87--0.730.68- chemicals and chemical products (NACE C20)1.241.271.071.091.121.49--1.251.26- other non-metallic mineral products (NACE C23)2.292.232.162.281.851.80--2.532.24- basic metals (NACE C24)1.371.731.681.552.202.02--2.793.49Reduction of effort sharing emissions20182019202020212022202320182023GHG emission reductions relative to base year, % -18.4-20.9-22.3- domestic road transport-18.1-17.2-32.0-19.6-14.8-15.71.45.2- buildings-13.7-16.2-17.8-13.5-23.4-29.221.432.92005202120222023TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %343.1279.9271.5266.6-43.7-14.4-3.1Sustainable industryTrendCircular economy transition20182019202020212022202320182021Material footprint, tonnes per person10.310.29.410.810.710.514.715.0Circular material use rate, %18.8      18.8      20.6      19.7      20.6      20.8      11.611.1Resource productivity, €/kg3.6        3.6        3.6        3.6        3.8        4.2        2.12.3Zero pollution industryYears of life lost due to PM2.5, per 100,000 inhabitants778      695      764      703      994      -702571Air pollution damage cost intensity, per thousand € of GVA    17.9          27.5      Water pollution intensity, kg weighted by human factors per bn € GVA    1.9   0.9ItalyEU-27ItalyEU-27ItalyEU-27 
 
 
  
 
ANNEX 8: AFFORDABLE ENERGY TRANSITION 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  competitiveness  and  affordability, 
while advancing the transition to net zero. It 
examines  the  measures  and  targets  proposed  in 
the  final  updates  to  the  national  energy  and 
climate plans (NECPs) for 2030. 

and 

Italy  put  a  lot  of  effort  in  changing  its 
energy  system,  accelerating  the  deployment 
of  renewables,  strengthening  the  electricity 
grid 
cross-border 
fostering 
interconnections,  together  with  promoting 
for 
energy  efficient  behaviours.  Space 
improvement 
the 
consider 
countertrend  of  increasing  fossil  fuels  imports 
over the past year. 

remains 

if  we 

consecutive  year.  The  share  of  retail  energy  price 
components  broadly  follows  EU  trends,  with  the 
exception of lower network costs and higher taxes 
and  levies  in  electricity  for  both  household  and 
non-household  consumers.  When  it  comes  to  gas 
prices  for  non-households,  the  network  cost 
component  is  higher  than  the  EU  average  but 
taxes and levies are around five times lower than 
the EU average. 

Graph A8.2: Monthly average day-ahead wholesale 
electricity prices and European benchmark 
natural gas prices (Dutch TTF) 

Energy prices and costs 

Graph A8.1: Retail energy price components for 
household and non-household consumers, 2024 

(i) the Title Transfer Facility (TTF) is a virtual trading point for 
natural gas in the Netherlands. It serves as the primary 
benchmark for European natural gas prices. 
(ii) CWE gives average prices in the central-western European 
market (Belgium, France, Germany, Luxembourg, the 
Netherlands and Austria). 
Source: S&P Platts and ENTSO-E 

With  an  average  of  108 EUR/MWh  in  2024 
(174) (EU average of 84.7 EUR/MWh), Italy had 
the EU’s second-highest wholesale electricity 
prices – and while prices declined early in the 
year  along  with  falling  natural  gas  prices, 
they  picked  up  in  the  spring/summer  and 
surged  in  the  autumn  (175),  diverging  acutely 
from the broader Core (176) region. These price 
spikes  were  mainly  due  to  an  overreliance  on 
costly  natural  gas  for  electricity  generation,  with 

(174) Fraunhofer (ENTSO-E data). 
(175) A  similar  price  spike  was  observed  in  the  same  period  in 

2023. 

(176)Core  is  the  capacity  calculation  region  which  covers  central 
European  countries  namely  Austria,  Belgium,  Czechia,  Germany, 
France, Italy, Croatia, Hungary, the Netherlands, Poland, Romania, 
Slovenia, Slovakia and, once connected, Ireland. 

(i) For household consumers, consumption band is DC for 
electricity and D2 for gas. Taxes and levies are shown 
including VAT. 
(ii) For non-household consumers, consumption band is ID for 
electricity and I4 for gas. Taxes and levies are shown 
excluding VAT and recoverable charges, as these are typically 
recovered by businesses. 
Source: Eurostat 

Italy’s  retail  electricity  prices  for  both 
household  and  non-household  consumers 
decreased  in  2024  but  remained  above  EU 
average,  ranking  seventh  and  eighth  most 
expensive  respectively.  Regarding  retail  gas 
prices,  there  was  an  increase  for  households  of 
around  17%,  reaching  levels  above  EU  average, 
while 
consumers,  prices 
remained  below  EU  average  for  a  second 

for  non-household 

76 

 
 
 
 
 
 
 
 
covered  by 

Italy  holding  the  third  largest  share  in  the  EU, 
accounting  for  44%  of  its  electricity  mix  in  2024. 
Prolonged and more intense heatwaves, as well as 
a  colder  autumn,  led  to  higher  consumption  from 
April  to  December  (+1%  vs  the  same  period  in 
2023), while lower coal output (-60%), lower wind 
power  generation  (-13%)  due  to  meteorological 
conditions, a strained net import position (177), and 
limited  non-fossil  flexibility  further  tightened  the 
supply-demand  balance.  Though  the  gap  was 
partially 
increased  hydropower 
production  (+21%)(178)  and  growing  solar  (+19%), 
natural  gas-fired  generation  was  ramped  up  to 
cover  the  remaining  needs  to  an  even  greater 
extent  than  the  previous  year  (+1%),  especially 
during  peak  demand  hours.  Consequently,  even 
more  so  than  in  2023,  these  conditions  drove 
concentrated  price  spikes  in  the  evening  hours 
(18h-21h),  when  solar  output  declined  and 
demand  remained  high,  especially  during  the 
summer.  Despite  these  trends,  Italy’s  average 
electricity  price  over  the  year  still  decreased 
compared  to  2023  (127 EUR/MWh),  and  energy 
poverty levels are low (see Annex 11).  

Flexibility and electricity grids 

There are ongoing projects to increase Italy’s 
interconnection  capacity. 
Italy’s  electricity 
transmission  grid  is  interconnected  with  other 
countries  through  26  lines.  In  2022,  more  than 
53 GWh  were  imported  into  Italy  and  around 
28 GWh  exported.  Italy  is  part  of  the  Italy  North 
(179),  Core  and  Greece-Italy  capacity  calculation 
regions (CCRs). Member States should ensure that 
a  minimum  of  70%  of  technical  cross-border 
capacity  is  available  for  trading.  The  use  of 
allocation  constraints  limits  import  possibilities 
into  Italy  North  from  neighbouring  countries.  A 
derogation  enabling  a  lower  level  of  trades  for  a 
limited  time,  if  needed,  has  been  granted  to  the 
Italian transmission system operator (TSO), Terna, 
for  operational  security  reasons.  Regarding  the 
Greece-Italy  CCR,  the  impact  of  exchanges  with 
non-EU countries is limited,  as well as the impact 
of  exchanges  across  other  borders  within  the 
region. 

(177) Net cross-border electricity trading decreased by -4%. 
(178) ENTSO-E. 
(179)France, Italy, Austria and Slovenia are part of the Italy North 
CCR. A CCR is a group of countries which calculate cross-border 
electricity flows together. 

interconnection 

capacity  with 

for  2023  maintains 

The significant growth in installed generation 
capacity  (180)  due  to  new  solar  and  wind 
power  expected  by  2030  (181)  makes  it  even 
more  challenging  for  Italy  to  meet  the  15% 
interconnection  target  by  2030.  Terna’s 
development  plan 
the 
reinforcement  of  the  transmission  network  to 
develop 
the 
electricity  systems  of  neighbouring  countries.  This 
is to ensure greater security through the possibility 
of  mutual  assistance  between 
interconnected 
systems.  The  development  plan  aims  to  expand 
interconnection  capacity  with  Corsica, 
Italy’s 
Tunisia, Greece, Slovenia, Austria, Switzerland and 
Malta. The Italy-Tunisia interconnection will help to 
increase  the  benefits  for  the  whole  European 
system,  particularly  in  terms  of  sustainability, 
market integration and diversification of supply of 
resources  (182).  The  Central  and  South-Eastern 
Europe Energy Connectivity (CESEC) electricity and 
renewable energy action plan (183) gives additional 
emphasis to the importance  of  the  interconnector 
between  the  Lienz  (AT)  -  Veneto  (IT)  region  and 
GRITA2  HVDC  Galatina (IT)  -  Thesprotia  (EL)  lines. 
The action plan also includes the 300 MW northern 
Adriatic  Sea  offshore  wind  farm  on  the  first  ever 
CESEC  priority  list  of  renewable  energy  projects 
with  regional  impact.  The  CESEC  action  plan  on 
gases  includes  the  Italian  hydrogen  backbone 
infrastructure 
among 
the  priority  hydrogen 
projects  and  three  natural  gas 
infrastructure 
projects  that  will  contribute  to  achieving  the 
REPowerEU objectives (184). 

Decarbonisation targets pose new challenges 
for grid development and operation. Requests 
to  connect  to  the  national  electricity  transmission 
network  (RTN)  indicate  that  market  participants 
are  concentrating 
the  development  of  new 
renewable  energy  sources  (RES)  mainly  in  the 
south  and  in  the  islands.  To  enable  an  ambitious 
growth  of  RES,  it  will  be  crucial  to  develop  new, 
efficient infrastructure that can connect the areas 
with  increased  renewable  energy  production  with 
consumption  centres,  mainly  located  in  the  north 

(180)Doubling the current trading capacity between market areas 
from around 16 GW at present to over 30 GW. 
(181)+74  GW  In  the  policy  scenario,  maintaining  fossil  capacity 
with an integration, flexibility and reserve function. 
(182) NECP, pp. 159-160. 
(183) Endorsed at the 29 October 2024 CESEC ministerial meeting. 
(184)The  reinforcement  of  the  Adriatica  and  Matagiola-Massafra 
internal  pipelines,  the  expansion  of  the  trans-Adriatic  pipeline 
and the upgrade of the Poggio Renatico compressor station and 
reverse flow on the Malborghetto compressor station. 

77 

 
 
 
of  the  country.  The  Italian  recovery  and  resilience 
plan  (RRP)  includes  significant  investments  in  the 
grid, such as the ‘Tyrrhenian link’ and the SA.CO.I.3, 
both  of  which  aim  to  extend  the  electricity 
transmission  infrastructure,  as  well  as  cross-
border electricity interconnection projects between 
Italy  and  neighbouring  countries,  in  particular 
Austria and Slovenia. 

Italy  has  taken  steps  to  support  non-fossil 
flexibility.  The  current  operational  Italian  power-
storage  capacity  is  around  8 806 MW  (mainly 
pumped hydro) and the main barrier identified was 
the  lack  of  information  on  ancillary  services  to 
develop a storage business plan that is not based 
on  the  energy  market  alone.  Italy  plans  policies 
and  measures  that  enhance  flexibility.  These 
include  introducing  an  energy  storage  capacity 
procurement  mechanism  (MACSE),  which  seeks  to 
support  the  installation  of  the  power-storage 
capacity  necessary  to  achieve  the  country’s 
renewable  energy  target  by  2030.  The  Italian 
NECP  also  mentions  the  entry  into  force  of  the 
new  regulatory  framework  on  dispatching  from 
2025,  including  new  rules  for  the  participation  of 
demand  response  in  the  provision  of  ancillary 
services.  Aggregators  cannot  participate  in  the 
balancing  markets  and  services.  The  participation 
of  distributed  energy  resources  in  the  Italian 
MACSE, while remaining limited, has been steadily 
increasing over time. 

and 

various 

The  role  of  the  consumer  is  changing  from 
passive 
to  active.  The  development  of 
widespread  self-production  can  be  expressed 
collective 
individual 
through 
configurations, 
industrial/commercial  or  as  an 
expression  of  citizens’  initiatives,  including  for 
social  and environmental purposes. The uptake of 
self-consumption,  including  through  public  energy 
pricing  policies  within  the  various  possible  self-
consumption  configurations,  including  renewable 
energy communities(185), will of course be fostered 
by  technological  developments(186).  On  the  one 

(185)Decree-Law  162/19  (Article 42 a)  and  its  implementing 
measures,  such  as  Decision  318/2020/R/eel  of  the  ARERA  and 
the Ministerial Decree of 16 September 2020 of the Ministry of 
Economic  Development  (MiSE),  set  out  the  methods  and 
conditions  for  activating  self-consumption  from  renewable 
sources and creating renewable energy communities. 
(186)Such  as  the  potential  of  new  smart  meters  in  terms  of  the 
functions  available  to  consumers,  the  deployment  of  digital 
technologies  together  with  the  internet  of  things  and  the 
increased  accessibility  of  small  medium  size  production  and 
storage systems, with lower costs for users. 

hand, Italy has 100% of smart meter roll-out and 
consumers  have  access  to  both  fixed-term  and 
dynamic contracts. The switching rate is relatively 
high  at  15.7%  (EU  average  is  8.7%).  Moreover, 
Italy  is  one  of  the  few  Member  States  to  have  a 
publicly owned price comparison tool (managed by 
ARERA)  that  includes  dual  offers  (electricity  and 
gas)  with  a  single  supplier.  On  the  other  hand,  a 
tool of this kind does make it possible to compare 
dynamic  contracts.  Progress  in  prosumerism  is 
slow:  so  far,  4.5%  of  households  generate 
electricity.  Moreover,  disconnection  rates 
(for 
unpaid  bills)  in  electricity  in  Italy  in  2023  were 
among the highest (2.5%) recorded. 

The  electricity  sector  will  play  a  key  role  in 
the  2050  climate  neutrality 
achieving 
targets,  as  electrification  of  final  consumption, 
hydrogen  and  e-fuel  production  in  hard-to-abate 
sectors  will  require  large  amounts  of  electricity. 
The  updated  NECP  raised  the  2030  targets  for 
renewables  in  final  consumption  to  39.4%  (+9.4 
points),  as  an  average  combining  63%  for 
electricity,  36% for heating and cooling, and 34% 
for  transport.  It  also  sets  a  target  for  renewable 
hydrogen  to  account  for  42%  to  54%  of  total 
hydrogen consumption in industry by 2030. 

ratio 

price 

In  2023,  electricity  accounted  for  22.1%  of 
Italy’s  final  energy  consumption(187),  slightly 
below  the  EU  average  of  22.9%,  and  this 
share  has  remained  largely  stagnant  in  the 
last  decade  partly  due  to  an  unfavourable 
electricity-to-gas 
that 
disincentivises  electrification  and  cost-
effective  decarbonisation.  When  it  comes  to 
households, electricity accounts for 19.8% of final 
energy consumption, while in industry it represents 
39.2% (see Annex 7). For the transport sector, this 
share remains negligible at 2%. In 2024’s second 
semester, retail electricity prices in the  household 
sector  were  among  the  highest  in  the  EU  (7th 
highest). While the electricity-to-gas price ratio for 
remained 
households  was  below  2:1  and 
unchanged  after  taxes  and  levies,  electricity  for 
energy-intensive  industries  cost  4.2  times  more 
per  unit  than  gas,  decreasing  to  3.4  before  non-
recoverable  taxes  and  levies.  For  this  segment, 
non-recoverable  taxes  and  levies  made  up  a 
significant  portion  of  the  final  electricity  price 

(187)CAGR  (compound  annual  growth  rate)  of  0.2%  between 
2013  and  2023  and  minimum/maximum  share  of  21.7%  and 
23%, respectively.  

78 

 
 
 
(24.6%,  compared  to  the  EU  average  of  15.4%), 
while gas was nearly tax-exempt (2.5% vs the EU 
average of 11.5%) (188). 

Renewables and long-term contracts 

the 

Renewable sources in Italy represented 50% 
of electricity generation in 2024, slightly more 
than  the  EU’s  overall  RES  share  of  47%  (189).  
Installed  RES  capacity  grew  by  11.33%  in  2024. 
The  total  renewable  energy  capacity  in  Italy  in 
2024  stood  at  72  115  MW.  As  regards  the 
acceleration  of  solar  deployment, 
total 
installed capacity in 2024 was 36 013 MW, almost 
an  22.7%  increase  from  2023.  Wind  capacity 
increased  by  5.6%.  The  updated  NECP  envisions 
131 GW  of  renewable  capacity  in  2030 (including 
28 GW  of  wind  and  79  GW  of  solar  PV),  with  a 
generation  of  228 TWh,  including  98  TWh  from 
solar  (43%)  and  65 TWh  from  wind  (28%).  In 
addition,  Terna  estimates  that  Italy  should  install 
8.9  GW  (71 GWh)  of  energy  storage  (including 
pumped-storage  hydropower) 
its 
decarbonisation targets by 2030. 

to  meet 

Graph A8.3: Italy’s installed renewable capacity 
(left) and electricity generation mix (right) 

“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Ember 

(188)Analysis based on Eurostat data for the second semester of 
2024.  For  household  consumers,  consumption  band  is  DC  for 
electricity  and  D2  for  gas,  which  refer  to  medium-sized 
consumers  and  provide  an  insight  into  affordability.  For  non-
household consumers, consumption band is ID for electricity and 
I4  for  gas,  referring  to  large-sized  consumers,  providing  an 
insight  into  international  competitiveness  (price  used  for  the 
calculation excludes VAT and other recoverable taxes/levies/fees 
as non-household consumers are usually able to recover VAT and 
some other taxes). 
(189) Yearly electricity data, Ember. 

79 

The  REPowerEU  chapter  of  the  RRP  includes 
the  reform of  the  ‘Single  Text’  (Testo  Unico) 
aiming  to  collect,  compile  and  consolidate  the 
existing  legislation  and  provisions  regulating  RES 
deployment  and  superseding  all  relevant  past 
legislation.  The  Ministerial  Decree  of  June 
2024(190)  gives  the  Italian  regions  six  months  to 
establish  RES-suitable  areas.  However, 
the 
identification  of  suitable  areas  is  experiencing 
delays,  partly  as  a  result  of  some  legal  disputes 
arising  with  the  regions  (191).  There  is  thus  room 
for  further  improvement  to  shorten  the  RES 
permit-granting  procedure,  especially  taking  into 
consideration the guidance on speeding up permit-
granting procedures. 

The  updated  NECP  encourages  initiatives  to 
promote new investments in renewable generation 
capacities,  decouple  electricity  price  from  gas 
prices,  and  to  help  decarbonise  the  energy 
consumption  of  large  industrial  consumers.  These 
initiatives 
include  power-purchase  agreements 
(PPAs)  and  contracts  for  difference.  The  REPower 
chapter  of  the  RRP  includes  a  reform  aimed  at 
mitigating counterparty risk to facilitate access to 
PPAs.  This 
introduces  a  centralised 
guarantee system and designates an entity as the 
operator  of  last  resort.  In  2023,  1.06 GW  were 
contracted  through  PPAs,  which  allowed  Italy  to 
jump  from  ninth  to  third  position  among  EU 
Member  States.  However,  the  total  volume  is  still 
far  behind  that  of  the  top  EU  Member  States 
(Spain  and  Germany,  with  4.67  GW  and  3.73  GW 
respectively). Some 24 deals for PPAs were signed 
in  2023,  which  represents  a  steep 
increase 
compared to 10 deals in 2022. 

reform 

Energy efficiency 

Italy’s  energy  efficiency  measures  continue 
to  deliver  energy  savings  in  the  residential 
and 
in  particular,  but 
untapped  savings  potential  remains  in  key 
sectors.  In  2023,  primary  energy  consumption 

industrial  sector, 

(190)IT  Ministerial  Decree  –  21  June  2024  implements  the 
provisions of Legislative Decree 199 of 8 November 2021. 
(191)A controversy with the Region of Sardinia has been brought 
before the Administrative Court of First Instance and a judgment 
is expected to be issued by 5 February 2025. Sardinian Regional 
Law  -  5  of  3  July  2024:  Sardinia  first  issued  a  regional  law 
establishing  a  moratorium  for  RES  until  the  regional  law  with 
suitable or non-suitable areas was adopted. 

 
 
 
 
consumption 

(PEC) decreased by 3.5% to 134.8 Mtoe compared 
(FEC) 
to  2022.  Final  energy 
decreased  by  2.0%  to  108.6 Mtoe.  Compared  to 
2022, FEC increased in the transport and services 
sectors  by  3.4%  and  3.0%  respectively,  while  it 
decreased in the industrial and residential sectors 
by 5.0% and 8.6% respectively. This reflected the 
impact of energy efficiency efforts and measures, 
notably  in  the  residential  sector.  According  to  the 
recast  Energy  Efficiency  Directive  (Directive  (EU) 
2023/1791), Italy should reach 112.2 Mtoe in PEC 
and  93.05  in  FEC  by  2030,  as  proposed  in  the 
updated final NECP. 

Italy  has  some  under-exploited  potential  to 
further  roll  out  an  efficient  district  heating 
and  cooling  network  and  modernise  the 
existing district heating and cooling network. 
Gestore Servizi Energetici (GSE) (192) estimated the 
economically  viable  potential  to  increase  the 
annually  delivered  energy from  district  heating  at 
around 20.9 TWh , for an extension of the district 
heating  and  cooling  network  at  national  level  of 
approximately 3 700 km. Italy has not notified the 
Commission  of  its  comprehensive  heating  and 
cooling  assessment  identifying  potential  for  the 
application  of  high-efficiency  cogeneration  and 
efficient  district  heating  and  cooling  in  line  with 
Article 25(1)  of  the  Energy  Efficiency  Directive. 
There is no estimate available as to when this will 
be done. 

Regarding  energy  consumption  in  buildings, 
Italy  reduced  the  (climate  corrected)  FEC  of 
its residential sector by 5.5% between 2018 
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. 

In  2022,  heating  and  cooling  represented 
80% of the country’s residential final energy 
consumption.  Approximately  378 000  heat 
pumps  were  sold  in  2023,  a  decrease  of  26% 
compared  to  the  previous  year.  Electricity  in  Italy 
was  3.4  times  more  expensive  than  gas  in  2023, 
meaning that end users save energy but pay more 
if  they  chose  a  heat  pump  for  heating.  As  of 
January  2025,  Italy  has  phased  out  financial 

(192)The  company identified  by  the State  to  pursue  and  achieve 
environmental sustainability through the two pillars of renewable 
sources and energy efficiency.  

80 

incentives  related  to  the  installation  of  fossil  fuel 
boilers. 

financial 

instruments 

further  private  capitals 

Italy continues to deploy a national financing 
framework  for  energy  efficiency  mainly 
based on subsidies via tax credits, while the 
use  of 
remains 
underdeveloped.  In  the  course  of  2024,  Italy 
continued  to  implement  tax  credits  on  building 
renovations  and  thermal  heating  replacement  – 
‘Superbonus’  and  ‘Conto  termico  2.0’.  While  the 
financial  support  from  the 
‘Superbonus’  was 
reduced  to  70%,  no  parallel  financial  instruments 
or  innovative  financing  tools  were  developed  to 
mobilise 
in  energy 
efficiency  investments.  Financial  instruments  to 
activate energy efficiency investments in buildings, 
industry  and  services  remain  under-exploited  in 
Italy,  hampering  the  development  of  a  thriving 
market  for  energy  efficiency  investments  and 
further 
companies, 
energy-services 
mobilisation of private capitals. The existing Kyoto 
Fund  and  the  National  Energy  Efficiency  Fund 
suffer  from  chronical  under-execution  and  their 
future  development  is  unclear.  Italy  has  still  to 
deploy an announced but deferred overhaul of its 
national 
energy 
efficiency. 

framework 

financing 

and 

for 

Security of supply and diversification 

in  2023  but 

Italy’s  reliance  on  Russian  gas  significantly 
decreased 
imports  slightly 
increased  again  in  2024.  A  key  component  of 
this  strategy  is  the  planned  phase-out  of  Russian 
gas  by  2025,  which  will  be  achieved  through 
increased  imports  from  other  countries,  such  as 
Algeria, Azerbaijan and Qatar, as well as a boost in 
domestic  production,  expected  to  rise  by  1.4 bcm 
annually  by  2025.  To  support  this  diversification 
effort,  Italy  has  commissioned  two  new  floating 
storage  and  regasification  units  (FSRUs),  one  in 
is  already  operational,  and 
Piombino,  which 
another 
to  become 
is 
in  April  2025,  with  a  combined 
operational 
capacity of 10 bcm/y. The country has successfully 
navigated  the  end  of  Russian  gas  transit  via 
Ukraine,  which  ceased  on  1 January  2025. 
Additionally, Italy reduced its gas demand by 17% 
between August 2022 and November 2024.  

in  Ravenna,  which 

 
 
 
In  2023,  fossil  fuels  accounted  for  almost 
80%  of  the  total  energy  supply  in  Italy. 
Among  fossil  fuels,  natural  gas  and  oil  both 
accounted for roughly 38% of the energy mix. On 
the  contrary,  renewables  accounted  for  less  than 
20% of the total energy mix of Italy. 

Fossil fuel subsidies 

In  2023,  environmentally  harmful  (193)  fossil 
fuel  subsidies  without  a  planned  phase-out 
before  2030  represented  0.17%  (194)  of 
Italy’s GDP (195), below the EU  weighted average 
of  0.49%.  Tax  measures  accounted  for  94.3%  of 
this  volume,  while  the  remaining  share  were 
income/price support measures. Additionally, Italy’s 
2023  Effective  Carbon  Rate  (196)  averaged  EUR 
100.05  per  tonne  of  CO₂,  above  the  EU  weighted 
mean of EUR 84.80 (197). 

(193) Direct  fossil  fuel  subsidies  that  incentivise  maintaining  or 
increasing  in  the  availability  of  fossil  fuels  and/or  use  of 
fossil fuels. 

(194) Numerator  is  based  on  volumes  cross-checked  with  the 
Italian  authorities  via  the  2025  NECPR  reporting.  For  all 
Member States, it includes public R&D expenditures for fossil 
fuels  as  reported  by  the  IEA  (Energy  Technology  RD&D 
Budgets)  and  excludes,  for  methodological  consistency, 
excise  tax  exemption  on  kerosene  consumed  in  intra-EU27 
air traffic. 

(195) 2023 Gross Domestic Product at market prices, Eurostat. 

(196) The  Effective  Carbon  Rate  is  the  sum  of  carbon  taxes,  ETS 
permit  prices  and  fuel  excise  taxes,  representing  the 
aggregate effective carbon rate paid on emissions. 

(197) OECD (2024), Pricing Greenhouse Gas Emissions 2024. 

81 

 
 
Table A8.1:  Key Energy Indicators 

Source: Key Energy Indicators 

82 

20212022202320242021202220232024Household consumer - Electricity retail price (EUR/KWh)0,2307          0,3371              0,3571              0,3193          0,2314             0,2649          0,2877          0,2879          Energy & supply [%]48,9%68,1%66,1%56,4%36,6%54,3%55,6%47,8%Network costs20,0%17,1%13,8%15,0%26,7%25,3%24,8%27,2%Taxes and levies including VAT31,2%14,8%20,2%28,6%36,7%20,3%19,6%25,0%VAT9,1%8,6%8,7%9,3%14,5%13,4%13,8%14,6%Household consumer - Gas retail price0,0774          0,1040              0,1053              0,1230          0,0684             0,0948          0,1121          0,1128          Energy & supply43,0%67,4%78,7%52,8%43,7%61,0%64,5%53,9%Network costs20,2%17,5%22,4%21,3%22,5%17,3%17,1%18,3%Taxes and levies including VAT36,8%15,1%-1,1%25,9%33,8%21,7%18,4%27,8%VAT13,3%4,8%4,7%11,9%15,5%11,6%10,2%13,6%Non-household consumer - Electricity retail price0,1478          0,2760              0,2238              0,1928          0,1242             0,1895          0,1971          0,1661          Energy & supply55,5%77,4%66,4%58,3%43,0%66,5%63,0%55,8%Network costs10,1%7,0%6,8%8,6%15,8%10,7%11,9%15,5%Taxes and levies excluding VAT26,5%5,0%18,2%24,6%30,4%9,9%11,2%15,4%Non-household consumer - Gas retail price0,0303          0,0865              0,0669              0,0478          0,0328             0,0722          0,0672          0,0517          Energy & supply79,9%89,6%84,9%78,1%66,2%77,3%77,3%68,7%Network costs6,4%3,5%9,7%12,9%7,7%3,8%5,3%7,1%Taxes and levies excluding VAT6,3%2,1%1,0%2,5%12,5%6,1%7,3%11,6%Wholesale electrity price (EUR/MWh)125,5304,0127,2108,5111,0233,299,184,7Dutch TTF (EUR/MWh)n/an/an/an/a46,9123,140,534,420172018201920202021202220232024Gross Electricity Production (GWh)295.830        289.708            293.853            280.531        289.070           283.961        264.716        -Combustible Fuels208.824     192.129        195.084        180.805     189.132        198.515     161.974     -Nuclear-              -                 -                 -              -                 -              -              -Hydro38.025       50.503           48.154           49.495       47.478          30.291       42.068       -Wind17.742       17.716           20.202           18.762       20.927          20.494       23.640       -Solar24.378       22.654           23.689           24.942       25.039          28.121       30.711       -Geothermal6.201         6.105             6.075             6.026         5.914            5.837         5.692         -Other Sources661             601                650                501             579                703             630             Gross Electricity Production [%]Combustible Fuels70,6%66,3%66,4%64,5%65,4%69,9%61,2%-Nuclear0,0%0,0%0,0%0,0%0,0%0,0%0,0%-Hydro12,9%17,4%16,4%17,6%16,4%10,7%15,9%-Wind6,0%6,1%6,9%6,7%7,2%7,2%8,9%-Solar8,2%7,8%8,1%8,9%8,7%9,9%11,6%-Geothermal2,1%2,1%2,1%2,1%2,0%2,1%2,2%-Other Sources0,2%0,2%0,2%0,2%0,2%0,2%0,2%-Net Imports of Electricity (GWh)37.76143.89938.14132.20042.79042.98751.252-As a % of electricity available for final consumption 12,5%14,5%12,6%11,3%14,2%14,5%17,8%-Electricity Interconnection [%]8,2%#REF!8,7%8,8%3,8%4,0%4,6%5,0%Share of renewable energy consumption - by sector [%]Electricity34,1%33,9%35,0%38,1%36,0%37,1%38,1%-Heating and cooling20,1%19,3%19,7%19,9%19,3%20,6%21,7%-Transport6,5%7,7%9,0%10,7%9,9%10,0%10,3%-Overall18,3%17,8%18,2%20,4%18,9%19,1%19,6%-20202021202220232020202120222023Import Dependency [%] 73,5%73,3%79,2%74,8%57,5%55,5%62,5%58,3%of Solid fossil fuels 93,0%97,0%102,4%96,4%35,8%37,2%45,9%40,8%of Oil and petroleum products 88,7%84,3%92,9%89,1%96,8%91,7%97,8%94,5%of Natural Gas 92,8%93,7%99,2%96,3%83,6%83,6%97,6%90,0%Dependency from Russian Fossil Fuels [%]of Natural Gas 43,3%40,0%19,3%4,7%41,0%40,9%20,7%9,3%of Crude Oil11,1%10,1%19,3%0,0%25,7%25,2%18,4%3,0%of Hard Coal55,8%62,1%33,2%0,1%49,1%47,4%21,5%1,0%2017201820192020202120222023Gas Consumption (in bcm)75,2               72,7                  74,5                  71,3               76,4                  68,7               61,7               Gas Consumption year-on-year change [%]6,0%-3,3%2,4%-4,3%7,2%-10,0%-10,2%Gas Imports - by type (in bcm)69,7               67,9                  71,1                  66,4               73,0                  72,6               61,8               Gas imports - pipeline61,8               59,1                  57,3                  54,0               63,1                  58,2               45,3               Gas imports - LNG7,98,713,812,39,914,416,6Gas Imports - by main source supplier [%]Algeria28,0%26,5%18,8%22,8%30,8%35,8%41,6%Azerbaijan0,0%0,0%0,0%0,0%9,9%14,2%16,2%Qatar9,7%9,6%9,2%10,5%9,4%10,0%11,1%Russia47,5%48,4%47,1%43,3%40,0%19,3%4,7%ItalyEU 
 
   
 
ANNEX 9: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

Italy is one of the EU Member States that is 
the  most  exposed  to  climate  risks,  and 
therefore  urgent  action  to  build  resilience  is 
merited. Sustainable water management remains 
a major environmental issue, in particular in terms 
of  governance,  surface  water  body  rehabilitation 
and water efficiency. The state of ecosystems and 
soils  continues  to  deteriorate,  creating  significant 
and 
country’s 
risks 
competitiveness.  Italy  has  substantial  sustainable 
agriculture  practices,  but  its  agri-food  system 
continues 
pressure, 
warranting additional measures. 

significant 

economy 

create 

the 

to 

to 

Climate adaptation and preparedness 

country 

is  highly  vulnerable 

In  2023,  around  4.1%  of 

Italy  is  strongly  exposed  to  extreme  events. 
in 
The 
hydrogeological terms and most areas are at 
risk  of  floods,  droughts  and  heatwaves.  Italy 
is in  two  out  of  three macro-regions  identified  as 
hotspots of climate risks most affected by climate 
change  –  southern  Europe  and  low-lying  coastal 
regions (198). 
the 
population lived in zones at high risk from flooding 
and 2.2% in zones at risk from landslides (199). The 
specific  impacts  at  regional  level  are  shown  in 
Annex 17. Between 1980 and 2023, Italy recorded 
21 822  fatalities  and  almost  EUR 134  billion  in 
economic  losses  caused  by  weather  and  climate-
related  extreme  events  (see  Annex  15,  SDG  13). 
However, only 4% of economic damages over this 
in 
insured,  compared 
period  were 
Denmark (200). The annual costs of climate change 
for  infrastructure  in  Italy  are  estimated  to  be 
around  EUR 2  billion  in  2030 (201).  Projections 
suggest a cumulative negative impact on GDP per 
capita  of  3.7%  in  2050  and  8.5%  in  2080  (202). 
Provisions  introduced  in  the  2024  budget  law  on 
mandatory company insurance for extreme events 
and  natural  disasters  have  not  yet  fully  entered 
into  force (203).  Agricultural  activities  have  been 

to  62% 

(198) EEA, 2024, European Climate Risk Assessment, Link. 
(199) ISPRA, Link (flooding), Link (landslides). 
(200) EEA,  2024,  Economic  losses  from  weather-  and  climate-

related extremes in Europe, Link. 

(201) MIMS 2022, Cambiamenti climatici, infrastrutture e mobilita, 

p.17, Link. 

(202) Ronchi,  E.  2019,  ed.,  Relazione  sullo  stato  della  green 

economy, p.30, Link. 

(203) Italian  government,  2024  Budget  Law,  Articles  101-111, 
Link.;  Decree-law  39  31.3.2025,  Link,  for  large  companies 

83 

covered  since  2022 (204),  but  housing  insurance  is 
In  2023,  only  3.4%  of 
not  mandatory. 
microenterprises  and  28.2%  of  small  enterprises 
had  an  insurance  against  flooding  compared  to 
two-thirds  of  medium  sized  enterprises  and 
almost  total  coverage  for  large  companies  (205). 
This 
coverage  not  only  exposes 
microenterprises and SMEs to significant financial 
risks in the event of a disaster, but also reflects a 
widespread  underestimation  of  risk  and  a  low 
propensity to take out insurance. 

lack  of 

Climate change is having substantial impacts 
on  housing  and  manufacturing.  The  value  of 
housing  potentially  exposed  to  floods  is  around 
EUR 1 trillion, about a quarter of the total housing 
stock,  and  the  expected  annual  loss  is  estimated 
at around EUR 3 billion. The area at highest risk is 
the Po Valley, and the greatest losses are expected 
in 
of 
manufacturing  companies  are  potentially  exposed 
to floods or landslides. The most significant risk is 
flooding, 
to  which  29%  of  manufacturing 
employees  are  subject,  with  the  highest  risk  in 
Emilia-Romagna  and  Tuscany  (207).  There  is  no 
available  study  showing  the  climate  insurance 
gaps by region. 

(206).  About  35% 

Emilia-Romagna 

Climate change is having substantial impacts 
on  agriculture. In  2023,  the  agricultural  value 
added was close to EUR 37.5 billion, an increase in 
current  terms  (+7.9%),  but  a  decline  in  volume 
(-2.5%) compared to 2022 (208). In fact, 2023 was 
characterised  by  adverse  weather  and  extreme 
weather  events,  which  caused  extensive  damage 
to  crops  and  livestock.  On  average  over  the  last 
three years, the damage suffered by farms due to 
exceptional  weather events has exceeded  EUR 1.5 
billion  per  year.  In  the  first  year  of  implementing 
the  common  agricultural  policy  (CAP)  strategic 
plan,  the  highest  level  of  spending  was  on  risk 
management tools to manage losses in the event 
of  adverse  weather  conditions  and  natural 

obligatory from 1.4.2025, for medium sized companies from 
1.10.2025, for small and micro enterprises from 1.1.2026. 
(204) Fondo  mutualistico  nazionale  per  la  copertura  dei  danni 
catastrofali  meteoclimatici  alle  produzioni  agricole  causati 
da alluvione, gelo-brina e siccità (2022 Budget Law). 
(205) Associazione Nazionale fra le Imprese Assicuratrici, Link . 
(206) Bank  of  Italy,  2023,  L’impatto  del  rischio  di  alluvione  sulla 
ricchezza  immobiliare  in  Italia,  Occasional  Paper  768,  p. 18 
& p. 20, Link. 

(207) Bank  of  Italy,  2024,  The  exposure  of  Italian  manufacturing 
firms  to  hydrogeological  risk,  Occasional  Paper  899,  p. 16, 
Link. 

(208) CREA, 2023, Annual yearbook 2023, Link. 

 
 
 
 
 
 
 
disasters. At regional level, spending on agriculture 
also  illustrates  the  focus  on  climate  change: 
natural  disaster  spending  increased  from  4%  in 
2019  to  9%  in  2022  (209).  It  is  estimated  that  in 
2024  there  were  over  300  extreme  weather 
events  for  the  third  year  running,  up  from  60  in 
2015  (210).  Four  extreme  floods  have  taken  place 
in the Po Valley over the last 18 months. This area 
was  also  strongly  affected  in  2022  by  prolonged 
and 
affected 
drought,  which 
agricultural  output.  In  2024,  Sicily  suffered  an 
extreme  drought.  From  2010  to  2023,  spending 
due  to  damage  from  hydrogeological  events  in 
Italy tripled to EUR 3.3 billion per year (211). Italian 
SMEs  affected  by  extreme  events 
face  a 
bankruptcy  risk  4.8%  times  higher  than  other 
enterprises with all enterprises seeing a decline of 
revenues  and  employment  by  4.2%  and  1.9%, 
respectively, over the following three years (212). 

hydropower 

are 

losses 

associated  with 

National  statistics  show  that  in  2023,  20 
hectares  per  day  of  soil  was  converted  to 
artificial land cover (land take). The estimated 
total costs of the loss of ecosystem services’ flows 
range from EUR 8.22 to EUR 10.06 billion annually 
due  to  land  take  between  2006  and  2023.  The 
highest 
the 
‘hydrological  regime  regulation  service’,  i.e.  the 
increase  in  surface  runoff  produced  by  land  take, 
for  which  flow  loss  values  for  2006-2023  range 
from  EUR 7.6  billion 
to  EUR 8.9  billion  per 
year (213). Despite the huge loss due to soil sealing, 
a  draft  law  on  monitoring  soil  consumption  has 
been  pending  in  Parliament  since  2012 (214).  Italy 
would benefit from taking proper corrective action, 
along  with  transposition  of  the  forthcoming 
Directive  on  Soil  Monitoring  and  Resilience.  In 
addition,  the  EU  Nature  Restoration  Law  sets  the 
target  for  2031  to  have  no  net  loss  in  the  total 
national area of urban green space and urban tree 
canopy cover in urban ecosystem areas compared 

to 2024 (215). A positive step is the decree setting 
soil 
aside  EUR 160  million 
degradation in urban and peri-urban areas (216). 

for  managing 

Italy  has  one  of  the  highest  rates  of  soil 
erosion by water in the EU (217) and one of the 
lowest  shares  of  conservation 
tillage 
practices  in  tillable  areas  (218).  Soil  erosion 
decreases  agricultural  productivity,  increases  the 
risk  of  drought,  degrades  ecosystem  functions, 
amplifies  hydrogeological  risks  such  as  landslides 
or  floods,  and  it  causes  damage  to  infrastructure 
(219)(220)(221).  At  EU  level,  Italy  suffers  the  highest 
level  of  agricultural  productivity  loss  due  to  soil 
erosion, with an estimated crop productivity loss of 
EUR 619 million in 2010 (222). The key investment 
priorities  for  Italy  are:  i)  soil  regeneration,  to 
increase  the  poor  level  of  organic  carbon  and  the 
soil  sponge-effect;  ii)  restoration  of  water  bodies 
including  soil  de-sealing 
iii) 
reforestation  and  greening  of  urban  and  peri-
urban  areas; 
iv)  scaling-up  the  adoption  of 
agricultural  practices  that  increase  soil  resilience, 
reducing  hydrogeological  risks  and  maintaining 
productivity. 

in  their  basins; 

related 

policy  measures 

National 
to 
adaptation  and  preparedness  have  improved 
in  recent  years,  but  additional  efforts  are 
still  required.  Italy  adopted  its  national  climate 
change adaptation strategy (NAS) (223) in 2015 and 
subsequently, in 2023, its national adaptation plan 
(NAP) (224). The NAS has not been revised since its 
adoption.  Italy  highlights  specific  challenges in  its 
NAP, including insufficient coordination, disparities 
in  subnational  adaptation  planning  and  delays  in 
the planning process.  

observatory 

The 
change 
on 
adaptation  planned  in  the  NAP  has  never 

climate 

(209) CREA, 2023, Annual yearbook 2023, p. 12 Link. 
(210) Legambiente,  Bilancio  2024:  Italia  sotto  scacco  della  crisi 
climatica,  Link.  In  the  methodology,  an  extreme  weather 
event is counted as damage caused in a specific location. 
(211) Italian  Alliance  for  Sustainable  Development  (ASviS),  2023, 
Rischio  idrogeologico  in  Italia,  senza  prevenzione  costi 
triplicati in 13 anni, Link. 

(212) Bank  of  Italy,  2022,  Gli  effetti  del  cambiamento  climatico 
sull’economia  italiana.  Un  progetto  di  ricerca  della  Banca 
d’Italia, Occasional Paper 728, p. 50, Link. 

(213) ISPRA,  2024,  Consumo  di  suolo,  dinamiche  territoriali  e 
servizi  ecosistemici.  Edizione  2024,  pp.199-200  &  p. 343, 
Link. 

(214) Italian Chamber of Deputies, 2023, Link. 

(215) Nature Restoration Law, Article 8, Link. 
(216) Ministry  of  Environment  and  Energy  Security  (MASE),  Draft 

soil decree, Link. 

(217) Eurostat, Agri-environment indicator - soil erosion, Link., see 

Annex 15, SDG 15. 

(218) Eurostat, Agri-environment indicator - tillage practices, Link. 
(219) FAO, Global Symposium on Soil Erosion.Link. 
(220) Accademia  dei  Georgofili,  Siccità,  alluvioni  ed  erosione  del 

suolo, Link. 

(221) FAO, Soils store and filter water, Link.  
(222) Panagos P. et al. Cost of agricultural productivity loss due to 
soil erosion in the European Union, 2018, Table 6, Link. 
(223) MASE,  Strategia  nazionale  di  adattamento  ai  cambiamenti 

climatici, Link. 

(224) The  NAP  was  adopted  on  21 December  2023  by  a 

ministerial decree, Link. 

84 

 
 
 
been  set  up.  The  observatory  should  set  the 
priorities,  identify  the  interested  parties  and  the 
sources  of  financing,  as  well  as  the  measures  to 
remove the obstacles to adaptation (225).  

regional  adaptation 
several 
Italy  has 
strategies 
(Emilia-Romagna,  Sardinia,  Valle 
d’Aosta,  Liguria,  Lombardy  and  Molise)  and  two 
regional adaptation plans (Lombardy and Marche). 
The Technical Support Instrument was used by the 
City of Rome to develop an action plan to tackle its 
heat  island  effect  and  by  the  Cassa  Depositi  e 
Prestiti to provide a draft strategy and action plan 
for its climate adaptation facility. In 2023, 78% of 
the population was covered by the EU Covenant of 
Mayors for Climate and Energy, well above the EU 
average (44% in 2021). 

Water resilience 

Large  areas  of  Italy  are  subject  to  water 
stress, in particular due to demand for water 
from 
and 
agriculture,  manufacturing 
electricity  cooling.  These  sectors  are  heavily 
dependent  on  the  water  supply  and  irrigation  is 
crucial in many rural areas. The Water Exploitation 
Index+  arrived  to  15.6  in  2022,  with  a  value  of 
30.9  in  summer  2022  (EU  average  4.6  in  2021) 
(226). Italy’s water productivity is considerably lower 
than in other EU Member States, at EUR 40 per m3 
of  abstracted  water  in  2022  and  on  a  downward 
trend  over  the  past  five  years.  Around  20%  of 
Italian GDP depends on water resources (227). 

Seasonal data show that in summer months, 
the  country’s 
total  water  consumption 
exceeds  its  renewable  freshwater  resources. 
Agriculture is the main consumer of water, with a 
steady  uptake  of  10 929  million  m3,  i.e.  57%  of 
total  consumption  in  2022,  posing  a  significant 
strain  on  the  country’s  water  resources (228).  The 
government has implemented measures to reduce 
water  consumption 
in  agriculture,  such  as 
improving  irrigation  efficiency  and  promoting  the 
use of drought-resistant crops  under the  recovery 

resilience  plan  and 

and 
rural 
development  programme.  The  challenges  remain 
significant,  particularly  in  regions  with  high  levels 
of water stress. 

the  national 

Water leakage remains a significant problem. 
In 2022, around 9.1 billion m3 of withdrawals were 
made,  81%  of  this  volume  measured.  However, 
only  8  billion m3  of  water  is  fed into  the  network 
each year, and of these only 4.6 billion m3/year is 
distributed  to  authorised  users  (229).  Water  losses 
are  greater  in  central  and  southern  regions  (see 
Annex  17).  Campania  and  Apulia  import  the 
highest  volume  of  water  from  other  regions (230). 
In  addition  to  investments  under  the  RRP,  the 
national plan for infrastructure and security in the 
water  sector  (PNISSI) (231)  can  help  alleviate  the 
problem,  as  can  nature-based  solutions (232). 
ARERA  has  taken  environment  resource  costs  and 
climate change into account in their tariffs (233). 

Concerns  remain  on  the  quality  of  surface 
water.  Italy’s  third  river  basin  management  plan 
(2022-2027)  under 
the  Water  Framework 
Directive  shows  that  the  ecological  status  and 
potential  of  surface  water  bodies  has  improved 
only slightly since the second plan. Just over 44% 
of  surface  water  bodies  are  reported  as  having 
good ecological status/potential. Nutrient pollution 
from  diffuse  agricultural  and  urban  wastewater 
point sources and hydro-morphological alterations 
are  the  main  reasons  for  the  deterioration  in 
ecological  status.  Water  abstraction  is  also  a 
problem.  The  chemical  status  remains  stable,  as 
75%  of  surface  water  bodies  are  classified  as 
having  good  chemical  status.  The  quantitative 
status  of  groundwater  bodies  has  significantly 
improved  since  the  second  plan,  with  79% 
reported 
in  good  quantitative  status.  Their 
chemical  status  has  also  improved  with  at  least 
70% reported as having good chemical status. 

Wastewater  treatment  is  a  persistent  cause 
for  concern.  In  Italy,  the  overall  compliance  rate 
with  the  Urban  Wastewater  Treatment  Directive 
was  only  56%  in  2020 (234).  Four  infringement 
proceedings  are  currently  open  for  failure  to 

(229) MASE, European Semester mission, Rome, 5 February 2025. 
(230) Confindustria,  2024,  Dall’emergenza  all’efficienza  idrica, 

(225) The Italian authorities indicate that “administrative activity to 

pp.19-20, Link. 

establish the Observatory is under way” (April 2025). 

(226) EEA, 2025, link. 
(227) Ambrosetti House, Libro Bianco 2025, p.6, Link. 
(228) MASE,  European  Semester  mission,  Rome,  5 February 2025. 
About 80% of this volume is measured, the rest is estimated. 

(231) Ministry  of  Infrastructure  and  Transport,  PNISSI,  Link.;  the 
2025 budget law increases PNISSI resources, Link, p.197. 

(232) For example, the Horizon 2020 Oristano project, Link. 
(233) Autorità di Regolazione per Energia Reti e Ambiente, Link. 
(234)European Commission, Link. 

85 

 
 
 
at 

comply with the requirements of the EU  Directive, 
850 
present  more 
covering 
agglomerations, the majority of which are in Sicily, 
Calabria, 
Two  
infringements  have  led  to  EU  Court  of  Justice 
rulings and fines (C-251/17 & C-515/23). 

Lombardy. 

Campania 

than 

and 

Increasing 

The  investment  needs  for  water  protection 
and  water  management  are  substantial,  with 
a  gap  of  EUR 2.2 billion per  year  by  2027 (Graph 
A9.2)(235).  Roughly  35%  of  the  gap  can  be 
attributed to unmet financing needs in wastewater 
investments  will  be 
management. 
needed 
the  Directive  as 
strengthened  in  2024 (236).  Of  the  total  financing, 
4%  is  provided  by  the  EU  multiannual  financial 
framework (mostly cohesion policy), with a further 
14.6%  from  the  Recovery  and  Resilience  Facility, 
reaching  a  combined  18.6%.  Financing  by  the 
European  Investment  Bank  is  around  4.9%  of  the 
total, with the rest from national sources (76.6%). 

to  comply  with 

Biodiversity and ecosystems 

The  state  of  nature  and  ecosystems 
continues to degrade, reducing Italy’s climate 
resilience. Italy hosts 132 habitat types and 340 
species  covered  by  the  Habitats  Directive (237). 
According  to  the  latest  available  data,  only  9.9% 
of  the  country’s  habitats  are  classified  as  having 
good status (EU average: 14.7%). 

the 

economy 

country’s 

Nature  degradation  creates  significant  risks 
and 
to 
competitiveness.  Italy  has  a  high    supply  chain 
dependency  on  ecosystem  services  of  21%  of  its 
gross  value  added  (EU  average:  22%).  Overall, 
41%  of  Italy’s  economy  is  highly  dependent  on 
ecosystem  services  to  produce  its  gross  value 
added (EU average: 44%). Several sectors such as 
agriculture,  forestry  and  healthcare  (Graph  A9.1) 
have  100%  of  their  gross  value  added  directly 
dependent on ecosystem services.  

(235) N.B.  a  2025  study  by  the  Study  Centre  of  the  Chamber  of 
Deputies reveals a gap of up to EUR 2 billion/year, p.56, Link. 
(236) Directive  2024/3019,  of  27 November  2024.  The  deadline 

for transposition is 31 July 2027, Link. 

(237) EEA,  2019,  Number  of  habitats  and  species  per  Member 

State, Link. 

86 

Graph A9.1: Direct dependency(1) on ecosystem 
services(2) of the gross value added generated by 
economic sector in 2022 

(1) Dependency based on the sector’s own operations, 
excluding value chain operations within countries and across 
international value chains. A high dependency indicates a high 
potential exposure to nature-related shocks or deteriorating 
trends, meaning the disruption of an ecosystem service could 
cause production failure and severe financial loss. 
(2) Ecosystem services are the contributions of ecosystems to 
the benefits that are used in economic and other human 
activity, including provisioning services (e.g. biomass 
provisioning or water supply), regulating and maintenance 
services (e.g. soil quality regulation or pollination), and cultural 
services (e.g. recreational activities). 
Source: Hirschbuehl et al, 2025, The EU economy’s 
dependency on nature, Link. 

Action  on  nature  protection  and  restoration 
is  needed  to  meet  Italy’s  nature  restoration 
targets.  Including  both  Natura  2000  and  other 
nationally designated protected areas, Italy legally 
protects 21.4% of its land (EU average: 26%) and 
about 9.7% of marine areas (EU average: 12.1%). 
Italy still needs to restore up to 67 333 km2 of the 
land  habitats  listed  in  Annex  I  to  the  Habitats 
Directive, corresponding to up to 22.3% of its land 
(238). The investment gap to preserve biodiversity is 
around EUR 0.9 billion per year (see Graph A9.2).  

(238) European 

Commission, 

assessment 
accompanying  the  proposal  for  a  Regulation  on  nature 
restoration, Link. 

Impact 

2022, 

0%20%40%60%80%100%AgricultureForestryFishery and acquacultureMining and metalsConstructionWater utilitiesHealthcare deliveryAviation travel and tourismFood beverages and tobaccoSupply chain and transportPublic services and othersElectricityChemical and materials industryElectronicsOil and gasReal estateHeat utilitiesAutomotiveRetail consumer goods and…Information technologyBanking and capital marketsInsurance and asset…Digital communicationsHighMediumLow 
 
   
 
Graph A9.2: Investment needs and gaps in EUR 
million, in 2022 constant prices 

Source: European Commission, DG Environment, 
Environmental investment needs & gaps assessment 
programme, 2025 update. 

Sustainable agriculture and land use 

Italy 

(LULUCF). 
in  boosting 

Italy’s carbon removals fall short of its 2030 
target  for  land  use,  land-use  change  and 
forestry 
faces  significant 
the  carbon-absorbing 
challenges 
capacity of its land-use sector, as carbon removals 
have declined at a worrying speed in recent years. 
To meet its 2030 LULUCF target, additional carbon 
removals of  -3.2 million tonnes of CO2 equivalent 
(CO2eq) are needed (239). The projections submitted 
in  the  NECP  show  a  significant  gap  to  target  for 
2030 (240); thus additional measures are needed to 
reach the 2030 target. 

Italian  agriculture  is  a  major  source  of 
greenhouse  gas  emissions  and  continues  to 
have  significant  impacts  on  air,  water  and 
soils. Agriculture generated 30.8 million tonnes of 
CO2eq in 2022, accounting for around 7.5% of the 
country’s  total  emissions  (excluding LULUCF).  This 
includes 21 million tonnes of CO2eq from livestock. 

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

Regulation (EU) 2023/839, Link. 

in 

(UAA) 

The  utilised  agricultural  area 
Italy 
increased from 12 909 thousand hectares in 2018 
to  13 078 
in  2023.  There  has  been  some 
improvement in the overall  nitrogen balance, with 
a  drop  from  58.2 kg  of  nitrogen  per  hectare  of 
UAA in 2018 to 56.2 kg in 2021. Nevertheless, an 
infringement  of  the  Nitrates  Directive  remains 
open  as  the  situation  in  several  Italian  regions  is 
not  improving  sufficiently.  The  livestock  density 
index  in  Italy  was  0.81  in  2020,  above  the  EU 
average of 0.75. Ammonia emissions  fell by 13% 
between 2018 and 2022 despite being still above 
the EU average (see Annex 15, SDG 2). However, in 
2021, the level of pesticides in surface water was 
34%, above the EU average (29%).  

its  CAP  strategic  plan, 

impacts  of  agriculture, 

Italy  is  transitioning  to  a  sustainable  food 
system  by  implementing  policies  to  reduce 
the  environmental  impact  of  agriculture.  In 
2022,  8%  of  its  agricultural  land  had  landscape 
features  such  as  woods  and  non-productive 
grasslands,  above  the  EU  average  of  5.6% (241). 
Organic  farming,  which  reduces  the  use  of 
synthetic fertilisers and pesticides, made up 18.1% 
of  Italy’s  agricultural  land,  above  the  EU  average. 
Under 
Italy  allocates 
approximately EUR 2 billion to organic farming and 
aims to increase the area under organic farming to 
reach  25%  of  UAA  by  2027.  To  mitigate  the 
environmental 
the 
government has implemented measures to reduce 
pollution,  for  example  by  promoting  integrated 
farming systems on almost 500 000 hectares and 
improving  the  methods  of  distributing  fertilisers 
and manure to the soil. Over EUR 10 billion of the 
plan’s  budget  is  earmarked  for  measures  to 
support  the  climate  and  the  environment.  To  this 
end, Italy has designed 34 voluntary schemes that 
compensate  farmers  for  the  additional  costs  and 
income  loss  deriving  from  the  adoption  of  more 
environmental  and  climate-friendly  practices. 
These  include  reduced  use  of  fertilisers  and 
pesticides, 
that  protect 
biodiversity, as well as soil conservation practices. 
The  bioeconomy  contributed  EUR  98.2  billion  of 
added  value  to  the  country’s  GDP  in  2021. The 
national  action  plan  on  bioeconomy  was  updated 
in December 2024 (242). 

techniques 

farming 

(240) European  Commission,  2024,  Climate  Action  Progress  Report, 
COM/2024/498,  Link.  Updated  projections  taking  into  account 
methodological adjustments have been submitted by Italy in its 
most recent NECP Reporting in March 2025. 

(241) European  Commission,  Land  Use/Land  Cover  Area  Frame 
Survey, Link; Landscape features in agricultural land: what is 
the extent?, p. 34, Figure 14 (map), Link. 
(242) MASE, updated bioeconomy action plan, Link.  

87 

 - 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000BiodiversityWaterBaselineGap 
   
 
 
Table A9.1:  Key indicators tracking progress on climate adaptation, resilience and environment 

(1) The data show the average for the timespan 2006-2023 based on EFFIS - European Forest Fire Information System. 
(2) Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2024, Dashboard on insurance protection gap for natural catastrophes. 
(3) van Daalen, K. R. et al., 2024, The 2024 Europe report of the Lancet Countdown on health and climate change: unprecedented 
warming demands unprecedented action. The Lancet Public Health. 
(4) This indicator measures total water consumption as a percentage of the renewable freshwater resources available for a given 
territory and period. Values above 20% are generally considered to be a sign of water scarcity, while values equal or greater than 
40% indicate situations of severe water scarcity. 
(5) European Commission, 2024, 7th Implementation Report from the Commission to the Council and the European Parliament on 
the implementation of the Water Framework Directive (2000/60/EC) and the Floods Directive (2007/60/EC) (Third River Basin 
Management Plans and Second Flood Risk Management Plans). 
(6) For this indicator, the EU average includes figures for the UK under the previous configuration, EU-28. 
(7) European Commission, 2023, EU Bioeconomy Monitoring System dashboards. 
(8) Nitrates can persist in groundwater for a long time and accumulate at a high level through inputs from anthropogenic sources 
(mainly agriculture). The EU drinking water standard sets a limit of 50 mg NO3/L to avoid threats to human health. 
(9) 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. 
Source: Eurostat, EEA. 

88 

Climate adaptation and preparedness:20182019202020212022202320182021Drought impact on ecosystems0.810.581.593.7718.171.836.772.76[area impacted by drought as % of total]Forest fires burned area (1)56 673     56 673     56 673     56 673     56 673     56 673     [ha, annual average 2006-2023]Economic losses from extreme events5 708       5 273       2 720       686          17 626     15 741     24 142       62 981       [EUR million at constant 2022 prices]Insurance protection gap (2)----1.75         1.75         [composite score between 0 and 4]Heat-related mortality (3)159          159          159          159          159          [number of deaths per 100 000 inhabitants in 2013-2022]Sub-national climate adaptation action71            73            74            75            76            78            4144[% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:20182019202020212022202320182021Water Exploitation Index Plus, WEI+ (4)8.17.611.111.015.6-4.54.6[total water consumption as % of renewable freshwater resources]Water consumption13 750     13 708     18 353     19 411     19 335     -           [million m3]Ecological/quantitative status of water bodies (5)[% of water bodies failing to achieve good status]Surface water bodies---47%---59%Groundwater bodies---19%---93%Biodiversity and ecosystems:20182019202020212022202320182021Conservation status of habitats (6)9.9-----14.7-[% of habitats having a good conservation status]Common farmland bird index72.273.871.672.369.4-72.274.42000=100Protected areas---2121--26[% of terrestrial protected areas]Sustainable agriculture and land use:20182019202020212022202320182021Bioeconomy's added value (7)91 538     94 213     88 755     98 215     634 378     716 124     [EUR million]Landscape features----8              -[% of agricultural land covered with landscape features]Food waste--136140139-[kg per capita]Area under organic farming15.215.216.016.818.17.99-[% of total UAA]Nitrogen balance58.257.256.156.2--[kg of nitrogen per ha of UAA]Nitrates in groundwater (8)19.018.618.217.8--[mgNO3/l]Net greenhouse gas removals from LULUCF (9)41 900-     37 702-     27 499-     24 787-     21 199-     -           256 077-     240 984-     [Kt CO2-eq]ItalyEU-27ItalyEU-27ItalyEU-27ItalyEU-27 
 
  
 
FAIRNESS 
ANNEX 10: LABOUR MARKET 

by 

impacted 

persistently 

In  particular, 

Italy’s 
labour  market  has  demonstrated 
resilience and incremental progress in recent 
years,  marked  by  improving  labour  market 
outcomes,  although  the  country  still  faces 
structural  challenges. 
Italy’s 
competitiveness and potential economic growth is 
low 
negatively 
productivity  growth,  stark  regional  imbalances, 
demographic decline coupled with the migration of 
talent;  and  the  underrepresentation  of  some 
groups,  particularly  women,  older  workers  and 
young people, in the labour market. As Italy works 
its  2030  employment  rate 
towards  reaching 
target, 
of 
using 
underrepresented groups through a more effective 
active  labour  market  policy  system,  addressing 
skills  mismatches  and 
labour  shortages,  and 
improving  job  quality  will  be  key  challenges  to 
overcome  for  a  more  robust  and  inclusive  labour 
market and a thriving economy. 

potential 

better 

the 

Graph A10.1: Key labour market indicators 

Source: Eurostat, LFS [lfsi_emp_a, une_rt_a, une_ltu_a, 
lfsi_neet_a]. 

Italy’s 
labour  market  has  continued  to 
improve, but structural challenges persist. In 
2024,  the  employment  rate  rose  to  a  historically 
high  level,  reaching  67.1%,  and  the  activity  rate 
remained  stable  at  66.6%.  However,  both  rates 
remain  well  below  the  EU  averages  (75.8%  and 
75.4%,  respectively).  At  73%,  the  country’s  2030 
employment  rate  target  remains  substantially 
(by  5.9  percentage 
above 

current 

levels 

points (pps)),  calling  for  continued  efforts.  The 
unemployment  rate  fell  significantly  to  6.5%  in 
2024,  with  its  youth  and  long-term  components 
decreasing  to  20.3%  and  3.3%,  respectively, 
marking  significant  progress.  Though  this  is  still 
above the EU averages of 5.9%, 14.9% and 1.9%, 
respectively, the rates are increasingly converging. 
Regional  disparities  are  particularly  pronounced, 
with  a  gap  of  22.5 pps  between  the  employment 
rate  in  the  North-East  and  that  in  the  South. 
Similar patterns are also observed for the activity 
and  unemployment  rates  (see  Annex  16).  These 
regional 
structural 
weaknesses  in  southern  regions  and  a prevalence 
of  smaller,  less  competitive  and  less  innovative 
firms offering fewer job opportunities (243). Looking 
ahead,  after  employment  growth  decelerated  to 
1.6% 
labour  market 
participation  in  2025-2026  is  expected  to  more 
than  offset  the  projected  decline  in  the  working-
age population. 

in  2024,  still 

disparities 

result 

rising 

from 

institutional  barriers. 

Low  labour  market  participation  of  women 
highlights  significant  gender  disparities,  tied 
to  insufficient  childcare  and  long-term  care 
services  and 
Italy’s 
female employment rate, at 57.4% in 2024, while 
increasing, is among the lowest in the EU (70.8%) 
and  characterised  by  regional  disparities.  The 
gender  employment  gap  is  nearly  twice  the  EU 
average (19.4 pps vs 10 pps) and has shown only 
improvements  since  2015.  Recent 
marginal 
estimates  show 
the 
that  an 
participation  rate  for  women  to  the  EU  average 
would  add  10%  to  Italy’s  total  labour  force  and 
could  lead  to  increases  in  GDP  of  a  similar 
magnitude in the long term (244). These disparities 
are,  among  other  things,  linked  to  a  significant 
impact  of  parenthood,  stemming  from  women’s 
predominant role in caregiving and domestic work, 
challenges  in  the  availability  and  access  to  high-
quality  long-term  care  and  childcare  (see  Annex 
11), 
balance 
opportunities.  As  a  result, a  high  share  of  women 
exits the labour market upon childbirth, and those 
who  remain  employed  often  significantly  reduce 
their  working  hours.  Remote  work  adoption,  while 

insufficient  work-life 

increase 

and 

in 

(243) Banca d’Italia, Lo sviluppo del Mezzogiorno: una priorità 

nazionale, 2019. 

(244) Banca d’Italia, Women, labour markets and economic growth, 

2023. 

89 

56586062646668707274051015202530352018201920202021202220232024%%ITActivity rate 20-64 (rhs)Employment rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs) 
 
 
     
 
 
 
levels, 

Certification 

employment (245). 

than  pre-pandemic 

higher 
remains 
significantly  below  the  EU  average,  including 
among  parents  of  young  children.  In  addition,  the 
tax and benefit system continues to disincentivise 
women’s 
Three  measures 
supported  by  the  Recovery  and  Resilience  Facility 
go in the right direction: i) Italy’s plan for nurseries 
and  preschools  aims  to  create  at  least  150 480 
new childcare places by 2026, promoting work-life 
balance  and  female  employment;  ii)  the  Gender 
Equality 
increase 
participation  of  women  in  the  labour  market  and 
reduce the gender pay gap; and iii) investments for 
the  creation  of  women’s  enterprises  to  foster 
women’s  self-employment  and  entrepreneurship. 
Italy’s medium-term fiscal structural plan commits 
to  making  further  progress  on  covering  unmet 
demand  for  childcare.  Further  actions  could  be 
explored to increase flexible working conditions to 
support  women  and  parents.  Balanced  parental 
leave  policies,  such  as  extending  paternity  leave 
beyond the current 10 days, could help redistribute 
care  responsibilities  and  narrow 
the  gender 
employment gap. 

System 

to 

High  marginal  effective  tax  rates  and  some 
characteristics  of  the  tax-transfer  system 
discourage  second  earners  (predominantly 
women) from increasing their working hours. 
At 43.5%, the country’s implicit tax rate on labour, 
an  approximation  of  the  average  effective  tax 
burden on labour income, is among the highest in 
the  EU  (37.8%).  In  2024,  Italy  merged  the  two 
lowest tax brackets, applying a unified tax rate of 
23%  to  alleviate  the  tax  burden  on  middle 
incomes.  The  effective  tax  rate  for  low-wage 
earners decreased significantly to 38.1% in 2024. 
Nonetheless,  the  proportion  of  gross  earnings 
taxed  away  when  transitioning  to  employment  is 
still high at 78.4% in 2024(EU: 74.4%). In addition, 
while the effective taxation of income gains when 
moving  to  a  higher  wage  has  declined,  second 
earners,  most  of  whom  are  women,  face  higher 
disincentives than single individuals (see Annex 2). 
Moreover,  some  aspects  of  the  tax-transfer 
system,  such  as  means-based  benefits  and  tax 
credits  based  upon  overall  family  income  as  well 
as  tax  allowances  for  dependent  spouses  might 
discourage  a  higher 
labour  market 
participation  by  second  earners (246).  These 

level  of 

(245) Ibid. 

(246) Banca d’Italia, Women, labour markets and economic growth, 

2023. 

90 

dynamics  undermine  incentives  for  dual-income 
households  and  contribute  to  the  low  level  of 
labour market participation by women. 

Graph A10.2: Labour market outcomes of young 
people 

Source: Eurostat, LFS [une_rt_a, lfsi_neet_a, lfsi_emp_a, 
edat_lfse_18, lfsi_act_a, edat_lfse_20]  

progress 

on  most 

Young  people  continue  to  face  significant 
labour market challenges, but Italy has made 
substantial 
youth 
employment indicators. In 2024, only 40.3% of 
young  Italians  (15-29)  participated  in  the  labour 
market, significantly trailing their peers across the 
EU  (55.9%)  and  decreasing  by  1.3  pps  compared 
to  2023.  Among  those  aged  15-24  participating, 
20.3%  were  unemployed,  well  above  the  EU 
average  of  14.9%,  though  this  constitutes  an 
historical low for Italy and an improvement by 2.4 
pps  compared  to  the  previous  year.  Employment 
rates  also  lagged,  with  only  around  a  third  of 
people  in  this  age  group  employed  against  about 
half  in  the  EU.  The  difficulties  faced  by  young 
people  in  transitioning  to  high-quality,  stable 
employment  are  further  underscored  by  the 
decreasing  yet  nonetheless  high  share  of  young 
people neither in employment nor in education and 
training (NEETs) (15.2% vs 11% in the EU), despite 
this being its lowest level on record, and the high 
prevalence  of  temporary  employment.  In  2024, 
25%  of  young  people  born  outside  the  EU  and 
38.9% of young women in this group were NEETs. 
Moreover, 39.4% of young people (aged 15-29) in 
employment held temporary contracts, reflecting a 
significant  improvement  of  3.8  pps  since  2023. 
reflect  structural 
These 

levels  continue 

to 

010203040506070800510152025303540452015201620172018201920202021202220232024%%ITEmployment rate 15-24 (lhs)Unemployment rate 15-24 (lhs)NEET rate 15-29 (lhs)In education, training 15-24 (rhs)Tertiary education 30-34 (rhs) 
 
     
limited 

challenges  such  as 
job  opportunities, 
inadequate support for transitions from education 
to  work,  and  underutilisation  of  young  people’s 
potential. The European Social  Fund Plus supports 
access to employment through the national youth, 
women  and  jobs  programme  as  well  as  through 
together, 
regional  programmes.  Taken 
these 
programmes 
than  115 000 
reached  more 
unemployed people between 2021 and 2024. 

At 

to 

54.5%, 

attainment. 

Vulnerable  groups,  including  low-qualified 
adults,  immediate  descendants  of  migrants 
and  persons  with  disabilities,  also  face 
barriers 
integration. 
labour  market 
Employment  outcomes  in  Italy  are  closely  tied  to 
educational 
the 
employment rate for people with lower-secondary 
education or below is 27.7 pps lower than for the 
tertiary educated. Among women, this gap widens 
to  almost  43  pps.  While  recent  higher  education 
graduates  (aged  20-34)  generally  perform  better 
in  the  labour  market,  their  employment  rate 
(77.8% in 2024) remains among the lowest in the 
EU.  However,  the  rate  was  characterised  by  a 
significant  improvement  of  2.4  pps  since  2023. 
Employment  rates  are  particularly  low  for  recent 
graduates  from  medium-level  education  with  a 
general  orientation  (48.5%  in  2024),  while  recent 
graduates  from  vocational  programmes  do  much 
better  (63.7%).  People  born  in  Italy  with  one  or 
both  parents  born  abroad  also  participate  less  in 
the  labour  market  and  have  a  relatively  low  and 
decreasing  employment  rate  of  56.3%,  11.2 pps 
below  those  without  a  migrant  background,  and 
well above the EU average gap of 2 pps. Moreover, 
people  from  other  EU  countries  and  non-EU 
citizens  are  more  frequently  employed  under 
fixed-term contracts than Italian citizens. However, 
the employment gap between people born outside 
Italy  and  those  born  in  Italy  is  relatively  narrow 
(0.7 pps)  compared  to  the  EU  average  (6.5 pps). 
Furthermore, 
the  disability  employment  gap 
experienced a deterioration from 15.9 pps in 2023 
to 25.1 pps in 2024, while Italy has not yet set a 
target for employing persons with disabilities (247). 
At  the  same  time,  only  41.7%  of  persons  with 
disabilities  were  active  in  the  labour  market  and 
close to half of young persons (15-29) was neither 
in employment, nor education or training (29.8% in 
the EU). 

(11.7%), 

skills  mismatches, 

Persistent 
labour 
shortages,  and  insufficient  job  opportunities 
for highly educated workers hinder potential 
productivity  gains.  Job  vacancy  rates  have 
declined  across  sectors,  reaching  2.1%  in  2024 
(EU: 2.4%), with the highest rates being reported in 
construction.  At  the  same  time,  around  a  third  of 
employers  in  services  reported  limited  availability 
of  workers  as  a  factor  limiting  production  in  Q4-
2024.  The  overall  labour  market  slack,  reflecting 
the unmet demand for labour, declined by 1.9 pps 
in 2024 to 15.8%. It remained  well above the EU 
indicating  still  significant 
average 
untapped  labour  potential.  Simultaneously,  Italy 
continues  to  have  one  of  the  highest  levels  of 
macroeconomic  skills  mismatch (248)  in  the  EU, 
especially among young people. In 2024, it was at 
25.7%,  far  above  the  EU  average  (19.2%).  The 
employment rate of people with tertiary education 
(82.2%)  lags  behind  the  EU  average  (86.5%)  and 
recent  tertiary  graduates  significantly  trail  their 
peers in the EU, pointing to barriers in transitioning 
to 
labour  market.  Furthermore,  over-
qualification  remains  a  structural  issue,  with  over 
one in five tertiary-educated workers employed in 
positions  that  do  not  require  their 
level  of 
education. Particularly high over-qualification rates 
in  administrative  and  support  services  highlight 
both a slow response of the education and training 
system  to  changing  labour  market  needs  and 
limited  capacity  among  firms 
to  effectively 
harness skilled labour.  

the 

pose 

birth 

Further  integrating  underrepresented  groups 
is  critical  as  Italy’s  ageing  population  and 
long-term 
rates 
declining 
challenges.  While  the  decline  in  the  population 
has  recently  slowed,  Italy  has  experienced  a  net 
loss  of  1.35  million  residents  since  2014.  Births 
have  fallen  to  historic  lows,  with  only  370 000 
births in 2024 (compared to a peak of 577 000 in 
2008).  This  trend  is  driven  by  low  fertility  rates, 
changes 
in  population  structure  and  delayed 
parenthood. Italy’s total population is projected to 
shrink  by  9.7%  between  2022  and  2070,  more 
than  twice  the  EU-wide  decline  of  4%.  The 
working-age  population  is  projected  to  decline, 
despite anticipated increases in migration, leading 
to a 7.2 pps decrease in the share of the working-

(247) Break in series in 2024.  

(248) This indicator highlights the relatively higher difficulty of the 
low- and medium-qualified in entering the labour market, as 
compared to the high-qualified. 

91 

 
 
 
for 

the 

the 

standards 

of  workers 

transition  of 

employability 
uniform 

age  (20-64)  out  of  total  population  by  2070 (249). 
As  the  population  is  increasingly  ageing,  the  old-
age  dependency  ratio  is  projected  to  rise  from 
40.8%  in  2022  to  a  peak  of  66%  around  2050, 
reflecting 
‘baby-boom’ 
cohorts  into  old  age,  and  reach  65.5%  in  2070. 
These  demographic  shifts  are  likely  to  entail 
labour  market  tightness  and  therefore  require 
activating and better integrating underrepresented 
groups  and  those  outside  the  labour  market.  As 
part of Italy’s RRP, the national programme for the 
has 
guaranteed 
public 
introduced 
employment  services  across  the  country,  focusing 
on  skills  forecasting,  personalised  training  plans, 
guidance  and  job  coaching.  At  least  3  million 
the 
people  are  expected 
programme  by  2025,  particularly  women,  long-
term unemployed people, persons with disabilities 
and  those  under  30  or  over  55,  through  targeted 
active labour market policies along with upskilling 
the  public 
and 
reskilling.  The  capacity  of 
employment  services  will  be  essential 
for 
successful implementation. In addition, to address 
emerging  shortages  and  as  other  measures  may 
not be sufficient, there may be an increasing need 
to  foster 
legal  migration  and  attract  talent, 
particularly  from  non-EU  countries,  to  maintain 
adequate human capital in key sectors and bolster 
Italy’s  competitiveness.  Furthermore,  the  ageing 
population  will  put  further  pressure  on  the  health 
system,  which  faces  acute  shortages  (see  Annex 
14). 

to  benefit 

from 

Amplifying  these  developments,  many  young 
the  highly 
people,  particularly  among 
qualified,  are  searching  for  better 
job 
prospects  abroad.  Between  2008  and  2022, 
over  half  a  million  young  Italians  emigrated,  with 
only a third of them returning (250). The outflow of 
talent has intensified, with the share of graduates 
among  people  moving  abroad  increasing  from 
30.5%  in  2013  to  50.6%  in  2022 (251).  Improving 
the quality of job offer and in particular outreach 
activities,  including  for  vulnerable  young  people 
under the Youth Guarantee; strengthening training 

(249) European  Commission,  2024  Ageing  Report.  Economic  and 
Budgetary  Projections  for  the  EU  Member  States  (2022-
2070), 2024.  

(250) Banca  d’Italia,  Annual  Report  –  The  Governor’s  Concluding 

Remarks, 2024. 

(251) Eurofound,  Role  of  human  capital  inequalities  in  social 

cohesion and convergence, 2024. 

and  education  in  line  with  labour  market  needs, 
and  to  better  prepare  for  the  transition  to  work; 
and  enhancing  employment  opportunities  could 
help  retain  young  talent  in  the  Italian  labour 
market. 

The  workforce  is  adapting  to  the  green  and 
digital  transitions,  with  a  growing  need  for 
skilled  workers  in  emerging  sectors.  In  2023, 
employment 
in  the  country’s  energy-intensive 
industries  represented  3.3%  of  total  employment, 
while  jobs  in  the  green  economy  have  expanded 
rapidly.  Between  2016  and  2021,  employment  in 
the environmental goods and services sector grew 
by 52.8%, reaching 4.1% of total employment (EU: 
2.7%) (252).  Similarly,  the  job  vacancy  rate  in 
construction, a key sector for the green transition, 
is below the EU average (3.0% vs 3.1% in 2024). 
The  greenhouse  gas  emission  intensity  of  Italy’s 
workforce  has  improved,  decreasing  from  13.9 
tonnes per worker in 2015 to 11.3 tonnes in 2023 
(EU: 12.3 tonnes), reflecting progress made on the 
ICT  sector 
green  transition.  By  contrast,  the 
remains  underdeveloped,  with 
ICT  specialists 
accounting  for  4%  of  total  employment  in  2024, 
compared  to  5%  in  the  EU,  partly  due  to  low 
enrolment 
in  higher  education  programmes 
preparing  ICT  specialists  (see  Annex  12).  Women 
are  particularly  underrepresented:  only  17.1%  of 
ICT  specialists  are  women  (EU:  19.5%).  Italy  also 
lags  behind  in  terms  of  broader  digital  skills 
among the working population, with only 57.5% of 
workers (25-64) having at least basic digital skills, 
underscoring the need for further strengthening of 
upskilling 
individuals 
reskilling 
and 
potentially looking for work. 

those 

amid 

losses, 

structurally 

Recent real wage increases only partly offset 
past 
low 
productivity growth. Productivity growth in Italy 
has  long  been  hindered  by  factors  such  as  small 
firm  size  and  slow  human  capital  accumulation, 
resulting in low innovation capacity (see Annex 3). 
Between  2013  and  2023,  cumulative  real  labour 
productivity  growth  per  capita  was  only  2% 
compared  to  5.8%  in  the  EU.  Italy’s  structurally 
low labour productivity growth puts a constraint on 
wage growth. Cumulative real wage developments 
have  been  even  weaker  than  productivity  growth 
over the same period: in 2023 real wages in Italy 

(252) The  environmental  goods  and  services  sectors  generate 
environmental products, i.e. goods and services produced for 
environmental protection or resource management. 

92 

 
 
 
weaknesses  heighten  poverty  risks  and  weigh  on 
long-term productivity growth and social cohesion. 

Graph A10.3: Employment by type (y-o-y change) 

were  3.5%  below  2013  levels,  while  they  rose by 
around  3%  EU-wide.  After  marked  declines  in 
2022 and 2023 (by 4.4% and 2.8%, respectively), 
real  wages  increased  by  2.3%  in  2024  and  are 
forecast  to  rise  by  1.1%  in  2025  (253),  reflecting 
both  moderating  inflation  and  stronger  nominal 
wage growth. However, these gains are unlikely to 
compensate for the prior losses. In turn, low wage 
growth  over  the  past  decade  has  enabled  cost 
competitiveness  gains.  Over  recent  years,  unit 
labour costs (ULC) have risen more slowly in Italy 
than  in  other  Member  States.  ULC  growth  is 
forecast to accelerate from 4.3% in 2023 to 5.0% 
in 2024, before moderating in 2025. 

Source: Eurostat, LFS [lfsq_egaps, lfsq_etgaed].  

(17.2%), 

involuntary 

impact  on 

In  a  context  of  real  wage  stagnation,  low 
work  intensity  and  a  high  prevalence  of 
atypical  work  negatively 
job 
quality.  Despite  significant  improvements  over 
the  last  five  years  (see  Graph  A8.3),  with  the 
number of permanent contracts rising by 13% and 
that  of  fixed-term  contracts  falling  by  16%,  the 
share  of  employees  with  temporary  contracts  is 
still  above  the  EU  average  (14.4%  vs  11.6%  in 
2024),  particularly  for  young  workers.  In  addition, 
while  part-time  work  (16.7%)  is  below  the  EU 
average 
part-time 
employment  remains  disproportionately  high  at 
51.3%  (EU:  18.2%),  particularly  among  women. 
These  conditions  also  exacerbate  in-work  poverty, 
with  Italy’s  at-risk-of-poverty  rates  for  full-time 
workers  (9.0%)  and  part-time  workers  (15.7%) 
exceeding  the  respective  EU  averages  (6.9%  and 
12.8%).  The  high  prevalence  of  non-standard 
forms  of  work, 
seasonal  work, 
including 
contributes  to  low  work  intensity,  which  further 
aggravates  the  risk  of  in-work  poverty.  It  also 
undermines  the  accumulation  of  firm-specific 
human  capital  as  well  as  social  protection 
financing.  Despite  some 
coverage  and 
improvement  in  recent  years,  undeclared  work  in 
Italy remains widespread and amounted to almost 
3  million  full-time  equivalent  jobs,  particularly  in 
regions (254). 
the 
southern 
implementation  of  RRF  measures 
tackle 
undeclared  work,  including  through  strengthening 
the National Labour Inspectorate, will be essential. 
Furthermore,  Italian  workers  experience  a  higher 
incidence  of  fatal  accidents  at  work.  These 

Continuing 
to 

its 

(253)Based on the European Commission Autumn 2024 economic 

forecast. 

(254) ELA, Factsheet on undeclared work – Italy, 2023. 

93 

-1500-1000-500050010001500thsITPermanent employeesTemporary employeesSelf employmentOverall 
 
  
 
 
ANNEX 11: SOCIAL POLICIES 

Although  social  conditions  are  improving  in 
Italy,  poverty  and  social  exclusion  continue 
to  pose  a  risk.  This  is  particularly  the  case 
among  certain  groups  and  regions,  for  example, 
regions,  where 
the  southern 
children  and 
employment  rates  and  incomes  are  low  and  in-
work  poverty  rates  are  high.  In  addition,  adverse 
demographic  trends  pose  a  significant  challenge, 
not  only  to  the  sustainability  of  pension  and  care 
systems  but  also  to  the  provision  of  quality, 
accessible,  and  affordable  care,  including  long-
term care.  

Poverty  and  social  exclusion  risks  are  in 
decline but remain high in the South. In 2024, 
the  at-risk-of  poverty  or  social  exclusion  (AROPE) 
rate  rose  by  0.3 pps  to  23.1%,  as  the  EU  rate 
decreased  by  the  same  amount.  While  remaining 
above  the  EU  average  of  21.0%,  the  rate  had 
shown  clear  signs  of  convergence  over  the 
previous years: the gap between the AROPE rate in 
Italy  and  the  EU  average  had  narrowed  from 
4.4 pps  in  2015  to  1.5 pps  in  2023.  With  a 
decrease  of  1.4  million  in  the  number  of  people 
AROPE in 2023, Italy is on a right path to achieve 
its  national  target  to  reduce  that  number  by  3.2 
million  by  2030.  In  part  driven  by  structural 
weaknesses  in  the  southern  economy  resulting  in 
fewer  job  opportunities,  the  rate  is  considerably 
higher  in  the  South  (39.8%)  and  in  the  Islands 
(38.1%) than in the North-East (11.2%) and North-
West  (13.9%),  although  regional  disparities  are 
likely  overstated  due  to  territorial  differences  in 
the  cost  of  living.  Moreover,  being  a  migrant 
significantly increases poverty and social exclusion 
risks:  the  AROPE  rate  for  foreign-born  people 
(34.2%)  was substantially higher than the rate of 
nationals  (20.8%),  and  the  gap  in  the  risk  of 
poverty at work was also one of the highest in the 
EU  (20.8%  vs  8.3%)  reflecting  a  high  prevalence 
of  atypical  contracts.  At  the  same  time,  the 
incidence  of  absolute  poverty  (255),  measured  by 
national data (ISTAT), slightly increased from 8.3% 
in  2022  to  8.4%  in  2023.  Absolute  poverty  is 
higher  in  the  Islands  (10.2%)  and  in  the  South 
(10.2%), while lower in the Centre (6.7%). Absolute 
poverty  is  also  higher  among  households  with  at 
least one foreign member (30.4%), while it stands 
at  6.3%  for  households  composed  exclusively  of 

(255) Defined as a household with a monthly expenditure equal or 
less  than  a  basket  of  goods  and  services  considered 
essential to avoid severe forms of social exclusion. 

the 

Italian  nationals (256).  Examining 
three 
components  of  the  AROPE  rate,  the  at-risk-of-
poverty  rate  (AROP)  remained  stable  at  18.9%, 
above  the  EU  average  (16.2%).  The  share  of 
people  suffering  from  severe  material  and  social 
deprivation  also  remained  stable  (4.6%)  and  
below  the  EU  average  (6.4%),  while  the  share  of 
people  living  in  households  with  very  low  work 
intensity increased by 0.3 pps, driving the increase 
of the AROPE rate. 

Graph A11.1: AROPE and its components 

Source: Eurostat, EU-SILC [ilc_peps01n, ilc_li02, ilc_mdsd11, 
ilc_lvhl11n]. 

Child  poverty  dropped  slightly  but  remains 
high.  In  2024,  the  AROPE  rate  for  children 
remained  stable  at  27.1%,  the  same  as  in  2019, 
while  the  EU  average  declined  by  0.6  pps  to 
24.2%.  Although  over  previous  years  Italy  was 
closing the gap with the rest of the EU, thanks to a 
faster decline in the rate, it has not set a national 
child poverty reduction target. In order to mitigate 
the  impact  of  poverty  on  children,  the  country  is 
implementing the European Child Guarantee (ECG) 
according  to  its  action  plan  of  March  2022.  The 
2024  biennial 
report  shows 
implementation 
progress  in  some  areas,  e.g.  increased  take-up  of 
childcare  by  disadvantaged  children.  At  the  same 
time,  there  is  a  need  to  better  understand  how 
many  children  in  need  have  benefited  from  the 
measures.  The  implementation  of  the  ECG  is 
supported  by  EU  cohesion  policy  funds  and  the 
Recovery  and  Resilience  Facility  (RRF),  including 

(256) ISTAT, Stabile la povertà assoluta, 2024. 

94 

05101520253035402015201620172018201920202021202220232024% of populationITAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty-or-social-exclusion rate children (<18)At-risk-of-poverty rateSevere material and social deprivationPeople living in low work intensity households 
 
 
   
 
 
 
through the full implementation of the investment 
plan  to  build  new  nurseries  (Piano  Asili  Nido)  to 
improve  the  availability  of  childcare  facilities. 
These  measures  could  positively  impact  mothers’ 
participation  in  the  labour  market,  as  currently 
only  54.8%  of  women  with  children  under  six 
years  are  employed  (see  Annex  10),  while  39.4% 
of  children  below  the  age  of  three  were  in  early 
childhood education and care (ECEC). According to 
the  Joint  Research  Centre, 
estimations  by 
expanding childcare coverage to 50% could boost 
the  participation  rate  of  women  and  increase 
average  weekly  working  hours  by  8%,  from  the 
current 17.9 (257). 

Graph A11.2: In-work-at-risk-of-poverty rates 

workers,  15.7%  were  at  risk  of  poverty,  a 
significant improvement compared to the previous 
year but still above the 12.8% in the EU. For fixed-
term  employees  the  risk  of  poverty  increased  by 
4.3  pps  to  20.4%,  at  a  higher  pace  than  the  EU 
it  was 
(+0.8pps,  14.2%).  Moreover, 
average 
particularly prevalent among those working at low 
intensity. More than one in three (36.3%) of those 
with  a  working  time  between  20-45%  of  total 
combined work-time potential in the previous year 
faced  in-work  poverty.  Low-wage  earners  are 
more vulnerable, as they are more likely to live in 
households  with  unemployed  members  or  low 
work intensity. The high incidence of low-paid, low-
intensity  work  helps  to  explain  why,  despite  post-
pandemic  improvements  in  employment  rates, 
absolute  poverty  levels  have  not  significantly 
decreased. 

Income 
inequality  and  wage  dynamics 
continue to pose significant challenges, even 
as inflation recedes. In 2024, the income of the 
richest  20%  of  the  population  was  5.53  times 
higher  than  that  of  the  poorest  20%,  increasing 
from  2023  (5.27)  in  contrast  with  a  slightly 
decreasing  EU  average  (from  4.72  to  4.66). 
Income inequality is driven by generally low levels 
of  employment,  strongly  varying  by  region  (see 
Annex  10).  Whereas  income  inequality  is  high  in 
Italy,  the  gross  disposable  household  income 
(GDHI) per capita stood at 95.3% of its 2008 level 
compared  to  113.6%  in  the  EU.  This  reflects 
persistent  wage  stagnation  in  Italy  over  the  last 
two  decades,  as 
labour 
productivity growth puts a persistent constraint on 
wage  growth.  After  marked  declines  in  2022  and 
2023, real wages rose by 2.9% in 2024, reflecting 
both  the  gradual  decrease  in  inflation  and  the 
acceleration of nominal wage growth, and are set 
to  rise  also  in  2025  (see  Annex  10).  Wealth 
inequality  is  also  high,  as  the  richest  10%  of  the 
population owns 54.6% of wealth vs 53.4% in the 
euro area average. 

structurally 

low 

Average house prices in Italy have increased 
only  marginally  over  the  last  decade.  House 
prices  have  increased by around  10%  since  2015 
in nominal terms. They grew by just 1.3% in 2023, 
after  increasing  by  2.6%  and  3.8%  in  2021  and 
2022,  respectively.  In  2024,  they  continued  to 
increase  mildly  (3.9%  in  2024-Q3  year-on-year). 
House prices at national level are not estimated to 
be  overvalued.  House  transactions  and  building 
permits  decreased  in  2023,  as  the  economy 
adjusted to higher mortgage rates.  

95 

Source: Eurostat, EU-SILC [ilc_iw01, ilc_iw05, ilc_iw07, 
ilc_iw02, ilc_iw03]. 

In-work  poverty  declined,  but  risks  remain 
high  for  the 
low-qualified,  for  non-EU 
citizens,  and  for  part-time  workers.  In  2024, 
Italy’s in-work at-risk-of-poverty rate increased to 
10.3%  from  9.9%  in  2023,  one  of  the  highest  in 
the  EU  and  well  above  the  EU  average  of  8.2%. 
The  risk  is  particularly  severe  for  low-qualified 
workers  (18.2%)  compared  to  those  with  tertiary 
education (4.5%), and for non-EU citizens (23.2%) 
compared  to  Italian  nationals  (8.9%).  Key  factors 
contributing to high overall in-work poverty include 
structurally 
low 
productivity,  and  low  work  intensity  due  to  non-
standard  employment.  In  2024,  among  part-time 

low  wage  growth, 

linked  to 

(257) Estimations performed by the European Commission, Joint Research 

Centre, based on the EUROMOD model, I6.0+. 

051015202530354045502015201620172018201920202021202220232024% of employedITTotalTemporaryPart-timeLow-qualifiedNon-EU citizenshipLow work-intensity 
  
 
At  macro 
level  housing  affordability 
improved  over  the  last  decade.  House  prices 
grew  at  slower  pace  than  household  income,  on 
average  across  the  Italian  territory  and  different 
income  groups,  over  the  last  decade  and  the 
standardised  house  price-to-income  ratio  has 
decreased (-13% from 2015 to 2023). The house 
price levels are relatively low compared to income 
levels.  Taking  into  account  the  cost  of  mortgage 
funding,  the  borrowing  capacity  of  households 
improved  over  the  past  decade. While  the  rental 
market  is  rather  small,  the  ratio  of  new  rents  to 
incomes increased over the last decade. 

While  the  share of  households overburdened 
by  housing  costs  remains  low,  overcrowding 
and  housing  deprivation  remain  a  challenge. 
In  2024,  the  housing  cost  overburden  rate,  the 
share  of  households  where  housing  costs 
represented more than 40% of disposable income, 
in Italy was 5.1%, compared  to an EU average of 
8.2%. Housing overburden is higher for households 
experiencing  poverty  risks  (21.8%)  yet  still  lower 
than EU average (31.1%). It is also higher in cities 
(6.6%) than in towns and suburbs (4.7%) and rural 
areas  (3.2%).  At  the  same  time,  however,  the 
overcrowding rate in Italy (23.9%) is high and well 
above  the  EU  average  (16.9%).  It  is  considerably 
higher at the lower end of the income ladder (first 
income  quintile:  33%)  and  above  the  EU  average 
(27.8%). Moreover, structural issues such as leaks, 
damp, or rot affected 17.1% of dwellings in 2023. 
Even  though  this  reflects  improvements  –  a 
decrease of 2.5 pps compared to 2021 – the level 
of housing deprivation still remained above the EU 
average of 15.5%. The latest partial homelessness 
count  took  place  in  2021  when  over  96  000 
individuals  were  identified  as  homeless.  At  the 
same time, the last National Plan of Interventions 
and  Social  Services  that  covered  homelessness 
policies expired in 2023. With support  of the RRF, 
Italy  plans  to  invest  EUR 2.1  billion  until  2026  to 
support the construction and redevelopment of at 
least 10 000 housing units in order to improve and 
increase social housing. 

Energy and transport poverty levels are low. 
In 2024, 8.6% of individuals reported being unable 
to  keep  their  homes  adequately  warm,  which  is 
slightly below the EU average of 9.2%. Conversely, 
4.5% of the population faced arrears on utility bills 
in  2024,  marking  a  slight  increase  from  4.1%  in 
the previous year but placing this figure well below 
the  EU  average  of  6.9%.  Italy  is  advancing  a 
national strategy to address energy poverty, with a 

recurring  subsidies,  with 

focus  on  improving  building  energy  efficiency 
through  renovations  and  energy  performance 
certifications.  Italy’s  National  Energy  and  Climate 
Plan (NECP) also includes a range of measures to 
mitigate  energy  poverty,  including  social  bonuses 
and  energy  efficiency  programmes  for  vulnerable 
households.  However,  these  measures  primarily 
consist  of 
limited 
structural  interventions  targeting  the  root  causes 
of energy poverty. Italy has established a national 
energy poverty observatory to monitor and assess 
the  effectiveness  of  its  strategies.  The  country 
also plans to launch a voucher scheme to support 
energy  efficiency  improvements  in  low-income 
households,  though  the  full  impact  of  these 
initiatives  remains  to  be  seen.  A  facility  of  EUR 
1 381 billion to support renovation for low-income 
and  vulnerable  households  and  alleviate  energy 
poverty  is  also  part  of  the  Italian  RRP.  Also 
transport  poverty  is  low:  car  ownership  is  broadly 
affordable  in  Italy,  even  for  lower-income  groups. 
The  share  of  Italians  who  could  not  afford  a  car 
was  2.0%  in  2024,  standing  well  below  the  EU 
average of 5.6%. Similarly, the share of people at 
risk of poverty who cannot afford a car was 5.6% 
in 2024 – only a third of the EU average (15.9%). 
However,  the  continued  dominance  of  personal 
cars  and  the  stagnation  in  public  transport  use 
highlight  challenges  in  promoting  sustainable  and 
inclusive transportation systems. 

income  scheme, 

The  effectiveness  of  the  social  protection 
system  is  improving,  but  gaps  in  terms  of 
adequacy  and  coverage  remain.  In  2024,  the 
impact of social transfers (other than pensions) in 
reducing  monetary  poverty  rose  to  31.3%  from 
30.5%  in  the  previous  year,  further  converging 
with  the  EU  average  of  34.4%.  Italy’s  new 
minimum 
the  Assegno  di 
Inclusione  (Inclusion  Allowance,  AdI),  replaced  the 
Reddito di Cittadinanza (RdC) in 2024. The AdI has 
stricter  eligibility  criteria,  focusing  in  particular  on 
households  with  minors,  seniors,  persons  with 
disabilities, or those in conditions of disadvantage 
and  supported  by  social  or  healthcare  services 
(258).  While  Italy  spent  EUR 8  billion  on the  RdC  in 
2022,  projected  annual  expenditure  for  AdI  in 
2024  was  EUR 4  billion,  reflecting  significant 
savings.  However,  an  estimated  40.6%  of 
households 
in  absolute  poverty  previously 
receiving  RdC  are  excluded  from  AdI,  with  the 

(258) As defined by ministerial decree no. 154 of December 13, 

2023. 

96 

 
 
likely 

to  meet 

exclusion  risk  being  higher  for  single  person 
households,  those  without  minors  or  elderly,  and 
households  in  the  north.  The  number  of  recipient 
households  dropped  by  37.6%,  from  around  1 
million  (RdC,  May  2023)  to  around  625  000  (AdI, 
May  2024),  while  the  number  of  individuals 
decreased  by  28.3%,  from  around  2.1  million  to 
around  1.5  million,  significantly  reducing  the 
coverage  of  the  measure.  Larger  households  are 
the  new  eligibility 
more 
requirements.  As  a  result  of  stricter  eligibility 
criteria and a less generous equivalence scale, the 
AdI  has  a  more  limited  poverty-alleviating  effect 
than  the  RdC.  Whereas  the  RdC  reduced  the 
headcount index  of households below the poverty 
line  from  7.3%  to  6.5% in  2019,  under  the  AdI  it 
would  only  have  been  reduced  to  7.0%.  Similarly, 
the  RdC  reduced  the  absolute  poverty  incidence 
from 8.9% to 7.5% in 2019, while AdI would have 
lowered it only to 8.3% (259). At the same, the AdI 
was  accompanied  by  the  introduction  of  the 
activation measure Supporto Formazione e Lavoro. 
Working-age  individuals  who  meet  the  income 
threshold  for  the  AdI,  but  do  not  fall  into  the 
eligible  categories  can  receive  a  fixed  EUR 500 in 
monthly  benefits  for 
their 
participation in active labour market policies, for a 
maximum  of  twelve  months.  The  introduction  of 
the  family  allowance  for  dependent  children 
Assegno  unico  e  universale  per  i  figli  a  carico 
(AUU)  in  2022  aimed  to  improve  social  safety 
nets,  support  parenting,  and  potentially  raise  the 
birth  rate.  However,  further  investments  in  care 
services and incentives for fathers to take parental 
leave  are  needed  to  achieve  these  goals  and 
improve  women’s  labour  force  participation.  As 
AUU  eligibility  is  restricted  to  residents  who  have 
lived 
the 
Commission  opened  an  infringement  procedure  in 
March 2023 and in July 2024, referring Italy to the 
Court  of  Justice  of  the  European  Union  for 
breaching the rights of mobile workers. 

least  two  years, 

the  duration  of 

Italy  for  at 

in 

Many  self-employed  workers  and  those  in 
non-standard  employment  experience  de 
facto gaps in access to social protection. The 
self-employed  and  those  under  non-standard 
contracts,  which  represent  a  high  share  of  the 
total  workforce  in  Italy,  much  higher  than  EU 
average,  experience  gaps  in  access  to  social 

(259) The  Commission’s  analysis  has  been  informed  by  the 
scientific  support  from  the  European  Social  Policy  Analysis 
Network (ESPAN). 

97 

in 

protection. This results in low benefit receipt rates. 
For  instance,  among  the  unemployed,  only  39.5% 
of  those  AROPE  received  any  social  benefits 
compared 
the 
to  52.4%  on  average 
EU. Similarly,  only  11.7%  of  self-employed 
workers  that  were  AROPE  received  any  social 
benefits compared to 45.4% among employees in 
2023. This contributes to a high at-risk-of-poverty 
rate  for  non-standard  workers,  at  20.4%  (EU: 
13.3%)  for  temporary  contract  workers,  standing 
well  above  the  rate  of  those  under  permanent 
contracts  (6.9%).  AROP  is  also  high  among  part-
timers  (15.7%  vs  12.8%  for  the  EU)  than  among 
full-time workers (9.0%). 

Population  ageing  threatens  the  adequacy 
and  fiscal  sustainability  of  the  pension 
system.  Demographic  developments  represent  a 
key  challenge  for  Italy.  In  2024,  the  country 
recorded  one  of  the  highest  old-age  dependency 
ratios in the EU (38.4% vs 33.9%) and the fertility 
rate, at 1.18, was well below the replacement rate 
of  2.1  and  one  of  the  lowest  in  the  EU.  The  total 
population  within  the  25-49  age  group  continues 
to fall while the 50-64 age group is the largest in 
the  EU  in  relative  terms.  The  population  aged 
sixty-five  and  over  is  expected  to  increase  to 
33.6% by 2070, resulting in a dramatic increase in 
the  old-age  dependency  ratio.  As  a  result, 
demographic 
to  place 
significant  financial  strain  on  the  pension  system 
future.  The  proportion  of  pension 
in 
expenditure  relative  to  GDP,  currently  already 
among  the  highest  in  Europe,  is  expected  to 
increase from 15.6% in 2023 to a peak of 17.3% 
in  2036  (260),  which  increasingly  depends  on 
prolonged  working  careers 
to  ensure  both 
adequacy and fiscal sustainability. 

trends  are  expected 

the 

Demographic trends weigh on long-term care. 
Although  public  expenditure  on  long-term  care 
(LTC) is similar to the EU average, a larger share is 
allocated  to  cash  transfers  rather  than  services. 
This has led to limited-service coverage, with only 
around  3%  of  those  aged  sixty-five  and  over 
having  access  to  residential  facilities  and  5%  to 
home  care.  The  RRP  focuses  on  strengthening 
home  care  services  for  non-self-sufficient  adults 
by  investing  EUR  4.75  billion,  with  the  goal  of 
covering  10%  of  older  people  and  includes  a 
general  reform  of  the  LTC  system. 
It  also 
reform  of  non-self-sufficiency, 
introduces  a 

(260) EPC-Ageing Working Group, 2024 Ageing report - Italy. 

 
 
 
focusing on integrating social and health services, 
including by establishing one-stop shops as well as 
measures  to  improve  home  care.  In  addition,  the 
reform  introduces  a  benefit  for  low-income  non-
self-sufficient 
individuals  to  help  cover  care 
service expenses. Despite these positive initiatives, 
some measures  adopted  in  the  LTC  field,  such  as 
the 
di 
of 
Accompagnamento  into  the  Prestazione  Unica 
Universale  per  la  Non  Autosufficienza  and  the 
introduction  of  the  Bonus  Badanti,  exhibit  several 
limitations.  These  include  their  experimental  and 
temporary  nature  without  clear  planning  for 
structural measures, together with a limited scope 
of application. 

transformation 

Indennità 

the 

98 

 
ANNEX 12: EDUCATION AND SKILLS 

translate 

regional  disparities, 

The  Italian  education  and  training  system 
long-standing  structural 
struggles  with 
challenges  that  hinder  skills  development. 
Challenges linked to the quality, equity and labour 
market  relevance  of  education  and  training,  and 
wide 
into  a 
misalignment  between  skills  demand  and  supply 
and  significant  rates  of  youth  unemployment  and 
inactivity  (see  Annex 10).  Shortcomings  in  skills 
development  start  at  an  early  age  with  low 
participation  of  disadvantaged  children  in  quality 
early  childhood  education  and  care  (ECEC),  and 
levels  of  basic  skill 
continue  with  unequal 
proficiency  depending  on  geographical  area  and 
type  of  school,  low  rates  of  tertiary  educational 
attainment  and 
in  adult 
learning.  All  this  harms  Italy's  innovation  capacity 
and competitiveness. 

limited  participation 

Low  participation 
in  ECEC  by  younger 
from  disadvantaged 
children,  especially 
backgrounds,  impacts  foundational  learning 
and  increases  inequalities.  The  participation  of 
children aged below three in formal education and 
care  is  growing,  but  it  is  strongly  influenced  by 
their  place  of  residence  and  socio-economic 
background.  In  2024,  the  proportion  of  children 
aged  0-2  enrolled  in  formal  education  and  care 
reached 39.4%, up 4.9 pps compared to 2023. The 
rate  is  now  in  line  with  the  EU  average  of  39.2% 
and  approaching  the  new  Barcelona  target  of 
41.7%  by  2030  after  a  clear  upward  trend  over 
the  past  years.  This  can  be  attributed  to  a 
combination  of  government  policies  to  support 
families  and  low  birthrates  narrowing  the  gap 
between  the  demand  and  supply  of  childcare 
places.  However,  disparities  persist,  particularly 
between  the  north  and  the  south  and  between 
large  urban  and  smaller  peripheral  municipalities, 
fragmented  demand  has 
where 
traditionally hindered the development of childcare 
services.  Moreover, participation  rates  for  children 
aged 0-2 increase with household income (261) and 
employment 
parents’ 
status (262),  undermining  the  capacity  of  ECEC  to 
compensate disadvantages. 

level  and 

low  and 

education 

The 
imbalances 

government 

is 

regional 
tackling 
in  participation  and  service 

Italy 

In  2024, 

relaunched 

provision. 
the 
implementation of its recovery and resilience plan 
(RRP) initiative to expand the supply of ECEC, after 
the initial approach based on open calls for tender 
by municipalities produced limited results (263). The 
Ministry  of  Education  and  Merit  has  shifted  to  a 
top-down  approach,  directly 
the 
municipalities with the greatest need to strengthen 
funds 
childcare 
accordingly. The aim is to encourage municipalities 
with strong shortcomings in the provision of early 
childhood services to develop new public nurseries. 
However,  not  all  eligible  municipalities  are 
participating in the programme. 

identifying 

allocating 

provision 

and 

in 

inequalities 

Early  school  leaving  continues  to  decrease, 
educational 
large 
but 
outcomes  persist, 
leaving  parts  of  the 
population  behind.  In  2024,  the  share  of  early 
leavers from education and training (ELET) among 
18-  to  24-year-olds  fell  to  9.8%  (EU  average: 
9.3%),  compared  to  15%  in  2014.  If  this  positive 
trend  continues,  Italy  appears  on  track  to  achieve 
the  EU’s  ELET  target  of  less  than  9%  by  2030. 
With  early  school  leaving  on  a  downward  trend, 
the focus needs to shift towards improving overall 
educational  performance.  The  OECD  Programme 
for International  Student Assessment (PISA)  2022 
survey  highlights  significant  differences  in  basic 
skills  proficiency  between  geographical  areas  and 
types  of  school.  The  north  of  the  country  has  the 
lowest  percentage  of  low-performing  students 
(18%)  and  the  highest  percentage  of  high-
performing  students  (about  9%  in  the  northeast 
and  12%  in  the  northwest)  in  mathematics.  By 
contrast,  in  the  south,  almost  half  of  all  students 
(46%)  fail  to  achieve  basic  proficiency  and  less 
than  3%  reach  the  top  levels.  Performance  also 
varies by type of school: students in upper general 
education (licei) obtain higher scores than students 
in  technical  and  vocational  schools  and  are  more 
likely to perform at the top levels (11%), although 
almost  a  fifth  (19%)  still  do  not  reach  basic 
in 
proficiency.  Of  particular  concern 
vocational schools (istituti professionali), the share 
of top-performing students is almost non-existent 
(0.1%),  whereas  the  share  of 
low-achieving 
students is above 60%, twice the national average. 

is  that 

Further  efforts  are  needed  to  build  a  highly 
skilled  teaching  workforce  that  can  improve 

(261) OECD, Education at a Glance (EAG), 2024. 

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

(263) Italy's revised RRP envisages 150 480 ECEC places by June 

cambiamenti, 2023. 

2026 instead of 264 480 by December 2025. 

99 

 
 
 
 
 
 
the  skills  of  young  people.  There 
is  a 
substantial  geographical  and  subject  mismatch 
between  the  supply  of  qualified  teachers  eligible 
for  recruitment  on  a  permanent  contract  and  the 
staffing  needs  of  schools.  This 
is  because 
relatively  low  salaries  and  the  lack  of  career 
prospects make teaching relatively unattractive to 
many graduates, especially in science, technology, 
engineering  and  mathematics  (STEM),  who  have 
better career prospects in other sectors. The result 
is  shortages  in  some  subjects  and  regions  and 
oversupply in others. Shortages are most acute in 
disciplines  like  science  and  mathematics,  foreign 
languages and learning support, and affect mostly 
the north of the country. In recent years, only half 
of  the  vacant  posts  at  the  start  of  each  school 
year could be filled with permanent appointments, 
resulting 
in  temporary 
contracts  and  raising  issues  about  the  quality  of 
teaching.  A  recent  reform  of  initial  training  and 
recruitment  for  secondary  school  teachers  under 
the RRP aims to address some of these issues by 
introducing  a  specific  initial  training  for  aspiring 
secondary  school  teachers  and  a  clear  path  to 
tenure. 

in  a  steady 

increase 

programmes  with 
(51.3% 

Important  measures  have  been  implemented 
in  recent  years,  but  additional  efforts  could 
enhance  the  attractiveness  of  vocational 
education  and  training  (VET)  and  further 
align programmes with labour market needs. 
The  share  of  pupils  in  medium-level  education 
attending 
vocational 
a 
orientation 
in  2023)  has  steadily 
decreased  over  the  last  decade  (-7.8 pps  from 
2013).  Although  recent  VET  graduates  have  good 
employment  prospects,  only  24.7%  of  them  have 
participated in work-based learning, hindering their 
transition into work. This is significantly lower than 
the EU average of 65.3% and falls short of Italy’s 
European  Education  Area  target  of  achieving  at 
least 60% by 2025. This might contribute to Italy’s 
significantly 
lower  employment  rate  of  VET 
graduates aged 20-34 compared to the EU (63.7% 
vs  80.0%  in  2024).  The  2023  Labour  Decree 
promotes  alignment  with  labour  market  needs  by 
introducing  cross-skilling  and  guidance  pathways, 
enabling young people to acquire in-demand skills. 
It  also  enhances  transparency  and  access  to 
certification by validating non-formal and informal 
skills, 
and 
boosting 
Italy  also 
employability.  Through 
reformed the VET system in 2022 with the aim of 
increasing  private  sector 
in  VET 
education (Istituti Tecnici and Istituti Professionali) 

professional 

involvement 

the  RRP, 

growth 

learning 

work-based 

to  better  align  it  with  labour  market  needs, 
and 
emphasising 
collaboration  with  companies.  Better  governance 
and collaboration among stakeholders at national, 
regional  and  local  levels,  through  coordination 
platforms  and  shared  monitoring mechanisms  for 
example,  could  help  overcome  challenges 
in 
implementing education and training policies (264). 

further 

The  non-academic  tertiary  education  sector 
is  being  developed 
to  equip 
graduates with the high-level technical skills 
required by the digital and green transitions. 
The  government  has  implemented  a  series  of 
reforms to boost the vocationally oriented tertiary 
education  system  (ITS  academy),  chiefly  through 
Recovery  and  Resiliency  Facility  investment.  The 
government 
is  also  reforming  technical  and 
vocational  upper  secondary  education,  linking  it 
directly  to  the  ITS  academy  system  to  set  up  a 
single  technical-vocational  track  leading  to  a 
tertiary  degree.  ITS  academies  collaborate  closely 
with local firms, universities, research centres and 
local  entities  to  provide  practical,  job-oriented 
through  advanced  programmes.  This 
training 
integrated  approach  not  only  meets  the  needs  of 
local  businesses  but  also  facilitates  students’ 
professional  integration.  A  significant  part  of  the 
training  includes  mandatory  internships,  often 
offering opportunities abroad (265). 

Although  the  share  of  tertiary  graduates 
increased steadily over the last decade, Italy 
continues  to  significantly  trail  behind  the 
rest  of  the  EU.  In  2024,  31.6%  of  people  aged 
25-34 had a tertiary educational qualification – up 
from 24.2% in 2014. Although this is a significant 
improvement,  Italy  continues  to  have  one  of 
lowest  rates  of  tertiary  educational  attainment 
and the gap with the EU (44.2% in 2024) remains 
wide.  Women  are  more  likely  to  hold  a  tertiary 
qualification than men (38.5% vs 25%), while the 
tertiary educational attainment rate is particularly 
low  among  the  foreign-born  population,  whether 
born  in  the  EU  (16.4%)  or  outside  (14.1%).  This 
reflects  ongoing  difficulties  both  in  including  the 
younger  in  the  post-secondary  education  system 
and in attracting highly qualified foreigners. 

(264) CEDEFOP, Implementing European priorities in VET , 2024. 

(265) Ibid. 

100 

 
 
The  share  of  graduates  in  STEM  fields, 
including  ICT,  crucial  for  competitiveness, 
remains  comparatively  low.  Among  those  who 
graduated  from  tertiary  education  in  2022,  only 
23.4% obtained a STEM qualification, compared to 
26.6% in the EU. The share of female graduates in 
STEM  fields  (39%)  is  above  the  EU  average 
(35.4%)  and  the  share  of  students  enrolled  in 
STEM appears to suggest a stable trend: 24.9% at 
tertiary level in 2022 (EU average: 27.1%), yet just 
2.1%  enrolled  in  ICT  (EU:  5.2%),  and  46.5%  in 
medium-level VET (EU: 36.2%). 

remains 

challenging. 

A  tertiary  degree  provides  an  advantage  in 
the  labour  market,  but  the  transition  into 
employment 
The 
employment rate of recent tertiary graduates (266) 
has  improved  steadily  over  the  past  10  years, 
reaching 77.8% in 2024, up 20.3 pps compared to 
2015. However, this is well below the EU average 
of  86.7%.  Skills  mismatches  and  low  labour 
demand from a productive sector characterised by 
small  and  medium-sized  firms  are  both  factors 
behind  graduates’  relatively  poor  employment 
prospects  (see  Annex 10).  The  over-qualification 
rate, although aligned with the EU average (21.0% 
vs  21.4%),  points  to  inefficiencies  in  matching 
skills to jobs. By contrast, the ITS academy system 
offers  better  employment  prospects,  with  87%  of 
graduates  employed  within  a  year  and  93.8%  of 
them in a job in line with their qualifications, but it 
is still a niche provider of education, with just over 
9 000 new students enrolled in 2022/23 (0.4% of 
all students enrolled in tertiary education) (267). 

An increasing number of university graduates 
are 
in  a 
leaving  the  country,  resulting 
significant  loss  of  talent  and  innovative 
capacity. In 2022, almost 18 000 graduates aged 
25-34  moved  abroad,  23.2%  more  than  the 
previous  year (268).  Over  the  same  period,  the 
number  of  young  graduates  moving  back  to  Italy 
decreased  by  18.9%  compared  to  2021.  Even  if 
this  negative  flow  represents  around  3%  of  the 
annual number of tertiary graduates, it reflects an 
loss  of  highly  qualified  people, 
increasing 
capacity, 
negatively 
productivity  and  competitiveness.  The  share  of 

innovation 

impacting 

(266) People (20-34) who obtained their degree 1-3 years earlier. 

(267) Indire, Monitoraggio nazionale, 2024. 

(268) ISTAT, Intensi flussi di immigrazione straniera, in lieve ripresa 

graduates  among  young  expatriates  has  grown 
from  around  a  third  in  2013  to  almost  50%  in 
2022,  attesting  to  a  structural  challenge,  partly 
driven  by  better  job  and  wage  prospects  abroad 
(see Annex 10) (269). At the same time, Italy is also 
struggling  to  make  the  most  of  incoming  high-
skilled  talent.  Secondary  and  tertiary  graduates 
born outside the EU have very similar employment 
rates  (68.0%  vs  66.8%),  while  there  is  a  big 
difference for native graduates (68.7% vs 83.6%). 
A  contributing  factor  is  the  complex  process  for 
recognising  qualifications  obtained  abroad.  The 
procedure is often lengthy, costly, and fragmented 
across 
tertiary  education 
institutions,  hindering  access  to  the  employment 
opportunities. 

territory  and 

the 

Graph A12.1: Basic skills among adults in Italy 

(1) Unweighted EU average of participating Member States. 
Source: OECD, Survey of adult skills 2023. 

Italian  adults  face  persistent  challenges  in 
basic  skills  as  well  as  digital  skills.  In  the 
OECD  Survey  of  Adult  Skills  (2022-23),  Italian 
adults  scored  significantly  below  the  average  of 
participating  EU  countries  in  literacy,  numeracy 
and adaptive problem solving (270). Over a third of 
literacy  and  numeracy 
adults  demonstrated 
proficiency only at the lowest level or below (both 
35%),  while  nearly  half  (46%)  struggled  with 
adaptive  problem  solving.  These  low-performing 
limited  to  basic  tasks,  such  as 
adults  are 
understanding  short  texts  or  performing  simple 
mathematical  calculations,  highlighting  significant 
gaps  in  foundational  skills.  Digital  skills  also 
Italians 
remain  a  concern.  Only  45.8%  of 
possessed  at  least  basic  digital  skills  in  2023, 
compared  to  55.6%  across  the  EU.  The  share  is 

(269) AlmaLaurea, Condizione occupazionale dei Laureati, 2024. 

mobilità interna ed espatri, 2024. 

(270) Results for Italy might be subject to non-response bias. 

101 

210220230240250260270ItalyEUItalyEUItalyEUProficiency inliteracyProficiency innumeracyProficiency inadaptive problemsolving 
 
  
 
to 

linked 

higher  (59%)  among  young  people  (16-24),  but 
still low compared to the EU average of 70%. This 
may  be 
long-standing  challenges 
stemming  from  curricula,  teachers’  digital  skills 
and  the  infrastructure  for  digital  education.  The 
RRP is funding several training programmes aimed 
at  both  public  and  private  sector  employees, 
including  teachers,  and  prospective  workers.  The 
persistent  gaps  in  essential  skills  underscore  the 
pressing need for further targeted educational and 
training  initiatives  to  equip  Italian  adults  with  the 
competencies necessary for modern challenges. 

is 

essential 

development 

Skills 
for 
competitiveness,  resilience  and  fairness,  in 
light  of  a  shrinking  population  and  skills 
shortages.  Skills  shortages  are  cited  by  66%  of 
SMEs in Italy as hindering business activities, while 
75%  of  employers  report  that  applicants  do  not 
meet  the  necessary  skills  requirements  for  the 
advertised positions. As demographic changes (see 
Annex  10)  lead  to  a  shrinking  workforce,  more 
than  two  thirds  of  SMEs  reported  an  improved 
collaboration  with  public  employment  services  to 
make  recruiting  staff  with  the  right  skills  easier. 
The occupations identified as the most difficult to 
fill  in  2023  mostly  belonged  to  craft  workers, 
primarily needed in the construction sector and the 
in  the  healthcare 
industrial  sector,  but  also 
sector (271).  Skills 
in  occupations 
requiring  higher  qualification  levels  were  reported 
sales 
for 
representatives,  construction  supervisors,  and 
trade  brokers).  According  to  projections  by  the 
the  Development  of 
European  Centre 
Italy’s 
Professional 
employment  needs  between  2022  to  2035  will 
require  a  workforce  with  medium  and  high 
qualifications (272).  By  2035,  approximately  6.9 
million  workers  will  be  needed  in  occupations 
requiring  high-level  education,  alongside  about 
7.5 million workers in roles necessitating medium-
level  qualifications.  Conversely,  only  around 
900 000  workers  with  low  levels  of  qualifications 
will be needed. 

for 
Training 

(commercial 

occupations 

(CEDEFOP), 

shortages 

three 

Participation  in  adult  learning  is  limited  and 
low-
decreasing,  particularly  among  the 
qualified  and  those  distant  from  the  labour 
market,  further  hampering  competitiveness. 

In  2022,  only  29.0%  of  adults  participated  in 
formal  or  non-formal  education  and  training,  a 
marked  decrease  (4.9 pps)  since  2016,  against  a 
rising  EU  average  of  39.5%,  and  far  below  Italy’s 
2030  target  of  60%.  Participation  is  significantly 
higher  among  people  with  tertiary  education 
(60.2%)  compared  to  those  with  primary  (10.3%) 
or secondary education (28.2%), reflecting the role 
of  prior qualifications  in shaping lifelong  learning. 
Workers  in  high-skilled  roles,  such  as  managers 
and  professionals  (55.0%),  are  far  more  likely  to 
engage in training than clerical workers (27.8%) or 
(16.4%).  Employment  status 
manual  workers 
further  influences  participation,  with  employed 
people  (34.6%)  engaging  more  than  unemployed 
or  inactive  people  (17.1%).  Age  is  another  critical 
factor,  as  participation  declines  sharply  with  age: 
adults  aged  25-34  report  the  highest  rates 
(40.1%),  while  those  aged  55-64  the  lowest 
(22.2%).  Participation  consistently  decreased 
across  all  these  groups  between  2016  and  2022. 
These  patterns  underscore  the  need  for  further 
targeted  policies  to  broaden  access  to  adult 
learning,  especially  for  vulnerable  groups,  to 
support upskilling and competitiveness. 

Developing  green  skills  is  crucial  for  Italy’s 
green  transition.  Participation  in  education  and 
training (in the past 4 weeks) among employees in 
energy-intensive industries  stands  at  6.7%,  below 
the  EU  average  (11.7%  in  2024).  Furthermore,  in 
2022,  only  52%  of  Italians  believed  their  current 
skills  enabled  them  to  contribute  to  the  green 
transition,  compared  to  54%  in  the  EU.  According 
to  a  recent  report (273),  roles  requiring  green  skills 
are increasingly difficult to fill, limiting the impact 
of 
investments.  Recruitment  challenges  are 
particularly acute in the construction sector, which 
is 
faces 
persistent difficulties due to its low attractiveness. 
In  2024,  shortages  were  also 
in 
occupations  requiring  specific  skills  related  to  the 
green  transition,  including  garbage  and  recycling 
collectors,  environmental  protection  professionals 
and  building  architects.  Addressing  these  gaps  is 
essential  to  ensure  the  workforce  is  adequately 
prepared to support Italy’s climate goals. 

receiving  substantial 

funding  and 

reported 

(271) ELA, EURES Report on labour shortages and surpluses, 2024. 

(273) ELA, EURES Report on labour shortages and surpluses 2023 

(272) CEDEFOP, Skills forecast 2023 – Italy. 

– Country fiche Italy, 2024. 

102 

 
 
 
ANNEX 13: SOCIAL SCOREBOARD 

Table A13.1:Social Scoreboard for Italy 

(1) Update of 5 May 2025. 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 2025 for details on the 
methodology (https://employment-social-affairs.ec.europa.eu/joint-employment-report-2025-0). 
Source: Eurostat 

103 

29,09,845,815,219,45,5367,16,53,394,223,127,131,325,15,139,41,9Critical situationTo watchWeak but improvingGood but to monitorOn averageAdult participation in learning (during the last 12 months, excl. guided on the job training, % of the population aged 25-64, 2022)Equal opportunities and access to the labour marketSocial Scoreboard for ItalyBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2024)Young people not in employment, education or training(% of the population aged 15-29, 2024)Gender employment gap(percentage points, population aged 20-64, 2024)Income quintile ratio (S80/S20, 2024)Dynamic labour markets and fair working conditionsSocial protection and inclusionShare of individuals who have basic or above basic overall digital skills(% of the population aged 16-74, 2023)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2024)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2024)Self-reported unmet need for medical care (% of the population aged 16+, 2024)Disability employment gap (percentage points, population aged 20-64, 2024)Housing cost overburden (% of the total population, 2024)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2024)Employment rate(% of the population aged 20-64, 2024)Unemployment rate(% of the active population aged 15-74, 2024)Long term unemployment(% of the active population aged 15-74, 2024)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2023)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2024) 
 
 
 
  
 
 
ANNEX 14: HEALTH AND HEALTH SYSTEMS 

health 

system 

Italy’s 
performs 
comparatively well, with high life expectancy 
at birth linked to low levels of treatable and 
preventable mortality. However, challenges with 
accessibility,  compounded  by  shortages  of  health 
workers,  exist.  These  need  to  be  addressed  if  the 
country  is  to  ensure  the  health  of  its  population 
and 
the 
fairness,  while 
competitiveness of the economy. 

boosting 

social 

Life expectancy at birth in Italy rebounded to 
slightly  below  its  pre-COVID-19  level  and 
was  among  the  highest  in  the  EU  in  2023. 
However, 
in  health 
there  are  gender  gaps 
outcomes.  Women  can  expect  to  live  4  years 
longer than men. That said, they can only expect to 
live  about  8  months  longer  than  men  in  good 
health. Treatable mortality is relatively low in Italy. 
Diseases of the circulatory system (‘cardiovascular 
diseases’)  and  cancer  are  the  leading  causes  of 
death, but  with mortality rates  lower than  the  EU 
average. 

Graph A14.1: Life expectancy at birth, years 

Source: Eurostat (demo_mlexpec) 

Italy’s  health  spending  is  below  the  EU 
average,  both  in  per  capita  terms  and  as  a 
measure of GDP. However, health spending is on 
the  rise,  as  the  2025  Budget  Law  increased  the 
healthcare  budget  from  EUR  134  billion  to 
EUR 136.5 billion for 2025. Around three quarters 
of  total  health  expenditure  is  publicly  funded 
(lower  than  the  EU  average),  using  a  mix  of 
national  and  regional  taxes.  The  main  spending 
categories  are  outpatient  care  (around  33%  of 
total  health  expenditure),  inpatient  care  (29%), 
followed  by  retail  pharmaceuticals  and  medical 
devices  (20%).  In  2022,  the  number  of  hospital 
beds  per  capita  was  lower  than  the  EU  average. 
Out-of-pocket  payments  account  for  a  greater 
proportion of spending on health in Italy than the 
EU  average  (22.7%  vs  14.3%).  Nearly  half  of  all 
out-of-pocket  payments  are  for  outpatient  care 

funding 

(274). Under the Italian recovery and resilience plan 
(RRP), around EUR 16.1 billion is planned for health 
reforms and supporting investments. In addition to 
the  RRP,  significant 
for  healthcare 
(EUR 1.7 billion)  is planned under the EU cohesion 
policy  funds  in  2021-2027.  These  funds  aim  to 
improve 
the  accessibility,  effectiveness  and 
resilience of health services in the less developed 
regions  of  the  country,  with  a  focus  on  improving 
access for vulnerable groups (see Annex 16) (275). 

Graph A14.2: Treatable mortality 

Age-standardised death rate (mortality that could be 
avoided through optimal quality healthcare) 
Source: Eurostat (hlth_cd_apr) 

As  regards  public  health, 
Italy  places 
considerable  focus  on  disease  prevention.  In 
2022,  the  share  of  total  spending  on  health 
dedicated  to  prevention  was  higher  than  the  EU 
average.  While  preventable  mortality  is  low  in 
Italy, rates of physical inactivity and daily smoking 
among adults are higher than the EU average (see 
Annex  15)  (276).  In  addition,  mortality  linked  to  air 
pollution is high (see Annex 7). Screening rates for 
some types of cancer (such as cervical cancer) are 
below 
the 
consumption  of  antibiotics  was  still  above  the  EU 
average,  raising  concerns  about  antimicrobial 
resistance. The 2025 Budget Law has established 
a EUR 1.2 million fund for obesity prevention and 
treatment  for  2025,  increased  financial  support 
for  the  costs  of  psychotherapy  sessions,  and 
created  a  dedicated  psychological  support  service 
fund for students. 

the  EU  average 

In  2023, 

(277). 

in  policies  and 
Historical  differences 
financing  have  created  regional  imbalances 

(274) OECD/European Commission (2024), Health at a Glance: 

Europe 2024: State of Health in the EU Cycle, pp. 186-187. 

(275) The EU cohesion policy data reflect the status as of 

15 January 2024. 

(276) Health at a Glance: Europe 2024, Chapter 4. 
(277) Health at a Glance: Europe 2024, pp. 162-163. 

104 

83.682.382.782.883.581.380.480.180.681.420192020202120222023ItalyEU65.263.766.564.563.591.389.291.793.389.720182019202020212022per 100 000 populationItalyEU 
 
        
        
 
 
 
Table A14.1:Key health indicators 

*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 based on 2022 (or latest 2021) data except for Luxembourg (2017). Doctors’ density data refer to practising 
doctors in all countries except Greece, Portugal (licensed to practise) and Slovakia (professionally active). Density of nurses: data 
refer to practising nurses (EU recognised qualification) in most countries except France and Slovakia (professionally active) and 
Greece (hospital only). **‘Available hospital beds’ covers somatic care, not psychiatric care. ***The EU median is used for patents. 
Source:  Eurostat database; European Patent Office; ****European Centre for Disease Prevention and Control (ECDC) for 2023. 

in  access  to  healthcare  services.  Among 
people  with  medical  needs,  the  gap  in  unmet 
needs  between  people  below  and  above  the 
poverty threshold (defined as 60% of the median 
equivalised  income)  is  much  higher  in  Italy  than 
the EU average. The gender gap in this area is also 
among the highest in the EU, with higher foregone 
care for women. As of 2023, the RRP is supporting 
pharmacies  in  small  municipalities  to  strengthen 
healthcare  access  in  rural  and  remote  areas. 
Moreover,  Italy  adopted  Law  107  in  July  2024, 
which  establishes  that  each  region  will  appoint  a 
Regional  Healthcare  Manager  to  address  the 
causes  of  long  waiting  times.  More  recently,  the 
2025 Budget Law has allocated EUR 50 million for 
2025 and EUR 100 million for 2026 to regions as 
incentives  to  reduce  waiting  times  and  meet 
targets.  In  2024,  the  Italian  parliament  also 
approved  Law  86  on  differentiated  autonomy, 
allowing  regions  greater  legislative  power  over 
healthcare.  It  will  be  important  to  monitor  this 
legislation  to  ensure  that  it  does  not  exacerbate 
existing  regional  disparities  in  healthcare  access 
and outcomes.  

Italy  faces  shortages  of  health  workers, 
which  limits  the  availability  of  care.  For 
several  years,  the  density  of  doctors  in  Italy  has 
been  similar  to  the  EU  average.  However,  the 
distribution  of  doctors  is  uneven  both  across  the 
country  and  among  medical  specialties.  Around 
27% of practising physicians are aged between 55 
and  64,  and  only  11%  are  under  the  age  of  35. 
This 
long-term 
accessibility  of  health  services.  Italy  had  around 
5.2  specialists  for  every  general  practitioner  (GP) 
in  2022,  highlighting  the  considerable  shortfall  in 
GPs compared to specialists. The RRP is supporting 

raises  concerns  about 

the 

the 

the 

limiting 

the  award  of  2 700  additional  scholarships  in 
general  medicine  over  2021-2026  to  boost  the 
number  of  GPs  (see  Annex  16).  In  2022,  the 
density of practising nurses in Italy was lower than 
the EU average, making it difficult to expand care 
services  for  an  ageing  population  (see  Annex  11). 
Nurses in Italy do not earn more than the average 
job’s 
wage  of  all  workers, 
attractiveness (278). Efforts are underway to make 
nursing  professions  more  attractive  by  revising 
educational  pathways,  with 
launch  of 
specialisation  programs  in  family  and  community 
primary  care,  neonatal  and  paediatric  care,  and 
intensive  care  and  emergency  nursing.  The  2025 
Budget  Law  has  introduced  measures  to  improve 
retention  and  recognise  the  contributions  of  key 
workers,  increased  allowances  for  various  health 
professionals,  including  a  new  flat  5%  personal 
income  tax  rate  on  nurse  overtime  and  salary 
increases  for  medical  and  other  health  trainees, 
with  additional 
less  attractive 
increases  for 
specialties.  In  2024,  Italy  also  adopted  several 
regulations to tackle the issue of violence against 
health professionals and protect them during care 
delivery.  Furthermore,  Italy  participates  in  the 
HEROES  joint  action  under  EU4Health,  through 
countries  share  knowledge  and 
which  EU 
experience on health workforce planning (279). 

to  driving 

The 
Italian  health  system  significantly 
innovation  and 
contributes 
fostering  industrial  development  in  the  EU 
medical  sector.  Italy  is  among  the  EU  countries 
that  report  the  highest  public  spending  on  health 

(278) Health at a Glance: Europe 2024, pp. 196-197. 
(279) JA HEROES | Health workforce planning project. 

105 

20192020202120222023EU average* (latest year) Cancer mortality per 100 000 population230.9227.0221.5218.7n.a.234.7 (2022)Mortality due to circulatory diseases per 100 000 population 270.7 281.1 266.9 270.3n.a.336.4 (2022)Current expenditure on health, purchasing power standards, per capita2 5292 6222 8232 945n.a.3 684.6 (2022)Public share of health expenditure, % of current health expenditure 73.7 75.9 74.5 74.4 74.081.3 (2022)Spending on prevention, % of current health expenditure 4.75.56.76.05.35.5 (2022)Available hospital beds per 100 000 population** 308 310 304 301n.a.444 (2022)Doctors per 1 000 population*4.14.04.14.2n.a.4.2 (2022)*Nurses per 1 000 population* 6.2 6.3 6.2 6.5n.a.7.6 (2022)*Mortality at working age (20-64 years), % of total mortality10.49.810.49.710.114.3 (2023)Number of patents (pharma / biotech / medical technology)36736928622432929 (2023)***Total consumption of antibacterials for systemic use,                    daily defined dose per 1 000 inhabitants****21.718.417.521.923.120.0 (2023) 
 
 
        
 
 
research  and  development  (see  Annex  3).  This  is 
reflected in  the high number of  European patents 
granted  to  patent  in  2023  in  the  combined  areas 
of  pharmaceuticals,  biotechnologies  and  medical 
devices (280). Clinical trial activity in Italy is among 
the highest in the EU (281).  

Italy plans to accelerate the digitalisation of 
its  health  system,  with  significant  support 
from EU programmes. While the share of people 
using  online  health  services  (excluding  phone) 
instead of in-person consultations in Italy (29.3%) 
exceeded most EU countries in 2024, the share of 
people  accessing  their  personal  health  records 
online  (26.9%)  was  very  close  to  the  EU  average. 
Despite  the  above  average  overall  technical 
deployment  of  electronic  health  records  (see 
Annex  6),  their  use  by  patients  can  still  be 
increased.  Significant  planned  investments  under 
the  RRP  and  cohesion  policy  aim  to  boost  the 
digital  transformation  of  the  healthcare  sector  in 
Italy 
(i) 
accelerating 
telemedicine, 
the  adoption  of 
especially  for  patients  with  chronic  diseases;  (ii) 
improving  health  information  systems  and  digital 
tools, 
technological 
equipment;  and  (iii)  providing  training  on  digital 
skills 
Italy 
participates  in  the  joint  action  TEHDAS2  (282)  and 
receives  direct  grants  under  EU4Health  to  help  it 
implement the European Health Data Space. 

(see  Annex  16).  Measures 

to  health  workers. 

for  hospitals’ 

In  addition, 

including 

include: 

(280) European Patent Office, Data to download | epo.org. 
(281) EMA 

(2024),  Monitoring 

the  European  clinical 

trials 

environment, p. 9. 

(282) Second  Joint  Action  Towards  the  European  Health  Data 

Space – TEHDAS2 - Tehdas 

106 

 
 
 
HORIZONTAL 
ANNEX 15: SUSTAINABLE DEVELOPMENT GOALS 

dimensions 

This  Annex  assesses  Italy’s  progress  on  the 
Sustainable Development Goals (SDGs) along 
competitiveness, 
of 
the 
and 
fairness 
social 
sustainability, 
macroeconomic stability. 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 
inequalities  and  tackle  climate 
poverty,  fight 
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 
the EU. 

Italy  needs to catch  up  with the  EU  average 
on  all  SDGs  related  to  competitiveness 
(SDGs 4,  8,  9),  but  it  is  improving.  Gross 
domestic  expenditure  on  R&D  decreased  and 
remains  below  the  EU  average  (1.3%  of  GDP, 

Graph A15.1: Progress towards the SDGs in Italy 

(30%) 

since  2019 

against 2.2% in the EU in 2023; SDG 9). Real GDP 
per  capita  is  almost  on  a  par  with  the  EU 
(EUR 32 810  vs  EUR 33 530  in  the  EU  in  2024) 
and  investments  represent  22%  of  GDP  (SDG 8), 
which  is  slightly  above  the  EU  average  (21.7%). 
The  share  of  households  with  a  high-speed 
internet  connection  in  2023  (59.6%)  was  well 
below the EU average (78.8%), despite significant 
progress 
(SDG 9).  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). Italy 
progressed  on 
tertiary 
education  and  adult  learning  but  remains  well 
below  the  EU  average  (SDG 4).  The  recovery  and 
resilience  plan  (RRP)  is  expected  to  contribute 
significantly to competitiveness by investing in the 
digitalisation  of  public  administration, 
justice, 
education  and  research,  as  well  as  in  the  tourism 
and  cultural  sector.  Measures  supporting  the 
digitalisation 
of 
manufacturing  and  research  and  innovation  are 

competitiveness 

indicators 

related 

and 

to 

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 
five 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 28 April 2025. Data refer mainly to the period 2018-2023 or 2019-2024. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

107 

 
 
 
 
 
 
 
also expected to boost productivity. 

affected 

for  marine  waters 

Italy  is  improving  on  most  of  the  SDGs 
related to 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  indicator  on  clean  water  and 
sanitation as well as the one on life on land 
(SDGs  6,  15).  Italy  still  needs  to  catch  up 
with  the  EU  average  indicators  on  industry, 
innovation  and  infrastructure,  sustainable 
cities  and  communities,  climate  action  and 
life  on  land    (SDGs 9,  11,  13,  15).  In  Italy  the 
use  of  circular  material  is  higher  than  in  the  rest 
of  the  EU  (20.8%  of  material  input  for  domestic 
use vs 11.8% in the EU in 2023), but generation of 
waste  increased  between  2018  and  2022  (from 
2.8  to  3.2  kg  per  capita;  SDG  12).  While  the 
percentage of marine protected areas is below the 
EU  level  (9.7%  vs  12.3%  in  the  EU  in  2022),  the 
figure 
by 
eutrophication  is  virtually  zero,  outperforming  the 
EU average (0.01% of the exclusive economic zone 
vs 0.4% in the EU in 2024; SDG 14). Italy performs 
well  on  energy  efficiency  and  consumption 
(SDG 7),  but  the  share  of  renewable  energy 
remains  lower  than  the  EU  average  (19.6%  of 
gross final energy consumption vs 24.6% in the EU 
in  2023;  SDG 13).  Italy  also  faces  some  of  the 
highest  and  increasing  climate-related  economic 
losses (EUR 63.5/inhabitant vs EUR 44.8 in the EU 
in  2023;  SDG 13).  On  a  positive  note,  net 
greenhouse gas emissions removals from land use 
and forestry are improving compared to 2018 and 
are  higher  than  the  EU  level  (-177.4  tonnes  CO2 
eq.  per  km²  vs  -47  in  the  EU  in  2023,  SDG  13). 
While 
sustainable 
agricultural  production,  ammonia  emissions  from 
agriculture remain above the EU average (23.1 kg 
per hectare of utilised agricultural area vs 18.3 kg 
in  the  EU  in  2022;  SDG  2).  The  share  of  railways 
and  inland  waterways  in  freight  transport  is  far 
from  the  EU  average  (9.9  pp.  difference  in  %  of 
inland  freight  tonne/km  in  2023;  SDG 9).  The 
recycling rate of waste at municipal level is above 
the  EU  average  (53.3%  in  2022  vs  48.2%  in  the 
EU;  SDG 11).  Access  to  sanitation  worsened: 
despite  remaining  below  1%,  the  share  of 
population  without  sanitary  facilities  doubled 
between  2018  and  2023  (SDG  6).  Soil  sealing 
increased  leading  to  significant  environmental 
impact, and the area at risk of severe soil erosion 
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,  15).  Moreover,  the  impact  of 

Italy  performs  well  on 

drought  on  ecosystems  increased  from  2018  to 
2023  but  remains  under  EU  levels  (1.8%  of  the 
country  area  vs  3.6%  in  the  EU  in  2023;  SDGs 
6, 15) following the drought year of 2022 (18.2% 
of  the  country  area  vs  16.2%  in  the  EU).  The 
in  each  dimension  of 
average  performance 
environmental  sustainability  masks  large  regional 
differences  across  the  country.  The  RRP  includes 
important measures expected to support the green 
transition  in  renewable  energy,  circular  economy, 
natural  resource  management,  the  reduction  of 
hydrogeological  risks,  sustainable  transport  and 
the energy efficiency of buildings. 

Italy  is  improving  in  all  SDGs  related  to 
social fairness (SDGs 1, 3, 4, 5, 7, 8, 10), and 
it  performs  well  on  good  health  and  well-
being  and  affordable  and  clean  energy 
compared with the rest of the EU (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 
average remain. The share of young people not in 
education, employment or training is declining but 
is  still  well  above  the  EU  average  (15.2%  of  the 
population aged 15-29 vs 11% in the EU in 2024; 
SDG 8). Despite a relatively high share of women 
in  senior  management  positions  (44.6%  in  2024 
vs  32.6%  in  the  EU;  SDG  5),  the  participation 
gender  gap  due  to  caring  responsibilities  remains 
higher than the EU average (1 pps vs 0.8 in the EU 
in 2024 in the population aged 20-64; SDG 8) and 
so  is  the  gender  employment  gap  (19.4 pps  vs 
10 pps in the EU in the population aged 20-64 in 
2024; SG 5). In a context of low tertiary education 
attainment and low labour market participation of 
women,  the  share  of  women  attaining  tertiary 
education  is  higher  than  that  of  men;  the  gap  is 
increasing  and  higher  than  the  EU  average 
(13.5 pps  vs  11.2  in  the  EU  in  2024  in  the 
population  aged  25-34;  SDG  5).  The  share  of 
employed  people  at  risk  of  poverty  slightly 
decreased  (12.2%  of  population  over  18  in  2018 
vs 9.9% in 2023), and fatal accidents at work also 
declined  slightly,  but  remain  higher  than  the  EU 
average  (2.03  per  100 000  workers  vs  1.7  in  the 
EU  in  2022;  SDG 8).  Numerical  skills  worsened 
across the EU: over 2018-2022, the percentage of 
low achievers in mathematics among 15-year-olds 
increased  by  almost  7%,  reaching  about  30%  in 
Italy  and  the  EU  (SDG 4).  Participation  in  early 
childhood education has slightly decreased in Italy, 
while improving at the EU level (93.5% of children 
aged 3 and over vs 94.6% in the EU in 2023; SDG 

108 

 
are 

expected 

RRP 
Italy’s 
macroeconomic  stability,  particularly  the  public 
administration and justice system reforms and the 
measures to fight tax evasion. 

improve 

to 

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

4).  Preventing  early 
leaving  from  education 
remains a challenge, especially for students with a 
migrant  background 
(18.9  percentage  points 
difference  between  EU  and  non-EU  population 
aged  18-24  vs  15.4  pp.  difference  in  the  EU  in 
2024;  SDG 10).  Access  to  housing  in  terms  of 
excessive  costs  (SDG 1)  and  affordable  energy 
(SDG 7)  improved  in  Italy,  as  the  share  of  the 
population unable to keep their homes adequately 
warm  decreased,  falling  below  the  EU  average 
(9.5%  of  population  vs  10.6%  in  the  EU  in  2023; 
SDG  7).  The  share  of  people  at  risk  of  poverty  or 
social  exclusion  declined  but  remains  slightly 
higher  than  in  the  EU  (22.8%  of  the  total 
population  in  2023  vs  21.3%  in  the  EU)  and, 
despite  a  decrease  in  the  relative  median  of  the 
at-risk-of-poverty gap, Italy remains slightly above 
the  EU  average  (23.8%  distance  to  poverty 
threshold  vs  23%  in  the  EU  in  2023;  SDG 1). 
Healthy life years at birth and the share of people 
slightly 
perceiving 
increased,  against  a  decline  at  EU  level,  with 
73.3% of Italian population above 16 in 2018 (vs 
68.6%  of  population  in  the  EU),  and  73.9%  in 
2023  (vs  EU  67.9%).  At  the  same  time,  obesity  
and the share of households suffering from noise 
increased,  while  remaining  lower  than  the  EU 
average (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. 

themselves 

healthy 

as 

While  the  country  is  improving  on  SDGs 
related  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  its 
institutions, with a significant reduction in reported 
crime,  falling  below  the  EU  average  (from  11.3% 
in  2018  to  6.4%  in  2023,  EU:  10%  of  the  total 
population  in  2023;  SDG  16).  Access  to  justice 
remains  a  challenge,  with  only  36%  of  the 
population  perceiving 
justice  system  as 
independent,  and  the  trust  in  institutions  with 
regard  to  perceived  corruption  remains  below  the 
EU  average  (SDG 16).  There  has  been  some 
progress  related  to  sustainable  economic  growth 
and  employment 
indicators,  but  the  country 
remains  below  the  EU  average  (SDG 8).  There  is 
still  little  uptake  on  global  partnerships,  and 
important  challenges  remain  on  public  debt 
(135.3%  of  GDP  vs  EU  average  of  81%  in  2024; 
SDG 17). Several structural reforms included in the 

the 

109 

 
ANNEX 16: CSR PROGRESS AND EU FUNDS IMPLEMENTATION 

recommendations 

Italy  faces  structural  challenges  in  a  wide 
range  of  policy  areas,  as  identified  in  the 
country-specific 
(CSRs) 
addressed  to  the  country  as  part  of  the 
European  Semester.  They  refer,  among  other 
things,  to  taxation  policy,  the  functioning  of  the 
labour  market  and  policies  to  help  people  find 
work  or  stay  in  work,  skills  and  education,  the 
business  environment,  restrictions  on  competition, 
regional  development,  the  public  administration 
including  the  capacity  to  manage  EU  funds,  the 
justice system and energy. 

The Commission has assessed the 2019-2024 
CSRs  considering  the  policy  action  taken  by 
Italy  to  date  and  the  commitments  in  its 
recovery  and  resilience  plan  (RRP).  At  this 
stage, Italy has  made at least  ‘some progress’ on 
94%  of  the  CSRs  (283),  and  ‘limited  progress’  on 
4% (Table A16.2). 

significant  benefits  for  the  economy  and  Italian 
society.  Project  selection  under  the  2021-2027 
cohesion  policy  programmes  has  accelerated, 
while significant volumes of investment are yet to 
be mobilised. 

The  Italian  RRP  contains  150  investments 
and  66  reforms  to  stimulate  sustainable 
growth  and  address  social  and  regional 
divides.  A  year  before  the  end  of  the  RRF 
timespan, implementation is on its way  with 63% 
of  the  funds  disbursed.  At  present,  Italy  has 
fulfilled around 43% of the milestones and targets 
in  its  RRP  (287).  Efforts  are  needed  to  ensure 
completion  of  all  RRP  measures  by  31 August 
2026.  It  is  essential  for  Italy  to  accelerate  the 
implementation  of  reforms  and  investments  by 
addressing  relevant  challenges.  In  particular,  Italy 
would  benefit  from  strengthening  administrative 
capacity,  notably  at  local  level,  and  detecting  and 
addressing potential delays in a timely manner. 

reforms 

EU funding instruments provide considerable 
resources to Italy by supporting investments 
increase 
structural 
and 
to 
competitiveness, 
environmental 
sustainability  and  social  fairness,  while 
helping  to  address  challenges  identified  in 
the  CSRs.  In  addition  to  the  EUR 194.4  billion 
funding  from  the  Recovery  and  Resilience  Facility 
(RRF) in 2021-2026, EU cohesion policy funds (284) 
are  providing  EUR 42.2  billion  to  Italy  (amounting 
to  EUR 73.9  billion  with  national  co-financing)  for 
2021-2027 (285) to boost regional competitiveness 
and  growth.  Support  from  these  instruments 
combined  represents  around  11.1%  of  2024  GDP 
(286).  The  contribution  of  these  instruments  to 
different  policy  objectives  is  outlined  in  Graphs 
A16.1  and  A16.2.  This  substantial  support  comes 
on  top  of  financing  provided  to  Italy  under  the 
2014-2020  multiannual 
framework, 
which  financed  projects  until  2023  and  has  had 

financial 

Italy  also  receives  funding  from  several 
other  EU  instruments,  including  those  listed 
in  Table  A16.1.  Most  notably,  the  common 
agricultural  policy  (CAP)  provides  Italy  with  an  EU 
contribution  of  EUR 28  billion  under  the  CAP 
strategic  plan  for  2023-2027  (288).  A  further 
EUR 964 million  are  available  under  the  Asylum, 
Migration  and  Integration  Fund  (AMIF),  together 
with the Border Management and Visa Instrument 
(BMVI)  and  internal  security  funds.  Furthermore, 
operations  amounting  to EUR 4.5  billion  (289)  have 
been signed under the InvestEU instrument backed 
by 
to 
financing for riskier operations in Italy. 

the  EU  guarantee, 

improving  access 

(283) 6%  of  the  2019-2024  CSRs  have  been  fully  implemented, 
19%  substantially  implemented,  and  some  progress  has 
been made on 69%. 

(284) In  2021-2027,  cohesion  policy  funds  include  the  European 
Regional  Development  Fund,  the  European  Social  Fund  Plus 
and  the  Just  Transition  Fund.  The  information  on  cohesion 
policy 
is  based  on  adopted 
in  this  annex 
programmes with the cut-off date of 5 May 2025. 

included 

(285) European  territorial  cooperation 

(ETC)  programmes  are 

excluded from the figure. 

(286) RRF  funding 

loans,  where 
includes  both  grants  and 
applicable. GDP figures are based on Eurostat data for 2023. 

(287) As  of  mid-May  2025,  Italy  has  submitted  7  payment 

requests, the last one being under assessment. 

(288) An  overview  of 

Italy’s  formally  approved  strategy  to 
implement  the  EU’s  common  agricultural  policy  nationally 
can  be  found  at:  https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/italy_en. 

(289) Data reflect the situation on 31.12.2024. 

110 

 
 
 
 
 
 
Graph A16.1: Distribution of RRF funding in Italy by 
policy field 

(1) Each RRP measure helps achieve the aims or 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 circle 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. 
Source: European Commission 

Graph A16.2: Distribution of cohesion policy 
funding across policy objectives in Italy 

Source: European Commission 

Cohesion  policy  funds  aim  to  increase  the 
productivity  and  competitiveness  of  Italian 
firms and improve the business environment. 
Cohesion  policy  support  is  particularly  important 
for  boosting  competitiveness  and  growth  in  the 
less developed regions in southern Italy, benefiting 
from  the  highest  amounts  of  support.  The 
European  Regional  Development  Fund  (ERDF)  will 
support  nearly  17 000  small  and  medium-sized 
enterprises  (SMEs)  investing  in  skills  for  smart 
specialisation, 
transition  and 
entrepreneurship.  It  will  help  nearly  4 000  public 
institutions  develop  digital  services,  products  and 
processes,  thus  also 
improving  the  business 
environment. Italy is making significant use of the 
Strategic Technologies for Europe Platform (STEP) 
to  strengthen  the  resilience  and  competitiveness 
of 
strategic 
dependencies of the EU as a whole. It has already 

regions  and 

industrial 

reduce 

the 

for 

its 

reducing 

allocated around EUR 3 billion to STEP priorities, of 
which around EUR 2.7 billion in regions in southern 
Italy,  covering  digital  technologies  and  deep  tech 
(including 
‘Quantum 
in  the  Campania  region 
valley’),  clean  and  resource-efficient  technologies 
and  efficiency  of  production  processes.  This  will 
involve 
consumption  and 
energy 
promoting  solar  energy  and  biotechnologies, 
notably  for  the  pharmaceutical  sector.  The  Just 
Transition  Fund  (JTF)  is  focusing  on  Taranto 
(Puglia),  to  address  challenges  arising  from  the 
industrial transition, and the mining area of Sulcis-
Iglesiente (Sardegna). In both territories, the JTF is 
supporting  investment  in  renewable  energies  and 
the  environment,  diversification  of  economic 
activity, creation of new businesses, and upskilling 
and  reskilling  measures  for  workers  impacted  by 
the  transition.  The  European  Social  Fund  Plus 
(ESF+) 
is  supporting  upskilling  and  reskilling 
initiatives  across  all  sectors,  earmarking  around 
EUR 2  billion  (about  14%  of  the  total  ESF+ 
allocation) for the development of green skills and 
jobs  in  Italy.  Similar  amounts  are  allocated  to 
investment in digital skills and jobs. This funding is 
also used to support technical non-academic post-
secondary  education,  which  is  designed  to  equip 
participants  with  skills  in  high  demand  from 
companies. 

are 

funds 

contributing 

Other 
to 
competitiveness in Italy, for instance through 
open  calls.  The  Connecting  Europe  Facility  has 
financed  strategic  investments  for instance in  rail 
infrastructure  and  the  modernisation  of  Italy’s 
maritime and inland waterways transport network; 
energy  market  integration,  decarbonisation  of  the 
energy  system  and  security  of  energy  supply,  in 
particular  electricity  interconnectivity;  as  well  as 
capacity,  resilience  and  security  of  backbone 
the 
digital 
deployment  of  5G  in  smart  communities.  Horizon 
Europe  has  supported  research  and  innovation, 
from  scientific  breakthroughs 
to  scaling  up 
innovations, with Climate, Energy and Mobility and 
Digital, Industry and Space as top priorities in Italy. 
In  Italy,  the  Technical  Support  Instrument  (TSI)  is 
focused  on  realising  the  potential  of  AI  in  the 
sector  and  developing  a  more 
financial 
sustainable, resilient and digital tourist industry. 

infrastructure 

advancing 

and 

Italy’s  RRP  also  contains  ambitious  reforms 
and  investments  to  improve  the  business 
environment  and  competitiveness.  As  part  of 
the  measures  covered  by  payment  requests 
submitted over the past year, major reforms have 

111 

Green transitionDigital transformationSmart, sustainable andinclusive growthSocial & territorial cohesionHealth & resilienceNext generationSmarter EuropeGreener EuropeConnected EuropeSocial EuropeEurope closer to citizensJTF specific objective 
      
 
      
the 

to  make 

implemented 

been 
public 
administration  and  judicial  system  more  efficient. 
This  includes  recruiting  12 000  staff  for  the  trial 
office  and  technical  administrative  posts  to 
significantly  reduce  the  backlog  of  cases 
in 
regional administrative courts. Italy also undertook 
reforms  to  increase  competition  in  the  electricity, 
retail  and  pharmaceutical  sectors;  and 
to 
modernise  public  procurement,  by  training  more 
than 20 000 civil servants in public purchasing and 
significantly  reducing  the  time  taken  to  award 
contracts. Firms are being supported in their digital 
transition by 147 557 tax credits for tangible and 
intangible 
the  digital 
investments.  Regarding 
transformation  of 
the  public  administration, 
10 675  public  administrations  have  joined  and 
provide  services  through  the  ‘IO’  app  (an increase 
of 251% compared to 2021). 

disaster 

its  budget 

climate-related 

EU  funds  are  playing  a  significant  role  in 
promoting  environmental  sustainability  and 
green  transition  in  Italy  during  the  current 
seven-year  EU  budget  (multiannual  financial 
framework).  Within 
for  green 
investment  exceeding  EUR 8.7  billion,  the  ERDF  is 
investing  more  than  EUR 1.2  billion  in  measures 
for 
prevention, 
preparedness  and  resilience  with  a  focus  on 
hydrogeological  risks  and  wildfires  in  the  most 
affected  regions  of  the  South.  The  ERDF  is  also 
reducing  dependence  on  fossil  fuels  by  boosting 
the  capacity  to  produce  renewable  energy  by 
898 MW 
to  medium-scale 
small 
investments,  by  promoting  self-consumption  and 
renewable  energy  communities.  It  is  improving 
wastewater  management  for  over  1.5 million 
people  mainly  residing  in  Italy’s  southern  regions. 
Furthermore,  Italy’s  CAP  strategic  plan  allocates 
over EUR 10 billion to interventions relating to the 
climate and the environment through 34 voluntary 
schemes  that  support  farmers  by  applying  more 
sustainable  practices,  such  as  reduced  use  of 
fertilisers  and  pesticides  and  soil  conservation 
practices.  Moreover,  Italy  allocates  approximately 
EUR 2 billion to organic farming. 

through 

for 

the  green 

Italy’s RRP, including the REPowerEU chapter, 
has  a  comprehensive  set  of  reforms  and 
investments 
transition. 
Measures  covered  by  the  payment  requests 
submitted  over  the  last  year  include,  among 
others, 
authorisation 
procedures  to  build  structures  for  producing 
renewable  energy.  Italy  has  also  significantly 
landfills.  The  regional  gap 
reduced 

streamlining 

irregular 

the 

of 

between  the  national  average  and  the  worst 
performing  regions  in  separate  waste  collection 
has  been  reduced,  and  significant  investments 
have  been  made  in  primary  water  infrastructure. 
Italy  has  also  started  the  construction  of  high-
speed railway connections to the South. Contracts 
have been awarded to equip urban public transport 
with  at  least  231  additional  kilometres  of  new 
infrastructure  by  2026;  more  than  3 000  zero-
transport  buses  are  being 
emission  public 
purchased; and 200 km of cycling lanes have been 
completed in metropolitan areas. 

inclusion 

programmes 

Promoting  fairness,  social  cohesion  and 
improving  access  to  basic  services  are 
among  the  key  priorities  of  EU  funding  in 
Italy.  ERDF  support  will  enable  access  to  new  or 
modernised healthcare facilities for over 5 million 
people a year, especially in less developed regions, 
improving the capacity of the health care system. 
The ESF+ promotes social cohesion in Italy through 
active 
supporting 
disadvantaged people, improved health, social and 
care services, and improved access to services for 
less 
in 
vulnerable  groups  and  people 
developed  regions.  Among  their 
interventions, 
ESF+  programmes  will  support  at  least  590 000 
people in  unemployment, 151 000  people  outside 
the labour force, at least 133 000 people who are 
homeless  or  affected  by  housing  exclusion  and 
more than 35 000 people with a disability (290). In 
for 
addition, 
applicants  and  beneficiaries  of 
international 
protection  in  reception  centres  in  Italy.  Special 
emphasis  is  placed  on  proper  protection  of  the 
mental  and  physical  health  of  unaccompanied 
minors  by  establishing  systems  of  care  pathways 
for correct diagnosis and care. 

the  AMIF  supports  healthcare 

living 

strengthened 

Italy’s  RRP  contains  several  reforms  and 
investments  related  to  fairness  and  social 
policies.  All  levels  of  the  education  system  have 
been 
comprehensive 
reforms  and  investments  covered  by  payment 
requests  over  the  last  year.  This  includes  teacher 
recruitment;  the  reform  of  the  vocational  training 
system;  scholarships  for  more  than  55 000 
the 
students 
awarding  of  contracts  for  building  new  schools 

in  socio-economic  difficulties; 

through 

(290) An  overview  of 

Italy’s  formally  approved  strategy  to 
implement  the  EU’s  common  agricultural  policy  nationally 
can  be  found  at:  https://agriculture.ec.europa.eu/cap-my-
country/cap-strategic-plans/italy_en. 

112 

 
 
legislation  has  been  adopted 

and  the  building/renovation  of  more  than  300 
sports  facilities  for  school  use.  In  the  field  of 
healthcare, 
to 
strengthen  the  autonomy  of  people  with  a 
disability  and  action  has  been  taken  to  support 
dependent  older  people.  Italy  has  also  increased 
the  number  of  scholarships  for  general  medicine 
and  is  investing  in  telemedicine  solutions  and 
healthcare  innovation  to  address  challenges  with 
access and quality of care. To help Italy implement 
its  RRP,  in  2024  the  TSI  assisted  with  measures 
for  improving  digital  skills,  for  increasing  the 
quality and resilience of the health system, and for 
designing  and  implementing  the  universal  civil 
service.  

Table A16.2:Summary table on 2019-2024 CSRs 

Table A16.1:Selected EU funds with adopted allocations - summary data (million EUR) 

113 

Instrument/policyDisbursed since 2021   (1)             RRF grants (including the RepowerEU allocation)46 448.9RRF loans75 675.2Instrument/policyAllocation 2014-2020 (2)Allocation 2021-2027 Disbursed since 2021 (3)    (covering total payments to the Member State on commitments originating from both 2014-2020 and 2021-2027 programming periods) Cohesion policy (total)45 996.442 179.533 761.3European Regional Development Fund (ERDF)27 724.426 341.320 180.5European Social Fund (ESF, ESF+) and the Youth Employment Initiative (YEI)20 152.214 808.613 261.7Just Transition Fund (JTF)1 029.6 319.2European Maritime, Fisheries and Aquaculture Fund (EMFAF) and the European Maritime and Fisheries Fund (EMFF) 537.3 518.2318.8Migration, border management and internal security - AMIF, BMVI and ISF (4) 748.6 993.4445.4The common agricultural policy under the CAP strategic plan (5)Disbursements under the CAP Strategic Plan (6)Total under the CAP strategic plan6 842.9European Agricultural Guarantee Fund (EAGF)5 878.9European Fund for Agricultural Development (EAFRD) 964.0Allocation 2023-202728 023.520 763.37 260.1Allocation 2021-2026 71 779.6122 602FisheriesMigration and home affairsItalyAssessment in May 2025Relevant SDGs2019 CSR 1Some 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.No longer relevantSDGs 8, 16Shifttaxationawayfromlabour,includingbyreducingtaxexpenditureandreformingtheoutdated cadastral values.Some progressSDGs 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 progressSDGs 8, 16Implementfullypastpensionreformstoreducetheshareofold-agepensionsinpublicspending and create space for other social and growth-enhancing spending.No progressSDG 82019 CSR 2Some progressStep up efforts to tackle undeclared work. Some progressSDG 8Ensure that active labour market and social policies are effectively integrated and reach out notably to young people and vulnerable groups.Substantial progressSDGs 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 progressSDGs 8, 10Improve educational outcomes, also through adequate and targeted investment, and foster upskilling, including by strengthening digital skills.Some progressSDG 42019 CSR 3Some progressFocus investment-related economic policy on research and innovation, and the quality of infrastructure, taking into account regional disparities.Some progressSDGs 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 progressSDGs 4, 9, 16Address restrictions to competition, particularly in the retail sector and in business services, also through a new annual competition law.Some progressSDG 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 progressSDG 16Improvetheeffectivenessofthefightagainstcorruptionbyreformingproceduralrulestoreduce the length of criminal trials.Some progressSDG 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 progressSDGs 8, 92020 CSR 1Some progressInlinewiththegeneralescapeclause,takeallnecessarymeasurestoeffectivelyaddressthepandemic,sustaintheeconomyandsupporttheensuingrecovery.Wheneconomicconditionsallow,pursuefiscalpoliciesaimedatachievingprudentmedium-termfiscalpositions and ensuring debt sustainability, while enhancing investment.No longer relevantSDGs 8, 16Strengthentheresilienceandcapacityofthehealthsystem,intheareasofhealthworkers,critical medical products and infrastructure.Some progressSDG 3Enhance coordination between national and regional authorities.Some progressSDGs 3, 162020 CSR 2Some progressProvide adequate income replacement and access to social protection, notably for atypical workers.No longer relevantSDGs 1, 2, 8, 10Mitigate the employment impact of the crisis, including through flexible working arrangements andNo longer relevantSDG 8active support to employment.Substantial progressSDG 8Strengthen distance learning and skills, including digital ones.Some progressSDG 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 progressSDGs 8, 9Front-load mature public investment projectsSome progressSDGs 8, 16and promote private investment to foster the economic recovery.Some progressSDGs 8, 9 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
  
Table (continued) 

(Continued on the next page) 

114 

Focusinvestmentonthegreenanddigitaltransition,inparticularoncleanandefficientproduction and use of energy,Some progressSDGs 7, 9, 13research and innovation,Some progressSDG 9sustainable public transport,Some progressSDG 11waste and water managementSome progressSDGs 6, 12, 15as well as reinforced digital infrastructure to ensure the provision of essential services.Some progressSDG 92020 CSR 4Substantial progressImprove the efficiency of the judicial system andSubstantial progressSDG 16the effectiveness of public administration.Substantial progressSDG 162021 CSR 1No longer relevantIn2022,usetheRecoveryandResilienceFacilitytofinanceadditionalinvestmentinsupportoftherecoverywhilepursuingaprudentfiscalpolicy.Preservenationallyfinancedinvestment. Limit the growth of nationally financed current expenditure.No longer relevantSDGs 8, 16Wheneconomicconditionsallow,pursueafiscalpolicyaimedatachievingprudentmedium-term fiscal positions and ensuring fiscal sustainability in the medium term.No longer relevantSDGs 8, 16Atthesametime,enhanceinvestmenttoboostgrowthpotential.Payparticularattentiontothecompositionofpublicfinances,onboththerevenueandexpendituresidesofthebudget,andtothequalityofbudgetarymeasuresinordertoensureasustainableandinclusiverecovery.Prioritisesustainableandgrowth-enhancinginvestment,inparticularinvestmentsupporting the green and digital transition. No longer relevantSDGs 8, 16Giveprioritytofiscalstructuralreformsthatwillhelpprovidefinancingforpublicpolicyprioritiesandcontributetothelong-termsustainabilityofpublicfinances,including,whererelevant,bystrengtheningthecoverage,adequacyandsustainabilityofhealthandsocialprotection systems for all.No longer relevantSDGs 8, 162022 CSR 1Some progressIn2023,ensureprudentfiscalpolicy,inparticularbylimitingthegrowthofnationallyfinancedprimarycurrentexpenditurebelowmedium-termpotentialoutputgrowth,takingintoaccountcontinuedtemporaryandtargetedsupporttohouseholdsandfirmsmostvulnerabletoenergypricehikesandtopeoplefleeingUkraine.Standreadytoadjustcurrentspendingtotheevolving situation.No longer relevantSDGs 8, 16Expandpublicinvestmentforthegreenanddigitaltransitions,andforenergysecuritytakingintoaccounttheREPowerEUinitiative,includingbymakinguseoftheRecoveryandResilience Facility and other Union funds.No longer relevantSDGs 8, 16Fortheperiodbeyond2023,pursueafiscalpolicyaimedatachievingprudentmedium-termfiscalpositionsandensuringcredibleandgradualdebtreductionandfiscalsustainabilityinthe medium term through gradual consolidation, investment and reforms.No longer relevantSDGs 8, 16Inordertofurtherreducetaxesonlabourandincreasetheefficiencyofthesystem,adoptandappropriatelyimplementtheenablinglawonthetaxreform,particularlybyreviewingeffectivemarginaltaxrates,aligningthecadastralvaluestocurrentmarketvalues,streamliningandreducingtaxexpenditures,alsoforVAT,andenvironmentallyharmfulsubsidieswhileensuring fairness, and by reducing the complexity of the tax code.Some progressSDGs 8, 10, 122022 CSR 2Proceedwiththeimplementationofitsrecoveryandresilienceplan,inlinewiththemilestones and targets included in the Council Implementing Decision of 13 July 2021.SwiftlyfinalisethenegotiationswiththeCommissionofthe2021-2027cohesionpolicyprogramming documents with a view to starting their implementation.2022 CSR 3Some progressReduce the reliance on fossil fuels and diversify energy import.Some progressSDGs 7, 9, 13Overcome bottlenecks to increase the capacity of internal gas transmission,Some progressSDGs 7, 9, 13develop electricity interconnections,Some progressSDGs 7, 9, 13accelerate the deployment of additional renewable energy capacitiesSome progressSDGs 7, 9, 13and adopt measures to increase energy efficiencySome progressSDG 7and to promote sustainable mobility.Some progressSDG 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) 

Source: European Commission 

115 

2023 CSR 1Substantial progressWinddowntheemergencyenergysupportmeasuresinforce,usingtherelatedsavingstoreducethegovernmentdeficit,assoonaspossiblein2023and2024.Shouldrenewedenergypriceincreasesnecessitateneworcontinuedsupportmeasures,ensurethatsuchsupportmeasuresaretargetedatprotectingvulnerablehouseholdsandfirms,arefiscallyaffordable and preserve incentives for energy savings.Substantial progressSDGs 8, 16Ensureprudentfiscalpolicy,inparticularbylimitingthenominalincreaseinnationallyfinanced net primary expenditure in 2024 to not more than 1,3%.Some progressSDGs 8, 16PreservenationallyfinancedpublicinvestmentandensuretheeffectiveabsorptionofgrantsundertheFacilityandofotherUnionfunds,inparticulartofosterthegreenanddigitaltransitions.Full implementationSDGs 8, 16Fortheperiodbeyond2024,continuetopursueamedium-termfiscalstrategyofgradualandsustainableconsolidation,combinedwithinvestmentsandreformsconducivetoimprovedproductivityandhighersustainablegrowth,inordertoachieveaprudentmedium-termfiscalposition.Full implementationSDGs 8, 16Furtherreducetaxesonlabourandmakethetaxsystemmoreefficientbyadoptinganddulyimplementingtheenablinglawontaxreformwhilepreservingtheprogressivityofthetaxsystemandimprovingfairness,inparticularbystreamliningandreducingtaxexpenditures,includingVATandenvironmentallyharmfulsubsidies,andbyreducingthecomplexityofthetax code. Align the cadastral values with current market values.Some progressSDGs 8, 10, 122023 CSR2 Ensureeffectivegovernanceandstrengthenadministrativecapacity,inparticularatsubnationallevel,inordertoallowforthecontinuedswiftandsteadyimplementationoftherecoveryandresilienceplan.SwiftlyfinalisetheREPowerEUchapterwithaviewtorapidlystartingtheimplementationthereof.Proceedwiththespeedyimplementationofcohesionpolicyprogrammes,inclosecomplementarityandsynergywiththerecoveryandresilienceplan.2023 CSR 3Some progressReduce the reliance on fossil fuels.Some progressSDGs 7, 9, 13Streamlinepermittingproceduresinordertoacceleratetheproductionofadditionalrenewable energy, andSome progressSDGs 7, 8, 9, 13develop electricity interconnections to absorb it.Some progressSDGs 7, 9, 13Increasethecapacityforinternalgastransmissioninordertodiversifyenergyimportsandstrengthen security of supply.Some progressSDGs 7, 9, 13Increaseenergyefficiencyintheresidentialandcorporatesectors,includingthroughbettertargetedincentiveschemes,addressinginparticularthemostvulnerablehouseholdsandtheworst-performing buildings.Some progressSDGs 1, 2, 7, 10Promotesustainablemobility,includingbyremovingenvironmentallyharmfulsubsidiesandspeeding up the roll-out of charging stations.Some progressSDGs 8, 10, 11, 12Stepuppolicyeffortsaimedattheprovisionandacquisitionofskillsandcompetencesneeded for the green transition.Limited progressSDG 42024 CSR 1Substantial progressSubmit the medium-term fiscal-structural plan in a timely manner.Full implementationSDGs 8, 16In line with the requirements of the reformed Stability and Growth Pact, limit the growth in net expenditure in 2025 to a rate consistent with, inter alia, putting the general government debt on a plausibly downward trajectory over the medium term and reducing the general government deficit towards the 3% of GDP Treaty reference value.Full implementationSDGs 8, 16Makethetaxsystemmoresupportivetogrowth,withafocusonreducingthetaxwedgeonlabourandinlinewithfiscalsustainabilityobjectives,includingbyreducingtaxexpendituresandupdatingcadastralvalues,whileensuringfairnessandprogressivityandsupportingthegreen transition.Some progressSDGs 8, 10, 122024 CSR 2StrengthenadministrativecapacitytomanageEUfunds,accelerateinvestmentsandmaintainmomentumintheimplementationofreforms.Addressrelevantchallengestoallowforcontinued,swiftandeffectiveimplementationoftherecoveryandresilienceplan,includingtheREPowerEUchapter,ensuringcompletionofreformsandinvestmentsbyAugust2026.Acceleratetheimplementationofcohesionpolicyprogrammes.Inthecontextoftheirmid-termreviewcontinuefocusingontheagreedpriorities,whileconsideringtheopportunitiesprovidedbytheStrategicTechnologiesforEuropePlatforminitiativetoimprovecompetitiveness.2024 CSR 3Some progressInordertomitigatetheeffectsonpotentialgrowth,tacklenegativedemographictrendsincludingbyattractingandretainingworkerswithadequateskillsandbyaddressinglabourmarketchallenges,inparticularwithregardstowomen,youngpeopleandinworkpoverty,notably of workers with non-standard contracts.Some progressSDGs 8, 102024 CSR 4Some progressDefineanindustrialanddevelopmentstrategytoreducetheterritorialdividebystreamliningcurrentpolicymeasuresandbytakingintoaccountkeyinfrastructureprojectsaswellasstrategic value chains.Limited progressSDGs 8, 9, 10, 11Address remaining restrictions to competition, in particular in the retail sector, regulated professions and railways.Some progressSDG 9RRP 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 is monitored in the context of the Cohesion Policy of the European Union. RRP 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 17: COMPETITIVE REGIONS 

by 

competitiveness 

local  public  services, 

Divergence between Italian regions is heavily 
and 
affected 
improvement  and 
demographic  trends.  The 
sustainability  of 
the 
accessibility,  availability  and  quality  of  public 
infrastructure,  including  for  logistics,  and  tailored 
activities to promote innovation in strategic supply 
chains  are  key  drivers  that  could  help  achieve  a 
stable  process  of  socio-economic  catching-up  in 
the Mezzogiorno. 

Italy  still 

While  economic  growth  since  the  COVID-19 
pandemic  has  shown  convergence  towards 
the  EU  average, 
registers 
significant  disparities,  internally  and  with 
the  EU.  Since  2021, 
Italy  has  experienced 
sustained  growth  in  GDP  per  head.  After  having 
lost ground to the EU average in terms of real GDP 
per  head  over  the  three  previous  decades,  Italy 
recovered  swiftly  over  2021-2022  followed  by 
slower  growth  in  2023-2024.  Moderate  growth  is 
expected  in  2025-2026,  providing  a  favourable 
environment  to  tackle  regional  disparities.  Six 
regions  –  all  in  the  Mezzogiorno (291)-  were  still 
below 75% of the EU average in terms of GDP per 
head in 2023 (Table A17.1). Calabria is the poorest 
region,  with  GDP  per  head  below  60%  of  the  EU 
average, closely followed by Sicilia, Campania and 
Puglia,  which  are  just  above  60%.  These  figures 
are the result of a long and steady deterioration in 
relative  development  levels,  particularly  affecting 
the Mezzogiorno. 

to 

the  post-pandemic 

Many  regions  in  the  South  and  Insular  Italy 
have  experienced  post-pandemic  growth 
which exceeds EU average.  This can in part be 
attributed 
resilience 
measures put in place in Italy, which benefited the 
economies  of  regions  most  dependent  on  public 
interventions.  Between  2019  and  2023,  the 
average  annual  growth  was  strongest  in  the  less 
developed  regions,  especially  Sicilia  and  Puglia, 
while  Toscana,  Liguria  and  Friuli  Venezia  Giulia 
grew  at  a  pace  well  below  the  EU  average  and 
many regions in the North and Centre did not keep 
up  with  the  EU  average  pace  (see  Map  A17.1). 
Looking at longer trends, the national performance 
in terms of real GDP per head growth (1.2%) over 
2014-2023  is  the  result  of  moderate  growth  in 
the  regions  of  northern  Italy  as  well  as  some 

regions  in  Southern  and  Insular  Italy(292)  .  Central 
Italian regions, which have historically represented 
an intermediate level of development between the 
poorer south and the richer north, have been on a 
divergent  path,  with  average  annual  growth  rates 
well  below  the  national  average.  These  trends 
show that central Italy is on a path that could lead 
to  a  situation  of  relative  underdevelopment,  also 
because of its demographic dynamics. 

Map A17.1:  Real GDP per head growth (2019-
2023) 

Source: Eurostat 

Demographic  trends  heavily  affect  the 
economic  performance of the  Italian  regions 
and  vice  versa.  The  performance  of  northern 
Italian  regions  has  been  showing  better  GDP  per 
head than the rest of the country, boosted in part 
by  population  trends.  While  the  Italian  population 
has  declined  overall, 
the  best  economically 
performing  regions  Lombardia,  Emilia-Romagna, 
Trento  and  Bolzano  are  showing  population 
growth.  The  demographic  situation  is  particularly 
stark in the Mezzogiorno (Graph A17.1), where low 
birth rates are compounded by outward migration, 
particularly  of  young  graduates.  The  South 
registered a decline in the working-age population 
of  6.2%  for  2015-2023,  compared  to  the  Insular 
Italy  -7.2%,  Centre  -3.2%,  North-west  -2.3%,  and 

(291) Mezzogiorno  includes  southern  and  insular  regions  and 

(292) Insular  Italy  (“Isole”)  is  one  of  the  five  statistical  NUTS  1 

Abruzzo. 

regions in Italy. 

116 

 
 
 
 
 
 
 
 
 
North-east  -1.6%.  The  most  affected  regions  are 
Sardegna,  Calabria  and  Molise,  where  the  decline 
is around 9%. The share of graduates moving out 
of  the  South  equals  39.8%  of  total  graduates, 
against  5.8%  for  the  North  and  21.4%  for  the 
Centre (293). These trends mean that the country’s 
productive  base  is  shrinking  (especially  in  the 
South), 
its  growth  potential  and 
exacerbating regional disparities. 

reducing 

Graph A17.1: Population dynamics 

Unit: Million persons  
Source: Eurostat 

economic 

performance. 

In  the  face  of  demographic  trends,  it  is 
important  to  mobilise  inactive  people  –  in 
particular  women  and  young  people  –  in  the 
less developed regions in the Mezzogiorno to 
improve 
The 
unemployment  rate  for  people  aged  15-24  in 
2024 was more than double in the Islands and the 
South  (33-34%)  North-West  (14.9%)  and  North-
East 
(11.3%).  There  also  appears  to  be  a 
significant  skills  and  education  gap  affecting  the 
younger component of the labour force in the less 
developed  regions.  Reducing  early  school-leaving 
in  these  regions  and  providing  skills  in  line  with 
labour  market  needs  could  bring  more  young 
people  into  the  labour  market.  Female  labour 
market participation remains low in South (39.4%) 
and Insular Italy (41.6%). This is in part explained 
by limited access to childcare services. Authorised 
places and educational services for children up to 
2  years  of  age  exceed  the  EU  target  of  33%  in 
almost  all  regions  of  central  and  northern  Italy, 
while in the Mezzogiorno they are generally below 

(except  for  Sardegna)  (294).  The  availability  of 
services  is  the  lowest  in  Campania  (13.2%  of 
children aged 0-2) and in Sicilia (13.9%), which are 
also  among  the  regions  with  the  lowest  female 
employment rates in Italy and in the EU. Improving 
access to childcare services remains key to making 
full  use  of  the  labour  force  potential  in  these 
regions. 

The competitiveness of the Italian regions is 
low relative to other EU Member States. Only 
Lombardia slightly exceeds the EU average of the 
EU  Regional  Competitiveness  Index (295)  and  its 
innovation  sub-index.  The  other  Centre-North 
regions and the entire Mezzogiorno are below and 
far  below  the  EU  average,  respectively.  These 
in  higher 
differences  mainly 
education,  lifelong  learning  and  labour  market 
efficiency and innovation (see the sub-components 
of  the  index).  Small  to  medium-sized  enterprises, 
throughout  the  country  –  which  tend  to  be  small 
and include a very high share of micro-businesses 
– score low on innovation when compared to their 
Swedish, 
German 
counterparts (296). 

reflect  gaps 

French, 

Dutch 

and 

in 

skills  as  well  as 

The  differences  in  educational  attainment 
and 
sectoral 
specialisation  are  significant  factors  behind 
the  productivity  gaps  between 
Italian 
regions.  The  share  of  employment  in  high-tech 
sectors is above the EU average only in Lombardia 
and  Lazio,  while  it  is  about  25%  lower  in  most 
other  central-northern  regions,  and  less  than  half 
in  most  of  southern  and  insular  Italy,  reflecting 
overall an imbalanced production structure in high 
technologies.  The  situation  appears  even  more 
unfavourable when looking at human resources in 
science  and  technology  as  a  percentage  of  total 
employment,  where  all  regions  are  below  the  EU 
average, 
regional 
differences. At national level, the ratio of business 
enterprise  R&D  expenditure  (BERD)  to  GDP  is 
below  60%  of  the  EU  average  at  0.8%  of  GDP. 
Only  Piemonte  and  Emilia-Romagna  are  slightly 

although  with 

smaller 

(294) ISTAT 

special 

report 

(October  2024)  available  at: 

https://www.istat.it/wp-content/uploads/2024/10/Report-
Completo_I-servizi-educativi-per-linfanzia-in-
Italia_16_10_24-1.pdf. 

(295) 2022  Regional  Competitiveness  Index  2.0,  available  at: 

https://ec.europa.eu/regional_policy/assets/regional-
competitiveness/index.html#/. 

(293) ISTAT, 2023 

(296) JRC Industrial Innovation Scoreboard. 

117 

0369121518Norrth-WestNorth-EastCentreSouthIslands200020112023 
       
 
 
Table A17.1:Selection of indicators at regional level in Italy 

Source: Eurostat and JRC 

above  the  EU  average,  while  the  Mezzogiorno 
shows  values  of  a  few  tenths  of  a  point,  and 
Basilicata, Calabria and Sardegna are close to zero 
(see  Annex  3).  In  addition,  the  tertiary  education 
attainment  rate  for  25-34  year-olds  in  Italy 
(31.6%), which was well below the EU average of 
44.2% in 2024, varies significantly across regions. 
regions  with  a  shrinking  working-age 
The 
population  and  lagging  level  of  tertiary  education 
are mainly in the South, but  some are also in the 
Centre  and  North.  These  factors  point  to  the 
country having: i) a reduced capacity, especially its 
less developed regions, to capture growth trends in 
dynamic and advanced sectors; and ii) poor access 
to  international  value  chains  of  the  industrial 
ecosystems. 

The  specialisation  of  Mezzogiorno  in  some 
industrial  sectors  shows  prospects  for 
growth.  Some  industrial  supply  chains  in  the 
Mezzogiorno  are  characterised  by  high  structural 
growth  potential  and  high  value  added,  as  their 
advanced  technological  content  attracts  external 
fuels 
(including 
innovation.  Other  industrial  sectors  (see  Annex  7) 
are  strategically  important  and  highly  relevant  as 
regards economic and social challenges connected 
to  climate  change  or  are  of  crucial  importance  in 
the  decarbonisation  of 
the  economy  while 
guaranteeing  high  labour  intensity  (such  as  the 
automotive  sector).  The  industrial  matrix  of  the 

investments 

foreign) 

and 

Mezzogiorno  identifies  the  production  areas  with 
high  transformation  potential,  in  the  following 
order:  i)  agroindustry  (1.53),  ii)  naval  shipbuilding 
(1.28), iii) aerospace (1.10), iv) construction (1.05) 
(297).  The  area's 
(1.04) 
and  v)  automotive 
specialisations  are 
substantially  driven  by 
Campania  and  Puglia,  which  host  almost  all  the 
industries.  

The  potential  availability  of  a  specialised 
workforce  and  the  widespread  presence  of 
underused  technical  faculties  can  become 
competitive  factors  for  the  Mezzogiorno.  In 
the last 20 years, the share of graduates aged 25-
34 leaving the Mezzogiorno regions has increased 
from 18% to 58% (Graph A17.2), highlighting the 
need  to  put  in  place  policies  to  retain  these 
resources in the South. In the context of an overall 
increase  of  enrolments 
Italian  universities 
significant 
between  2016 
variations  occur:  in  the  North-West  enrolments 
grew  by  about  25%,  but  they  decreased  in  the 
universities  of  the  South  and  Insular  Italy.  The 
enrolment  of  students  in  universities  depends  on 

in 
and  2022 (298), 

(297) The  indexes  express  the  ratio  between  the  southern  share 
and  the  national  share  of  employees  in  each  supply  chain 
(SVIMEZ, 2024) 

(298) Agenzia Nazionale di Valutazione del sistema Universitario e 

della Ricerca, report 2023. 

118 

GDP per head (PPS)Real GDP growthReal GDP per head growthProductivity - GDP per person employed (PPS)Productivity - GDP per hour worked (PPS)Real productivity growth (per hour worked)R&D expenditureEmployment in high-technology sectorsPopulation with high educational attainmentPopulation growthNatural population changeNet migrationFemale employment rate 20-64Household income per capita (PPS)Index EU-27 = 100Average annual % changeAverage annual % changeIndex EU-27 = 100Index EU-27 = 100Average annual % change% of GDP% of total employment% of population aged 25-64Average annual change per 1000 residentsAverage annual change per 1000 residentsAverage annual net crude migration rate (%)% of women 20-64Index, EU27 = 10020232014-20232014-2023202320222013-20222022202420242014-20232014-20232014-202320242022European Union (27 MS)1001.71.61001000.92.35.236.11.7-1.53.270.8100Italy981.01.2107990.31.44.322.3-1.8-3.82.057.4104Nord-Ovest (North-West)1221.11.21221110.31.45.323.2-0.9-4.33.466.9122Nord-Est (North-East)1161.11.11131050.51.63.423.2-0.4-3.73.368.2117Centro (IT) (Center)1050.60.7107100-0.11.65.726.0-1.8-4.32.663.8108Sud (South)650.81.387820.31.03.019.3-4.3-2.8-1.439.480Isole (Insular)650.71.28882-0.10.92.318.1-4.3-3.5-0.841.682Abruzzo850.61.094870.11.13.123.8-4.1-5.00.856.193Basilicata751.11.991951.20.62.120.2-7.4-5.1-2.246.282Calabria580.20.982770.30.61.820.1-5.6-3.2-2.535.877Campania630.91.388830.41.33.918.7-3.7-1.6-2.135.076Emilia-Romagna1181.11.01151060.62.03.624.90.1-4.54.668.0122Friuli-Venezia Giulia1030.60.91091040.81.53.224.1-2.5-5.93.468.7112Lazio1140.60.5114105-0.31.98.328.3-0.9-3.12.360.1108Liguria1040.20.71101060.11.52.923.8-4.2-8.54.364.2113Lombardia1341.41.31291170.41.26.223.90.9-2.93.867.1126Marche900.71.19590-0.11.02.124.2-4.3-5.31.066.2104Molise730.71.591840.10.71.923.1-7.8-6.5-1.350.788Piemonte1000.61.0108980.22.13.821.2-3.6-6.02.467.1114Provincia Autonoma di Bolzano/Bozen1631.41.01361210.50.82.219.14.31.13.174.0141Provincia Autonoma di Trento1261.00.91211170.71.53.923.71.2-1.62.870.8114Puglia641.01.583780.20.92.618.0-3.7-3.1-0.640.581Sardegna720.71.28780-0.10.92.119.0-4.7-5.10.453.889Sicilia620.71.28983-0.10.92.417.8-4.2-2.9-1.237.779Toscana1030.70.91061000.21.53.723.3-1.7-5.53.968.3110Umbria830.30.79085-0.40.93.525.6-4.0-5.71.666.3103Valle d’Aosta/Vallée d’Aoste126-0.10.3119114-0.30.50.021.4-4.6-4.80.273.5111Veneto1111.11.21081000.41.33.421.7-1.1-3.22.167.3111 
 
 
     
 
economic, 

territories' 

socio-cultural, 
the 
infrastructural  and  quantity/quality  of  service 
characteristics.  Promoting  sectoral  specialisation 
at  territorial  level  and  increasing  the  cooperation 
between universities and businesses would help to 
reduce 
leaving 
Mezzogiorno regions to study elsewhere instead of 
opting for universities in these regions.  

number  of 

students 

the 

Map A17.2:  Accessibility indices based on 
connection times 

Graph A17.2: Youth migration from Mezzogiorno to 
Centre-North 

Italy = 100. Ref years 2019 and 2020 
Road accessibility - left 
Railway accessibility – right 
Source: Banca d’Italia (2021) 

Source: SVIMEZ (2024) 

in 

of 

and 

quality 

deficiencies 

the 
competitiveness 
Territorial 
is  significantly  affected  by 
Mezzogiorno 
in  accessibility, 
structural 
availability, 
public 
infrastructure. The infrastructural  gaps between 
the Mezzogiorno and the rest of Italy remain large. 
Infrastructure  endowment  in  the  Centre-North 
approaches  or  exceeds  EU  levels,  providing  the 
essential  preconditions for economic development 
and  growth,  whereas  most  of  the  Mezzogiorno 
remains  far  behind.  Accessibility  to  transport 
networks  is  lower  in  the  Mezzogiorno  than  in  the 
rest  of 
Italy  (Map  A17.2).  Basilicata,  Molise, 
Abruzzo,  Calabria  and  Sicilia  are  the  regions  with 
the  highest  share  of  the  population  that  has  a 
lower  level  of  access  to  railway  stations  (Istat 
2023). 

is 

integrated 

Southern Italy is strategically positioned as a 
logistics  platform  in  the  Mediterranean.  The 
widespread  presence  of  port  facilities  located  on 
the routes that connect to Northern Africa and the 
Suez  Canal,  in  a  context  of  increasing  maritime 
transport  costs  and  emissions  containment 
policies,  makes  structural  interventions  necessary 
to  reduce  cost  fluctuations  along  the  main  global 
supply  chains.  The  Mezzogiorno 
ideally 
positioned  to  provide  strategic  services  to  place 
manufacturing  phases  along  global  value  chains: 
research,  development  and  design,  marketing  and 
distribution  as  well  as 
freight 
transhipment  services  and  process  activities.  The 
processes of regionalisation of value chains could 
imply  a  significant  change  in  the  way  in  which 
multinational  companies  organise  the  production 
and  distribution  of  goods  and  services,  with  the 
expansion  of  the  market  for  intermodal  and 
combined  road-rail  and  road-sea  transport  to  the 
ports  of  Southern  Italy,  along  the  main  rail 
intermodal corridors and along the Tyrrhenian and 
Adriatic coastal maritime intermodal corridors. The 
development  of  ports  and  port  areas  requires 
the 
modernisation  measures. 
multimodal  hubs, 
logistics 
railway 
platforms, ports and port areas  would need to be 
transformed  into  a  network  whose  nodes  also 
provide storage, distribution and supply centres of 
alternative  fuels  for  road  tractors  as  well  as  for 
the 
ships, 
Mezzogiorno in regional supply chains. 

identifying  a  specific 

Therefore, 

terminals, 

role 

for 

the  Mezzogiorno’s 

The  poor  delivery  of  public  services  heavily 
territorial 
affects 
attractiveness.  The  quality  of  public  services  in 
local  transport, 
the  fields  of  waste,  water, 
(see 
education 

(see  Annex 12),  healthcare 

119 

 
       
 
 
 
 
Annex 14),  social  care  (see  Annex 11),  electricity 
provision etc. tend to be lower in the Mezzogiorno 
than  in  the  rest  of  Italy.  This  is  regardless  of 
whether  these  services  are  provided  by  local  or 
national  administrations.  The  quality  of  water 
infrastructure and water services is lower in most 
southern and insular regions, with higher levels of 
water losses, than in the north (see Map A17.3). 

funds)  over  the  past  20  years  has  always  been 
below  30%  and  dropped  to  26%  in  2021  (Graph 
A17.3). Given the limited fiscal capacities of most 
regions, 
the  Mezzogiorno, 
investments  in  new  infrastructure  and  services 
typically  tend  to  be  deterred  by  the  cost  of 
maintenance  and  management  of  existing 
infrastructures. 

particularly 

in 

Map A17.3:  Technical quality of water 
services, 2023 

Graph A17.3: Capital expenditure in Centre-North 
and Mezzogiorno 

Unit: % of total expenditure in Italy 
Source: Elaboration based on Conti Pubblici Territoriali 

of 

ability 

constrains 

Local  governments  in  the  less  developed 
regions often have limited capacity to deliver 
essential  services  effectively  and  equitably. 
Administrations  in  Mezzogiorno  regions  tend  to 
have  fewer  resources  than  elsewhere,  which 
results  in  more  challenges  related  to  ageing 
infrastructure,  delayed  maintenance,  and  an 
inability  to  modernise  public  services.  Limited 
revenue 
local 
the 
governments to invest in public projects that could 
stimulate  economic  growth  and 
improve  the 
quality  of  life  for  residents  (Graph  A17.4).  In 
addition, many public services rely partly on tariffs 
or  user  fees  to  cover  operational  costs.  In  lower-
income areas, residents have less capacity to pay 
high  tariffs,  leading  to  affordability  constraints 
and  creating  a  barrier  to  cost  recovery  and 
reinvestment 
infrastructure  which 
cannot be  overcome without  extraordinary budget 
transfers.  In  the  Mezzogiorno,  local  governments 
have 
poor 
coordination and inefficiencies that also limit their 
capacity  to  attract  investment.  In  addition,  the 
organisation of public service providers influences 
the quality and reach of services. 

administrative 

in  essential 

capacity, 

lower 

Unit: Water losses in m3/km/day 
Source: ARERA, Annual report 2024 

Access  to  healthcare  in  rural  areas  shows 
significant regional differences. The proportion 
of  the  population  living  within  a  10-minute  drive 
of the nearest health centre ranges from 10.7% in 
the mountainous region of Valle d’Aosta to 42.7% 
in Lombardia. Noticeably, seven regions are below 
20%,  mostly  with  mountainous 
territories, 
including  the  Mezzogiorno  regions  of  Sardegna, 
Calabria 
difficult 
accessibility  is  combined  with  less  favourable 
socio-economic conditions in general. 

Basilicata,  where 

and 

In  the  less  developed  regions,  the  interplay 
of  resource  availability,  regional  economic 
factors and the capacity and organisation of 
the  administrations  affects  public  service 
delivery  and 
infrastructure  development. 
While  the  Mezzogiorno  counts  for  more  than  a 
third  of  the  Italian  population,  public  investment 
spending 
including  that  of 
national  public  companies  such  as  railways  (RFI), 
highways 
(ANAS)  and  electricity  distribution 
(TERNA)  operators  and  the  investments  from  EU 

in  these  regions, 

120 

71%72%74%29%28%26%20%30%40%50%60%70%80%2000200120022003200420052006200720082009201020112012201320142015201620172018201920202021Centre-NorthMezzogiorno 
 
 
 
       
Graph A17.4: Revenues of regional and local public 
sector 

Source: Elaboration based on Conti Pubblici Territoriali 

vulnerability, 

climate-related 

Almost  all  Italian  regions  show  a  high  level 
of 
but 
Mezzogiorno  regions  are  confronted  with  a 
risk of higher costs from climate change than 
the  rest  of  the  country  (Map  A17.4).  With  an 
increased  frequency  and  intensity  of  weather-
related  disasters  (see  Annex  9)  such  as  extreme 
temperatures, storms, inland and coastal flooding, 
droughts  and  wildfires,  the  Mezzogiorno  regions 
are  frequently  hit  by  severe  events.  The  limited 
economic resources available to regional and local 
administrations  constrain  the  capacity  of  these 
regions  to  carry  out  investments  to  increase 
resilience and mitigate climate-related risks. 

Map A17.4:  Costs of climate-related vulnerability 

Additional economic costs of a 2°C global warming scenario 
by 2050 compared to the present-day baseline. 
Source: 9th Cohesion Report (JRC data) 

121 

79%79%78%21%21%22%18%28%38%48%58%68%78%88%2000200120022003200420052006200720082009201020112012201320142015201620172018201920202021Italy 2021: 609,355.94 EUR millionCentre-NorthSouth