COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Italy
Date: 2026-06-03
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, 3.6.2026  SWD(2026) 212 final  COMMISSION STAFF WORKING DOCUMENT 2026 Country Report - Italy Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Italy {COM(2026) 212 final}  
 
 
 
 
 
 
 
 
 
 
 
ECONOMIC DEVELOPMENTS AND KEY POLICY 
CHALLENGES 

Output growth decelerates, amid 
international tensions 

Trade  barriers  and  uncertainty  are 
affecting  Italy’s  economic  performance. 
GDP  growth  slowed  further  to  0.5%  in  2025. 
Geopolitical uncertainty weighed on household 
spending,  while  investment  rebounded  after 
declining  in  2024  due  to  the  rollback  of  tax 
credits for residential construction. Despite the 
challenges  posed  by  trade  barriers  and  a 
stronger euro, exports grew in 2025, reversing 
two  consecutive  years  of  decline,  although 
imports grew even faster. 

Employment  continued  to  grow  strongly. 
Both  headcount  employment  and  hours 
worked  increased  by  1.1%  in  2025,  rising  in 
the service and construction sectors but falling 
in  agriculture  and  manufacturing.  Self-
employed  workers  and  permanent  employees 
increased  the  most  (by  2.0%  and  1.9%, 
respectively),  whereas  fixed-term  employees 
decreased  by  7.9%.  Part-time  employment 
also dropped by  7.1%. The fourth consecutive 
annual  fall  brought  the  unemployment  rate 
down  to  6.1%.  Despite  this  progress,  the 
employment rate remained well below the EU 
average,  particularly  for  women  and  young 
people. Wages also grew by 2.5%, particularly 
in  industry  (3.5%)  and  construction  (4.4%). 
Real  wages  recovered  some  more  of  the 
previously lost purchasing power. 

Positive  labour  market  performance  has 
not been matched by productivity growth. 
Apart  from  the  period  after  the  COVID-19 
pandemic, Italy’s GDP growth has consistently 
lagged  behind  employment  growth  over  the 
past  two  decades:  a  productivity  stagnation 
that sets it apart from other EU countries (see 
Graph  1.1).  Both  macro-  and  microeconomic 
factors  help  explain  Italy’s  weak  productivity 

performance.  Predominance  of  small  firms 
and  specialisation  in  traditional,  low  value-
added  sectors  (see  Annex  5)  contribute  to 
chronically  low  investment  in  research  and 
innovation  (see  Annex  4).  Persistent  regional 
gaps between north and south (see Annex 18), 
high  energy  costs  (see  Annex  9),  a  still 
unfavourable  business  environment,  and  the 
absence  of  an  innovation-driven  industrial 
policy  vision  with  a  clear  territorial  focus 
continue  to  undermine  the  country’s  growth 
potential.  Easier  access  to  finance  through 
capital  markets  would  benefit 
deeper 
particularly the most innovative small firms.  

Graph 1.1: Labour productivity 

(1) (Real GDP per person employed, 2000=100) 
Source: European Commission 

Reduced  energy  price  pressure  kept 
inflation  down  in  2025,  but  the  outlook 
worsened  significantly  due  to  the  Middle 
East conflict. In 2025, the harmonised index 
of  consumer  prices  (HICP)  rose  by  1.6%,  with 
energy  import  prices  continuing  to  fall  and 
remaining  weak  for  non-energy 
inflation 
industrial  goods,  while  food  and  services  saw 
stronger  price  growth,  reflecting  rising  unit 
labour  costs.  The  protracted  slump  in  labour 
in  recent  years  makes  even 
productivity 
on 
dynamics  weigh 
moderate  wage 
on 
dependence 
competitiveness. 

Italy’s 

2 

808590951001051101151201252000200220042006200820102012201420162018202020222024EU27DEESFRIT 
 
   
imported  energy  and  raw  materials  makes  it 
highly  vulnerable  to  spikes  in  commodity 
prices,  like  those  occurred  in  the  wake  of  the 
Middle  East  conflict,  which  pass 
rapidly 
through to domestic prices and thus weigh on 
economic growth. 

regions,  accelerating  depopulation. 
those 
Productivity  (~80%  of  EU  levels  vs  Italy’s 
99%),  and  R&D  investment  (1%  of  GDP  vs 
1.5%  in  the  rest  of  the  country)  underscore 
persistent  underperformance.  The  share  of 
women  in  the  workforce  (40%)  trails  far 

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,  improvement  on  global  partnerships  (SDG  17)  and  innovation, 
industry and resilient infrastructure (SDG 9) has been slow, largely due to low investment levels 
and  high  public  debt.  This  has  resulted  in  limited  freight  transport  infrastructure  and  a  lower 
share  of  households with  high-speed  internet.  Stronger  progress  can  be  seen  for  indicators  on 
quality  education  (SDG  4),  decent  work  and  economic  growth  (SDG  8)  and  peace,  justice  and 
strong  institutions  (SDG  16)  due  to  improvement  on  indicators  related  to  tertiary  education, 
skills, employment and crime.   

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 
and a high need to catch up to the EU average (SDGs 6, 15). Water quality is declining, the 
impact of droughts on ecosystems is increasing and the areas at risk of severe soil erosion are 
expanding  (SDGs  6  and  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). 
Although indicators on poverty risk (SDG 1) are improving, Italy still needs to catch up with the 
EU average.  

net 

Italy’s 

A  sustained  current  account  surplus 
improves 
international 
investment  position.  The  current  account 
surplus  edged  up  to  1.2%  of  GDP  in  2025, 
further  improving  the  NIIP  to  15.4%  of  GDP. 
Net  exports  of  both  goods  and  services 
worsened  marginally,  while,  the  balance  of 
primary incomes turned slightly positive (0.1% 
from  -0.3%),  reflecting  smaller  premia  on 
domestic assets. 

Regional  gaps  remain  high  despite  some 
recent 
improvement.  Despite  marginal 
progress in recent years, the southern regions’ 
GDP  per  head  (65%  of  the  EU  average  in 
purchasing  power  standards)  lags  well  behind 
the rest of the country, which is above the EU 
total:  98%).  Structural 
average 
weaknesses,  including  low  competitiveness, 
logistics, 
weak 
demographic 
limited 
administrative capacity tend to perpetuate the 
gap (see Annex 18). Public service quality and 
accessibility  also  remain  severely  limited  in 

inadequate 
and 

innovation, 

decline, 

(Italy’s 

transport 

inadequate 

behind northern Italy (66%) and the EU (71%), 
while 
infrastructure 
constrains economic activity. These challenges 
are compounded by weak fiscal autonomy and 
administrative 
in 
smaller  municipalities,  resulting 
in  chronic 
service failures in healthcare and in water and 
waste  management,  and  thus  worsening  the 
competitiveness  gap  with  the  north  and 
territorial fragmentation. 

inefficiencies,  especially 

Improving the quality of public 
finances is key for a sustained 
reduction of the high public debt 

is 

falling  but 
Government  deficit 
remained slightly above the EU reference 
value  in  2025.  Italy’s  general  government 
deficit fell further from 3.4% in 2024 to 3.1% 
of GDP in 2025, supported mainly by stronger 
revenue  thanks  to  higher  employment  and 

3 

 
 
fiscal 

further  as 

wages.  For  2026,  the  deficit  is  expected  to 
decline 
consolidation 
progresses  under  the  framework  of  the 
Medium-Term  Fiscal-Structural  Plan  (MTFSP). 
Until 2027, primary surpluses are expected to 
the  debt-
remain 
insufficient 
increasing  effects  of  the 
interest–growth 
differential  and  the  stock-flow  adjustments 
related  to  the  delayed  cash  effect  of  the 
housing renovation tax credits. As a result, the 
debt-to-GDP ratio is projected to increase from 
137.1%  in  2025  to  138.5%  in  2026  and 
139.2% in 2027. 

to  offset 

Bringing  public  debt  on  a  sustained 
downward trend remains a key challenge. 
Italy’s  debt-to-GDP  ratio  declined  after  the 
COVID-19  pandemic  peak  but  started  rising 
again  in  2024  and  remains  above  its  pre-
pandemic level. The cost of servicing the high 
level  of  public  debt,  combined  with  projected 
increases in age-related spending, in particular 
for pensions spending, is expected to continue 
weighing  on  public  finances  in  the  coming 
years.  As  a  result,  Italy  is  projected  to  face 
high  fiscal  sustainability  risks  in  the  medium 
term and low risks in the long term (see Annex 
2).  Ensuring  a  sustained  reduction  in the debt 
ratio  requires  continued  fiscal  consolidation 
and  an  improvement  in  the  composition  of 
public  finances  together  with  the  effective 
implementation  of  structural  reforms  and 
growth-enhancing 
to  support 
higher potential growth. 

investments 

Italy  continues  to  face  vulnerabilities 
related  to  high  government  debt  and 
weak productivity growth. The Commission 
undertook  an  in-depth  review  of  the  Italian 
economy  as  part  of  the  Macroeconomic 
Imbalance  Procedure  earlier  in  2026 (1).  It 
highlighted  that  despite  improving  primary 
balances, 
Italy’s  public  debt-to-GDP  ratio 
reversed its downward trajectory in 2024 and 
started  rising  again,  driven  mainly  by  the 
lagged  impact  of  the  tax  credits  for  housing 
renovations.  Sizeable  debt  servicing  costs, 
together  with  a  public  expenditure  skewed 

(1)  SWD(2026)  139 

final; 

Commission, 
Directorate-General  for Economic and  Financial  Affairs, 
In-Depth Review 2026 Italy, Institutional Paper 335, 20 
May 2026. 

European 

towards  pensions,  limit  budgetary  flexibility. 
The adverse impact on the economic potential 
is compounded by Italy’s sluggish productivity 
growth,  a  participation  to  the  labour  market 
stubbornly  below  EU  levels  and  a  restrained 
access  to  finance  by  firms,  also  linked  to 
banks’  holdings  of  sovereign  bonds  and 
despite  the  falling  stock  of  non-performing 
loans.  Fiscal  sustainability  risks  remain  high 
over  the  medium  term.  The  government  has 
implemented  several  policies  to  foster  fiscal 
sustainability,  including  enhancing  the  annual 
spending  reviews,  permanently  reducing  the 
tax  wedge  and  revising  tax  expenditures. 
Keeping a prudent fiscal stance and continuing 
to  effectively  implement  reforms  and  support 
investments  are  crucial  to  boost  productivity 
growth. 

Italy  would  benefit  from  a  fairer  and 
growth-friendlier  tax  system,  alongside 
further efforts to curb tax evasion. There 
is scope to shift part of the relatively high tax 
burden on labour to other, currently underused 
tax  bases,  including  wealth  and  inheritance. 
The widespread use of special regimes and the 
large  number  of  tax  expenditures,  including 
reduced  rates  and  exemptions  in  value  added 
tax  as  well  as  environmentally  harmful 
subsidies, contribute to making the tax system 
highly  complex  and  erode  the  tax  base, 
resulting  in  significant  revenue  losses.  The 
inequality of households’ disposable income is 
relatively  high  and  the  redistributive  effect  of 
the  overall  tax-and-benefit  system  could  be 
improved, including by expanding the tax base 
of  progressive 
In  addition, 
cadastral  values  are  not  aligned  to  market 
values  and  main  residences  are  exempted 
from property tax (see Annex 3). In its MTFSP, 
Italy committed to reforms in taxation and tax 
compliance, including to further reduce the tax 
wedge  by  2026  and  reduce  tax  expenditures 
by  around  EUR  7.5  billion  by  2028  compared 
with  2019.  Delivering  on  these  commitments 
would  help  broaden  tax  bases,  improve  the 
efficiency  and  fairness  of the tax  system  and 
support growth over the medium term. 

income 

tax. 

Further  progressing  on  policy  evaluation 
is  needed  to 
and  spending  reviews 
improve  the  efficiency  and  quality  of 
public spending. In 2024, total spending was 

4 

 
 
investment  has 

50.4%  of  GDP,  above  the  EU  average  of 
49.1%,  increasing  by  2  pps  compared  with 
2019  (48.4%).  A  significant  share  of  the 
budget  is  earmarked  for  social  protection,  in 
particular  pensions,  and  for  debt-servicing 
costs,  limiting  fiscal  space  for  other  priorities. 
Public 
risen  significantly 
compared with pre-pandemic levels, supported 
in part by the Recovery and Resilience Facility 
(RRF).  At  the  same  time,  some  growth-
enhancing  spending,  including  education  and 
health,  has  declined  compared  with  2019. 
Spending  on  education  fell  to  8.0%  of  total 
spending  in  2024  from  8.2%  in  2019,  while 
health spending fell from 13.8% to 13.2% (2). 
Italy  conducted  annual  spending  reviews  in 
2023-2025,  in  line  with  RRP  commitments, 
is  being 
and 
the  MTFSP 
strengthened. 
commitments, 
Law 
established  that  each  ministry  is  required  to 
evaluate at least one spending policy under its 
responsibility  by  30  June  2026  under  the 
framework  of  the  Spending  Analysis  and 
Evaluation  Plans.  This  aims  to  strengthen 
financial planning and budgetary responsibility 
of  central  administrations, 
the 
efficiency of public resource management, and 
boost the  monitoring  and evaluation  of  public 
policies. 

In 
the  2026  Budget 

its  administrative  capacity 

line  with 

improve 

Defence spending is increasing marginally 
with  additional  support  provided  by  the 
EU.  Total  government  spending  on  defence 
amounted  to  1.3%  GDP  in  2024  and  is 
forecast  by  the  Commission  at  1.3%  GDP  in 
2025,  1.2%  in  2026  and  1.4%  in  2027  (see 
Annex  2).  Investment  in  defence  is  receiving 
support from the  EU. As part  of the European 
Commission’s  ReArm  Europe  Plan,  Italy  has 
requested EUR 14.9 bn in EU loans under SAFE 
(Security  Action  for  Europe)  for  defence 
procurement.  In  addition,  following  the  mid-
term  review  of  cohesion  policy,  Italy  has 
allocated  EUR  248  million  to  defence-related 
priorities, including civil preparedness. 

Growing demographic challenges 

an 

including 

Italy  faces  long-standing  demographic 
ageing 
challenges, 
population  and  a  low  fertility  rate.  By 
2050,  Italy’s  total  population  is  expected  to 
decline  by  more  than  4  million (3).  In  2024, 
Italy had one of the lowest fertility rates in the 
EU  (IT: 1.18; EU:  1.34) and one of the highest 
women’s average age at the birth of their first 
child (IT: 31.9 years, EU:  29.9; see Graph  1.2). 
This can also explain why Italy has one of the 
highest  gaps  between  desired  and  actual 
fertility  in  the  EU (4).  The  share  of  population 
younger  than  15  decreased  from  14.2%  in 
2004 to 11.9% in  2025, more than in the EU 
(from 16.2% to 14.4%) resulting in one of the 
lowest shares of children in the EU (5). A long-
standing  demographic  decline,  particularly  in 
the  south,  is  itself  a  barrier  to  higher  birth 
rates.  This  trend  is  compounded  by  a  rising 
share  of  over-65s,  which  reached  24.7%  in 
2025  compared  with  an  EU  average  of 
22% (6).  

Graph 1.2: Fertility rate and mean age of 
women at birth 

Source: European Commission. 

While net migration remains positive and 
in  2025  almost  offset  the  negative 
it  only  mitigates  a 
natural  balance, 
structural  demographic  decline,  and  the 

(3)  Population and household projections – Base 1/1/2024 

– Istat.  

(4)  Fertility policy and practice: a Toolkit for Europe – 

Economist Impact. 

(5)  Eurostat, Demography of Europe – 2025 edition, Link. 

(2)  COFOG data. 

(6)  Ibidem. 

5 

28.028.529.029.530.030.531.031.532.032.50.0.20.40.60.81.1.21.41.61.82015201620172018201920202021202220232024Mean Age of women at birth of first child Fertility rateEU27 (fertility)IT (fertility)EU27 (mean age)IT (mean age) 
 
  
 
brain drain persists. In 2024, over 450 000 
people migrated  to  Italy, but  around  188 000 
left  the  country (7),  while  in  2025  440 000 
people  migrated  to  Italy  and  a  lower  amount 
(around  144 000) left  the  country.  This  fall is 
probably  because  the  year  2024  saw  an 
exceptionally  high  number  of  registrations 
with  the  registry  of  Italian  citizens  residing 
abroad  (AIRE),  following  the  introduction  of 
stricter  regulations  in  this  field (8).  Among 
these,  many  young,  highly  qualified  Italians 
seek  better  opportunities  abroad  (see  Annex 
11). Italy struggles to attract  and retain high-
skilled  workers (9) 
(see  Annex  13).  The 
situation is worse in the  south of the country, 
as young people in the southern regions move 
not  only  abroad  but  also  to  the  centre-
north (10).  

trends  point 

These 
to  a  shrinking 
workforce and weigh on social protection. 
The shrinking workforce is further exacerbated 
by persistently low labour market participation 
among  women  and  young  people  (see  Annex 
11).  The  working-age  population,  aged  15-64, 
is projected to decrease to 54.3% of the total 
by  2050  (from  63.5%  in  2024) (11).  Age-
related spending (pensions, followed by health 
and  long-term  care)  is  projected  to  increase, 
weighing on public finances. An increasing old-
age  dependency  ratio  is  expected  to  exert 
significant  upward  pressure  on  pension 
spending  in  the  coming  decades.  In  addition, 
the higher prevalence of chronic diseases and 
multimorbidity among older people is expected 
to  increase  demand  for  hospital  services, 
pharmaceuticals,  and 
long-term  care  (see 
Annex 2).  

While  recent  policy  measures  have  had 
only  limited  impact,  a  more  integrated 

(7)  Istat,  Trasferimenti  di  residenza,  Tavola  3  -  Iscritti  e 
cancellati  per  trasferimento  di  residenza  da  e  per 
l'estero per regione. 

(8)  Istat, Demographic Indicators, 2025.  

(9)  CNEL, Italy’s attractiveness to young people from 

advanced countries, 2025. 

(10)  Ibidem. 

in 

The 

cycle. 

three-year 

the  2025 

addressing 

foster  participation 

approach  combining  labour,  migration, 
and  social  policies  would  be  far  more 
effective 
Italy’s 
demographic  challenges.  In  the  area  of 
pensions, with the 2026 Budget Law, Italy has 
not  renewed  the  early  retirement  schemes 
that had been annually renewed since 2019. In 
addition, further measures have been adopted 
in  supplementary 
to 
pension  schemes  (see  Annex  2).  At  the  same 
time,  while 
link  between 
the  automatic 
retirement  conditions  and  life  expectancy  is 
set  to  resume,  it  will  be  phased  in  gradually. 
Certain  categories  of  workers  remain  exempt 
from  the  adjustment  mechanism.  For  the 
period  2026-2028, 
decree 
establishing migration  flows  to  Italy  (“Decreto 
Flussi”)  has  introduced  a  quota  of  497 550 
workers  of  all  categories,  higher  than  the 
sectors 
previous 
concerned have been identified in consultation 
with  social  partners  to  better  address  labour 
market needs. However, this instrument has a 
limited  role  in  countering  population  ageing 
and in attracting high-quality workers, as only 
a  small  share  of  total  entry  quotas 
is 
converted  into  residence  permits  (7.9%  in 
2025) (12). 
accelerate 
demographic renewal in the short term, but in 
the  long  term,  to  address  Italy's  low  fertility 
challenges,  a  structural  approach  is  essential. 
An  approach  that  does  not  solely  rely  on 
financial 
incentives  but  also  promotes  a 
supportive  environment  for  parenting  through 
stable  jobs  and  labour  policies  especially  for 
young  people  (see  Section  4).  This  should  be 
complemented  by 
further  comprehensive 
measures  to  encourage  more  women  and 
young  people  into  the  workforce  (see  Section 
4)  and  to  attract  and  retain  high-quality 
workers,  including  through  the  establishment 
of  favourable  conditions  that  grant  young 
talent the “right to stay” in Italy (13). Measures 
to  ease  and  encourage  workers  to  remain  in 
the workforce for longer are needed, including 

Migration 

can 

(12)  Ero Straniero, IV rapporto di monitoraggio sugli ingressi 

per lavoro, February 2026. 

(11)  Previsioni della popolazione residente e delle famiglie – 
Base 1/1/2024 – Istat (under the median scenario, with 
a potential range between 53.2% and 55.4%). 

(13)  Demographic  outlook  on  "right  to  stay"  -  Beyond  the 
Letta  report  -  Publications  Office  of  the  European 
Union, Luxembourg, 2025. 

6 

 
 
 
through  flexible  working  arrangements  and 
age-specific management policies.  

funding 

instruments 

competitiveness, 

provide 
EU 
Italy.  They 
considerable  resources  to 
support investments and structural reforms to 
environmental 
increase 
sustainability,  skills,  social 
fairness  and 
security,  while  helping  to  address  challenges 
identified in the CSRs. Key instruments include 
the  Recovery  and  Resilience  Facility  (see  Box 
2)  and  Cohesion  policy  funds  (see  Box  3).  In 
addition, the Common Agricultural Policy (CAP) 
provides  Italy  with  an  EU  contribution  of  EUR 
28  billion  under  the  CAP  strategic  plan  for 
2023-2027  (14),  while  EUR  518  million  are 
allocated  under  the  Common  Fisheries  Policy 
(CFP).  A  further  EUR  1.5  billion  are  available 
under  the  Asylum,  Migration  and  Integration 
Fund 
the  Border 
together  with 
Management  and  Visa  Instrument  (BMVI)  and 
the  Internal  Security  Fund  (ISF).  Other  EU 
programmes  also  support  competitiveness  in 
Italy,  for  instance  through  open  calls  under 
Horizon  Europe  and  the  Connecting  Europe 
Facility. 

(AMIF), 

(14)  An  overview  of  Italy's  formally  approved  strategy  to 
the  EU’s  common  agricultural  policy 
at 

implement 
nationally 
https://agriculture.ec.europa.eu/cap-my-country/cap-
strategic-plans/italy_en. 

found 

can 

be 

7 

 
 
 
Box 2: 

Key achievements of the recovery and resilience plan 

Italy’s  recovery  and  resilience  plan  (RRP)  represents  a  total  budget  of  EUR  194.4  billion, 
corresponding  to  9.13%  of  GDP.  The  plan  is  aimed  at  supporting  reforms  and  investments 
contributing  to  the  green  and  digital  transitions,  strengthening  economic  resilience,  and 
addressing long-standing structural challenges identified in the European Semester.  

As of 4 May 2026, EUR 153.2 billion (around 79% of the total allocation) have been disbursed 
to Italy following the satisfactory fulfilment of 366 milestones and targets, of which EUR 99 
billion in loans. Implementation has progressed steadily, with a growing number of reforms and 
investments already fulfilled and delivering real results on the ground.   

Highlights and impact of the plan  

•  Public administration and digitalisation. Reforms of public employment and justice, 
along  with  investments  on  civil  servants’  upskilling  and  central  and  local  public 
administrations’ digitalisation have contributed to improving  administrative capacity 
and public services, including through the simplification/digitalisation of more than 260 
administrative procedures for businesses and individuals, and the reduction of criminal 
justice backlog by around 95% for cases pending since 31 January 2020. 

•  Wider  availability  of  renewables  has  been  unlocked  through  a  reform 
consolidating  the  legal  framework  on  renewable  permitting  as  well  as 
investments  on  renewable  plants  (for  example  the  installation  of  1 550  MW  of  solar 
panels  on  agro-industrial  structures)  complemented  by  grid  investments  to  improve 
renewables  integration  (Tyrrhenian  link  ensuring  electricity  transmission  between  the 
mainland, Sicily and Sardinia, or interventions on smart grids increasing hosting capacity 
by 4 000 MW and enabling electrification of consumption for 1 730 000 residents). 

• 

Improved  active  labour  market  and  skills  policies  underpinned  by  reforms  and 
investments  to  encourage  labour  market  participation,  up  and  re-skilling  and 
vocational  training  and  improve  the  quality  of  public  employment  services, 
resulting in more than 3 million jobseekers, notably women, benefiting from reformed 
active labour market  policy (ALMP) services, over 600 000 jobseekers trained, most of 
them  in  digital  skills,  and  other  200 000  people  in  skills  for  the  green  transition; 
900 000  students  participated  in  the  dual  system  and  more  than  347  public 
employment  services supported  to  for  instance  improve  their IT  system,  set-up  labour 
market observatories, train their staff or carry out communication campaigns. 

•  Digital  and  inclusive  education.  Digital  equipment  delivered  to  more  than  8 000 
schools  and  100 000  classrooms,  complemented  by  training  focused  on  school  staff 
and pupils at risk of early school leaving and dropping out. 

• 

Improved  resilience  of  the  national  healthcare  framework  through  the  reform  of 
territorial healthcare and investments to digitise 281 medium and large hospitals. 

8 

 
 
 
Box 3: 

Contribution of cohesion policy funds 

EU  cohesion  policy  funding  supports  Italy’s  efforts  to  increase  competitiveness, 
territorial  development,  environmental  sustainability  as  well  as  skills  and  social 
fairness. In 2021-2027, EU cohesion policy funds (15) are providing EUR 42.2 billion (amounting 
to  EUR  72.8  billion  with  national  co-financing),  or  1.9%  of  2024  GDP,  to  Italy.  This  makes 
cohesion  policy  one  of  the  main  sources  of  public  investment  in  the  country.  The  number  of 
selected projects corresponds to 55.2% of the total allocation as of March 2026, with additional 
calls in the pipeline. 

• 

Innovation,  business  environment  and  productivity.  Nearly  EUR  10.3  billion  are 
allocated  for  research  and  innovation  and  SMEs  competitiveness  EUR  2.8  billion  for 
investments  in  critical  technologies  under  the  Strategic  Technologies  for  Europe  Platform 
(STEP) initiative. Around 76 715 firms have already seen their projects approved. 

•  Decarbonisation, energy affordability and sustainability. EUR 9.1 billion are dedicated 
to  clean  transition  projects.  Of  these,  more  than  EUR  1.7  billion  to  drinking  water  and 
wastewater treatment projects, with expected improved  water supply for 2.3  million people 
and  improved  wastewater treatment  for  1.5  million  people.  Another EUR  2.8  billion  support 
energy efficiency and renewables interventions, with over 7 000 households expected to have 
an  improved  energy  performance  and  an  expected  renewables  new  capacity  of  888  MW. 
Clean technologies under STEP are targeted with more than EUR 600 million. 

•  Skills,  quality  jobs  and  social  fairness.  EUR  416  million  are  allocated  to  support  the 
labour  market  relevance  of  education  and  training  systems,  EUR  2.61  billion  to  improve 
quality  and  for  strengthening  inclusive  education  and  training  and  an  additional  EUR  731 
million are dedicated to boosting lifelong learning. The European Social Fund Plus (ESF+) also 
supports better access to employment with EUR 1.35 billion and tackling material deprivation 
with  EUR  747  million.  Moreover,  it  also  intervenes  in  fields  such  as  healthcare  (EUR  2.57 
billion).  By  the  end  of  2025,  almost  four  million  participants  have  benefited  from  ESF+ 
funding.  

The  mid-term  review  (MTR) (16)  reinforced  the  cohesion  policy’s  contribution  to  emerging 
strategic priorities, reallocating nearly EUR 7.1 billion. Two thirds of these reallocations support 
competitiveness and the development of critical technologies, 15% to additional investments in 
more  affordable  housing,  9%  is  dedicated  to  better  water  management,  and  3%  to  energy 
efficiency and investments in interconnectors and related infrastructures. Ringfenced resources 
for  the  new  MTR  priorities  will  also  target  policies  such  as  the  adaptation  of  workers  to 
decarbonisation  and  the  development  of  specialised  skills  for  cyber  security  and  civil 
preparedness. However, almost 90% of this budget (more than 1 billion out of EUR 1.26 billion) 
is  allocated  to  promoting  skills  in  the  development  of  critical  STEP  technologies  focusing  on 
access  to  employment,  adaptation  to  change,  improving  of  and  access  to  the  education  and 
training system. In addition to cohesion policy funding, Italy will be allocated up to EUR 7 billion 
under  the  Social  Climate  Fund  for  the  2026-2032  programming  period  to  help  mitigate  the 
social impact of the new emissions trading system (ETS2), supporting vulnerable households and 
small businesses. 

(15)  ERDF, ESF+, CF and JTF. 

(16)  The  mid-term  review  is  to  be  carried  out  halfway 
through  the  2021-2027  programming  period.  It  is  a 
formal assessment process required under Article 18 of 
the Common Provisions Regulation that aims to assess 
implementation  of  programmes  and,  where 
the 
necessary,  propose  adjustments  to 
improve  their 
performance, ensure their relevance in light of new and 
emerging  needs  and  keep  them  aligned  with  other  EU 
policies. 

9 

 
 
 
INNOVATION, BUSINESS ENVIRONMENT AND 
PRODUCTIVITY 

to 

related 

In  2025,  Italy  received  country-specific 
recommendations  (CSRs)  to  address  the 
challenges 
sluggish 
productivity  growth  and  competitiveness. 
Italy was invited to make the tax system more 
growth-friendly,  fight  tax  evasion,  support 
research  and  innovation,  promote  business 
growth, 
industrial  strategy, 
including  to  reduce  the  territorial  divide, 
increase the efficiency of public administration 
and  justice  system,  and  remove  remaining 
barriers  to  competition.  With  the  support  of 
the recovery and resilience plan (RRP), several 
measures  have  been  implemented  to  address 
these challenges, but more effort is needed. 

implement  an 

Industrial strategy, territorial 
divide and transport infrastructure 

Productivity growth in Italy has remained 
weak,  also  due  to  strong  gaps  between 
northern  and  southern  regions. 
Italy’s 
productivity has been declining since the early 
2000s. This is explained at micro level, among 
other things, by a small average firm size and 
a structural underinvestment in innovation and 
firm specialisation in low value-added sectors. 
This  dynamic  is  even  more  pronounced  in  the 
southern  regions,  where  businesses  are  on 
average  smaller,  more  focused  on  traditional 
sectors,  and  disproportionately  affected  by  a 
significant  infrastructural  gap  compared  with 
the North (see Annex 18). 

strategy, 

industrial 

Italy  took  a  first  step  in  defining  a 
but 
national 
additional  effort  is  needed  to  implement 
and  align 
it  with  the  development 
strategy  for  the  South.  In  2026,  the 
Ministry  of  Enterprises  and  Made  in  Italy 
published the White Book “Made in Italy 2030”, 
which  outlines  development  priorities  for  the 

ineffective 

country.  However,  the  White  Book  is  not 
aligned  with  the  strategic  plan  for  the  Single 
Special  Economic  Zone  (SEZ)  (17)  published  in 
2024  by  the  SEZ  Mission  Structure.  Although 
these  two  documents  clearly  identify  the 
challenges that the country  faces, they fail to 
incorporate 
provide  clear  policy  actions, 
infrastructural  and 
investment 
research 
planning,  or  ensure  mutual  alignment  overall. 
At the same time, the identification of a broad 
range  of  18  strategic  sectors,  many  of  them 
low  value-added,  without  clear  strategic 
prioritisation  or  a  defined  territorial  scope, 
risks  making  public  efforts  non-selective,  and 
consequently, 
in  a  context  of 
limited resources. The analysis provided in the 
White  Book  shows  a  clear  need  for  horizontal 
measures  aimed  at  addressing 
the  five 
weaknesses (18)  identified  in  the  industrial 
strategy, 
the 
competitiveness  of  Italian  firms.  There is  also 
a  need  for  vertical  measures  to  support  high 
value-added 
and 
technologies  in  a  context  of  renewed  interest 
in  strategic  autonomy.  An  example  is  Italy’s 
investment 
in  satellite  constellations  and 
space technologies under its National Recovery 
and  Resilience  Plan,  reinforcing  innovation-
Earth 
driven 
observation, 
and 
advanced propulsion systems. In both cases, it 
is  important  to  identify  clear  measurable 
objectives  and  actions  that  can  be  monitored. 
The  industrial  strategy  could  also  contribute 
improve  the  coordination  among  ministries 

in 
capabilities 
telecommunications, 

promoting 

as  well 

industrial 

strategic 

sectors 

as 

(SEZ) 

(17)  The  Single  Special  Economic  Zone 

is  a 
geographically  defined  area,  encompassing  the  eight 
southern Italian regions, where business and trade rules 
are  more  favourable  than  the  rest  of  the  country.  The 
Single  SEZ  envisages  an  administrative  simplification 
tool  (the  Single  Authorisation)  and  a  tax  credit  for 
investments in the area.  

(18)  Low R&D, firm size, human capital, energy costs, under-

capitalisation. 

10 

 
 
 
and  across  different  governance  levels  (local 
and national).  

promote 
transformation in Southern Italy (19)(20). 

industrial  growth  and  structural 

the  RRP, 

to  setup 

incentives.  While 

framework,  additional  effort 

Streamlining and stabilising national and 
regional tax incentives is key to promote 
policy  coordination  and  better  focus 
public  actions  towards  growth-boosting 
investments.  As  part  of 
the 
government has recently adopted the Incentive 
Code,  a  reform  aimed  at  providing  a  single 
rulebook 
this 
represents a step forward in the creation of a 
is 
common 
required  to  rationalise  and  stabilise  national 
and regional incentives and to earmark ad hoc 
resources for the southern regions to address 
their lower economic development (see Annex 
18).  To  date,  Italy  counts 2 723 incentives,  of 
which 348 of national competence and 2 375 
of regional one. The latter amount to only 18% 
of  the  overall  resources.  This  fragmentation 
entails  high  administrative  burdens 
for 
businesses and allocation inefficiencies across 
territories  and  ministries.  The  streamlining 
actions  should  also  be  accompanied  by  a 
better  targeting  of  incentives,  matching  the 
incentive type to the policy objective. 

to  support 

territorial  measures 

The Single SEZ represents the main policy 
initiative 
the  economic 
development  of  the  South,  but  more 
and 
targeted 
incentives  are  needed.  While  the  single 
authorisation 
is  speeding  up  permitting 
procedures in the whole area, and the SEZ tax 
credit  is  supporting  investments  in  the  South 
and its extension from one year to three years 
makes  it  a  more  predictable  incentive,  its 
design  does  not  promote  industrial  upgrading 
in  Southern  Italy  due  to  its  non-selective 
nature.  Sectors  such  as  pharmaceuticals, 
renewables,  microelectronics  and  aerospace 
are  present  in  the  South,  but  their  potential 
remain  underexploited.  For  this  reason,  using 
locally 
(e.g.  a 
targeted  policy  mixes 
combination  of  incentives,  spatial  planning, 
could 
and 

development), 

infrastructure 

lines 

technology 

The  further  development  of  transport 
infrastructure  beyond 2026 will be a key 
condition for competitiveness. The RRP and 
cohesion  policy  funds  provided  a  significant 
boost,  particularly  for 
railway  and  port 
infrastructure.  However,  sustained  effort  will 
be  needed  beyond  the  plan’s  conclusion  to 
address  Italy’s  persistent  infrastructural  gaps. 
In  the  railway  sector,  it  will  be  essential  to 
finalise the large-scale projects initiated under 
the RRP, while also accelerating the roll-out of 
the European Rail Traffic Management System 
(ERTMS) 
to  boost  operational 
efficiency and prioritising the electrification of 
key 
in  support  of  decarbonisation 
objectives.  Road  and  port  infrastructure  and 
multimodal logistic nodes also require greater 
in 
role 
critical 
their 
attention,  given 
connectivity  and 
in 
logistics,  particularly 
reducing  regional  gaps.  Additionally,  bridging 
the  infrastructure  gap  between  northern  and 
southern  regions  must  remain  a  strategic 
priority,  particularly  on  access  to  industrial 
zones  and  improving  last-mile  connectivity.  In 
this sense further effort should be devoted to 
ensure  a  multiannual  and  multimodal 
Transport Strategy that is closely aligned with 
industrial  and  regional  development  needs.  It 
could  help  maximise  the  impact  of  public 
spending, avoid the duplication of unnecessary 
investments,  attract  private  capital,  develop 
public-private  partnerships  (PPP)  and  ensure 
is  both 
infrastructure  development 
that 
efficient and sustainable in the long term. 

Businesses’ growth and research & 
innovation 

Italy’s  business  sector  faces  structural 
limit  business  and 
weaknesses  that 

(19)  OECD (2025). Place-based industrial policy. Lessons for 
transformation.  OECD  Local  Economic  and 

place 
Employment Development (LEED) Papers.  

(20)  Incoronato,  L.  &  Lattanzio,  S.  (2025).  Place-based 
industrial  policies  and  local  agglomeration  in  the  long 
run. Working papers. Banca d’Italia. 

11 

 
 
productivity  growth.  In  2023,  businesses 
with  fewer  than  20  employees  generate  34% 
of  value  added,  compared  with  26.1%  in  the 
EU,  while  businesses  with  250  employees  or 
more  account  for  only  38.4%  compared  with 
49.1%  in  the  EU.  Although  fragmentation  has 
declined in recent years, the average business 
size remains small and continues to hold back 
productivity  growth  (see  Annex  5  and  Section 
1).  Businesses  are  smaller  in the  South  which 
continues  to  limit  productivity  growth  and 
technological  advancements  (see  Annex  18). 
Low  innovation,  partly  explained  by  a  less 
generous  of  public  support  for  private  R&D, 
limited managerial professionalisation, modest 
use  of  non-bank  finance,  and 
tax  and 
regulatory  barriers  prevent  businesses  from 
growing. 
in 
addressing  the  2025  CSR  to  support  research 
and 
innovation  and  promote  businesses’ 
growth. More specifically, Italy progressed with 
the implementation of RRP investments under 
Mission 4 Component 2, such as the support of 
innovation  agreements  and  the  creation  and 
strengthening  of  R&I 
infrastructures  and 
networks,  continued  with  the  implementation 
of the Scale Up Act, introduced and new three-
year funding plan for competitive project calls. 
However,  more  effort  is  needed  to  close  the 
gap with best performing countries.  

Italy  made  some  progress 

practices,  with 

Italy’s tax system encourages businesses 
to  stay  small  and  family-run.  Family-run 
businesses, which in Italy account for 83% of 
micro-firms  and  a  significant  share  of  larger 
businesses,  tend  to  rely  less  on  professional 
management 
negative 
implications  for  innovation  and  productivity. 
The  simplified  lump-sum  tax  regime,  with  a 
15% rate for businesses with a turnover below 
EUR  85 000,  creates  a  tax  disincentive  for 
micro-firms to merge or expand. Similarly, the 
favourable 
inherited 
businesses encourages generational continuity 
in  ownership  and  management,  rather  than 
aggregation  or  external  succession  (OECD, 
2026). 

treatment  of 

tax 

More public support for low R&D spending 
and a stronger framework for innovation 
procurement,  would  help  unlock  Italy’s 
innovation 
R&D 
spending stood at 0.79% of GDP in 2024, well 

potential. 

Business 

below  the  EU  average  of  1.49%,  while  SME 
R&D  spending  amounted  to  0.22%  of  GDP  in 
2023,  around  half  the  EU  average  of  0.43%. 
Low business  R&D  intensity  continues  to  limit 
the  shift  towards  more  technology-intensive 
activities  (see  Annex  4).  There  is  a  significant 
regional  divide  in  the  South,  with  the  North 
and  Centre  regions  showing  a  stronger  R&D 
performance  combining  higher  R&D  spending, 
stronger  patenting  capacity,  and  higher 
innovation intensity (see Annex 18). Moreover, 
in  2023,  public  support  for  private  R&D 
remained  low  in  Italy,  at  0.09%  of  GDP 
compared  with 
across  OECD 
0.23% 
economies,  limiting  its  capacity  to  crowd  in 
private 
limited 
progress in addressing the relevant 2025 CSR 
to  support 
innovation  by  strengthening 
business  academia  linkages  and  innovation 
procurement.  On  the  latter,  a  comprehensive 
framework  for  innovation  procurement,  which 
so  far  is  limited  to  the  defence  and  green 
sectors,  could  support 
for 
innovation while making public spending more 
efficient  (see  Annex  4).  Additionally,  in  line 
with  Medium  Term  Fiscal  Plan  commitments, 
increasing  and  rebalancing  public  support  to 
business  R&D  towards  more  predictable  and 
well-targeted  direct  instruments  could  help 
crowd  in  private  investment  in  innovation, 
especially among SMEs.  

investment (21). 

the  demand 

Italy  made 

Building  on  RRP  efforts,  links  between 
business  and  academia  need  to  be 
strengthened  while  existing  initiatives 
could be rationalised. Italy is classified as a 
moderate  innovator,  with  above  EU  average 
results  in  scientific  publications  but  below 
(22).  Despite 
average  patent  applications 
several  RRP  investments  to  promote  links 
between  business  and  academia,  Italy  made 
limited  progress  to  address  the  related  2025 
CSR.  While  some  of  these  initiatives  will  be 
continued  (23),  the  overall  fragmentation  of 

(21)  OECD Country Report 2026. 

(22)  2025 European Innovation Scoreboard. 

(23)  The  2025  budget  law  allocated  EUR  300  million  to 
further  support  the  National  centres  and  the  extended 
partnerships  financed  by  investments  1.3  and  1.4  of 
Mission  4,  Component  2,  of  the  Italian  RRP.  The 
allocation  of  resources  will  be  based  on  specific  Key 
Performance Indicators (KPIs).  

12 

 
 
for  example 

actors and investments favours a dispersion of 
resources. (24). Assessing and integrating these 
initiatives  into  a  coherent  national  strategy, 
as established by  the  annual  competition  law 
no.  190/2025,  could  help  rationalise  and 
increase  their  impact  (25).  Some  of  these 
initiatives, 
the  competence 
centres  and  technology  transfer  offices  could 
also play a role in stimulating demand for, and 
raise  awareness  of,  non-bank 
financing 
opportunities,  while  supporting  the  upskilling 
and  professionalisation  of  managers  and 
employees.  Moreover,  the  continuation  and 
improvement  of  innovative  PhD  scholarships 
with  companies,  an  important  policy  action 
financed by the RRP, could also play a key role 
in  further  fostering the  alignment  of  research 
with entrepreneurial needs. 

to 

on 

focus 

limited,  with 

the  Bank  of 

to  adequately 

Limited  resources  and 
incentives  for 
the 
universities 
commercialisation  of  research  continue 
to  hamper  innovation.  Resources  for  the 
Italy 
university  system  are 
showing one of the lowest figures in university 
spending  in  the  OECD  countries (26).  According 
Italy (27),  resources  are 
to 
reward  best-
insufficient 
performing  universities.  Moreover,  universities 
and  researchers  continue  to  have  limited 
incentives  to  perform  research  valorisation 
and technology transfer activities. As a result, 
R&D spending by higher education institutions 
is  significantly lower  than  EU  average (0.36% 
of  GDP  compared  with  an  EU  average  of 
0.48% of GDP in 2024). While the adoption of 
a three-year plan for the financing of research 
activities can partially address inefficiencies in 
the allocation of resources, further efforts are 
needed  to  address  the  relevant  2025  CSR  on 

supporting  research  and  boosting  the  role  of 
universities  in  innovation.  Strengthening  and 
institutionalising technology transfer and their 
weight on university governance would be key 
to  increasing  the  supply  of  marketable  and 
innovative 
reward 
mechanisms for researchers and graduates to 
pursue  entrepreneurial  activities  would  be 
beneficial  to  turn  research  into  spin  off  and 
start-ups,  fuelling  the  demand  for  venture 
capital investment (see Annex 4). 

Moreover, 

ideas. 

A  recent  reform  could  further  affect  the 
attractiveness  of  research  careers,  in 
absence  of  an  improved  and  long-term 
recruitment  planning.  Short-term  contracts 
are  widely  used  in  the  public  research  sector 
while  the  hiring  of  tenure  track  researchers 
and academic staff is contingent to the ad hoc 
allocation  of  resources  by  the  government 
through  extraordinary 
recruitment  plans, 
without  stable  and  predictable  multiannual 
researchers  and 
planning.  Tenure 
track 
than 
academic  staff 
average (28)  and  data  show  that  around  10 
years  pass  from  the  PhD  completion  date  to 
the  achievement  of  a  stable  position  in  the 
university  system (29).  A  new  reform  in  2025 
has  increased  the  number  of  short-term  non-
tenure 
to  hire 
contractual 
researchers, with the risk of making the career 
path  of  researchers  more  unpredictable  and 
unstable. Improving recruitment planning while 
taking  action  to  speed  up  the  career  path  of 
researchers 
the 
research 
attractiveness 
profession. 

to  be  older 

improving 

public 

track 

tools 

tend 

key 

the 

of 

to 

is 

(24)  Andini, M., Bertolotti, F., Citino, L., D’amuri, F., Linarello, A. 
&  Mattei,  G. 
innovazione  e 
(2025).  Ricerca, 
trasferimento  tecnologico  in  Italia  (Occasional  Papers 
No. (954). Banca d’Italia. 

(25)  CNR  (2025).  Relazione  sulla  ricerca  e  l’innovazione. 
Analisi e dati di politica della scienza e della tecnologia. 
Quinta. Ottobre 2025.   

(26)  OECD (2026). OECD economic surveys: Italy 2026. 

(27)  Andini,  M.,  Bertolotti,  F.,  Citino,  L.,  D’Amuri,  F.,  Linarello, 
A.,  &  Mattei,  G. 
innovazione  e 
trasferimento  tecnologico  in  Italia  (Occasional  Papers 
No. 954). Banca d’Italia. 

(2025).  Ricerca, 

(28)  In 2023, 55% of academic staff had at least 50 years, 
compared to OECD and EU average respectively 40.4% 
and  40.6%  This  represented  the  highest  figure  in  all 
OECD  countries.  OECD  (2025).  Education  at  glance. 
OECD indicators. 

(29)  ANVUR  (2026).  Rapporto  sul  sistema  della  formazione 

superiore e della ricerca. 

13 

 
 
 
of 

Italian 

launched  several  measures 

to 
Italy  has 
develop  its  equity  and  bond  markets  and 
improve  their  depth  and  liquidity.  The  capital 
markets  reform,  the  ELITE  programme,  and 
the  Fondo  Strategico 
establishment  of 
Nazionale  as  an  anchor  investor  for  initial 
public  offerings  are  steps  in  this  direction. 
Demand  for  non-bank  finance  is  also  limited 
by  the  average  small  firm  size  and  limited 
professionalisation  among  managers.  The  low 
participation 
non-financial 
corporations  in  equity  and  bond  markets  is  a 
missed  opportunity  as  financial  institutions 
and  retail  investors  increasingly  rely  on  asset 
managers  and  exchange-traded  funds  (ETFs) 
to  ensure  diversification  and  invest  savings. 
Efforts  could  include  temporarily  reducing 
dividend  and  capital  gains  taxes  on  newly 
listed stocks - both before and after listing - to 
encourage  firms  to  enter  financial  markets 
interest.  Refocusing 
and  attract 
to  prioritise 
existing  guarantee  schemes 
capital  market 
could  also 
instruments 
incentivise corporate demand. 

investor 

institutional 

themselves  with 

Several initiatives are in place to support 
the  development  of  venture  capital  and 
private  equity,  but  further  efforts  are 
needed.  Beyond  the  critical  role  played  by 
Italiano 
CDP  Venture  Capital  and  Fondo 
d’Investimento 
the  venture 
in  developing 
capital  and  private  equity  markets,  Italy  has 
recently  adopted  additional  measures.  The 
Capital Market Reform, the RRP’s Scale Up Act, 
and  the  launch  of  the  “Previdentia  Fund”  are 
investors 
first  steps  to  help 
familiarize 
these  asset 
classes  and  could  be  expanded  to  insurance, 
banking, and corporate players. In this regard, 
a  further  development  of  the  market  could 
come  from:  i)  supporting  early-stage  and 
riskier  market 
ii)  de-risking 
segments; 
institutional 
through  guarantees, 
first-loss  provisions,  or  preferential  treatment 
in 
iii) 
supporting the consolidation of venture capital 
funds.  Similarly,  developing  the  corporate 
venture  capital  market  could  be  important  to 
increase  the  demand  for  solutions  offered  by 
startups, 
the  diffusion  of 
breakthrough  technologies  to  large  firms,  and 
to improve the exit opportunities for investors. 

the  distribution  of 

returns;  and 

investors 

support 

to 

Channelling savings into growth-
boosting investments 

of 

Italian 

capitalisation 

While  Italy’s  high  savings  are  key  to 
support  growth-boosting 
investments, 
capital  markets  remain  undersized  and 
firms’ access to non-bank finance limited. 
In  2024,  households’  net  financial  wealth 
amounted to approximately EUR 5 000 billion, 
i.e.  226%  of  GDP,  while  non-financial  wealth, 
including  real  estate  assets,  to  EUR  6 700 
billion. 
In  2024,  domestic  savings  were 
distributed  among  banks,  with  total  assets 
amounting  to  175.4%  of  GDP, 
insurance 
corporations  (50%  of  GDP),  investment  funds 
(24.5%  of  GDP),  and  occupational  pension 
funds  (8.9%  of  GDP).  At  the  same  time,  the 
listed 
market 
companies  stood  at  39.4%  of  GDP 
in 
September  2025,  well  below  the  EU  average 
of 70%. Non-financial corporations and state-
owned firms accounted respectively for around 
60%  of  total  market  capitalisation.  The  bond 
market,  worth  156.7%  of  GDP  at  the  end  of 
2024, is dominated by government bonds and 
issuances  by  financial  institutions  (74%  and 
20%  of  the  total  market,  respectively).  Non-
financial  corporations  accounted 
the 
remaining 6%. The lack of depth in the Italian 
capital  markets  reflects  the  relatively  limited 
role  that  listed  shares  and  bonds  play  as 
source of financing for domestic non-financial 
firms, representing only 13.1% of their overall 
financing  vs  23.5%  for  the  EU  average. 
Furthermore,  Italian  private  markets  are  very 
limited.  In  the  first  half  of  2025,  real  estate 
funds  managed  the  largest  share  of  assets 
(EUR  131  billion),  while  non-real-estate 
alternative  investment  funds  (AIFs)  remained 
much  smaller  (EUR  57  billion  of  which  EUR 
29.4  billion  in  private  equity  funds,  i.e.  15.6% 
of  total  AIF  assets).  Venture  capital  (VC)  is 
catching  up  but  remains  small,  managing 
assets for less than EUR 3 billion at the end of 
2023.  This  leads  successful  local  start-ups 
that  want  to  scale  up  to  increasingly  rely  on 
funding  from  abroad  to  fully  meet  their 
financing needs. 

for 

Despite  ongoing  initiatives,  demand  for 
capital  market  products  remains  limited. 

14 

 
Italian  firms  report  dissatisfaction  with  the 
public administration, the highest share in the 
EU and well above the EU average of 24%. For 
example,  a  user-focused  approach,  the  once-
only  principle,  clear  data  governance  and 
accountability  for  data  reuse  should  be 
strengthened (see Annex 7). The shortcomings 
translate  into  delays  in  operations,  increased 
operational  costs and difficulties in expanding 
to  new  markets.  Furthermore,  Italy’s  public 
administration  workforce  is  among  the  oldest 
in the EU, with 53% of civil servants above 50 
years  of  age  (EU  average:  40%).  This  is 
coupled  with 
limited  participation  of  civil 
servants in adult learning (15% vs EU average 
of  19%)  and  a  relatively  low  share  of  staff 
with  post-secondary  education  (38%  vs  EU 
average  of  54%).  Moreover,  administrative 
capacity 
characterised  by  significant 
regional differences, the widest in the EU (see 
constraints 
Graph  2.1),  with 
particularly  visible  at  local  level,  especially  in 
southern  regions  (see  Annex  18).  In  2024, 
northern regions constantly scored higher than 
southern  ones  in  the  European  Quality  of 
Government Index (maximum of 0.72 for Friuli 
Venezia Giulia vs minimum of -2.06 for Sicily). 

capacity 

is 

Graph 2.1: 2024 EU Quality of government 
index across countries and regions 

will 

help 

grow 

reform 

fragmented,  with  291 

to  strengthen  auto-
Italy’s 
enrolment 
its 
supplementary  pension  sector.  Insurers 
and  pension  funds  invest  conservatively. 
At  the  end  of  2024,  despite  a  gradual 
Italy’s  pension  fund  system 
consolidation, 
remained 
funds 
managing  EUR  243  billion  in  assets,  with  a 
predominant  allocation  to  government  and 
other  debt  securities,  and  still 
limited 
participation  by  Italian  workers  particularly 
self-employed  (see  Annex  6).  In  September 
2025, insurers held an investment portfolio of 
EUR  1 070  billion,  with  large  allocations  to 
government  and 
corporate  bonds,  and, 
according  to  Confindustria,  with  a  high  share 
of  assets  invested  abroad  (56%)  (see  Annex 
6).  The  2026  Budget  Law  strengthened  the 
auto-enrolment  of  workers  and  introduced  a 
life  cycle  default  investment  strategy.  The 
reform shortened  the period for opting out  of 
the 
to 
supplementary  pension  funds  and  made 
default  investment  options  more  age-  and 
horizon-sensitive;  it  also  improved  mobility 
across  pension  funds  and  provided  more 
flexibility  for  plan  holders  in  the  pay-out 
phase.  The  reform  is  a  positive  step  forward, 
and  proper  implementation  will  be  important 
to  strengthen  the  collection  of  pension  funds 
and  ensure  better  returns  for  employees. 
Supplementary  pension  schemes  could  boost 
the  resilience  of  the  pension  system  by 
diversifying  retirement  income  sources  (see 
Annex  2).  On  the  investment  side,  improving 
the  ability  of  domestic  institutional  investors, 
such  as  pension  funds  and  insurers,  to  invest 
more in asset classes with a longer investment 
horizon,  could  improve  access  to  non-bank 
the 
finance 
development of the venture capital and private 
equity markets. 

for  companies  and 

severance 

transfer 

foster 

pay 

of 

A more supportive business 
environment 

(1) EU average = 0 
Source: European Commission. 

business 

environment 

Italy’s 
could 
benefit  from  a  more  efficient  public 
administration and further administrative 
simplification.  The  data  show  that  41%  of 

Italy has made progress in  strengthening 
public employment and simplification, but 
more  effort  is  needed  on  administrative 
capacity,  especially  at  local  level  and  in 
the  South.  Italy  made  some  progress  in 
addressing  the  2025  CSR  that  called  for  a 

15 

-3-2-10123FinlandDenmarkSwedenLuxembourgNetherlandsIrelandAustriaGermanyEstoniaBelgiumFrancePortugalLithuaniaSloveniaSpainCzechiaLatviaMaltaCyprusItalyGreeceSlovakiaPolandCroatiaHungaryRomaniaBulgariaAvgMinMax 
  
7). 

the 

RRP’s 

Under 

involved 

administrations 

more  efficient  public  administration,  more 
simplification  and  stronger  administrative 
capacity.  Italy  is  keeping  up  the  simplification 
effort  with 
the  creation  of  a  national 
repository  for  simplified  and/or  digitalised 
administrative  procedures,  and  of  a  platform 
that  enables  interoperability  between  one-
stop-shops  at  municipal  level  with  all  the 
in 
public 
administrative  procedures  for  businesses  (see 
Annex 
public 
administration  reform,  all  platforms  for  the 
recruitment and management of civil servants 
(i.e. HRM-Minerva, inPA, Syllabus) are expected 
to be operational and interoperable within the 
year.  Boosting  horizontal  and  vertical  mobility 
of  public  employees,  further  strengthening 
upskilling  and  reskilling  (including  on  AI),  and 
promoting equality and inclusion would further 
support  public  administration’s  effectiveness, 
in  line  with  objectives  included  in  MTFSP.  On 
administrative  capacity,  while  better-equipped 
regions  are  building  on  the  RRP  experience, 
less-resourced  regions  appear  to  lag  behind 
and would benefit from a more active support 
from central administration. Targeted  support, 
tailored 
southern 
small 
administrations,  including  through  innovative 
tools,  and  promoting  forms  of  administrative 
associations,  could  prove  key  to  support  local 
administrations  in  implementing  reforms  and 
investment.  These  actions  go  hand  in  hand 
with  an 
finance 
mechanisms  to  increase  the  tax  capacity  of 
local public administration. 

improvement  of 

local 

and 

for 

Despite  recent  improvements,  there  is 
still  ample  room  to  further  reduce  the 
length  and  backlog  of  trials  in  Italy. 
Despite recent measures to reduce the backlog 
and  disposition  time,  the  average  duration  of 
Italian  civil  and  commercial  trials  remains 
among  the  highest  in  the  EU  (see  Annex  7). 
Under  the  RRP,  Italy  made  some  progress  in 
addressing  the  relevant  CSR  on  reducing  the 
backlog  and  disposition  time  of  the  justice 
system  by  adopting  a  comprehensive  reform 
to increase the efficiency of the civil, criminal, 
insolvency  and  tax  justice  systems.  Italy  has 
also  heavily 
invested,  through  temporary 
hirings,  to  support  the  activities  of  the  courts 
(trial  office)  and  administrative  staff.  Further 
progress could be achieved by making the trial 
office,  introduced  by  the  RRP  and  very  much 

16 

appreciated by practitioners, structural. Further 
progress  to  address  the  severe  shortages  of 
magistrates  and  courts  staff  and  the  full 
digitalisation of the justice systems, especially 
in criminal  courts, could help.  The adoption of 
tailored  measures  to  further  reduce  pressure 
on courts and the average lengths of trials, for 
example a targeted support for justice sectors 
under  pressure,  such  as  the  Justice  of  Peace, 
whose  jurisdiction  has  been  expanded  by 
recent 
reforms  without  a  corresponding 
increase  in  resources,  could  also  help  to 
alleviate pressures on the judicial system.  

Regulatory and administrative barriers to 
the  EU  single  market  persist  in  Italy, 
in  goods  and 
affecting  both  trade 
services  as  well  as  business  operations. 
These  include  packaging  and  labelling  rules 
and  complex  permitting  and  establishment 
procedures. 
administrative 
requirements in the implementation of posting 
of  workers  rules  could  reduce  regulatory 
fragmentation  within  the  EU  single  market, 
facilitate  cross-border  mobility  and  boost 
competitiveness, without undermining workers’ 
protections (See Annex 5). 

Easing 

to 

laws  are  positive  steps 
the  2025  CSR  on 
restrictions 

Fostering  liberalisations  and  effective 
sectoral  regulation  would  benefit  Italy’s 
productivity  growth.  The  RRP’s  annual 
in 
competition 
removing 
addressing 
remaining 
competition, 
increasing competition in a number of sectors, 
including  in  local  public  services  and  energy. 
Competition  would  benefit  from ensuring that 
the  RRP  reforms  are  properly  implemented 
and  followed  up,  particularly  for  highways, 
ports  and  local/regional  transport  services. 
Ensuring 
pro-
competitive measures in the railways sector to 
strengthen  contestability  of  the  contracts, 
quality  of  the  service,  accountability  of  the 
operators  and  monitoring  entities  would  also 
launch  of  open  and 
be  beneficial.  The 
the  award  of 
tenders 
competitive 
concessions  or  service  contracts 
in  all 
transport  sectors  would  also  help.  The 
electricity  sector  would  benefit  from  more 
competitive  market  structures  and  improved 
regulatory frameworks that could reduce costs 
facilitate 
and 
for 

implementation 

households 

firms, 

the 

for 

of 

 
infrastructural  investments  and  support  the 
energy  transition  (see  Section  3).  Similarly, 
strengthening  competition  and  efficiency  in 
the  health  sector  -  for  instance  with  open 
selection procedures for the accredited private 
providers  -  remain  crucial  to  improve  medical 
assistance quality and ensure  fairer access to 
healthcare  across 
regions.  New  annual 
Competition  Laws  could  be  instrumental  to 
tendering  of  expiring 
ensure 
concessions  across  all 
sectors,  where 
concessions  are  granted  by  public  authorities 
at central, regional or local level. 

timely 

the 

A more efficient, fair and growth-
friendly tax system 

despite 

structural 

There  is  scope  to  improve  Italy’s  tax 
system  by  shifting  the  tax  mix  to  better 
support  growth  and  stepping  up  efforts 
to  fight  tax  evasion.  Tax  revenues  to  GDP 
increased  in  2024  and  remain  relatively  high 
compared  with  the  EU  average,  with  the 
largest  contribution  coming  from  labour  tax. 
After  a  decrease  in  2024,  the  labour  tax 
wedge increased in 2025, although for earners 
of low wages at 50% of the average wage is 
now  below  the  EU  average  (see  Annex  3). 
cuts 
the 
Overall, 
implemented in recent years, the tax wedge in 
Italy  remains  above  the  EU  average.  Special 
regimes  for  self-employed  and  the  growing 
income 
temporary  flat  personal 
use  of 
taxation make the tax system highly complex, 
weakens  progressivity  and  erodes  the  tax 
base,  resulting  in  significant  revenue  loss. 
Furthermore,  despite  a  significant  reduction, 
environmentally  harmful  subsidies 
remain 
high,  and  tax  expenditures,  including  on  VAT, 
are  widely  used.  Shifting  the  current  high  tax 
burden  on  labour  to  other  underused  sources 
of  revenue,  which  are  less  detrimental  to 
growth,  would  help 
raise  economic 
potential.  Moreover,  taxes  on  energy  are  not 
the 
designed 
transition  to  clean  technologies,  and  taxation 
of  private  vehicles  does  not  directly  take  into 
account  CO2  emission  levels.  Tax  evasion 
remains  high,  particularly  in  VAT  and  among 
self-employed  workers,  despite  the  ambitious 
recent  years, 
taken 
countermeasures 

sufficiently  encourage 

to 

to 

in 

including  under the  RRP  (see  Annex  3).  At  the 
same  time,  recent  measures  similar  to  tax 
amnesties  risk  being  counterproductive 
in 
terms of tax compliance. Efforts to ensure that 
the  cadastre  is  complete  and  reflects  up-to-
date  values  would  improve  the  fairness  and 
efficiency  of the property tax  system.  Overall, 
while  positive  steps  have  been  taken,  more 
effort is needed to further increase the overall 
progressivity and fairness of the tax mix. 

17 

 
 
DECARBONISATION, ENERGY AFFORDABILITY AND 
SUSTAINABILITY 

In  2025,  Italy  received  country-specific 
recommendations  (CSRs)  to  accelerate 
the electrification and the deployment of 
renewable  energy,  address 
climate-
related  risks,  and  tackle  the  remaining 
in  water  and  waste 
inefficiencies 
management.  Under 
recovery  and 
resilience  plan  (RRP),  several  measures  were 
implemented  to  address  these  challenges. 
However, more effort is needed. 

the 

Structurally mitigating high 
electricity prices 

Italy’s  retail  electricity  prices  for  both 
households  and  industry  remain  among 
the  highest  in  the  EU,  largely  due  to  the 
dominance of gas in energy generation. In 
the first semester of 2025, electricity prices in 
Italy  were  the  fourth  highest  in  the  EU  for 
households  and  the  sixth  highest  for  large 
businesses (30).  This  translates 
in  a  high 
electricity-to-gas  price  ratio,  equivalent  to  2.7 
for households (2.5 in the EU), while for large 
businesses  electricity  was  3.7  times  more 
costly than gas (3 in the EU). This impacts the 
competitiveness  of  Italy’s  firms  and  reduces 
their  incentives  to  electrify,  as  compared  to 
peer  countries  (see  Graph  3.1).  Retail  prices 
are  driven  by  high  wholesale  prices,  in  turn 
caused mainly by Italy’s heavy reliance on gas. 
Despite  being  typically  the  most  expensive 
source of electricity generation, gas maintains 
a  structural  role  as  dominant  and  marginal 

price-setting  technology.  It  set  the  electricity 
price  in  61.4%  of  hours  in  Italy  in  2024 (31). 
Fossil fuels represented 51% of the electricity 
mix  in  Italy  in  2025,  compared  with  29%  in 
the EU (32).  

Despite  falling  daytime  prices  in  recent 
years owing to growing solar power, Italy 
remains vulnerable to price spikes during 
peak-demand  hours  when  solar  output  is 
low.  Combined  with 
limited  non-fossil 
flexibility (33),  this  requires  the  increased  use 
thermal  power  plants.  Further 
of  costly 
accelerating renewable deployment, along with 
non-fossil 
structurally 
flexibility,  would 
mitigate prices by reducing reliance on gas, in 
line with the 2025 CSR. However, Italy has one 
of  the  highest  percentage  gaps  among  EU 
Member  States  between  its  2030  renewable 
levels,  despite 
energy  targets  and  2023 
significant  untapped 
renewable  potential. 
National  energy  and  climate  plan  (NECP) 
require  additional  70GW  of 
objectives 
installation  by  2030 
renewable  capacity 
compared with 2022. However, growth is slow: 
solar capacity added around 5-7 GW annually 
compared  with  the  54  GW  needed  in  total, 
while  wind  expansion  has  stalled,  and 
to  hinder 
grid/permitting  delays  continue 
deployment. 
to 
Accelerating 
renewables  and  storage  through  regularly 
planned  auctions,  in  line  with  and  building  on 
FER X and the upcoming FER Z, would mitigate 
electricity  prices  in  the  medium  term  and 
contribute  to  meeting  decarbonisation  goals. 
The  RRP  ‘Testo  Unico’  reform  also  supported 
renewable  deployment  by  collecting  and 
legislation  on  permitting:  full 
simplifying 

support 

(30)  Firms  here  are  defined  as  medium-sized  consumers 
with  an  annual  consumption  between  2-20  GWh  (ID 
consumption  band),  covering  firms  consuming  large 
amounts  of  electricity  due  to  their  size,  or  energy-
intensive  SMEs.  Household  consumers  are  defined  as 
medium  household  annual  consumption  of  2,5-5 000 
GWh (DC consumption band).  

(31)  GME, 2025, Relazione Annuale 2024, Link. 

(32)  Ember, 2026, data for Italy: Link; data for EU: Link. 

(33)  The  ability  of  the  electricity  system  to  adjust  to  the 
variability of generation and consumption patterns and 
to grid availability. 

18 

 
 
 
 
renewable 

implementation now requires the definition by 
regions  of 
‘acceleration’  and 
‘suitable’  areas  beyond  the  minimum  set 
established  at  national  level.  Strengthening 
the  capacity  of  local  public  administrations 
could support faster permitting. 

Graph 3.1: Electricity and gas prices for firms, 
including taxes 

(1) For non-household consumers, the electricity 
consumption band is ID (2 000 MWh to 19 999 MWh), 
and the gas consumption band is I4 (100 000 GJ to 999 
999 GJ). 
(2) VAT and recoverable charges are not displayed as 
these are typically recovered by businesses. 
(3) The price net of taxes is the retail price excluding all 
taxes and levies. It includes the energy/supply and 
network cost components, which are not disaggregated 
in Eurostat’s six-monthly price dataset. 
Source: Eurostat. 

Final  retail  prices  are  also  impacted  by 
taxes  and 
levies  disproportionately 
skewed  towards  electricity  compared 
with  gas,  particularly  for large firms.  For 
large firms, the electricity-to-gas price ratio is 
3.7 including taxes and levies, but it would be 
lower  (3.1)  without  taxes  and  levies.  While 
taxes  and  levies  paid  by  Italian  firms  for 
electricity  as  a  share  of  prices  was  the  third 
highest in the EU in the first half of 2025, the 
share  follows  the  EU  average  for  household 
consumers (also due to a denominator effect, 
as prices themselves are exceptionally high in 
Italy).  As  shown  also  in  Graph  3.1,  prices  are 
also  burdened  by  parafiscal  levies  which  are 
significantly  higher  for  electricity  compared 
firms (34).  This 
with  gas,  especially 
electrification, 
imbalance 

for 
disincentivises 

(34)  ECCO think tank, 2025, Energy taxation and fossil fuel 

especially in industry, and could be adjusted in 
a budget-neutral way.  

Strengthening the power grid to 
encourage decarbonisation 

from 

persistent 

constraints 

The electricity system would benefit from 
strengthening 
Italy’s  power  grid  and 
flexibility  through  faster  investments, 
streamlined  permitting,  and  deeper 
market  reforms.  Italy’s  electricity  system 
faces 
low 
interconnection,  grid  bottlenecks,  and  limited 
non-fossil  flexibility,  though  recent  reforms 
and investment plans are beginning to address 
them.  With  an  interconnection  rate  expected 
for this year slightly above 5% (35), among the 
EU’s  lowest  and  below  the  15%  target,  Italy 
experiences  high  wholesale  prices  and  limited 
renewable integration. Terna(36) manages over 
75 000 km of high voltage lines and 30 cross-
border  links.  It  plans  to  make  more  than 
EUR 23 billion  of  investments  by  2034  to 
transfer  capacity  by  15 GW  and 
boost 
least  additional  65 GW  of 
integrate  at 
renewables by 2030 and 94 GW by 2035 (37). 
Decree  Law  No 21/2026  (“DL  Bollette”)  aims 
to  fast-track  strategic  projects  and  shorten 
permitting  to  under  12  months.  Distribution 
networks  need  roughly  EUR  6  billion  annually 
integrate 
to  modernise, 
digitise, 
distributed 
second 
generation smart meters now reach over 95% 
of  households,  local  congestion  still  causes 
curtailment  and  grid  connection  delays. 
Heightened  competition 
to  be  promoted 
through  open  and  competitive  tenders  for 
concession  awards  would  help  attract  new 
investment  to  address  these  challenges  while 
limiting  the  impact  on  electricity  bills.  Recent 
reforms  favour  renewing  existing  distribution 
system  operator 
If 
(DSO) 
concession  renewal/extension  is  deemed  the 

renewables.  While 

concessions. 

and 

(35)  of  the  electricity  production  capacity  on  its  territory. 
Source:  European  Commission,  2026,  Electricity 
interconnection targets, Link. 

(36)  Terna S.p.A. is a transmission system operator (TSO). 

subsidies in Italy, Link. 

(37)  Terna, 2025, Esigenze di sviluppo: i nuovi progetti, Link. 

19 

00.050.10.150.20.25ItalyGermanyFranceSpainEuro areaItalyGermanyFranceSpainEuro areaElectricityGasEUR/kwhPrice net of taxesTaxes (VAT excluded) 
  
 
 
to  carry  out  urgent  grid 
only  option 
investments,  the  renewal/extension  should  be 
strictly  limited  to  the  period  needed  to  carry 
out  the  works  and  tied  to  investments  being 
cost-efficient. 
additional,  necessary  and 
Unbundling  obligations  and  monitoring  should 
also  be  reinforced.  Non-fossil  flexibility  is 
expanding  through  storage  auctions  (MACSE) 
and  the  TIDE (38)  framework,  which  opens 
provision  of  ancillary  services  to  demand 
response  and  aggregators.  Dynamic  contracts 
cover  15-20%  of  households,  supported  by 
1.2-1.5 million  prosumers (39)  and  energy 
communities,  though  electricity-to-gas  price 
imbalances  and  market  barriers  still  limit 
broader flexibility and electrification. 

could 

accelerate 

Specific  measures  targeted  at  industrial 
players 
their 
decarbonisation  while  shielding  them 
from  high  and  volatile  energy  prices. 
Around  18%  of  Italy’s  total  emissions  come 
from  manufacturing,  in  line  with  the  EU. 
However, since 2019, emissions have fallen by 
only 9%, below the EU average. More than two 
thirds  of  industrial  emissions  are  energy-
related,  among  the  highest  shares  in  the  EU, 
largely reflecting the heavy reliance on natural 
gas. The share of electricity and renewables in 
final  energy  consumption  in  manufacturing 
has  remained  broadly  stable  in  the  last  5 
years, standing at 41.6% in 2023 (EU average: 
44.8%).  In  2024,  energy-intensive  industries 
accounted  for  3.7%  of  Italy’s  gross  value 
added  and  remain  highly  exposed  to  energy 
costs,  with  their  production  declining  by  12% 
since  2021.  The  “Energy  Release  2.0”  scheme 
provides renewable energy to energy-intensive 
industries  under  contracts  for  difference  in 
in  additional 
investments 
exchange 
renewable  capacity.  The  uptake  of  power 
purchase  agreements  (PPAs)  remains  limited. 
Under  its  RRP,  Italy  adopted  legislation  aimed 
at  establishing  an  organised  market  for  long-
term  renewable  PPAs,  backed  by  the  energy 
services  operator  GSE  as  a  ‘guarantor  of  last 
The 
resort’, 

reduce 

credit 

risk. 

for 

to 

(38)  Testo Integrato del Dispacciamento Elettrico. 

(39)  End  users  who  produce  renewable  electricity  for  own 
consumption  and  can  store  or  sell  self-produced 
renewable electricity. 

operationalisation  of  the  platform  along  with 
2025  regulatory  changes  facilitating  PPA-
backed 
private 
investment in renewables and reduce exposure 
to fossil fuel price volatility. 

can  mobilise 

projects 

implement 

Italy’s  final  energy  consumption 
in 
industry  has  fallen  by  6.6%  since  2019, 
but  with  post-COVID-19  and  RRF 
financing  now  phased  out,  structural 
support  for  industrial  energy  efficiency 
remains  limited.  This  includes  the  need  to 
the  Energy  Efficiency 
fully 
Directive.  To  further  support  decarbonisation, 
Italy plans to increase the uptake of hydrogen 
in transport and hard-to-abate sectors, as well 
as  carbon  capture  and  storage  projects,  but 
both  require  public  subsidies  to  promote 
deployment.  The 
full  allocation  of  EU 
emissions  trading  system  (EU  ETS)  auction 
revenues  to  decarbonisation  projects  could 
provide a source of revenue in this sense. 

Italy 

investing 

in 
keeps 
While 
manufacturing  capacities  for  clean  and 
digital technologies, it remains dependent 
on  critical  raw  material  imports.  With 
significant  manufacturing  facilities  for  solar 
PV and wind energy, Italy is one of the leading 
EU  Member  States  for  clean  technologies. 
Additionally,  Italy  invests  in  digital  technology 
such  as  semiconductor  manufacturing  (see 
Annexes  4  and  5).  On  the  demand  side,  Italy 
has also been the first EU country to apply the 
Net  Zero  Industry  Act  resilience  criteria  to  a 
renewable  energy  auction,  to  diversify  supply 
sources  and  reducing  a  strategic  dependency. 
On critical 
Italy 
continues to rely on imports for a large share 
of its demand, but it has prioritised de-risking 
activities through a diversification of supply, a 
national  mapping,  increasing  research  and 
recycling investments (see Annexes 5 and 8). 

raw  materials,  however, 

Increasing economic security by 
addressing energy and trade 
dependencies 

Italy  is  working  to  diversify  its  energy 
supply,  reduce  consumption  and  support 

20 

 
 
the  national  market  but  supply  security 
risks  persist.  Despite  efforts  undertaken 
since  2021  to  replace  Russian  gas  imports, 
persisting  geopolitical  tensions  due  to  the 
recent conflict in the Middle East increases the 
need  for  Italy  to  further  diversify  its  energy 
supply.  Italy’s  Piano  Mattei’s  plan  to  develop 
economic  cooperation  with  African  countries 
and  investments  in  the  energy  sector  is 
four 
progressing,  with 
the 
additional 
(Gabon, 
Democratic  Republic  of  Congo,  Rwanda  and 
Zambia)  in  2026 (40).  In  parallel,  Italy’s  state-
controlled  ENI  has  announced  two  new  gas 
discoveries  in  Libya  reinforcing  a  strategic 
Mediterranean  supply  corridor (41).  Domestic 
gas  demand  dropped  by  approximately  18-
20%  between  August  2022  and  November 
2025,  thanks  to  energy  efficiency  measures 
and higher adoption of renewables (see Annex 
9). 

inclusion  of 
countries 

partner 

for 

challenge 

Rising  global  trade  uncertainty  poses  a 
export-driven 
major 
economies such as Italy. Italy is among the 
world’s leading exporters of goods, accounting 
for  30%  of  the  GDP,  while  Italy’s  trade 
diversification  (both  geographically  and  by 
product)  could  limit  the  impact  of  potential 
adverse  shocks.  Italian  exporters  are  active 
across  several  sectors.  These  include  metal 
and  non-metal  manufactured  materials, 
machinery  and  equipment  (including transport 
vehicles), textile, apparel and leather products, 
pharmaceuticals and chemicals, and food and 
drinks (42).  

Improving sustainable mobility 

Italy’s  transport  system  has  wide  scope 
to  improve  its  efficiency  and  energy 
performance.  High  reliance  on  road  use,  as 
shown by the highest motorisation rate in the 

(40)  Italian Government, 2026, Link. 

(41)  ENI, 2026, Link. 

flexible, 

services, 

transport 

EU (43) and a high share of freight transport by 
road,  is  a driver  of  the  high  road  fatality  rate 
and the high share of road transport in effort 
sharing  emissions  (see  Annexes  8  and  19). 
This  could  be  mitigated  by  further  developing 
public 
including  by 
complementing  scheduled  services  with  cost-
efficient 
transport-on-demand 
services  and  shared  mobility  schemes.  At  the 
same  time,  the  current  low  uptake  of  electric 
vehicles which made up only 6.2% of new car 
registrations  in  2025,  could  be  increased  by 
speeding  up  the  deployment  of  recharging 
infrastructure.  Redesigning  vehicle  taxation  to 
accurately  reflect  CO2  emissions,  with  the 
option  of 
local  flexibility  to  address  air 
pollution in heavily congested cities, could help 
to  finance  sustainable  mobility  infrastructure 
and  encourage  its  use.  On  company  cars,  the 
recent reform has increased tax incentives for 
electric and hybrid plug-in vehicles. 

Addressing climate risks 

Italy  is  one  of  the  EU  Member  States 
most  exposed  to  climate-related  risks 
due  to  the  country’s  hydrogeological 
vulnerability and an increasing number of 
extreme  climate  events.  The  2025  CSR 
called on Italy to address climate-related risks 
and  mitigate  their  economic  impact,  through 
more  institutional  coordination,  nature-based 
solutions and climate insurance coverage. Only 
recently, 
legislative  measures  have  been 
adopted,  such  as  the  December  2025  set  up 
of  the  National  Observatory  for  Climate 
Change Adaptation, which is tasked to improve 
institutional  coordination,  operationalise  the 
National  Adaptation  Plan  approved  in  2023, 
and  identify  sources  of  funding  for  climate 
change  adaptation.  Securing  funding  and 
consolidating  planning  for 
in 
climate  adaptation  and  the  reduction  of 
hydrogeological 
utmost 
importance,  given  the  country’s  investment 

investments 

risks 

are 

of 

(42)  Istat,  2025,  Commercio  estero  e  attività  internazionali 

delle imprese, Link. 

(43)  Eurostat, 2026, Passenger cars in the EU, Link. 

21 

 
 
 
needs  for  climate  adaptation  of  over  EUR  10 
billion per year up to 2050 (44) (see Annex 10).  

in 

is 

these 

highly 

vulnerable 

exacerbates 

increasing  trend 

Italy 
to 
hydrogeological  risks,  and  increased  soil 
sealing 
risks, 
highlighting the need for more systematic 
nature-based  solutions.  National  statistics 
in  2024  with 
show  an 
23 ha/day  of  soil  sealed  (compared  with 
2023) (45). 
20 ha/day 
Nature-based 
solutions  offer  a  strategic  opportunity  to 
Italy’s 
reverse 
vulnerability  to  hydrogeological  risks.  While 
such  solutions  are  increasingly  adopted  with 
the support of EU funding, they would further 
benefit  from  the  establishment  of  a  national 
inventory,  as  well  as  a  more  systematic 
integration  into  land  use  planning  (see  Annex 
10). 

trend  and  alleviate 

this 

natural 

catastrophes 

Italy  is  addressing  the  climate  insurance 
gap  by  introducing  mandatory  insurance 
for 
against 
companies,  with  a  gradual  roll  out  that 
started  in  2025.  Implementation  is  ongoing 
(see  Annex  10).  This 
includes  uptake, 
enforcement  monitoring  and  the  scheme’s 
impact  on  reducing  the  insurance  protection 
gap.  However,  an  insurance  protection  gap 
against 
for 
households remains  (46).  Given  that  Italy  has 
one  of  the  highest  ratios  of  natural  disaster 
damage to GDP in the EU (47), it is important to 
evaluate  approaches  in  order  to  address  the 
insurance  protection  gap  for  households, 
balancing  affordability  and  the  need  for 
climate adaptation.  

disasters 

natural 

(44)  European  Commission,  2026,  Assessment  of  EU  and 
Member States adaptation investment needs, Link. 

(45)  ISPRA, 2025, Consumo di suolo, dinamiche territoriali e 

servizi ecosistemici, Link. 

(46)  EIOPA,  2025,  Dashboard  on  insurance  protection  gap 

for natural catastrophes, Link. 

(47)  ECB and EIOPA, 2024, Towards a European system for 
natural  catastrophe  risk  management,  Chart  2,  p.  8, 
Link. 

Addressing infrastructure gaps in 
water and waste management 

initiatives 

improving 

Infrastructure gaps remain in central and 
southern  regions,  creating  inefficiencies 
in  waste  and  water  management  and 
increasing  costs  for  individuals.  When  it 
comes to circularity, Italy performs strongly on 
the circular material use rate, reaching 21.6% 
in 2024, the third highest in the EU. Resource 
productivity is also well above the EU average 
(see Annex 8). On waste management, the RRP 
and  cohesion  policy  funds  have  financed 
several 
improve  collection, 
to 
recycling, and treatment of waste, contributing 
to  increasing  recycling  rates  and  reducing 
landfill  and  incineration.  Regional  gaps  are 
being  narrowed (48)  but  persist,  affecting 
individuals  (see  Annexes  8  and  18).  Reducing 
infrastructure gaps in the central and southern 
regions  and 
separate  waste 
collection,  including  improving  organic  waste 
treatment  and  collection  and  recycling  of 
waste from electrical and electronic equipment 
(WEEE) 
improving  waste 
to 
management.  On  water  management,  it  is 
crucial  to  implement  the  national  plan  for 
infrastructure and security in the water sector 
(PNIISSI), while also advancing efforts to track 
collectively 
water  usage 
managed  irrigation  in  the  dedicated  system. 
These  measures  are  essential  for  closing  the 
infrastructure  gaps  in  central  and  southern 
Italy,  while  building  on  progress  made  under 
the  RRP  and  cohesion  policy  programmes. 
Further  steps  are  needed,  particularly  in  the 
southern 
service 
to 
the 
includes 
operators. 
designation  of  single  integrated  water  service 
operators  across  all  relevant  territorial  areas 
to  ensure  effective  governance  (see  Annexes 
10 and 18).  

region, 
This 

volumes  and 

consolidate 

finalising 

key 

is 

(48)  See  ISPRA  (2025).  Rapporto  Rifiuti  Urbani,  edizione 

2025. 

22 

 
 
 
SKILLS, QUALITY JOBS AND SOCIAL FAIRNESS 

support 

In  2025,  Italy  received  country-specific 
recommendations  (CSRs)  to  promote  job 
quality, 
adequate  wages, 
encourage labour market participation, as 
well as mitigate the demographic decline, 
tackle  undeclared  work,  reduce  skills 
mismatches, 
educational 
improve 
outcomes  and  review  housing-related 
policies. With the support of the Recovery and 
Resilience  Fund  (RRF),  several  measures  have 
been 
these 
address 
challenges, but more effort is needed.  

implemented 

to 

and 

Demographic 
competitiveness 
challenges  call  for  breaking  the  low-
productivity 
low-wage  growth  circle, 
together  with  targeted  investments  in 
lifelong  learning  and  healthcare.  Italy’s 
labour  market  has  seen  further  progress  in 
participation  and  employment,  particularly  in 
the  southern  regions,  which,  however,  remain 
significantly  below  national  averages.  Yet, 
these gains have occurred in labour-intensive, 
low-productivity  sectors  and  have  not  been 
matched  by  progress  in  wages  or  job  quality. 
Mounting  demographic  pressures  will  require 
continued and robust growth in labour market 
participation  and  parallel  productivity  gains 
across  the  country.  This  calls  for  a  policy 
framework  that  supports 
innovation-driven 
growth  (see  Chapter  2)  as  well  as  gradual 
job  quality. 
in  wages  and 
improvements 
Closing the labour market participation gaps of 
underrepresented 
require 
sustained,  targeted  actions,  and  could  help 
Italy reach its 2030 employment rate target of 
73%.  Boosting  competitiveness  will  also 
require  substantial  investments  in  education 
and  training  and  addressing  skills  mismatch. 
Based on demographic trends, a more resilient 
healthcare 
essential, 
system  will 
particularly in southern Italy. 

groups 

will 

be 

23 

Addressing low wages, improving 
job quality and boosting 
participation of women and young 
people 

in 

Amid  demographic  change,  women  and 
the 
young  people’s  participation 
workforce  remains  the  lowest  in  the  EU. 
Despite  recent  progress,  in  2025  Italy  still 
recorded  the  lowest  participation  rate  overall, 
driven  by  women  (57.8%)  and  young  people 
aged  15-29  (38.6%),  both  marked  by  large 
regional disparities. Women’s low participation 
is linked to uneven availability of childcare and 
long-term  care  (LTC)  services.  Italy  made 
some  progress  in  addressing  the  CSR  to 
increase 
labour  market  participation,  also 
thanks to the RRP, but further effort is needed. 
While  the  availability  of  childcare  places  is 
increasing,  the  low  share  of  women  in  the 
workforce  is  still  linked  to  regional  disparities 
in  their  access,  as  well  as  to  increasing 
domestic long-term care (LTC)  responsibilities. 
Working  conditions  in  professional  LTC  are 
deteriorating,  fuelling  staff  shortages  and 
limiting  access  to  services  (see  Annex  11). 
Childcare and LTC often entail significant out-
of-pocket  costs,  which  limit  accessibility  and, 
together  with 
low  wages, 
structurally 
discourage  women  from  working.  Providing 
affordable  services  nationwide  and  promoting 
flexible  work  arrangements,  which  remain 
limited,  are  key 
increasing  women’s 
participation in the workforce. Additionally, the 
extension  of  parental  leave  benefits  is  a 
positive  step,  yet  additional  measures  are 
required  to  promote  a  more  balanced  uptake 
between  genders  and  to  further  extend 
paternity  leave.  While  the  share  of  young 
people neither in employment nor education or 
training 
youth 
(NEETs)  has  decreased, 
employment remains low and is declining (see 
Annex  11).  Aligning  the  tertiary  education 
labour  market  needs  and 
system  with 

to 

 
 
employability. 

secondary-to-tertiary  orientation  are  key  to 
improve 
The  Guaranteed 
Employability  of  Workers  (GOL)  programme 
under  the  RRF  has  supported  more  than 
3 million  job  seekers (49)  but  has  been  less 
effective  in  reaching  those  farthest  from  the 
labour  market,  such  as  women  and  young 
people  in  the  southern  regions.  The  recent 
scale-up  of  the  Labour  Inclusion  Information 
System (SIISL) is a step forward in addressing 
labour mismatch. However, as the RRF reaches 
its  conclusion,  the  reformed  system  of  active 
labour  market  policies  (ALMPs)  needs  stable 
funding,  careful  monitoring,  and  strengthened 
outreach mechanisms. 

Labour  market  segmentation  and  long 
working hours reduce job quality. In 2025, 
atypical  work  remained  common:  11.3%  of 
workers  had  involuntary  temporary  contracts 
and  8.5%  were  in  involuntary  part-time  roles, 
well  above  EU  averages  of  6.4%  and  3.3%. 
Among  part-time  workers,  over  half  faced 
involuntary  reductions in hours  (17.8 % in the 
EU),  while  more  than  80%  of  those 
in 
temporary  jobs would  have preferred  to be in 
permanent ones (49.9% in the EU) (see Annex 
11).  Atypical  contracts  pose  challenges  to 
employment  and  wage  stability,  affect 
outcomes  of  already  disadvantaged  groups 
and 
limit  productivity  gains  from  human 
capital accumulation. Working atypical hours is 
more  common  in  Italy  than  in  the  rest  of  the 
EU, with a higher share of employees working 
long hours and on weekends. The 2026 Budget 
convert 
Law 
temporary 
close 
monitoring. More effort is also needed to limit 
the  abuse  of  on-call  work  and  of  repeated 
internships  and  apprenticeships.  Overall,  Italy 
has  made  limited  progress  in  addressing  the 
labour  market 
2025  CSR 
reduce 
segmentation.  Legislation 
the 
such  as 
“Collegato Lavoro” risks exacerbating the issue 
by further protecting incumbent workers while 
expanding  temporary  and  hybrid  forms  of 
work.  

to 
requiring 

introduced 

incentives 

contracts, 

to 

inflation. 

cumulative 

reinforces  a  low-wage,  low-productivity 
circle,  which 
limits  competitiveness. 
Despite  lower  inflation  and  nominal  wage 
growth  of  3%,  the  1%  rise  in  real  wages  in 
2025 failed to recover previous losses, leaving 
real  wages  nearly  3%  below  2019  levels. 
According to national statistics, between 2015 
and 2025, private sector wages rose by 20.8% 
and  public  sector  ones  by  16.1%,  against 
24.2% 
Stagnant 
productivity  continues  to  limit  wage  growth, 
while  low  job  quality  and  wages  fuel  a  low-
productivity,  low-wage  trap  and  discourages 
labour  market  participation.  In  recent  years, 
the  relatively  lower  cost  of  labour  led  Italy’s 
production  system  to  use  the  labour  factor 
more than capital, leading to the expansion of 
low-added 
labour-intensive 
industries (50).  Strengthening  competitiveness 
calls  for  a  policy  framework  that  supports 
innovation-driven  growth  alongside  gradual 
improvements  in  wages  and  job  quality.  Low 
work  intensity  also  raises  in-work  poverty 
in  2025. 
risks,  which  slightly  decreased 
Families  with  children  are  especially  affected, 
contributing  to  high  child  poverty  rates  (see 
Annex 12). 

value 

and 

limit 

dumping 

Weaknesses  in  the  collective  bargaining 
system slow wage growth and exacerbate 
segmentation.  Delays  in  contract  renewals, 
the limited use of second-level bargaining and 
contractual 
real  wage 
growth (51).  By  the  end  of  2025,  42.2%  of 
workers  were  on  expired  contracts,  with  an 
average  18.2  month  wait (52).  To  address  the 
issue  of  delays  in  contract  renewals,  decree-
law 62/2026 foresees a provisional wage rise 
if  collective  agreements  are  not  renewed 
within one year of expiry. The provisional wage 
increase  is  set  at  30%  of  the  variation in  the 
Harmonised 
Index  of  Consumer  Prices 
excluding  imported  energy  prices.  However, 
since  persistent  delays  are  associated  with 
losses  in  purchasing  power,  enforcing  timely 

Slow wage growth and low work intensity 
in-work  poverty  and 
contribute 

to 

(50)  CNEL, Comitato Nazionale sulla Produttività, Rapporto 

annuale sulla produttività 2025. 

(51)  CNEL,  XXVI 

rapporto  Mercato 

del 

lavoro 

e 

Contrattazione collettiva, 2025. 

(52)  ISTAT,  Contratti  collettivi  e  retribuzioni  contrattuali, 

(49)  INAPP, Attuazione del programma GOL, 2025. 

2026. 

24 

 
 
 
for 

to  account 

for  SME  workers, 

contract  renewals  remains  key.  Second-level 
bargaining  remains  limited,  with  large  firms 
covering 76.2% of agreements and SMEs only 
23.8%.  Most  agreements  are  signed  in  the 
North.  In  the  South,  where  SMEs  prevail, 
territorial  bargaining is more widespread than 
firm-level bargaining, but overall, still lags well 
behind  the  North (53).  Strengthening  territorial 
bargaining  could  particularly  support  wage 
growth 
including  by 
introducing  supplementary  variable  wage 
components 
local  price 
variations  and  streamlining  certification  for 
tax-deductions. 
In  2024,  214  collective 
agreements signed with major unions covered 
96% of workers, while 803 contracts signed by 
smaller  unions  covered  4%.  The  contracts 
signed  by  smaller  unions  typically  feature 
lower wage floors and poor working conditions. 
They are more widespread in the south and in 
lower-skilled  sectors  and  often  cover  women, 
workers (54), 
part-time 
exacerbating 
regional 
disparities.  While  limited  in  coverage,  they 
indirect  downward  pressure  on  all 
exert 
negotiated  salaries.  To  strengthen  industrial 
relations,  Italy  would  benefit  from  greater 
transparency  and  continuous  monitoring  of 
less  representative  agreements,  as  well  as 
appropriate  enforcement  procedures  to  tackle 
underpayment 
non-compliance, 
and 
particularly in the light of decree-law 62/2026. 

low-paid 
segmentation  and 

and 

Widespread  undeclared  work  undermines 
job  quality  and  fair  competition,  while 
enabling  non-compliant  firms  to  persist 
with  low-productivity  strategies.  In  2023, 
undeclared work concerned about 3.13 million 
full-time equivalent jobs, up 4.9% from 2022, 
with  a  12.7%  irregular  work  rate (55).  It  is 
concentrated in labour-intensive services, such 
as  personal  services,  which  together  account 
for  about  62%  of  undeclared  work,  and  is 
sometimes  combined  with  atypical  contracts 
such as on-call work. By evading taxes, social 

(53)  INAPP,  Wages,  tax  policies,  and  industrial  relations  in 

Italy, 2026. 

(54)  Dustmann  &  others,  Opting  Out  of  Centralized 

Collective Bargaining: Evidence from Italy, 2025. 

(55)  Estimates  by  ISTAT,  Economia  non  osservata  nei  conti 

nazionali - Anni 2020-2023, October 2025. 

can 

firms 

tackle 

standards, 

undeclared  work  with 

security  contributions  and  collectively  agreed 
minimum 
lower 
production costs and gain an unfair advantage. 
These  distortions  weaken  market  competition 
and  reduce  incentives  to  invest  in  innovation 
and training, ultimately hampering productivity 
growth. Italy is moving in the right direction to 
address  the  2025  CSR  on  maintaining  efforts 
the 
to 
strengthened  enforcement  under  the  RRP’s 
National  Plan  Tackling  Undeclared  Work. 
Inspections  rose  to  over  158 000 in  2025,  up 
42% on 2024. However, staff shortages linked 
to  relatively  low  pay  and  working  conditions 
limit  enforcement,  especially  in  the  northern 
regions  and  Sicily. 
lack 
Increasing  data-
administrative 
sharing  across  all  entities  carrying  out 
inspections  would  improve  coordination.  A 
public  register  of  companies  that  violate 
labour law, linked with limited access to public 
funding,  could  increase  deterrence.  Effective 
preventive  measures  would  also  be  beneficial 
in sectors such as care work and agriculture.  

Inspectors  also 

support. 

It  occurs 

Labour  exploitation  pushes  down  wages 
and  traps  many  in  poverty  and  social 
in  sectors  such  as 
exclusion. 
agriculture,  logistics,  retail,  food  delivery  and 
textiles.  Many  victims  live  in  overcrowded 
employer-provided  housing  without  basic 
services  (see  Annex  12).  Weaknesses  in  the 
migration system contribute to exploitation, as 
intermediaries  charge  migrants  large  fees  for 
promised  jobs,  but  employers  are  not  legally 
required  to  hire  them,  and  migration  offices 
lack staff to check applications. In 2025, while 
181 450 work entries were envisaged (70 720 
for  non-seasonal  workers), 
received 
applications  for  222  617  workers.  A  total  of 
49  762  applications  were  approved  with  the 
release  of  a  six-month  entry  permit  (nulla 
osta).  Nevertheless,  only  14 349  residence 
in  many 
permits  were 
migrants  accepting  irregular  and  underpaid 
work  to  repay  debts,  while  fear  of  expulsion 
prevents  victims  from  contacting  authorities. 
Protection  for  victims  could  be  strengthened, 
including  by 
improving  checks  on  permit 
applications  and  increasing  use  of  special 
residence permits (56) and professional cultural 

resulting 

issued, 

Italy 

(56)  Legislative decree 25 July 1998, n. 286, art. 18-ter. 

25 

 
 
 
mediators  in  inspections  and  outreach.  To 
address  the  root  causes,  entry  permits  could 
be  linked  to  real  employment  or  job  search, 
while 
regular 
employment for those already in Italy. 

removing 

barriers 

to 

Addressing educational gaps and 
skills mismatches   

outcomes, 

particularly 

RRF-funded 

investments 

Educational  outcomes  in  Italy  remain 
poor  and  uneven,  with  disparities  across 
regions  and  socio-economic  backgrounds. 
Learning outcomes have not recovered to pre-
COVID-19 pandemic levels and remain fragile, 
especially  in  mathematics,  with  stark  regional 
disparities.  In  the  south,  46%  of  pupils  fail  to 
achieve  basic  proficiency,  and  disadvantaged 
students are around three times more likely to 
underperform  than  their  advantaged  peers 
(see  Annex  13).  Italy  made  some  progress  in 
improving 
addressing 
its  2025  CSR  on 
for 
educational 
students.  Measures  have 
disadvantaged 
included 
to 
strengthen  basic  skills,  combat  educational 
poverty,  reduce  drop-out  rates,  and  address 
regional  disparities,  alongside  programmes  to 
promote 
and 
language  skills  and 
Mathematics 
innovative teaching methods. However, a more 
structural 
RRF 
investments  could  be  leveraged  to  reform 
teaching  methods,  also  by  harnessing  digital 
tools,  and  enhancing  the  teaching  profession. 
Similarly,  further  efforts  could  strengthen  the 
implementation  of  a  skills-based  approach 
integrating basic and transversal competences, 
building  on  the  new  national  guidelines  (DM 
to  pre-primary, 
221/2025)  which  apply 
primary  and 
settings. 
Following  preliminary  positive  results,  further 
monitoring  of  the  4-Year  Highschool  Reform 
pilot  will  also  be  key.  Greater  focus  and 
targeted action aimed at the worst-performing 
schools  could  help  Italy  to  address  its  socio-
economic and territorial inequalities. 

Sciences, 
(STEM) 

Technology 

secondary 

approach 

needed. 

lower 

is 

The  attractiveness  of 
teaching 
profession  is  key  to  improve  educational 
outcomes.  Despite  overall  spending  per 
student  being  close  to  the  OECD  average, 

the 

26 

to 

Italian teachers’ salaries remain relatively low 
compared  with  both  EU  and  OECD  averages 
and  to  tertiary-educated  workers  in  Italy.  The 
RRP’s  recruitment  reform addresses the  2025 
improve  educational  outcomes, 
CSR 
specifically  on  the  attractiveness  of  the 
teaching  profession,  and  goes  in  the  right 
direction,  but  lengthy  and  complex  hiring 
procedures  limit  schools’  ability  to  attract 
qualified  candidates.  As  a  large  share  of 
teachers  will  retire  over  the  coming  decade, 
strengthening 
the 
profession  is  key.  More  stable  employment 
conditions,  a  clear 
link  between  salaries, 
qualifications  and  performance,  as  well  as 
enhanced  professional  development  and 
mobility could help attract and retain qualified 
teachers. 

the  attractiveness  of 

the 

hinder 

employment 

Weaknesses  in  the  tertiary  education 
and 
system 
productivity growth, calling for structural 
reform.  Although  the  share  of  18-34-years-
old enrolled in tertiary education in both 2016 
and  2021  was  around  EU  average,  by  2025 
Italy’s share of 25-34-year-olds with a tertiary 
qualification remained the EU’s second lowest 
(IT:  31.1%,  EU:  44.8%).  This  is  linked  to  long 
graduation  times,  high  drop-out  rates,  low 
return  on  education,  and  skills  mismatch, 
which  have  important  implications  on  youth 
employment and productivity. In 2023, 43.8% 
of  Italian  students  failed  to  complete  their 
bachelor’s  degree  within 
theoretical 
duration  plus  3  years  (EU25:  32.5%).  They 
face  comparatively  high  drop-out  rates  and 
the  lowest  employment  rate  among  recent 
graduates  (77.8%  vs  EU  86.7%,  in  2024), 
while  40%  worked  in  jobs  unrelated  to  their 
studies. Additionally, Italy’s university teaching 
staff  is  the  oldest  in  the  EU,  associated  with 
less  innovative  teaching  methods,  curricula 
and use of technology (56.2 vs 39.6 years old 
in 2021). Under the RRF, Italy has taken some 
steps  to  address  these  challenges.  The  RRP’s 
reform of university degree courses, once fully 
rolled  out,  will  enable  greater  curriculum 
personalisation  and  alignment  with  emerging 
skills needs. However, stark challenges remain 
unaddressed. Reforming the university system 
to  eliminate  disincentives  such  as  free  exam 
retakes,  no  mandatory  minimum  annual 
credits  completion,  and  no  class  attendance 

 
services 

combining 

“Supporto 
protection  measures,  such  as 
Formazione  e  Lavoro”  income  support  or  the 
reduction of care duties, needs to be assessed 
against  other  models,  such  as  territorial 
experiments on individual learning accounts or 
further  reforms  of  work-based  learning (59). 
Information  gaps,  particularly  on  employment 
returns to training, are also a barrier, stressing 
the importance of aligning training offers with 
real 
labour  market  opportunities  and  of 
providing  effective  tailored  guidance  (60).  The 
GOL  programme  has  reformed  the  ALMP 
system  in  the  right  direction  by  introducing 
minimum 
training, 
unemployment  and  social  services,  and 
tailored  jobseeker  assessment.  However,  it  is 
important  to  ensure  the  sustainability  of  the 
system,  while  focusing  investment  on  less 
effective  PES,  particularly  in  certain  regions. 
Improving skills intelligence and forecasting is 
also key. Regional observatories would benefit 
from  a  national  integrated  system,  which 
informs  and  is  informed  by  data  on  local 
labour  markets  and  exploiting  AI  tools.  The 
governance  model  of  skills  forecasting  and 
provision  could  also  be  improved  by  placing 
training effectiveness and quality assurance at 
its  core  and  through  tighter  cooperation 
among education and training providers, social 
partners  and  employers,  building  on  the 
successful 
“Fondi 
Interprofessionali”.  This  approach  could  help 
Italy  reach  its  2030  target  of  60%  of  adults 
participating in training. 

experience 

of 

Reducing poverty and inequality 

self-employed, 

Limited  social  protection  for  people  who 
are 
or 
inactive  leaves  them  more  vulnerable  to 
poverty.  Italy’s  share  of  people  at  risk  of 
poverty or social exclusion  decreased in 2025 

unemployed 

(59)  Some experts suggest for instance introducing a model 
for adults’ apprenticeships similar to the Danish model, 
Link.  

(60)  Alexia  Delfino,  Andrea  Garnero,  Sergio  Inferrera,  Marco 
to 
Real-World 
(2026), 

Leonardi,  and  Raffaella  Sadun, 
Reskill? Experimental 
Jobseekers,"  NBER  Working  Paper  34633 
https://doi.org/10.3386/w34633.  

"Unwilling 

Evidence 

from 

financing  criteria 

requirements  would  help  reduce  the  drop-out 
rate  and  graduation  delays.  Linking  ANVUR(57) 
university 
to  students’ 
courses  evaluations  and  completion  rates 
would  also  be  key.  Improving  secondary-to-
tertiary  career  guidance  and  promotion  of 
STEM  fields,  especially  among  women,  would 
reduce skills mismatches. Employability would 
further  benefit  from  reforming  curricula  and 
teaching  methods  to  incorporate  transversal 
and  work-oriented  skills,  and  mandatory 
internships during university studies. 

Against  the  background  of  a  shrinking 
labour  force,  it  is  key  to  boost  both  the 
quantity  and  the  quality  of  human 
low, 
capital.  Adults’  basic  skills  remain 
macroeconomic  skills  mismatches  are  among 
the highest in the EU,  while  low and declining 
learning  hampers 
in 
adult  participation 
adequate  up-  and  reskilling  (see  Annexes  11 
and  13).  Under  the  RRF,  important  measures 
have  been  implemented  to  address  the  2025 
CSR  on  post-secondary  vocational  education 
and training (VET) and adult training. By 2025, 
the  GOL  programme 
trained  more  than 
600 000 jobseekers, more than 60% of whom 
in  digital  skills (58).  Other  programmes  are 
expected 
“Fondo  Nuove 
Competenze” is supporting on-the-job training; 
the  “New  Skills  Plan–Transitions”  reinforces 
“Crescere 
skills  provision  and  portability; 
Green”  trained  more  than  20 000  people  in 
green  skills.  However, the training  governance 
remains  fragmented  and  recent  investments 
to  strengthen  Public  Employment  Services 
(PES)  have  not  offset  regional  disparities. 
Given  its  strong  link  to  employability,  Italian 
VET  students  would  benefit  from  increasing 
work-based learning (see Annex 13), which still 
ranks among the lowest in the EU. 

to  boost  skills. 

Training uptake, notably for reskilling and 
longer programmes, is hampered  both  by 
monetary  and  non-monetary  constraints. 
social 
The  adequacy  of  accompanying 

(57)  ANVUR is the Italian national agency that evaluates the 
quality of universities and research institutes in Italy 

(58)  INAPP (2026), Focus N. 17, “Attuazione del programma 
GOL garanzia di occupabilità dei lavoratori, Nota di 
monitoraggio (dati al 31/12/2025)”. 

27 

 
 
 
people 

represent  13.4% 

but  remains  among  the  highest  in  the  EU 
(22.6%  in  2025),  particularly  for  children 
(27.1%).  While  the  impact  of  social  transfers 
on poverty reduction is above the EU  average 
for  employees,  it  is  lower  for  people  who  are 
self-employed,  unemployed  or  inactive.  Self-
employed 
of 
employed  people  (9.3%  in  the  EU).  Around 
18%  of  them  depend  on  only  one  client, 
making  them  particularly  vulnerable.  A  high 
proportion  of them lack formal  entitlement to 
several  benefits  (see  Annex  12).  However, 
people  who  are  unemployed  or  non-standard 
workers  can  receive  limited  protection,  as  the 
duration  of  unemployment  benefits  depends 
on time worked, and one-quarter of temporary 
contracts  last  less  than  six  months.  After 
benefits  expire,  many  cannot  access  the 
income  scheme (61). 
minimum 
Insufficient 
social  protection  heightens  poverty  risks  and 
exacerbates  skills  mismatches.  By  contrast, 
adequate 
income  support  would  enable 
workers  to  seek  jobs  suited  to  their  skills, 
attend 
pursue  mobility 
and 
opportunities (62).  While  Italy  is  on  track  to 
meet  its  2030  poverty  reduction  target  of 
lifting  3.2  million  people  out  of  poverty 
(compared  with  2019  levels),  sustained  and 
comprehensive  anti-poverty  policies  in  line 
with  the  EU  anti-poverty  strategy  remain 
essential 
to  ensure  continued  progress. 
Expanding access to social protection is also a 
key  element  of  job  quality.  Expanding  it  for 
self-employed  workers,  improving  coverage 
for  non-standard  workers  and 
reviewing 
benefit  levels  and  duration  could  support 
better labour market transitions and help Italy 
achieve  its  poverty  reduction  target.  To  tackle 
child poverty specifically, among the highest in 
the  EU (see  Annex  12), more  effort  is  needed 
to fully implement the Child Guarantee. 

training, 

(61)  See 2025 country report. 

(62)  OECD  (2019),  OECD  Employment  Outlook  2019:  The 
Paris. 

Future 
https://doi.org/10.1787/9ee00155-en.  

of  Work, 

Publishing, 

OECD 

Graph 4.1: Social protection spending IT and 
EU-27 - % composition 

Source: European Commission 

Territorial  disparities  in  public  services 
for  policy  attention.  Disparities 
call 
between  the  northern  and  southern  regions 
persist  in  areas  such  as  healthcare,  child  and 
long-term  care,  as  well  as  in  administrative 
capacity.  For  instance,  the  coverage  of  public 
childcare  ranges  from  over  40%  in  Umbria, 
Emilia  Romagna,  and  Valle  d’Aosta  to  less 
than  12%  in  Campania  and  Calabria.  As  for 
LTC  services,  the  offer  ranges  from  10  beds 
per 1 000 residents compared with the North-
East  to  just  3  per  1 000  in  the  South  (see 
2025  CSR).  Despite  the  RRP  and  the  cohesion 
funds infrastructural investment, the ability of 
municipalities  to  finance  current  spending, 
including to operate new infrastructure, puts a 
constraint  on  capital  investment,  especially  in 
the  south.  There  are  still  wide  gaps  between 
municipalities  in  terms  of  minimum  levels  of 
service  (LEP).  Most  southern  regions  are  also 
significantly 
the 
of 
implementation 
assistance  (LEA)  in  healthcare,  with  some 
regions  striving  to  supply  minimum 
level 
services  in  primary  care,  hospital  access  and 
prevention,  causing  an  increase  in  healthcare 
migration  from  the  southern  to  the  northern 
regions (see Annex 15). The implementation of 
the  differentiated  autonomy  reform  has  been 
stopped  by 
in 
December  2024,  which  ruled  that  several 
aspects of the framework law adopted in June 
2024  were  unconstitutional.  Efforts  are  still 
ongoing to address the concerns raised by the 
Court,  including  for  the  preliminary  definition 
of  "essential  levels  of  service".  The  reform 
warrants  close  monitoring  in  the  light  of  its 
possible  structural  effects  on  the  national 
fiscal framework and regional disparities. 

underperforming 
essential 

the  Constitutional  Court 

in 
levels 

of 

28 

0,010,020,030,040,050,060,070,080,090,0100,02019202320192023ITALYEU27PensionsSickness and disabilityFamily and childrenUnemploymentHousingOther 
 
   
groups, 

Social  services  for  the  most  vulnerable 
groups are hindered by underfunding and 
a lack of measurable targets. Italy has 23 
social  workers  per  100 000  inhabitants,  well 
below  other  EU  Member  States (63).  Adequate 
Essential  Levels  of  Social  Assistance (64)  are 
key  to  reduce  social  exclusion  for  the  most 
vulnerable 
including  migrants, 
homeless  people,  and  Roma  people.  However, 
their  delivery  depends  heavily  on 
local 
capacity,  leading  to  large  regional  disparities. 
At the end of 2024, 80.3% of municipalities in 
the north could guarantee 1 social worker per 
5 000 residents, compared with only 46.3% in 
the  south,  where  over  72%  of  minimum 
income recipients live (65). Moreover, municipal 
spending  on  social  services  increased  in  the 
centre and the north between 2010 and 2021 
but declined in the south (66). National funding 
for  social  assistance  services  is  complex  and 
often  unpredictable,  as  it  relies  on  around  20 
different  funds  and 
is  often  based  on 
temporary  calls  for  applications.  Clear  and 
measurable  service  objectives  are  often 
missing, and monitoring systems exist only for 
a  subset  of  services.  Moreover,  national 
coordination  of  social  assistance  should  be 
improved, as responsibilities are spread across 
several  ministries.  A  properly 
resourced 
common  national  fund,  allocated  based  on 
standard  costs  and  spending  needs,  could 
targets, 
financing.  Clear  service 
simplify 
stronger monitoring and better coordination at 
national 
level  could  also  support  more 
consistent implementation  across  the country, 
together  with  effective  incentives  for  local 
authorities  and  corrective  actions  when 
standards are not met. 

High inequality is exacerbated by unequal 
access  to  tertiary  education,  limiting 

(63)  European  Social  Network,  European  Social  Services 

Index 2025 – Cross-country analysis, 2025. 

(64)  Livelli Essenziali delle Prestazioni Sociali, which include 
home care for the elderly, the multi-dimensional needs 
assessment for minimum income recipients, parenting 
support to prevent family separation, and more. 

(65)  INPS 2026, Osservatorio su assegno d’inclusione e 

supporto formazione e lavoro. 

(66)  Laura  Pelliccia,  Quali  risorse  per  i  LEPS?,  Prospettive 

Sociali e Sanitarie, Issue 1-2, 2025. 

linked 

social  mobility.  Income  inequality  is  among 
the  highest  in  the  EU,  fuelled  by  the  low 
redistributive  impact  of  taxes  and  benefits 
(see Section 1 and Annex 12)  and by unequal 
access  to  housing,  healthcare,  and  education. 
Increasing the progressivity  of the  tax system 
(see  Section  1).  At  primary  and 
is  key 
secondary  school 
territorial 
level,  stark 
disparities impact families’ capacity to sustain 
costs 
(e.g.  books, 
to  education 
transport),  with  fragmented  rules  established 
at  municipal 
level  on  co-payments  and 
exemptions.  At  tertiary  level,  Italy  still  has 
some  of  the  highest  tuition  fees  in  the  EU, 
while  the  maximum  need-based  grant  is  well 
below the poverty threshold (67). In addition to 
high  student  housing  costs,  this  leads  to  a 
strong  relationship  between  the  educational 
attainment  level  of  parents  and  children, 
limiting  social  mobility  (see  Annex  13).  This 
hinders  equal  opportunities  and  results  in 
under-used 
talent.  Reduced  poverty  and 
inequality  would  enhance  human  capital  and 
labour  market  inclusion  and  in  turn  boost 
competitiveness. 

Addressing  these  challenges  will  help 
Italy  boost  upward  social  convergence. 
The  second-stage  analysis  in  line  with  the 
Social  Convergence  Framework  points 
to 
challenges  for  Italy  that  may  affect  social 
convergence  in  relation  to  its  labour  market, 
education  and  skills  as  well  as  its  social 
situation (68).  

Improving access to healthcare  

In  2024,  9.9%  of 

Access  to  healthcare  has  declined  in 
recent  years. 
the 
population  (up  from  6.3%  in  2019)  reported 
forgoing  necessary  medical  care  (ISTAT),  and 
6.8%  cited  the  long  waiting  lists  as  the  main 
reason (up from 2.8% in 2019). Moreover, out-
of-pocket spending is significantly higher than 

(67)  See Eurydice. 

(68)  European  Commission,  SWD(2026)  122.  The  analysis 
relies  on  all  the  available  quantitative  and  qualitative 
evidence  and  the  policy  response  undertaken  and 
planned. 

29 

 
 
 
in 

the  EU  average  (23.7%  vs  14.9%  of  total 
health spending in 2023). This burden may be 
underestimated, given rising financial hardship 
in  Italy,  which  may  in  turn  likely  lead  to  an 
increasing  number  of  patients  to  forgo  care 
due  to  excessive  costs  (see  Annex  15).  These 
challenges can be attributed to several factors, 
including 
in  some  cases  overprescription, 
organisational  bottlenecks  and,  in  particular, 
shortages 
the  healthcare  workforce, 
especially  in  the  national  healthcare  service. 
Italy records one of the lowest nurse-to-doctor 
ratios  in  the  EU,  increasing  shortages  of 
general  practitioners,  and  persistent  unfilled 
positions in key medical specialties (see Annex 
15).  Combined  with  rapid  population  ageing 
and  strong  regional  disparities,  with  a  more 
critical  situation  in  the  south,  these  trends 
threaten  the  long-term  sustainability  of  the 
healthcare  system  and  create  additional 
barriers to timely and fair access to care. 

The  government  has  taken  initial  steps, 
but  additional  efforts  are  needed  to 
ensure the efficacy and efficiency of the 
healthcare  system.  The  Italian  government 
is implementing the 2022 territorial healthcare 
reform under the RRP, a reform of healthcare 
professions, and a national plan for managing 
waiting  lists.  The  full  implementation  of  the 
territorial  healthcare  reform  especially  in  the 
south, and its alignment with the 2015 reform 
on the reorganisation of the hospital system is 
key  to  ensure  a  more  efficient  and  cost-
effective healthcare system. It is essential that 
the  comprehensive  implementation  of  the 
is  accompanied  by  measures  to 
reform 
address 
key  professions, 
in 
particularly nurses and GPs. The attractiveness 
improved 
of  these  professions  could  be 
through  economic  and  career 
incentives, 
reducing  administrative  burden  and  better 
aligning  the  specialisation  courses  with  the 
national  healthcare  service  needs.  Additional 
gains  could  also  arise  from  the  complete 
the 
digitalisation  and 
of 
healthcare 
overprescription (especially in pharmaceuticals 
full 
and  diagnostic 
implementation 
list 
management plan. 

interoperability  of 
reduction 

the 
the  waiting 

exams),  and 
of 

shortages 

system, 

the 

Re-thinking housing-related 
policies 

Some Italian cities are characterised by a 
mismatch  between  the  cost  of  housing 
and  the  average  wages.  In  particular,  rents 
in  many  northern  and  central  metropolitan 
areas  are  disproportionately  high  compared 
with  local  wages  and  productivity.  This  may 
hinder  labour  mobility  and  lead  to  labour 
shortages (69).  In  2024,  24.1 %  of  households 
were  tenants  (compared  with  31.6%  in  the 
EU),  of  which  around  6%  occupied  a  flat  for 
free,  but  among  households  with  an  income 
below  60%  of  the  median  tenancy  increases 
to 63.7%. Affordability is a particular issue for 
tenants,  as  19.4%  of  them  face  housing  cost 
overburden (70)(71).  On  average,  households 
renting  their  home  allocate  20.2%  of  their 
disposable income to rent, rising to 31.1% for 
households  below  the  poverty  threshold.  In 
around  one-tenth  of  Italian  provinces,  rents 
represent  more  than  one  third  of  average 
wages (72). 
are 
Rent-to-income 
particularly  high  in  large  cities,  reaching  76% 
in  Milan,  65%  in  Rome  and  48%  in  Bologna 
(see Annex 16). Short-term rentals account for 
around  12%  of  the  available  housing  stock 
(excluding primary residences, i.e. the majority) 
in  Florence,  11%  in  Venice,  6%  in  Milan,  and 
4% in Rome, with much higher concentrations 
in historic centres (73).  

ratios 

Italy  has  been  traditionally  favouring 
home  ownership,  while  support 
to 
affordable  housing  has  been 
limited. 
Public  spending  on  housing-related  social 
protection  is  extremely  low  (0.04 %  of  GDP 
compared with 0.3 % in the EU). In Italy, main 

(69)  Confindustria,  Soluzioni  abitative  sostenibili  per 

i 

lavoratori, 2025, Link.  

(70)  EU-SILC, Housing cost overburden rate by tenure status, 

2024, Link.  

(71)  This  indicator  should  be  read  together  with  the  tenure 
structure  (homeowner,  tenants),  that  may  differ  across 
country and regions. 

(72)  Osservatorio  del  Mercato  Immobiliare,  Agenzia  delle 

Entrate, 2023. 

(73)  Agenzia delle Entrate, 2024. 

30 

 
 
a 

in 

cities 

facing 

residencies  are  exempted  from  recurrent 
property  taxation.  Moreover,  cadastral  values 
are no aligned to market values. This results in 
lower  revenues  from  property  at  local  level, 
housing 
including 
affordability  challenge.  The  share  of  social 
housing  is  low  in  Italy,  with  a  limited  public 
housing  stock  and  very  long  waiting  lists. 
remains  a  persistent 
Homelessness  also 
concern.  Affordable  housing  solutions  remain 
underdeveloped, and existing instruments such 
as 
(“canone 
concordato”)  are  in  some  cities  set  at  levels 
(see  Annex  16). 
close 
rents 
Governance 
with 
responsibilities  divided  across  national  and 
sub-national administrations. In the past years, 
lack  of  structural  funding  further  limited  the 
effectiveness  of  housing  policy.  The  Housing 
Plan, adopted in May 2026, aims at renovating 
the  public  housing  stock  and  supporting  in 
particular  affordable  housing  with 
the 
involvement of the private sector. 

to  market 
is 

fragmented, 

regulated 

contracts 

rent 

31 

 
 
KEY FINDINGS 

In  areas  covered  by  existing  country-
Italy 
specific  recommendations  (CSRs), 
would benefit from: 

• 

an 

Implementing 
innovation-
driven  industrial  policy  to  boost 
high-value  added  sectors,  with  a 
coherent  research  and  infrastructural 
investment  planning,  streamlining  and 
better  targeting  national  and  regional 
incentives  and  addressing  transport 
infrastructural  gaps,  notably  in  the 
South. 

•  Promoting  business  growth  by 
eliminating regulatory and tax barriers, 
supporting  equity  and  bond  financing, 
including 
institutional 
investors,  and  upskilling  of  managers, 
in particular in microenterprises. 

through 

•  Boosting  research  and  innovation 
by  supporting  public  and  private  R&D 
spending,  further  strengthening  links 
between  businesses  and  academia, 
the  efficiency  and 
and  boosting 
attractiveness 
university 
of 
system. 

the 

•  Strengthening 

administrative 
capacity  and  further  simplifying 
the  business  environment  by 
advancing 
and 
addressing  the  ageing  public-sector 
workforce and skills gaps, focusing on 
regional disparities. 

digitalisation 

EU 

•  Addressing  remaining  barriers  to 
single  market  and 
the 
competition,  including  by  awarding 
concessions  across  relevant  sectors, 
industry-specific 
and 
the 
in 
regulations, 
transport, 
electricity,  and  health 
sectors.  

particularly 

improving 

•  Further  improving  the  efficiency 
of the tax system by further shifting 
the high tax burden on labour to other 
revenue, 
sources 
under-used 
reducing  the  erosion  of  the  tax  base, 
further  combating  tax  evasion  and 
aligning taxation more closely with the 
green transition. 

of 

•  Further  progressing  with  policy 
evaluation  and  spending  reviews 
to  improve  the  efficiency  and  quality 
of public spending in Italy. 

• 

renewable 

Improving  economic  security  and 
tackling  high  electricity  prices 
caused by structural reliance on gas by 
energy 
accelerating 
fully 
deployment 
storage, 
and 
implementing 
renewable  permitting 
reforms at local level, and rebalancing 
energy  taxation  away  from  electricity, 
firms.  Supporting 
particularly 
industrial 
also 
through  renewable  power  purchase 
agreements.  

for 
decarbonisation, 

•  Further  reducing  the  duration  and 
backlog  of  trials, 
including  by 
making  the  trial  office  structural, 
continuing  to  address  magistrate  and 
staff shortages, and supporting justice 
sectors  under  pressure,  including  the 
Justice of Peace. 

•  Strengthening  the  power  grid  by 
capacity, 
interconnection 
scaling 
addressing 
connection 
grid 
bottlenecks,  promoting  competition, 
and accelerating grid investments. 

•  Mitigating  climate-related  risks 
impact, 
their 
and 
including  by 
institutional 
improving 
coordination,  integrating  nature-based 

economic 

32 

 
 
solutions,  and  addressing  remaining 
insurance protection gaps in a fair and 
affordable manner. 

strengthen 
relevance  of 
tailored  ALMPs,  and  social  services, 
also addressing regional disparities. 

training, 

•  Tackling  infrastructural  gaps  in 
water  and  waste,  in  particular  in 
southern and central regions, to reduce 
inefficiencies  and  improve  water  and 
waste management. 

•  Promoting 

upward 

social 
convergence 
addressing 
by 
poverty and inequality, also through 
tax  and 
an 
improved  progressive 
benefits  system,  access 
to  social 
protection  for  all  workers  (including 
and 
self-employed), 
inactive  people,  as  well  as  a  more 
effective delivery of social services for 
vulnerable  groups,  including  people 
facing homelessness. 

unemployed 

•  Addressing 

demographic 
the 
challenge  by  further  attracting  and 
retaining  a  high-quality  workforce; 
supporting  natality, 
labour  market 
participation  of  women  and  young 
people,  including  through  access  to 
child  and  long-term  care,  particularly 
in regions with high net emigration. 

•  Addressing  undeclared  work  and 
labour  exploitation, 
including  by 
improving  administrative  capacity  of 
labour 
promoting 
inspection  data,  and 
sharing  of 
adopting  preventive  measures  for  the 
most  affected 
such  as 
domestic work and agriculture.  

inspectorates, 

sectors 

• 

Improving job quality and reducing 
labour  market  segmentation  by 
the  misuse  of  atypical 
tackling 
contracts  and  strengthening  collective 
bargaining  to  support  adequate  wage 
growth,  improve  working  conditions 
and tackle contractual dumping.  

•  Promoting  human 

adult 

capital 

by 
and 
promoting 
training, 
vocational  education  and 
including 
improved  skills 
intelligence,  to  increase  quality  and 

learning 

through 

further 

•  Strengthening 
educational 
outcomes 
renewing 
by 
curricula with a skills-based  approach, 
improving  the  attractiveness  of  the 
teaching  profession,  and  providing 
targeted  support  to  underperforming 
schools to address regional and socio-
economic  disparities,  as  well  as 
to 
reforming 
improve  employability  and 
reduce 
drop-out rates. 

education 

tertiary 

•  Supporting  social  and  affordable 
housing  solutions,  particularly 
in 
areas  under  pressure,  to  facilitate 
labour  mobility,  and  for  vulnerable 
reassessing 
people, 
indirect 
for 
homeowners. 

including  by 

incentives 

tax 

In other areas, Italy would benefit from: 

transport  efficiency 
Increasing 
including  by 
and  sustainability, 
expanding  public  and  shared  mobility 
options 
charging 
infrastructures. 

as  well 

as 

Improving  access  to  healthcare 
through the continued implementation 
of  the  territorial  healthcare  reform, 
to  address 
along  with  measures 
shortages in key health professions, as 
well  as  ensuring  the  comprehensive 
digitalisation  and  interoperability  of 
the  healthcare  system  and  improving 
the waiting list management plan. 

• 

• 

33 

 
 
ANNEXES 

 
 
 
 
LIST OF ANNEXES 

A1.  CSR implementation 

Fiscal 

A2.  Fiscal developments and debt sustainability 

A3.  Taxation 

Productivity 

A4. 

Innovation to business 

A5.  Single market and industry 

A6.  Savings, investment and access to finance 

A7.  Effective institutional framework 

Sustainability 

A8. 

Industry decarbonisation, circularity and climate mitigation 

A9.  Affordable energy transition 

A10.  Climate adaptation, preparedness and environment 

Fairness 

A11.  Labour market 

A12.  Social policies 

A13.  Education and skills 

A14.  Social scoreboard 

A15.  Health and health systems 

A16.  Housing 

Horizontal 

A17.  Sustainable development goals 

A18.  Competitive regions 

A19.  Transport 

LIST OF TABLES 

A1.1. 
A2.1. 
A2.2. 
A2.3. 
A2.4. 
A3.1. 

2025 CSR implementation and Commission assessment 
Supplementary pension schemes - Scope for expansion 
Projected change in age-related expenditure in 2025-2040 and 2025-2070 
Fiscal Governance Database Indicators 
Implementation of Reforms and Investments underpinning an extension 
Taxation Indicators 

37 

39 

46 

46 

51 

56 

56 

62 

71 

79 

84 

84 

92 

100 

109 

109 

114 

119 

124 

125 

129 

136 

136 

139 

146 

39 
48 
48 
49 
50 
52 

 
 
 
Key innovation indicators 
Single Market and Industry 
Savings and Investments Union summary diagnostic 
Financial sector indicators 
Italy. Selected indicators on better regulation practices for primary legislation 
Digital Decade key performance indicators: availability of digital public services 
Key clean industry and climate mitigation indicators: Italy 

A4.1. 
A5.1. 
A6.1. 
A6.2. 
A7.1. 
A7.2. 
A8.1. 
A10.1.  Key Adaptation Indicators 
A14.1.  Social Scoreboard for Italy 
A15.1.  Key health indicators 
A18.1.  Main development trends, challenges and the concentration of resources. 
A18.2.  Selection of indicators at regional level in Italy 
A19.1.  ERTMS deployment in Italy. 

LIST OF GRAPHS 

Composition of non-financial corporations' funding 
Capital markets and financial intermediaries 
Composition of households' financial assets 
Trust in the justice system, regional / local authorities and in government 

Public investment evolution and composition (% of GDP) 
: Primary spending evolution and compositional change 
Tax revenue by economic function in 2024, Italy (outer ring) and EU-27 (inner ring) 
Tax wedge for single and second earners as a % of total labour costs, 2025 
Business R&D intensity 2015-2024 
Venture capital share as % of GDP: 2019 vs 2024 (1) 

A2.1. 
A2.2. 
A3.1. 
A3.2. 
A4.1. 
A4.2. 
A5.1.  Manufacturing production: total and selected sector, index (2021=100), 2015-2024 
A6.1. 
A6.2. 
A6.3. 
A7.1. 
A7.2.  Most time-consuming aspects of service delivery 
A8.1. 
A9.1. 
A9.2. 
A9.3. 
A11.1.  Key labour market indicators 
A12.1. 
A13.1.  Selected indicators on tertiary education and VET 
A15.1.  Healthcare infrastructure investment by year 
A15.2.  Out-of-pocket payments: share in healthcare spending and categories, 2023 
A16.1.  House prices, rents and price-to-income evolution in IT and EU27 since 2005 
A16.2.  House supply indicators in IT since 2005 
A16.3.  Housing affordability selected indicators 
A17.1.  Progress towards the SDGs in Italy 
A19.1. 

Greenhouse gas emissions in the effort sharing sectors, 2005, 2023, and 2024 
Electricity and gas prices for household and non-household consumers, first half of 2025 
Low-carbon electricity generation vs. electricity wholesale prices, 2025 
Italy’s installed renewable capacity vs electricity generation mix 

Impact of taxes and benefits (excl. pensions) on the S80/S20 income share ratio 

Italy's road fatalities per million, 2024 

LIST OF MAPS 

A18.1.  GDP per head compared to the EU average. 
A18.2.  Water services management in Italy 
A19.1.  TEN-T Cross-Border & National Priority Sections in Italy 
A19.2. 

Italy's road safety map 

38 

61 
70 
71 
78 
80 
81 
91 
108 
124 
127 
141 
145 
147 

46 
47 
51 
53 
58 
59 
69 
71 
72 
73 
79 
80 
85 
93 
93 
96 
109 
117 
121 
125 
126 
130 
131 
135 
136 
148 

139 
143 
147 
148 

 
 
 
 
 
 
ANNEX 1: CSR IMPLEMENTATION  

Table A1.1:  2025 CSR implementation and Commission assessment 

(Continued on the next page) 

39 

Italy faces challenges in a wide range of policy areas, as identified in the country-specific recommendations (CSRs). Italy was recommended, among other things, to strengthen innovation and SME growth by improving business-academia links and industrial strategy; enhance public administration efficiency, justice, and competition; accelerate the green transition through electrification, renewables, and better resource management; and improve labour market outcomes by boosting participation, skills, job quality, and education, while addressing undeclared work.  The Commission has assessed the degree of implementation of the 2025 CSRs considering the policy action taken by Italy to date*. To do so, the Commission has taken into account the information provided by Italy in its Annual Progress Report as well as other information sources. This annex provides summary information on the policy actions taken or planned by Italy for each CSR. More detailed information on these actions is included in the relevant chapters and other annexes of the report. *CSR 2 is not assessed in CeSaR. 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 is monitored in the context of the Cohesion Policy of the European Union. Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  1.1 Reinforce overall defence and security spending and readiness while ensuring debt sustainability in line with the European Council conclusions of 6 March 2025. Total general government defence expenditure in 2026 is projected at 1.2% of GDP, corresponding to a decrease of around 0.05 ppt. compared to 2024. Total general government defence expenditure in 2027 is projected at 1.4% of GDP, corresponding to an increase of 0.1 ppt. compared to 2024.  The increase is explained by higher expected gross fixed capital formation on defence related to weapon deliveries.  Some progress 1.2 Adhere to the maximum growth rates of net  expenditure recommended by the Council on 21 January 2025, with a view to  bringing an end to the situation of an excessive deficit.   Annual and cumulated deviations in 2025 amounted to 0.1% of GDP and less than 0.1% of GDP, respectively. Annual and cumulated deviations in 2026 projected at -0.1% of GDP and -0.1% of GDP, respectively. The EDP is held in abeyance. Substantial progress 1.3 Implement the set of reforms  and investments underpinning the extended adjustment period as recommended by  the Council on 21 January 2025. See table A.2.4 in Annex 2 of the Country Report Full implementation 1.4 In line with fiscal sustainability objectives, make the tax system more conducive to growth, by further fighting tax evasion, Mandatory electronic connection between POS and cash registers.  Measures to improve tax collection (as required by the RRP), especially in relation to VAT.  Mandatory 1% withholding tax on PIT and VAT in B2B transactions aimed at incentivising tax compliance.    Some progress  
 
 
 
      
 
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(Continued on the next page) 

40 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  New simplified and more favourable debt settlement for tax collection (in line with measures similar to tax amnesties introduced in previous years), which risks jeopardising the positive results achieved in recent years in the fight against tax evasion. 1.5 reducing the labour tax wedge and the remaining tax expenditures, including those related to value added tax and environmentally harmful subsidies, as well as updating cadastral values, building on the medium-term fiscal-structural plan commitment as part of a broader review of housing-related policies, while ensuring fairness. Measures aimed at permanently reducing the tax wedge for low and middle income earners, by also making structural the lower personal income tax rates already implemented in 2024.   Italy has implemented some measures to reduce tax expenditures.  Reduction of environmentally harmful subsidies, namely: (i) elimination of the reduced VAT on waste landfill disposal by raising it from 10% to 22%; (ii) remodulating of the taxation of company cars as fringe benefits in favour of electric vehicles with the aim of encouraging the renewal of company fleets; and (iii) elimination of the gasoline/diesel tax differential.  Proliferation of flat tax regimes, including for the self-employed and on bonuses and extraordinary earnings, risks further eroding the personal income tax base. It also worsens the horizontal equity and efficiency of the tax system, by reducing redistribution, favouring specific taxpayers’ categories and disincentivising business growth.   Within the Cohesion Policy programmes, housing investments  were prioritised.  The 2026 Budget Law allocates limited resources to the Piano Casa.  However, no comprehensive review of housing-related policies was carried-out.  Italy is working on the update of cadastral values for some categories of buildings, in line with the MTFSP but concrete broader actions still missing.  The adoption of the Piano Casa, aimed at addressing the housing needs of the so-called “grey area” and leveraging public resources to crowd in private investment, was announced for May 2026. Some progress  
 
 
      
 
Table (continued) 

(Continued on the next page) 

41 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  1.6 Step up efforts to improve the efficiency and effectiveness of public expenditure. Yearly spending reviews implemented in line with its national framework.  2026 Budget Law established that each ministry is required to evaluate at least one spending policy under its responsibility by 30 June 2026 within the framework of the Spending Analysis and Evaluation Plans.  Some progress 1.7 Mitigate the effects of ageing on potential growth and fiscal sustainability, including by further limiting the use of early-retirement schemes and by addressing demographic challenges, also attracting and retaining high quality workforce. Italy has not renewed the early retirement schemes in place in previous years and constantly renewed. At the same time, the retirement age was partially frozen at 67.  The new Decreto Flussi for the next three years period 2025-2028.  Other measures include the organisation of vocational and civic-linguistic training programmes abroad: 76 projects approved concerning sectors characterised by structural labour shortages (construction, mechanics, plant engineering, shipbuilding, and electronics).  Some progress 3.1 Support innovation by further strengthening business-academia linkages, innovation procurement, corporate venture capital and opportunities for talents.  -The implementation of R&D investments of the RRF (M4C2) is progressing.  - Refinancing of some RRF investments on tech transfer (National Centres and extended partnerships) for the years 2027-2028 to ensure continuity of the actions taken.   -Legislative provision, in the 2025 Annual Competition Law, requiring the adoption every 3 years of a Strategy on knowledge valorisation and technology transfer  -The implementation of R&D investments of the RRF is progressing.  - No progress on innovation procurement and corporate venture capital A broad strategy on innovation and   technology transfer has been launched and opened to public consultation.   Limited progress 3.2 Boost the role of universities in innovation by further increasing their focus Entry into force of the three-plan for the financing of research activities (New RRP reform).  Limited progress  
 
 
      
 
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42 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  on commercialisation of research results and by improving the career path of researchers.  Reform in 2025 has increased the number of fixed-term non-tenure track contracts for researchers making the career path of researchers less predictable and stable  3.3 Promote growth and aggregation of SMEs and start-ups, also in light of the commitments in the medium-term fiscal-structural plan. The implementation of the RRF Scale up act is ongoing and it is too early to judge its effectiveness.  Since its creation in 2019, the CDP VC has received public support, including by the RRF (e.g GTF, DTF). funding  Annual SME law has been adopted but implementing acts are missing.  The Italian Export Action Plan has been published with the aim of strengthening the international competitiveness of small and medium-sized enterprises and promote access to global markets.  No measure to attract insurance and banks into the venture capital and private equity ecosystems.   Some progress 3.4 Implement an industrial strategy including to reduce the territorial divide, by streamlining current policy measures and taking into account key infrastructure projects. Publication of the White Book “Made in Italy 2030” outlining Italy’s starting point for an industrial strategy  Extension of the SEZ tax credit from 1 year to 3 years.  Publication of the incentives code Rationalization of incentives under MIMIT competence in the context of M1C2 Reform 3  Limited progress 4.1 Further increase the effectiveness and capacity of the public administration and further strengthen administrative capacity, particularly at local level.  Implementation of reforms and investment concerning public employment and training of civil servants under the RRP. In particular:  • Reform 1.9 - Reform of the public administration with implementation of strategic human resource management in the Public Administration.  • Investment 1.9: Provide technical assistance and strengthen capacity building for the implementation of the Italian recovery and resilience plan.  Italian Strategy for Virtual and Augmented Reality to promote the digitization of public administration and healthcare. Some progress  
 
 
      
 
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43 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  Further measures concerning simplifications of administrative procedures, i.e. simplification and/or digitalization of 200 critical procedures affecting citizens and business. 4.2 Further reduce the backlog and disposition time of the justice system. Under the RRP, progress on digitalisation of first instance criminal proceedings  Adoption of temporary measures to reduce disposition time in civil courts  Substantial progress 4.3 Address remaining restrictions to competition, including in local public services, business services and railways. Decree RRP (for railways). Annual Competition Law of 2025 (for local public services).  Some progress 5.1 Accelerate electrification and intensify efforts for the deployment of renewable energy, including by reducing fragmentation of permitting regulation and investing in the electricity grid. RRP reform Testo Unico (Permitting simplification, legislative decree No. 190/2024), full implementation at sub-national level underway.   Contracts-for-difference (FER 2 for immature tech and FER X for mature technology)  Auctions for storage under the energy storage capacity procurement mechanism (MACSE) FER Z auctions with bigger role for aggregators and storage  RRP reform to set up a Platform for renewable electricity PPAs (not yet operational)  Energy release, offering reduced electricity prices to energy-intensive-companies in exchange for renewable installation Some progress 5.2 Address climate-related risks and mitigate their economic impact, through more institutional coordination, nature-based solutions and climate insurance coverage. Mandatory climate disaster insurance scheme for companies introduced by the legge di bilancio 2024  National Observatory for Climate Change Adaptation has been set up by DM 455 from December 2025  Some progress 5.3 Tackle remaining inefficiencies in water and waste management by reducing infrastructural gaps. First funding decrees for water investments under the national plan for water infrastructure and safety measures (PNIISSI) published  Some progress 6.1 Promote job quality and reduce labour market segmentation, also to support adequate wages, and increase labour market participation, in particular for underrepresented groups, including by further strengthening active labour market policies and improving affordable access “Collegato lavoro” (Law 203/2024) and implementing decrees in 2025: to simplify the contractual framework but in practice expands temporary/seasonal work and hybrid contracts, especially for vulnerable workers (e.g. unemployed, older workers, workers with lower qualifications), with a likely increase in segmentation.   Some progress  
 
 
      
 
Table (continued) 

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44 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress  to quality child- and long-term care, taking into account regional disparities. Expansion of ECEC under the RRF   ALMPs reforms and investments in training under the RRF (GOL, Dual etc.)  Collective bargaining - Delegated law (Legge delega 144/2025): aims to address structural issues in the collective bargaining framework, namely (i) lack of enforceability of collective agreements, (ii) delays in contract renewals and (iii) contractual dumping (so￼called “pirate” contracts). Implementing decrees are still to be adopted.  Legge Locatelli (Legge Delega 33/2023, implemented by D.Lgs. 29/2024): establishes a National System for Non‑Self‑Sufficiency Assistance (SNAA)  Hiring tax incentives in the 2026 budget Law: “(‘Youth and women hiring relief” – with priority to the ZES); (‘Mothers’ full contribution exemption”; General permanent employment incentives’ 6.2 Keep-up the efforts to tackle undeclared work, particularly in the most affected sectors. Implementation of reform under the RRP – notably increased inspections, strengthening rete del lavoro agricolo di qualita’ Final target of the RRF reform concerning deterrent measures (ISAC indicators and letters to firms to incentivize compliance), study on impact of employment vouchers Limited progress 6.3 Continue promoting postsecondary VET and in-work training in high-demand sectors to address short-term skills needs, while strengthening adult learning by expanding work-based learning in high-growth sectors. ITS academy 4+2 (reform introduced under the RRF as a pilot and brought to ‘regime’ in all ITS schools, including national Platform  Fondo nuove competenze 3: €500M+ PNRR (FNC3); paid leave (up to 160h/year, 100% wage replacement via Fondo) for workers/firms training on digital/green/transversal skills; >300k participants 2021-25;   Dual system (further strengthened under the RRF): expanded apprendistato professionalizzante duale (15-29 years)  Some progress 6.4 Improve educational outcomes, with a focus on disadvantaged students, including by strengthening basic skills. School building stock renovated: 70% of the school building stock is being renovated under the RRF, prioritising obsolete and unsafe buildings, especially in disadvantaged areas. Expansion of 4 years high school pilot to the national level, targeting schools and attracting students from diverse socio-economic backgrounds  Some progress  
 
 
      
 
Table (continued) 

Source: Italy's reporting and Commission assessment 

45 

Recommendation text Main measures adopted or implemented  By 30 April 2026  Preparatory steps/ credibly announced measures By 30 April 2026 Assessm. of progress   Teacher training programme under the RRF (“new language and new skills”)  Digitalization of classrooms under the RRF (“school 4.0”)  Teachers reform: The reform under the RRF introduced a new qualified architecture intended to stabilize recruitment, but a link between career progression and performance based incentives is still missing   University system – “Riforma delle classi di laurea” and ANVUR: The 2023–25 reform of degree classes (DM 96/2023 and related decrees)     
 
     
 
FISCAL 
ANNEX 2: FISCAL DEVELOPMENTS AND DEBT SUSTAINABILITY 

spending 

This annex discusses selected topics in public 
finances  and  developments  on 
fiscal-
structural  CSRs  addressed  to  Italy  in  July 
2025.  These  include  a  call  to  reinforce  overall 
defence 
readiness  while 
and 
implementing  a  fiscal  strategy  in  line  with  the 
Council  Recommendation  of  6  March  2025.  Italy 
was  also  recommended  to  make  the  tax  system 
more  conducive  to  growth,  step  up  efforts  to 
improve the efficiency and effectiveness of public 
expenditure and mitigate the effects of ageing on 
potential growth and fiscal sustainability. 

On  8  July  2025,  the  Council  adopted  the 
Recommendation  endorsing  Italy’s  medium-
term  fiscal-structural  plan  (74).  The  plan 
includes an extended fiscal adjustment over seven 
years,  underpinned  by  a  set  of  reforms  and 
investment.  At  the  same  time  the  Council  also 
adopted  a  Recommendation  under  Article  126(7) 
TFEU to correct the excessive deficit in Italy (75)(76).  

Developments in government balance, 
debt and public expenditure (77) 

Italy’s government deficit amounted to 3.1% 
of GDP in 2025 and the government debt-to-
GDP ratio amounted to 137.1% at the end of 
2025.  Based  on  the  Commission  Spring  2026 
Forecast, Italy’s government deficit is projected to 
narrow  marginally  from  3.1%  of  GDP  in  2025,  to 
2.9% in both 2026 and 2027. The debt ratio is set 
to reach 139.2% of GDP by 2027, as the expected 
primary surpluses are still insufficient to offset the 

(74)  OJ C, C/2025/651, EU: 

http://data.europa.eu/eli/C/2025/651/oj. 

(75)  Council  Recommendation  with  a  view  to  bringing  an  end  to 
the  situation  of  an  excessive  deficit  in  Italy,  as  adopted  on 
21  January  2025.  The  corrective  net  expenditure  path 
recommended  by  the  Council  under  the  excessive  deficit 
procedure  is  consistent  with  the  maximum  growth  rates  of 
net expenditure set out in the plan. 

(76)  Compliance  by  Italy  with  the  maximum  growth  rates of  net 
expenditure  recommended  by  the  Council  is  assessed  in 
COM(2026) 200. 

(77)  Figures  underpinning  fiscal  surveillance  (net  expenditure 
growth)  are  provided 
in  the  Fiscal  Statistical  Tables 
SWD(2026)200  providing  background  data  relevant  for  the 
assessment of the budgetary policies of the Member States. 

impact of the debt-increasing interest-growth-rate 
differentials and stock-flow adjustments.  

levels,  public 

Rising  public  investment  is  improving  the 
quality of expenditure in Italy. Compared with 
pre-pandemic 
investment  has 
increased markedly and is projected to stabilise at 
around 3.8% of GDP in 2026–2027, up from 2.3% 
in  2019  (see Graph  A2.1).  This  increase  has  been 
partly  supported  by  funding  from  the  RRF.  At  the 
same  time,  nationally  financed  public  investment 
has  also  risen  since  2019  and  is  expected  to 
continue  expanding  until  2027,  contributing  to  a 
more  growth-friendly  composition  of  public 
expenditure.  

Graph A2.1: Public investment evolution and 
composition (% of GDP) 

Source: European Commission Spring 2026 Forecast 

While  expenditure  with  a  higher  impact  on 
GDP had remained broadly stable over three 
decades,  it  has  slightly  increased  compared 
to  2019.  Zooming  in  on  the  composition  of 
spending, social protection accounts for the largest 
share  of  total  expenditure  (above  40%),  followed 
by  general  public  services  and  health,  with  each 
accounting  for  around  or  above  10%  of  total 
spending.  Since  2019,  public  expenditure  on 
transport,  housing,  other  economic  affairs  and 
interest  spending  has  increased  strongly  (see 
Graph  A2.3).  Spending  on  culture  has  risen  more 
modestly. By contrast, spending on communication 
remained  broadly  stable  while  spending  on  R&D, 
defence,  education  and  health  expenditure  has 
declined.  This  trend  deserves  attention,  as  these 
categories  (R&D  and  education)  are  generally 

46 

0.00.51.01.52.02.53.03.54.0201920202021202220232024202520262027% of GDPDefenceRRF grants and other EU fundsOther nationally-financed 
 
 
 
  
 
 
considered  spending  categories  conducive 
growth. 

to 

Cost of ageing 

Graph A2.2: : Primary spending evolution and 
compositional change 

Source: Eurostat 
Note: Based on economic literature, the categories considered 
to have the higher growth impact include education, R&D, 
health, transport and communication (See Barbiero and 
Cournede (2013), Gemmel et al. (2016), Lupu et al (2018), 
Cepparulo and Mourre (2020) and OECD (2025)).  

social 

security 

Italy  has  high  tax  revenues  as  a  share  of 
GDP compared to the EU average, with a high 
labour  tax  burden,  a  narrow  tax  base  with 
many tax expenditures and high revenue loss 
due  to  tax  evasion.  In  2025  Italy’s  total  tax 
revenues  as  a  percentage  of  GDP  (including 
compulsory 
contributions) 
amounted to 43.0%, clearly above the EU average 
of  39.9%.  Total  tax  revenues  are  projected  to 
remain  stable  in  2026  and  then  slightly  increase 
to  43.2%  of  GDP  in  2027  according  to  the 
Commission  Spring  2026 Forecast (78).  Italy has  a 
high  labour  tax  burden  at  many  different  wage 
levels,  makes  intensive  use  of  reduced  VAT  rates 
and tax expenditures (which narrows the tax base) 
and  experiences  high  levels  of  tax  evasion  (see 
Annex 3). 

in 

Italy 

Total  age-related  spending 
is 
projected  to  rise  by  about  1 pp.  of  GDP  by 
2040,  to  around  28%  of  GDP,  though 
declining by about 2 pps. by 2070 (see Table 
A2.2).  The  overall  decline  in  the  long  term  is 
mainly  the  result  of  a  projected  fall  in  pension 
spending,  which  would  more  than  offset  the 
expected  rise  in  healthcare  and  long-term  care 
spending.  Italy  currently  has  one  of  the  highest 
spending 
items  of  all 
Member  States.  The  projected  decline  in  the  long 
term would bring Italy closer to, but still above, the 
EU average. 

levels  on  age-related 

Public pension spending as a share of GDP is 
projected  to  increase  by  1 pp.  by  2040  but 
decline  thereafter.  Pension  spending  currently 
represents around 16% of GDP, the highest of all 
EU  Member States. A further increase is expected 
in  the  coming  decades.  Yet,  by  2070,  public 
pension  outlays  would  decline  to  a  level  about 
2.5 pps. of GDP below current spending. At close to 
14%  of  GDP  in  2070,  public  pension  spending 
would be higher than the projected EU average of 
about  12%.  In  2025,  Italy  received  a  CSR  to 
mitigate the effects of ageing on potential growth 
and  fiscal  sustainability, 
including  by  further 
limiting  the  use  of  early-retirement  schemes, 
which  contribute  to  an  effective  retirement  age 
that is lower than the statutory retirement age by 
more  than  4  years (79).  While  early-retirement 
schemes in place in previous years have not been 
renewed  in  2026,  a  partial  freezing  of  the 
retirement  age  at  67  has  been  introduced.  In 
particular,  the  three-month  freeze  on  the  life 
expectancy  adjustment  has  been  slowed  down:  it 
will  be  one  month  in  2027  and  two  months  in 
2028,  for  certain  categories  only.  The  impact  of 
this  measure  on  the  sustainability  of  public 
finances remains contained, but it still puts further 
pressure  on  the  long-term  sustainability  of  the 
pension 
finances. 
and 
Supplementary  pension  schemes  can  make  the 
pension  system  more  resilient  by  diversifying 
retirement  income  sources  and  encouraging  the 
adoption  of  sustainability-enhancing  reforms.  In 
Italy,  however,  their  uptake  remains  limited:  by 

system 

public 

(78)  Data  retrieved  from  the  AMECO  database  (https://economy-

finance.ec.europa.eu/economic-research-and-
databases/economic-databases/ameco-database_en)  

(79)  Economic  Policy  Committee  -  Ageing  Working  Group,  2024 

Ageing Report, Italy - Country Fiche. 

47 

510152040455055a) Evolution (% of GDP)Primary expenditureSpending with higher impact on GDP (rhs)-1,2-0,8-0,40,00,40,81,2SocialprotectionHealthGeneralservicesEducationR&DPublicorderDefenceEnvironmentCommunicationCultureInterestspendingHousingTransportOther economicb) Compositional change 2024-2019                                                                  (% of total spending) 
   
 
 
Table A2.1:  Supplementary pension schemes - Scope for expansion 

Source: European Commission. 

end-2024,  private  pension  assets  amounted  to 
around  12%  of  GDP  while  participation  covered 
around  27%  of  the  working-age  population (80). 
This  coincides  with  rising  medium-term  public 
pension  spending  pressures  and  a  projected 
decrease  in  the  replacement  rate  by  7.7 pps. 
between  2025  and  2040 
(Table  A2.2  and 
A2.3) (81).  

Public healthcare expenditure is projected to 
be  5.8%  of  GDP  in  2025  (below  the  EU 
average of 6.6%) and is expected to increase 
by  0.4  pps  by  2040  and  by  a  further  0.2  pp 
by  2070.  The  overall  increase  is  driven  by  an 
ageing  population  but  is  significantly  constrained 
by  reform  assumptions  of  a  constant  nominal 
growth path for public healthcare expenditure until 
2026.  

Public  expenditure  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  constrained  by  budgetary  cost 
containment  measures  included  in  the  projections 

until 2026. 

National fiscal framework 

The  Parliamentary  Budget  Office  (PBO)  is  a 
relatively  well-
and 
well-established 
resourced independent fiscal institution with 
a  broad  mandate.  Despite  a  number  of 
Memoranda of Understanding with the Ministry of 
Finance and other institutions, the PBO still reports 
issues  of  access  to  information,  in  particular 
regarding the timeliness and level of detail of the 
information  received.  There  is  a  policy  dialogue 
with  the  government,  which  however  takes  place 
in  a  non-public  way,  giving  no  media  echo  and 
therefore not informing the public debate on fiscal 
policy  and  sustainability.  The  PBO  has  a  clear 
presence  in  the  domestic  media  debate  and  is 
further 
activities, 
its 
becoming  more  active  on  social  media  and 
developing  new  features  of  its  website.  The  PBO 
recently  underwent  its  very  first  independent 
external evaluation. 

developing 

outreach 

Table A2.2:  Projected change in age-related expenditure in 2025-2040 and 2025-2070 

Source: 2024 Ageing Report (EC/EPC). 

(80)  Source: OECD Pension Market in Focus 2025. The highest 

participation rate in at least one supplementary pension plan 
is reported.   

(81)  The (gross) replacement rate refers, where the required data 
is available, to both public and private pensions. It is based 
on projections from the 2024 Ageing Report.  

48 

IT27,11,00,40,3-0,61,228,3ITEU24,30,50,30,4-0,30,925,2EUIT27,1-2,40,60,6-0,7##25,3ITEU24,30,20,60,8-0,31,325,6EUageing-related expenditure change in 2025-2040 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalageing-related expenditure change in 2025-2070 (pps GDP) due to:ageing-related expenditure pensionshealthcarelong-term careeducationtotalAssets in 2024 (% GDP)Participation in 2024 (% working-age population)IT11,7-7,726,7ITEU32,4-2,855,9EUGross replacement rate at retirement: (pps change 2025-2040)  
 
 
 
      
 
 
      
 
Table A2.3:  Fiscal Governance Database Indicators 

(1) 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. 
The score for public accounting reflects the degree of maturity in relation to the International Public Sector Accounting Standards 
(IPSAS). Countries with an accounting maturity of 70% or more in relation to IPSAS are deemed to apply accrual accounting. For 
more information, see the report on public accounting in the EU (COM(2025)746 and accompanying Staff Working Document 
SWD(2025)396). 
Source: Fiscal Governance Database, European Commission 

Spending  reviews  have  involved  extensive 
analytical  work,  but 
implementation  has 
been  limited.  Recent  efforts  have  focussed  on 
integrating 
the  findings  of  3-year  spending 
reviews cycles into the budgetary cycle. Under the 
RRP, Italy strengthened the national framework for 
spending reviews and implemented yearly reviews 
over the 2023-2025 period. However, the process 
involves  across-the-board  spending  cuts 
still 
for  a  genuine  expenditure 
leaving  margins 
evaluation with evidence-based reallocation. Under 
the  MTFSP,  efforts  are  expected  to  intensify  with 
the  preparation  of  monitoring  and  assessment 
plans, aimed at improving the efficiency of public 
spending.  The  EU  Technical  Support  Instrument 
(TSI)  has  provided  assistance  for  performance 
management. 

Accrual  accounting  improves  transparency 
over  a  public  body’s  financial  position  and 
performance  and  can  support  sustainability 
(14) 
intergenerational  equity.  Most 
and 
Member  States  have 
implemented  accrual 
accounting  across  the  general  government  sector. 
Italy  is  among  the  five  Member  States  which  are 
set to shift to a system of accrual accountings by 
2030,  building  on 
steps 
implemented under its RRP (82). However, currently 

the  preparatory 

Italy  still  lags  behind  the  EU  average  (see  Table 
A2.3) (83).  

Implementation of the reforms and 
investment underpinning the 
extension of the adjustment period  

of 

from 

set  of 

extension 

reforms  and 
the 

The CSRs for Italy also call for implementing 
investment 
the 
underpinning 
the 
adjustment  period.  This  set  is  composed  of 
commitments 
commitments 
extending  previously  existing  RRP  measures,  as 
well  as  some  additional  commitments  of  reforms 
the 
into  account 
and 
information  provided 
in  the  Annual  Progress 
Report,  Table  A2.4  shows  the  implementation 
status of the set of reforms and investments due 
in 2025 and the first half of 2026. 

investment.  Taking 

the  RRP, 

(82)  Report  on  public  accounting  in  the  EU  (COM(2025)746  and 
accompanying  Staff  Working  Document  SWD(2025)396). 
Countries  with  an  accounting  maturity  of  70%  or  more  in 
relation  to  International  Public  Accounting  Standards  are 
deemed to apply accrual accounting. 

(83)  Annexes 3.1 and 3.4 of SWD(2025)396. 

49 

Country Fiscal Rule Strength Index (C-FRSI)19,4114,81Medium-Term Budgetary Framework Index (MTBFI)0,880,722025 Public accounting maturity of general government32%65% 
 
 
 
 
 
 
 
 
 
   
 
Table A2.4:  Implementation of Reforms and Investments underpinning an extension 

The progress of each backward-looking key step (i.e., those scheduled for completion by 30 April 2026) is either classified as 
‘completed’ or factual information is provided. The status of forward-looking key steps in 2026 not yet completed remains blank 
and those due after December 2026 do not appear in the table, as these will be assessed by the Commission in future Country 
Reports. 
** 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 9th payment request under the RRF and the table does not prejudge its 
assessment. 
Source: Annual Progress Report of Italy and Commission’s assessment. 

50 

RRP milestones and targets related to M1C1.R1.4 - Reform of civil justice*Q4-2021; Q1-2024; Q4-2024; Q2-2026CompletedEnsure adequate personnel for the office of trial and the technical administrative personnel Q4-2026RRP milestones and targets related to M1C1.R1.12 - Reform of the tax administration*Q4-2021; Q2-2022; Q4-2022; Q2-2023;  Q4-2023; Q2-2024; Q4-2025; Q2-2026Reported as completed – under assessment**Achievement of annual performance targets that progressively ensures a reduction in VAT repayment times Q4-2025CompletedStrengthen 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 2026CompletedRRP 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 2026Eurostat's statistics available until 2024. Preliminary estimates provided by Italian authorities suggest the target appears to be on track to be met.Adoption of Annual Competition Laws Q4 2026Adoption of a framework law on SMEs on annual basis, based on an impact assessment, and entry into force of the implementing instrumentsQ4 2026RRP 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; Q2-2026CompletedImplementation of vertical mobilityQ4 2026Implementation of horizontal mobilityQ4 2026Valorization of performance-based frameworkQ4 2026RRP 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 2026CompletedReform 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 2026CompletedReforms and investment in the area of taxationReduction of the labour tax wedge Q4 2026COM's assessment 2026Reforms 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 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 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 LawsMeasureKey stepsRecommended implementation date 
 
 
 
 
 
 
 
   
 
ANNEX 3: TAXATION 

recommendations 

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  2025 
Italy 
country-specific 
highlighted  challenges  in  making  the  tax  system 
more conducive to growth (by further fighting tax 
evasion,  reducing  the  tax  wedge,  streamlining  tax 
expenditures  including  environmentally  harmful 
subsidies,  and  updating  cadastral  values)  while 
ensuring fairness. In addition, in the context of its 
medium-term  fiscal-structural  plan  (MTFSP)  Italy 
committed  to  completing  key  steps  of  the  above 
tax reforms, by Q4-2028.  

for 

The tax burden in Italy has remained steadily 
above  the  European  average  for  the  last 
10 years.  In  2024,  the  tax  burden  increased  by 
1.2 pps  from  2023,  to  42.4%  of  GDP,  against  an 
EU  average  of  39.4%  (see  Table A3.1),  with  the 
largest  contribution  still  coming  from 
labour 
taxation.  Labour  taxes  as  a  percentage  of  GDP 
were also slightly above the EU average. 

Property  taxation  in  Italy  is  also  above  the 
EU-27  average  (2.2%  vs.  1.8%  of  GDP). 
However,  first  residences  are  exempt  for  almost 
all property classes, and cadastral values have not 
been  systematically  brought  closer  to  market 
values  yet.  Still,  Italy  is  implementing  the  update 
of cadastral values for properties not yet included 
in  the  register  and  for  buildings  that  have 
benefitted  from  public  schemes  for  energy 
efficiency  and/or  house  renovation  interventions 
(see Annex 16).  

remain 

Revenues 

Environmental  tax  revenues  increased  in 
2024 and environmentally harmful subsidies 
from 
sizable. 
(EHS) 
environmental taxes increased to 2.75% of GDP in 
2024 (from 2.53% in 2023) as a consequence of 
an  increase  in  energy  taxes  during  the  year.  The 
tax on the single use plastics has been delayed for 
the  8th  time  until  January  2027.  Based  on  the 
national  yearly  review,  EHS  were  estimated  at 
EUR 25.34 billion  in  2024,  of  which  19.62 billion 
were  fossil-fuel  subsidies (84).  Recent  measures 
reduced  EHS  by  EUR 4.6 billion,  in  line  with  Italy’s 
commitment  under  the  recovery  and  resilience 

(84)  MASE, 2025, Relazione alle Camere e al CITE, Table 2, p.26. 

51 

“Bollette”) 

introduces  measures 

plan (85). Despite this progress, the overall amount 
of EHS remains sizable. The 2026 Decree-Law (so-
called 
that, 
although  being 
temporary,  are 
intended  as 
expected  to  increase  the  level  of  EHS (86).  For 
company  cars,  there is  further  scope  for  reducing 
tax  benefits  for  endothermic  vehicles,  which  still 
receive 
including 
tax 
deductions, although the recent reform for in-kind 
benefits has increased the price signal differential 
treating  more  favourably  zero-emission  vehicles 
and plug-in hybrids.  

favourable 

treatment, 

Graph A3.1: Tax revenue by economic function in 
2024, Italy (outer ring) and EU-27 (inner ring) 

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%  IRAP  tax  rate (87))  is 
among  the  highest  in  the  EU  (where  the  average 
CIT  rate  is  around  21%).  Italy’s  forward-looking 
effective  average  tax  rate (23.9%)  is  also  above 
the EU average of around 19%. The 2025 Budget 
Law extended a tax benefit temporarily introduced 
for  2024  to  2025-2027.  This  benefit  includes  a 
greater  tax  deduction  for  the  cost  of  some  new 

(85)  In  particular,  the  2025  and  2026  Budget  laws  provided  for: 
(i) eliminating the reduced VAT on waste landfill disposal by 
raising it from 10% to 22%; (ii) remodulating the taxation of 
company cars as fringe benefits in favour of electric vehicles 
with the aim of encouraging the renewal of company fleets; 
and (iii) eliminating the gasoline/diesel tax differential. 

(86)  Decree-Law No. 21 of 20 February 2026, converted into law 

No. 49 of 8 April 2026, Link. 

(87)  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)  of 
3.9%, where the regions have the right to increase the rate, 
by up to 0.92 pps, also differentiating it by sectors of activity 
or categories of taxpayers. 

51.526.821.648.625.925.5Taxes on labourTaxes on consumptionTaxes on capital 
 
 
     
 
 
 
Table A3.1:  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 2024. EU-27 refers to the median value. For more data on tax revenues as well as the methodology 
applied, see the Data on Taxation Trends webpage. 
Source: European Commission, OECD, ISPRA. 

ranging 

from  120% 

to  130% 
employees, 
depending  on 
the  category  of  newly  hired 
employees  (e.g.  women,  young  workers,  former 
beneficiaries  of  the  citizenship  income  benefit). 
The reduction in the IRES premiale CIT rate - from 
24%  to  20%  -  applicable  to  CIT  taxpayers  that 
meet  a  set  of  pre-defined  conditions  was  not 
rolled over to 2026 (88).  

Italy’s R&D investment as a share of GDP is 
much  lower  than  the  European  average.  In 
2024, Italy’s R&D  expenditure as a percentage of 
GDP stood at 1.38% compared with an EU average 
of  2.24% (89).  This  is  mainly  due  to  business-
sector-related  R&D,  representing  only  0.79%  of 
GDP against an EU average of 1.49%. Thus, public 
funds support business investments in R&D mainly 
the  new  hyper-
through 
the  previous 
depreciation 
Transition 4.0/5.0 credits as well as by facilitating 

tax  credits  and 

replacing 

regime 

(88)  i)  at  least  80%  of  profits  registered  for  2024  must  be 
retained  in  the  firm  as  reserves;  ii)  at  least  30%  of  these 
retained  profits,  and  no  less  than  24%  of  the  profits 
registered 
to  finance  new 
investments  in  instrumental  goods  for  productive  structures 
located  in  Italy,  those  falling  under  the  categories  of 
‘Transition 4.0 and 5.0’, with a minimum investment amount 
of EUR 20 000. 

in  2023,  must  be  used 

access to credit for micro, small and medium-sized 
enterprises.  Other  significant  incentives  pertain  to 
the  support  for  manufacturing  capacity  for  net-
zero technologies (EUR 1.5 billion) (90), and for the 
ZES  Unica  tax  credit  for  special  economic  zones 
(EUR 2.3 billion in 2026). 

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  was  made  permanent  as  part  of 
Italy’s  commitments  in  the  MTFSP,  and  the  basic 
tax  allowance 
for  dependent  workers  was 
increased  to  EUR 8 500.  Moreover,  the  2026 
Budget  Law  has  reduced  the  tax  rate  for  the 
second  tax  bracket  (income  between  EUR 28 000 
and EUR 50 000) from 35% to 33%. A mechanism 
to  neutralise  the  tax  benefit  arising  from  the 
reduction  in  the  tax  rate  (by  a  flat  reduction  of 
EUR 440) has been introduced for taxpayers with a 
total  income  exceeding  EUR  200 000.  As  from 
2026,  the  lump-sum  tax  regime  for  foreign-
sourced income of non-Italian tax residents in Italy 
is further increased from EUR 200 000 per year to 
EUR 300 000.  

(89)  R&D expenditure - Statistics Explained - Eurostat. 

(90)  Commission approves €1.5 billion Italian State aid scheme. 

52 

2019202220232024202520192022202320242025Tax structureTotal taxes (including compulsory actual social contributions) (% of GDP)42.241.741.242.439.939.739.039.4Taxes on labour (% of GDP)21.320.320.320.620.620.119.920.3of which, social security contributions (SSC, % of GDP)13.212.712.312.513.012.712.713.0Taxes on consumption (% of GDP)11.511.010.711.011.210.910.510.6of which, value added taxes (VAT, % of GDP)6.26.96.56.67.17.47.17.1Taxes on capital (% of GDP)9.410.410.210.88.18.78.58.5Personal income taxes (PIT, % of GDP)11.811.311.712.49.69.49.39.6Corporate income taxes (CIT, % of GDP)1.92.72.72.72.63.23.23.1Total property taxes (% of GDP)2.32.32.12.22.22.11.91.8Recurrent taxes on immovable property (% of GDP)1.41.31.31.31.21.00.90.9Environmental taxes (% of GDP)3.42.32.52.72.62.12.12.1Effective carbon rate in EUR per tonne of CO2 equivalentsnana100.1nanana84.8naTax wedge at 50% of average wage (single person) (*)32.331.730.129.530.032.431.631.531.531.6Tax wedge at 100% of average wage (single person) (*)43.942.942.641.942.540.139.739.939.940.0Corporate income tax - effective average tax rates (1) (*)23.923.923.923.920.019.219.019.3Difference in Gini coefficient before and after taxes and cash social transfers (pensions excluded from social transfers) (2) (*)6.57.97.67.37.88.07.97.8Outstanding tax arrears: total year-end tax debt (including debt considered not collectable) / total revenue (in %) (*)200.7181.0180.8na31.832.630.7naVAT gap (% of VAT total tax liability, VTTL) (**)19.314.515.015.310.57.38.2naEU-27ItalyProgressivity & fairnessTax administration & complianceBy tax baseSome tax types 
 
 
 
   
 
of 

the 

The  labour-tax  wedge  (91)  for  single  persons 
at  different  wage  levels  (67%,  100%  and 
167% 
average  wage)  was 
substantially  higher  in  Italy  than  the  EU 
average  in  2025  (see  Graph 3.2).  At  the  same 
time, it was lower than the EU average for earners 
of low wages at 50% 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 that was clearly higher than the 
EU average. The tax wedge for second earners was 
higher  than  the  tax  wedge  for  single  persons  at 
the  same  wage  level,  but  this  difference  was 
slightly  less  pronounced  than  for  the  EU  average. 
The  2026  Budget  law  introduced  changes  to 
already  existing  and  new  temporary  flat  personal 
income  taxes  on  salary  increases,  productivity 
bonuses  and  overtime  allowances.  These  changes 
further  complicate  the  tax  system  and  erode  the 
tax base. 

but 

recent  measures 

In  Italy,  the  fiscal  drag  in  recent  years  was 
sizeable 
partly 
compensated  its  negative  impact.  The  loss  to 
employees  and  pensioners  related  to  the  fiscal 
drag in recent years was more than compensated 
by  the  tax  reforms  introduced  since  2022,  which 
aimed  at  protecting  low  real  wages  against  the 
inflation  registered  in  2022  and  2023.  EUROMOD 
simulations  carried  out  by  the  JRC  show  that  the 
overall impact of these recent measures has been 
slightly  progressive (92).  Overall,  Italy’s  labour  tax 
burden  as  measured  by  the  difference  of  the  tax 
wedge between single persons at 167% and 50% 
of  average  wage  is  relatively  progressive.  At  the 
same  time,  the  tax-and-benefit  system  reduced 

employer 

contributions, 

(91)  The  tax  wedge  is  an  indicator  of  the  tax  burden  on  labour 
that  can  be  assessed  at  various  levels  of  earnings.  It  is 
calculated  as  the  sum  of  personal  income  tax,  employee 
social-security 
social-security 
contributions and other mandatory contributions, net of cash 
family benefits where relevant, expressed as a percentage of 
total  labour  costs  (composed  of  the  gross  wage  plus 
employer  social-security  contributions).  In  other  words,  the 
tax  wedge  measures  the  gap  between  the  total  cost  of 
employing  a  worker  and  that  worker’s  net  earnings,  as  a 
share  of  total  labour  costs.  Tax  wedge  data  in  the  2026 
country  reports  are  calculated  by  the  Joint  Research  Centre 
of  the  European  Commission  and  based  on  the  EUROMOD 
model, while in the past country reports they were based on 
the  OECD  tax  and  benefit  model.  While  the  underlying 
methodology  is  very  similar,  differences  in  the  assumptions 
can lead to different results between both models. 

inequality 

(as  measured  by 

income 
the 
corresponding  change  in  the  Gini  coefficient)  by 
7.3 pps in 2024, which was below the EU average 
of  7.8 pps (93). 
Inequality  of  total  disposable 
household  income  remains  high,  with  the  Gini 
coefficient  for  Italy  at  32.2%  compared  to  an  EU 
average of 29.1%. 

Graph A3.2: Tax wedge for single and second 
earners as a % of total labour costs, 2025 

Note: The second earner tax wedge shows a household’s tax 
wedge resulting from the wage that a second earner taking 
up a job at 67% of the average wage receives. It does not 
show the total tax wedge of the household. The household is 
assumed to have a first earner at 100% of the average wage 
and no children. For the methodology of the tax wedge for 
second earners, see OECD (2024), Taxing Wages 2024. 
Source: European Commission 

The  tax  system  does  not  incentivise  the 
unemployed  to  enter  to  work,  especially  at 
the  lowest  wage  levels.  Recent  EUROMOD 
simulations by the JRC show that participation tax 
rates  (PTR)  in  Italy  are  sizeable (94).  In  2025,  the 
PTR  for  employees  averaged  across  the  whole 
income  distribution  was  75.2% (95),  mainly  due  to 
a  significant  withdrawal  of  benefit  (47%).  In 
addition, the PTR reached 90% for the first quintile 
and  decreasing  in  the  others,  reflecting  strong 

(93)  The  Gini  coefficient  measures  the  extent  to  which  the 
distribution  of  income  within  a  country  deviates  from  a 
perfectly  equal  distribution.  A  coefficient  of  0  expresses 
perfect equality where everyone has the same income, while 
a coefficient of 100 expresses full inequality where only one 
person has all the income. 

(94)  PTR  shows  the  share  of  earnings  effectively  ‘taxed  away’ 
when  moving  from  unemployment  to  employment,  due  to 
the combined effect of foregone benefits and higher taxes or 
contributions.  The  simulation  was  performed  by 
the 
European  Commission,  Joint  Research  Centre,  based  on  the 
EUROMOD model, J2.0+. 

(92)  The simulation was performed by the European Commission, 
Joint  Research  Centre,  based  on  the  EUROMOD  model, 
J2.0+.See also Annex 12. 

(95)  Unweighted  EU  average  was  54.1%.  See  Annual  Report  on 
Taxation  2026  by  European  Commission  for  a  broader 
discussion on work incentives in the EU-27. 

53 

30.039.342.552.541.7202530354045505550100150Tax wedge, % of total labour costsEarnings as % of the average wageSingle earner - ITSingle earner - EU averageSecond earner -  ITSecond earner -  EU average 
 
     
 
unemployment  protection  for  low  incomes.  In 
practice,  potential  withdrawal  of  means-tested 
benefits  after  certain  income  threshold  drives 
lower work incentives for the first quintile. 

by 

the 

reported 

The number of tax expenditures (TEs) in Italy 
is still very high and their impact in terms of 
forgone  revenues  is  larger  than  in  previous 
years (96).  As 
national 
Commission for Fiscal Expenditures (CFE), the total 
number  of  TEs  decreased  from  2024  to  2025, 
although  they  led  to  increased  forgone  revenues. 
For  2025  TEs  are  estimated  to  have  led  to 
foregone  revenues  amounting  to  EUR 119 billion 
(97),  representing  about  11.4%  of  total  tax 
revenues  collected  and  5.3%  of  GDP.  The  Global 
Tax  Expenditure  Database (98)  also  estimates  the 
TEs  at  5.3%  of  GDP  in  2025,  up  from  4.8%  in 
2024.  However,  in  2025,  Italy  has  begun  some 
rationalisation of tax expenditures by introducing a 
cap  on  PIT  tax  deductions,  based  on  family 
members  and  income,  and  reducing  the  rates  of 
tax credits for energy efficiency. 

Housing  subsidies  dominate  TEs,  while 
systemic  inefficiencies  persist.  According  to 
the  Annual  Tax  Expenditures  Report,  the  largest 
tax  expenditures  for  2025  are  under  the  heading 
‘Housing  and  Urban  Planning’  with  approximately 
EUR 63.5 billion, followed by ‘Competitiveness and 
Business  Development’ 
(EUR 19.6 billion)  and 
‘Social  Rights,  Social  Policies,  and  Family’ 
(EUR 8.3 billion). The CFE’s analysis also highlights 
that  the  Italian  system  of  tax  expenditures  is 
characterised  not  only by the  significant  amounts 
of  expenditure  and  uncollected  revenues  —  as 
deviation  from  the  normal  regime  and  legal 
standards — but also by the very high number and 
variety of expenditure measures (99). In its MTFSP, 
Italy  has  committed  to  reducing  revenue  losses 
related to tax expenditures. 

Structural  reforms  have  supported  the 
longer-term  improvement  in  tax  compliance. 

(96)  European  Commission:  Directorate-General  for  Taxation  and 
Customs Union, Mind the gap – Challenges and opportunities 
for  tax  compliance  and  tax  expenditures  in  the  EU  –  Italy, 
Publications Office of the European Union, 2025. 

(97)  Rapporto annual sulle spese fiscali 2024, Link. 

(98)  Unlike  the  official  sources,  the  GTED  considers  the  spent 

amounts instead of the budgeted amounts. 

(99)  https://www.mef.gov.it/export/sites/MEF/documenti-

allegati/2024/RSF-2024.pdf. 

54 

Since  2019,  Italy  has  taken  several  measures  to 
improve  tax  compliance,  also  under  its  recovery 
and resilience plan (RRP). These include: extending 
mandatory  e-invoicing  (sistema  di  interscambio), 
which now covers all transaction types; increasing 
the  data  and  analytical  tools  available  for 
targeting audits and controls (including using daily 
data  from  electronic  payments);  and  introducing 
penalties for refusing electronic payments.  

Despite  these  efforts,  the  revenue 
loss 
related to tax evasion remains high. The latest 
national  estimates (100)  put  revenue  loss  from  tax 
evasion  in  2023  at  between  EUR 107-112 billion. 
The  2026  Budget  law  includes  the  adoption  of 
three additional measures planned under the RRP: 
data  from  electronic  invoicing  have  been  made 
directly  available  to  the  collecting  agent;  tax 
offsetting  is  now  only  allowed  in  cases  where 
unpaid tax liabilities do not exceed EUR 50 000; a 
new  fast-track  VAT  assessment  procedure  has 
been introduced in cases where electronic invoices 
were issued but no annual VAT returns were filed. 
The 2026 Budget law also introduced a mandatory 
1%  withholding  tax  on  PIT  and  VAT  in  B2B 
transactions aimed at incentivising tax compliance. 
This tax will take effect from 2029. 

In  Italy,  the  VAT  compliance  gap  declined 
almost continuously between 2019 and 2023, 
falling  by  more  than  4 pps  from  19%  to 
15% (101)  amounting  to  EUR 25 billion 
in 
2023.  The  rising  share  of  digital  payments,  also 
supported  by  government  measures.,  contributed 
to 
the  steady 
the  gap.  Despite 
improvements  over  the  last  5  years,  Italy  still 
ranked only 20th among EU countries in 2023, with 
a  VAT  compliance  gap  still  considerably  higher 
than the EU average of 9.5%.  

reducing 

Estimates  on  the  size  of  the  Italian  PIT  and 
CIT  gap  are 
regularly  computed  and 
published.  The  CIT  gap  in  Italy  decreased  by  -
0.8 pps  between  2022  and  2023,  from  18.5%  to 
17.7%  of  potential  CIT  revenue,  but  increased  by 

(100) Relazione-evasione-fiscale-e-contributiva-

2025_Aggiornamento_11_12.pdf. 

(101) See European Commission, Synestia, Poniatowski, G., Bonch-
Sokolovsky,  M.,  Śmietanka,  A.  et  al.,  VAT  gap  in  Europe  – 
Report  2025,  Publications  Office  of  the  European  Union, 
Luxembourg, 2025.  

 
 
 
EUR 0.76 billion  in  nominal  terms  (EUR 9.6 billion 
in 2022 vs EUR 10.3 billion in 2023) (102).  

facilitating  settlement  procedures  and  4.5 billion 
from activities promoting compliance (106). 

(100% 

the  digitalisation  of 

Italy is deploying investments under the RRP 
to  enhance 
tax 
administration,  strengthening  digital  tax 
processes  and  improving  tax  compliance. 
Since  2023,  Italy  has  automatically  prefilled  VAT 
returns  with  data  that  it  has  collected.  However, 
pre-filing for CIT returns is not yet in place. The e-
filing  rates  for  PIT,  CIT  and  VAT  returns  are  very 
the  EU 
high 
in  2023)  and  above 
average (107).  The  high  e-filing  rate 
Italy 
in 
indicates that the  country  is  well  advanced in  the 
digitalisation  process.  It  likely  results  in  a  lower 
compliance burden for Italian taxpayers compared 
to  the  EU  average.  RRP  investments  have  been 
largely  used  to  enhance  digital  tax  processes,  to 
legal  enforcement  mechanisms  and 
faster 
recovery 
improve 
administrative  capacity.  To  achieve  these  goals, 
the staff of the Revenue Agency will be increased 
by 1 000 units in 2026 and 1 300 in 2027 (108). 

courts  and, 

through 

to 

While PIT compliance in Italy is continuing to 
improve slightly, tax evasion remains high. Of 
the  EUR 72.3 billion  in  tax  evasion  assessed  in 
2024,  the  actual  recovered  amount  stood  at 
EUR 12.8 billion  (17.7%)  (103).  According  to  the 
Corte  dei  Conti  (Court  of  Audit),  the  widespread 
expectation  of  future  amnesties 
leads  many 
taxpayers  to  postpone  payments,  hoping  for 
subsequent amnesties or the possibility of evading 
government  enforcement action.  A  new  edition  of 
the  Rottamazione  quinques 
settlement 
procedure has been provided for 2026. 

tax 

including 

To improve the efficiency of the tax system, 
Italy  reorganised  the  national  tax  system  in 
2025 (104), 
the  VAT  collection 
system (105). Steps towards digitalising the whole 
tax  administration  have  been  made,  but 
challenges  remain.  Measures 
implemented  to 
relieve the tax and administrative burden on SMEs 
include increasing the VAT registration thresholds. 
Although  this  aimed  to  allow  micro  businesses  to 
benefit  from  VAT  exemption,  it  might  discourage 
growth  of  declared  activities.  This  reorganisation 
affected the core activities of the agency in charge 
the 
of 
automatic  write-off  of  qualifying  tax  receivables 
that  remain  uncollected  by  31 December  of  the 
fifth year. While the measure aims at reducing the 
stock  of  uncollectable  arrears, 
it  should  be 
accompanied  by  provisions  to  accelerate  tax 
collection  to  avoid  ultimately  rewarding  non-
compliant behaviours.  

tax  collection 

including 

(AdER), 

the 

The stock of tax arrears in Italy remains one 
of the highest among the EU Member States. 
However, the 2024 financial year was marked by a 
record  level  of  tax  recovery,  amounting  to  a total 
of EUR 33.4 billion, 5.4 of which derived from the 
extraordinary  measures 
Rottamazione-quater 

(102) CIT gap figures refer to the IRES - imposta sul reddito / sulle 
società  (‘income/corporate  tax’  in  English).  Contextually,  the 
IRAP 
(imposta  tegonale  sulle  attivitá  produttive)  gap 
increased by 1 pp. 

(103) https://www.corteconti.it/Download?id=aea876c4-e004-

4c06-b3b3-a46098e6c7be 

(106) Agenzia delle Entrate press communication. 

(104) Legislative Decree No 110 of 29 July 2024. 

(107) International Survey on Revenue Administration data. 

(105) Italy’s 2025 draft budgetary plan. 

(108) Piano integrato di attivita’ e organizzazione 2026-2028. 

55 

 
 
 
PRODUCTIVITY 
ANNEX 4: INNOVATION TO BUSINESS  

focus 

greater 

through 

linkages, 

innovation 

research  and 

improvements.  For 

Italy’s 
(R&I) 
ecosystem still faces challenges to translate 
scientific  excellence  into  innovation,  despite 
Italy,  the  2025 
recent 
country-specific recommendation (CSR) highlighted 
challenges  in  supporting  innovation.  These  could 
further  strengthening  business-
be  met  by 
academia 
innovation  procurement, 
corporate  venture  capital  and  opportunities  for 
talents  and  by  boosting  the  role  of  universities  in 
on 
innovation 
commercialisation  of  research  results  and  better 
career  paths  for  researchers.  According  to  the 
2025 European Innovation Scoreboard, Italy is still 
a ‘moderate innovator’. Its performance is 93% of 
the  EU  average (109)  while  its  R&D  intensity (110) 
has stagnated over the last decade, amounting to 
1.38% in 2024, far below EU levels (2.24%). Italy’s 
weak  business  dynamism  and  the  prevalence  of 
mid-tech  industries  contribute  to  low  business 
investment  in  R&D.  Start-ups  still  face  challenges 
in  attracting  venture  capital  and  business-
academia  linkages  require  strengthening,  with 
persisting  disparities  among  regions (111).  These 
factors,  coupled  with  limited  R&D  public  funding 
and  inadequate  opportunities  for  researchers  and 
talents, hinder the effective translation of research 
outcomes  into  marketable  innovations.  Italy  has 
recorded a strong increase in the uptake of digital 
technologies  by  SMEs.  Additionally,  the  country 
plays a crucial role in the deployment of advanced 
digital technologies and infrastructure. 

(109) European 

2025, 

European 

Commission, 

Innovation 
Scoreboard,  country  profile:  Italy  ec_rtd_eis-country-profile-
it.pdf.  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 with the EU average). 

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

percentage of GDP. 

(111) European 

Commission, 

2025, 

Regional 
profile: 

Innovation 
Italy 

country 

Scoreboard, 
https://ec.europa.eu/assets/rtd/ris/2025/ec_rtd_ris-regional-
profile-it.pdf.  This  scoreboard  is  a  regional  extension  of  the 
European  Innovation  Scoreboard,  assessing  the  innovation 
performance of European regions. 

Excellent science 

is 

subdued, 

hampering 

Despite  improvements  to  Italy’s  scientific 
performance  over  time,  public  investment  in 
further 
R&D 
consolidation  of  the  public  science  base.  The 
country’s  share  of  research  publications  among 
the  top  10%  most-cited  worldwide  stood  above 
the EU average in 2022 (112) (10.6% vs 9.4%), but 
has  stagnated  over  the  last  five  years.  Scientific 
excellence  could  be  further  boosted  by  increasing 
the  trend  in  public  R&D  intensity (113),  which 
amounted  to  0.57%  of  Italy’s  GDP  in  2024,  still 
below  the  EU  average  of  0.72% (114).  Public 
funding  of  tertiary  education,  which  also  drives 
higher  education  expenditure  on  R&D,  is  in  real 
terms  well  below  the  pre-2008  financial  crisis 
levels (115).  A  new  reform 
Italy’s 
recovery  and  resilience  plan  (RRP) (116)  aims  to 
improve the planning and predictability of research 
funding, including through the merger of different 
funding  instruments  of  competitive  nature (117). 
However, ensuring the research system’s financial 
sustainability  beyond  the  end  of  RRP  support  in 
2026  remains  a  crucial  challenge (118).  In  its 
medium-term 
Italy 
fiscal-structural 
committed  to  an  increase  in  public  R&D  intensity 
to 0.6% of GDP by 2029. 

included 

plan, 

in 

careers 

Research 
still 
in 
insufficiently  attractive,  despite  an  increase 
in  the  number  of  public-sector  researchers. 

Italy  are 

(112) Last available year. 

(113) These data include the government and the higher education 

sector. 

(114) These data include the government and the higher education 

sector. 

(115) Andini, M., Bertolotti, F., Citino, L., D’Amuri, F., Linarello, A., & 
Mattei,  G.,  2025,  ‘Ricerca,  innovazione  e  trasferimento 
tecnologico  in  Italia’  Occasional  Papers  No.  954,  Banca 
d’Italia. 

(116) Reform  M4C2-4bis  ‘Three-year  plan  for  the  financing  of 
research  activities’,  included  in  Italy’s  RRP  amendment 
approved in autumn 2025. 

(117) Including  those  funding 
national interest’ (PRIN). 

‘research  projects  of  relevant 

(118) Consiglio  Nazionale  delle  Ricerche,  2025,  Relazione  sulla 
ricerca e l’innovazione in Italia: Analisi e dati di politica della 
scienza e della tecnologia, 5th ed., CNR Edizioni. 

56 

 
 
 
 
 
 
 
areas 

expenditure  on  R&D  as  a  percentage  of  GDP  has 
slightly increased over the last decade, it remained 
at almost half the EU average as a percentage of 
GDP  in  2023  (0.22%  vs  0.47%).  Weaknesses  in 
business dynamism leads to slow adoption of new 
technologies (125),  with  significant  differences 
among  regions  (see  Annex  19).  Business-sector 
R&D  in  Italy  remains  concentrated  in  mid-tech 
industries  such  as  mechanics  and  transport  (126), 
even  though  since  2015  the  fastest-growing 
innovation 
digital 
communications  and  computer  technology.  This  is 
reflected  in  patents:  in  2024,  only  3%  of  Italy’s 
European Patent Office applications were in these 
high-tech  fields,  much  lower  than  the  rest  of  the 
world  (17%) (127).  Additionally,  Italy  lacks  the 
presence  of  global  leaders  in  R&D (128).  According 
to  the  2025  EU 
Investment 
Scoreboard (129), only 21 Italian companies ranked 
among  the  top  2 000  R&D  investing  companies 
worldwide in 2024 (130), slightly more than in 2023 
(17  companies).  The  highest-placed  company 
ranked 105th. 

Industrial  R&D 

globally 

are 

The number of researchers employed by the public 
sector continues to fall short of the EU average in 
per capita terms (4.1 researchers per thousand of 
the  active  population  vs  EU  average  of  4.3  in 
2024)  (119).  In  recent  years,  however,  there  has 
been  an  upward  trend  thanks  to  RRP  measures 
funding  the  hiring  of  fixed-term  researchers  (120). 
The  long-term  impact  of  this  initiative  may  be 
limited  once  the  RRP  concludes,  despite  some 
measure included in the 2026 budget. Additionally, 
research careers are still not attractive, especially 
at  early-career  stages,  due  to  both  job  insecurity 
and low salaries (121). Italy’s recent policy action on 
research  careers (122),  such  as  the  introduction  of 
additional  contract  types  for  researchers  (123), 
might  not  contribute  to  reducing  job  insecurity  or 
to  increasing  the  attractiveness  of  these  careers, 
which  are  crucial  to  the  2025  CSR  on  improving 
the career path of researchers.    

Business innovation   

Business  R&D  intensity  is  stagnating,  as 
Italy’s  economy  mainly  relies  on  small  and 
medium-sized  enterprises  that  principally 
operate  in  traditional  or  mid-tech  sectors. 
Business  enterprise  expenditure  on  R&D  as  a 
percentage of GDP has stagnated over the last 10 
years:  in  2024,  it  was  far  below  the  EU  average 
(0.79% vs 1.49%) and this gap has widened since 
2020, as shown in Graph A4.1. R&D  activities are 
mainly  carried  out  by  large  firms (124).  While  SME 

(119) Eurostat,  2023, 

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

Researchers 

(full-time 

(120) The RRP’s M4C2 component ‘From research to business’ has 
supported researchers through investments such as ‘research 
projects  of  significant  national  interest  (PRIN)’,  ‘Partnerships 
extended  to  universities,  research  centres,  companies  and 
funding  of  basic  research  projects’,  and  one  investment 
specifically targeting young researchers. 

(121) Civera, A., Lehmann, E., Meoli, M., Paleari, S. and Brioschi, M.S., 
2025,  ‘How  to  Protect  the  Taste  for  Science?  Working 
Conditions  in  European  Higher  Education  Systems’,  Higher 
e12591. 
Education 
https://doi.org/10.1111/hequ.12591.  

Quarterly, 

79: 

(122) Decree Law 45, 7 April 2025.  

(123) Such  as  incarichi  post-doc  (post-doc  assignments)  and 

incarichi di ricerca (research assignments). 

(125) International  Monetary  Fund  European  Dept,  2025,  ‘Italy: 
Selected  Issues’,  IMF  Staff  Country  Reports  2025,  202, 
https://doi.org/10.5089/9798229018241.002. 

(126) Banca d’Italia, 2025, Relazione annuale sul 2024. 

(127) Andini, M., Bertolotti, F., Citino, L., D’Amuri, F., Linarello, A., & 
Mattei,  G.  (2025),  ‘Ricerca,  innovazione  e  trasferimento 
tecnologico  in  Italia’,  Occasional  Papers  No.  954,  Banca 
d’Italia, based on EPO data for the period 2015-2024. 

(128) Banca d’Italia, 2025, Relazione annuale sul 2024. 

(129) Elaboration  based  on 

Industrial  R&D 
Investment Scoreboard (data refer to 2024), JRC Publications 
Repository  -  The  2024  EU  Industrial  R&D  Investment 
Scoreboard. 

the  2025  EU 

(124) ISTAT,  2025,  Ricerca  e  sviluppo  (R&S)  in  Italia  Anni  2023–

(130) Compared  with  674  from  the  United  States,  109  from 

2025. 

Germany and 51 from France. 

57 

 
 
 
Graph A4.1: Business R&D intensity 2015-2024 

Source: DG Research and Innovation, based on Eurostat 

intensity 

for  SMEs, 

The uptake of digital technologies by firms is 
increasing  remarkably,  and  Italy  is  also 
making  efforts  to  advance 
its  digital 
technologies  and  infrastructure.  The  country 
performs well above the EU average in its level of 
basic  digital 
reaching 
79.5% (131)  in  2025  and  positioning  itself  among 
the  best  performers  in  the  EU.  However,  the 
situation  differs  when  advanced  technologies  are 
considered.  While  Italy  shows  strong  performance 
in  cloud  adoption  (68%  of  enterprises)  and  is 
broadly  in  line  with  the  EU  in  data  analytics 
(42.7%  of  enterprises),  AI  uptake  remains  limited 
(16.4% of enterprises). Overall, progress is uneven: 
despite  recent  improvements  in  AI  adoption,  the 
pace  remains  insufficient  to  fully  close  the  gap 
with 
further 
digitalisation of businesses, Italy has put in place a 
range  of  policy  and  funding  measures.  These 
tax  credits 
include 
supporting digital transformation of firms, such as 
the  RRP  investment  Transition  4.0  and  Transition 
5.0.  Likewise,  targeted  measures  are  in  place  to 
foster  AI  adoption,  cloud  uptake  and  data  use, 
notably 
and 
innovation  hubs (132).  On  semiconductors,  the 
Important  Projects  of 
implementation  of  the 
Common 
on 
Interest 
Microelectronics  and  Communication  Technologies 
is  complemented  by  national 
incentives  for 
companies  operating  in  the  semiconductor  value 

the  EU  average.  To  support 

incentives  and 

competence 

European 

financial 

through 

centres 

(IPCEI) 

(131) As share of SMEs. 

(132) Including  measures  funded  under  the  RRP  (in  particular: 
measure  M4C2.I2.3:  strengthening  and  sectorial/territorial 
extension  of 
industry 
segments). 

transfer  centres  by 

technology 

chain (133).  In  parallel,  Italy  continues  to  support 
the  development  of  interoperable  and  accessible 
European data processing technologies through its 
participation in the IPCEI on Next Generation Cloud 
Infrastructure and Services. 

Despite  increases,  Italy’s  public  support  for 
business innovation remains below EU levels. 
The  total  public  sector  support  for  business 
expenditure  in  R&D  as  a  percentage  of  GDP  was 
below  the  EU  average  in  2022 (134)  (0.11%  vs 
0.21%),  declining  from  its  peak  of  2018  (0.26%). 
Italy’s  R&D  tax  incentives  are  intended  to  reduce 
instead  of  offering  companies 
firms’  costs, 
income-based  support (135),  and 
the  complex 
legislative framework has changed multiple times, 
leading  to  uncertainty  surrounding  its  precise 
scope  of  application  (136).  Direct  public  support  to 
business  R&D  includes  measures  such  as  the 
innovation agreements, also supported by the RRP, 
which  focus  on  industrial  research.  Italy  has 
recently mapped its tax incentives, including those 
specifically  linked  to  research  and  innovation,  as 
part  of  a  RRP  measure  aiming  to  streamline 
(137).  Simplifying  the 
measures 
incentive  framework  and  guaranteeing  its  long-
term  predictability  could  be  beneficial  to  ensuring 
effective public support to business innovation. 

in  this  field 

Italy  still  faces  key  challenges  to  improve 
science-business  linkages,  despite  growing 
attention  to  knowledge  valorisation  and 
technology  transfer.  While  the  number  of 
public-private  scientific  co-publications  has  been 
on an upward trend since 2018 and was above the 
EU  average  in  2024  (9.1%  vs  7.6%) (138),  the 
country’s  research  valorisation  is  still  a  two-tier 
system. There is a significant gap between the five 
best-performing  entities  and  a  large  group  of 

(133) ‘Sportello semiconduttori’. 

(134) Last available year. 

(135) Income-based 

tax 

incentives  award 

successful  R&I 

investments through measures such as reduced tax rates. 

(136) Bertolotti,  F.,  Citino,  L.,  Linarello,  A.,  Lotti,  F.,  Padovani,  E., 
Pisano,  E.,  Romanelli,  M.,  Sanelli,  A.,  Scoccianti,  F.,  Sette,  E. 
and  Zangari,  E.,  2024,  ‘Innovazione  e  politiche  di  sostegno 
pubblico:  un’analisi  comparata’ 
(Innovation  and  Public 
Support  Policies:  A  Comparative  analysis),  Bank  of  Italy 
Occasional Paper No. 898. 

(137) https://www.mimit.gov.it/it/pnrr/progetti-pnrr/pnrr-riforma-

degli-incentivi.  

(138) Public-private scientific co-publications as % of total number 

of publications. 

58 

0.6%0.7%0.8%0.9%1.0%1.1%1.2%1.3%1.4%1.5%1.6%2015201620172018201920202021202220232024ITEU 
   
 
 
universities  and  research  organisations  lagging 
behind.  The  creation  of  public  research  spin-offs 
has  sharply  declined  over  time,  with  86  new 
companies created in 2023 (compared with 162 in 
2018). Spin-off creation is mainly concentrated in 
northern Italy (139). The Ministry of Enterprises and 
Made in Italy has put forward measures targeting 
technology transfer offices (140), but staffing is still 
significantly below EU levels (5.7 vs 11 FTEs) (141), 
as  is  their  capacity  to  generate  revenues  from 
their  patents  (142).  Small  technology  transfer 
offices could benefit from stronger coordination of 
their  activities  to  promote  critical  mass,  while  the 
best-performing  ones  could  enjoy  a  more 
autonomous  and  flexible  set-up,  such  as  that  of 
university  foundations (143).  In  line  with  the  2025 
in 
CSR  on  boosting  the role  of  universities 
innovation 
on 
increasing 
commercialisation  of  research  results  and  on 
strengthening business-academia linkages, Italy is 
preparing  a  national  strategy  for  technology 
transfer and knowledge valorisation as part of its 
annual competition law for 2025. This reform has 
the potential to introduce a more structured, long-
term approach to valorising research results (144). 

focus 

their 

by 

Entrepreneurial dynamism 

While  Italy’s  start-up  ecosystem  has  grown 
over  time,  venture  capital  investment  still 
lags behind EU peers. The number of innovative 
start-ups in Italy increased by 23% between 2019 
and  2023 (145).  Although  Italy’s  venture  capital 

(139) Network per la Valorizzazione della Ricerca (NETVAL), 2025, 

XX Rapporto ‘Un’occasione persa?’. 

(140) Such  as  the  calls  launched  to  promote  improvements  and 
capacity building in technology transfer offices and the calls 
to fund Proof of Concept projects. 

(141) Full-time equivalents. 

(142) Andini, M., Bertolotti, F., Citino, L., D’Amuri, F., Linarello, A., & 
Mattei,  G.,  2025,  ‘Ricerca,  innovazione  e  trasferimento 
tecnologico  in  Italia’,  Occasional  Papers  No.  954,  Banca 
d’Italia, based on EPO data for the period 2015-2024. 

(143) Ibidem. 

(VC) market has grown over the past decade (146), 
it  remains  small  and  insufficient  for  start-ups:  in 
2024,  VC  spending  was  only  0.03%  of  GDP,  far 
below the  EU  average  of 0.06%  and the  levels  in 
Germany  and  France  (Graph  A4.2).  The  main 
causes  lie  in  the  limited  dynamism  of  Italy’s 
economy, the small size of Italian VC players and 
the  delayed  start  of  public  intervention  compared 
with  other  EU  countries (147).  Additionally,  the 
country’s  economic  structure  has  an  above-to-
average reliance on bank financing compared with 
market-based  financing,  which  has  a  negative 
impact  on  access  to  finance  for  R&D  and 
knowledge  intensive-activities (148).  In  its  2024 
competition  law,  Italy introduced  a  more targeted 
definition  of  ‘innovative  start-up’  as  well  as 
the  participation  of 
measures 
institutional  players  in  the  VC  market.  Measures 
included tax incentives  on  the  capital  gains  made 
on VC investments and a tax credit for registered 
incubators  and  accelerators.  Implementation  of 
these  measures  could  contribute  to  funnelling 
resources to young firms (see Annex 6). 

increase 

to 

Graph A4.2: Venture capital share as % of GDP: 
2019 vs 2024 (1) 

(1) Data calculated as a three-year moving average 
Source: DG Research and Innovation, based on Eurostat 

Italy has introduced measures to improve the 
regulatory framework for R&I, but innovation 
procurement practices require more effective 
action. 
Italia’,  a  regulatory 
sandbox,  was  introduced  in  2020  and  received 
the 
three  applications 

in  2024,  mainly  for 

‘Sperimentazione 

(146) Gallo, R., F. Signoretti, I. Supino, E. Sette, P. Cantatore and M. 
Fabbri,  2025,  ‘The  Italian  Venture  Capital  Market’,  Bank  of 
Italy Occasional Papers, 919. 

(144) This milestone is also part of Italy’s RRP. 

(147) Ibidem. 

(145) Relazione  annuale  2024  al  Parlamento  sullo  stato  di 
attuazione  delle  policy  a  sostegno  di  Startup  e  Pmi 
innovative, RELAZIONE_ANNUALE_2024-finale.pdf. 

(148) International  Monetary  Fund  European  Dept,  2025,  ‘Italy: 
Selected  Issues’,  IMF  Staff  Country  Reports  2025,  202, 
https://doi.org/10.5089/9798229018241.002.  

59 

0.00%0.01%0.02%0.03%0.04%0.05%0.06%0.07%0.08%0.09%ItalyEUGermanyFrance20192024 
 
   
 
transport  sector (149).  Reasons  for  the  apparent 
lack  of  market  attention  for  this  instrument 
include  administrative  burden  and 
limited 
information (150). The recently approved AI Act (151) 
also  includes  provisions  on  regulatory  sandboxes. 
Policies  on  innovation  procurement  need  further 
improvement,  in  line  with  the  CSR  2025  on 
strengthening  innovation  procurement.  Initiatives 
at  sectoral  level  are  limited  and  only  a  few 
regions (152)  are  active  in  this  field,  resulting  in 
reduced 
innovation 
ensure 
to 
procurement across the country (153).  

capacity 

ICT 

subjects,  and 

Italy  is  lagging  behind  on  innovative  talent, 
especially  on 
the 
entrepreneurial  culture  is  not  sufficiently 
developed.  Tertiary  education  attainment  is  still 
one  of  the  lowest  in  the  EU  (see  Annex  13)  (154) 
and  is  not  conducive  to  increasing  the  country’s 
talent  pool  in  science  and  technology.  While  the 
in  science  and 
number  of  new  graduates 
engineering  has  increased  over  time  and  has 
exceeded  EU  levels (155),  the  number  of  new  ICT 
graduates  was  below  the  EU  average  in  2024 
(Italy:  1.4  per  thousand  of  the  population  aged 
25-34  vs  EU:  3.8).  However,  demand  for  digital 
professionals remains high across all sectors, with 
a  growing  emphasis  on  AI  skills.  According  to  a 
recent study measuring 10 different dimensions of 
entrepreneurial ecosystems across OECD countries 
Italy's  weakest 
from  2020 
the 
performances 

associated  with 

to  2023 (156), 

are 

(149) Relazione  annuale  2024  al  Parlamento  sullo  stato  di 
attuazione  delle  policy  a  sostegno  di  Startup  e  Pmi 
innovative, RELAZIONE_ANNUALE_2024-finale.pdf. 

(150) Ranchordas,  S.,  Vinci,  V., 

‘Regulatory  Sandboxes  and 
Innovation-friendly  Regulation:  Between  Collaboration  and 
Capture’, Italian Journal of Public Law, Vol. 1/2024. 

(151) Law 132/2025. 

(152) Lombardy and Sardinia. 

(153) EU 

Innovation 

Procurement 

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

Observatory, 

(154) Source:  Eurostat  (2024).  Share  of  population  aged  25-34 
who  have  successfully  completed  tertiary  education.  Italy’s 
data: 31.6% vs EU average 44.2%.  

(155) Source:  Eurostat  (2024).  Italy’s  data:  18.9  vs  EU  average: 

16.8 per thousand of the population aged 25-34. 

(156) OECD,  2025,  ‘Entrepreneurial  Ecosystem  Diagnostics’,  OECD 
Studies  on  SMEs  and  Entrepreneurship,  OECD  Publishing, 
Paris, https://doi.org/10.1787/7096961f-en. 

60 

entrepreneurial culture and talent dimensions (157). 
In  response,  Italy  has  taken  action  to  improve 
students’  technological  skills,  including  through 
fostering  ITS  academies  (158).  This  is  in  line  with 
the 2025 CSRs on  strengthening opportunities for 
talents  and  continuing  to  promote  postsecondary 
VET  and  in-work  training  in  high-demand  sectors 
to address short-term skills needs. 

elements 

Entrepreneurship  education  in  Italy  remains 
unevenly  developed  and  only  partially 
connected  to  the  country’s  innovation  and 
of 
needs.  While 
business 
entrepreneurship  education  are  embedded 
in 
upper  secondary  curricula,  Italy  does  not  have  a 
dedicated  national  strategy  (159)  or  a  coordinated 
governance  framework  to  support  the  systematic 
development  of  entrepreneurial 
competence 
across  education  levels.  Recent  policy  initiatives 
aim  to  strengthen  students’  skills  in  initiative-
taking,  risk-taking  and  project  management,  with 
official  guidelines 
in  2018  providing 
issued 
orientation  for  secondary  schools  in  this  area. 
However,  the  notion  of  entrepreneurship  as  a 
the 
transversal  competence,  as  defined 
European  key  competence  framework  (160),  is  not 
yet fully embedded in curriculum design. According 
to  European  comparative  evidence,  the  ability  of 
entrepreneurship  education  to  foster  innovation-
oriented mindsets and entrepreneurial activity may 
be  held  back  by  limited  national  coordination,  the 
absence of dedicated support structures, and weak 
monitoring 
evaluation  mechanisms. 
Strengthening  strategic  coordination,  clarifying 
learning  outcomes,  and 
improving  data  on 
students’  entrepreneurial  competences  would 
enable  entrepreneurship  education  to  contribute 
more  effectively  to  Italy’s  innovation-to-business 
ecosystem. 

and 

in 

(157) Scores  are  composite  indices,  with  values  ranging  from 
0-100 (100 indicates the best score). Italy’s performance is 
18.3  for  entrepreneurial  culture  and  27.9  for  talent,  well 
below the OECD average. 

(158) Istituti tecnologici superiori (Higher technology institutes). 

(159) European  Commission:  European  Education  and  Culture 
Executive Agency, Baïdak, N., Kocanova, D., Pierantoni, L. and 
Riiheläinen, J. M., 2025, Entrepreneurship education at school 
in  Europe  –  2025  –  Eurydice  report,  Publications  Office  of 
the 
European 
Union, https://data.europa.eu/doi/10.2797/0693204. 

(160) This  framework  defines  entrepreneurship  as  a  transversal 

competence, which applies to all spheres of life. 

 
 
 
 
Table A4.1:  Key innovation indicators 

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

61 

R&D intensity (gross domestic expenditure on R&D as % of GDP)1.211.331.501.371.371.38:2.243.44Public expenditure on R&D as % of GDP0.520.510.550.530.540.57:0.720.64Scientific publications of the country within the top 10% most-cited publications worldwide as % of total publications of the country 10.3210.7810.8610.56:::9.4412.31Researchers (FTEs) employed by public sector (Gov+HEI) per thousand active population2.502.903.303.603.704.10:4.30:International co-publications as % of total number of publications39.5244.9547.5648.0448.0050.11:57.24:Business enterprise expenditure on R&D (BERD) as % of GDP0.650.770.930.810.800.79:1.492.69Business enterprise expenditure on R&D (BERD) performed by SMEs as % of GDP0.150.220.290.230.22::0.470.30Researchers employed by business per thousand active population1.602.103.103.103.003.00:5.90:Patent applications filed under the Patent Cooperation Treaty per billion GDP (in PPS €)1.962.192.341.76:::2.812.20Employment share of high-growth enterprises measured in employment (%):::0.780.86::0.87:SMEs with at least a basic level of digital intensity% SMEs (EU Digital Decade target by 2030: 90%)::::60.69:79.4971.39:Data analytics adoption% enterprises (EU Digital Decade target by 2030: 75%)::::26.61:42.7139.85:Cloud adoption% enterprises (EU Digital Decade target by 2030: 75%)::::55.11:68.0546.69:Artificial intelligence adoption % enterprises (EU Digital Decade target by 2030: 75%)::::5.058.2016.4019.95:Public-private scientific co-publications as % of total number of publications6.737.838.058.789.089.06:7.62:Public expenditure on R&D financed by business enterprises (national) as % of GDP0.010.010.030.030.03::0.060.02Total public-sector support for BERD as % of GDP0.050.100.120.11:::0.21:R&D tax incentives: foregone revenues as % of GDP0.000.050.060.06:::0.100.16BERD financed by the public sector (national and abroad) as % of GDP 0.050.050.060.050.05::0.11:Venture capital (market statistics) as % of GDP (calculated as a 3-year moving average)0.010.000.010.030.030.03:0.06:Seed stage funding share (% of GDP)0.000.000.000.000.000.00:0.01:Start-up stage funding share (% of GDP)0.010.000.010.010.020.02:0.03:Later stage funding share (as % of GDP)0.000.000.010.010.010.01:0.03:New graduates in science & engineering per thousand population aged 25-34:11.015.116.517.918.9:16.8:Graduates in the field of computing per thousand population aged 25-34:1.71.01.21.31.4:3.8:Innovative talentR&D investment & researchers employed in businessesInnovation outputsDigitalisation of businessesAcademia-business collaboration Public support for business innovationFinancing innovationScience and innovative ecosystemsItaly2010201520202022202320242025EU average (1)USHeadline indicator 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
ANNEX 5: SINGLE MARKET AND INDUSTRY 

and 

among 

system 

remains  above 

Italy’s  business  environment 
is  broadly 
supportive  but  continues  to  be  constrained 
by  deep-rooted  structural  features,  notably 
the  high  level  of  fragmentation  in  the 
persistent 
productive 
administrative  complexity.  For  Italy,  the  2025 
CSRs  highlighted  challenges 
in  growth  and 
aggregation of SMEs and start-ups and restrictions 
to  competition,  including  in  local  public  services, 
business  services  and  railways.  While  overall 
investment 
the  EU  average, 
business  investment  lags,  reflecting  uncertainty, 
labour  regulation  and  a 
high  energy  costs, 
intangible  and  digital 
structural  shortfall 
in 
investments, 
SMEs, 
particularly 
compounded  by  limited  access  to  equity  and 
venture  capital  financing.  Italy  has  stepped  up 
efforts  on 
through 
reforms linked to the recovery and resilience plan 
(RRP), including major simplification legislation and 
digitalisation  of  procedures.  Yet  administrative 
burdens, lengthy permitting processes and uneven 
implementation  across  regions  remain  significant 
obstacles  for  businesses.  The  situation  on  late 
payments  has  continued  to  improve,  with  shorter 
payment 
business-to-business 
in 
transactions  and  measurable  progress  in  public 
sector  payments  driven  by  RRP  commitments, 
although firms still perceive public administrations 
as  paying 
the  need  for 
sustained  monitoring  and  enforcement.  However, 
in 
despite  promising 
connectivity 
progress 
is required, especially in the expansion of fibre. 

regulatory  simplification 

late,  underscoring 

infrastructure, 

trends  and 

initiatives 

further 

times 

sectors  with  a  relatively  low  labour  productivity 
growth in comparison with similar European peers 
(see also Annex 18) (162).  

in 

The  fragmentation  of  businesses  has  fallen 
in  recent  years.  This  trend,  already  underway 
before  the  outbreak  of  the  Covid-19  pandemic, 
has  continued 
the  post-pandemic  period, 
accompanied  by  an  increase  in  employment  and 
turnover  and,  therefore,  in  the  average  size  of 
companies  (163).  The  proposed  framework  law  on 
SMEs 
trend, 
facilitating  the  growth  in  size  and  aggregation  of 
companies, 
administrative 
simplification  and  digitalisation  of  procedures, 
extending  and  strengthening  programmes 
to 
support the internationalisation of companies (164).  

to  underpin 

is  expected 

providing 

this 

for 

The  business  churn  rate  is  still  one  of  the 
lowest in the EU at 13.5% in 2023, compared to 
an  EU  average  of  19%  (165).  Enterprise births  and 
deaths in the business economy are both below EU 
levels  (7.8%  and  5.7%,  against  EU  values  of 
10.5%  and  8.5%,  respectively),  especially  in  high-
technology  sectors  (166).  This  reflects  a  mix  of 
long-term  structural  factors  (such  as  population 
regional  fragmentation), 
decline  and  ageing, 
supply-side 
early-stage 
frictions 
risk 
entrepreneurship,  constrained  access 
finance,  family  and  micro-firm  structure),  and 
institutional  features  that  hinder  scale-up  and 
efficient  exits  (see  Annex  7).  In  addition,  high 
growth  firms  accounted  for  9.4%  of  companies 
and  12.4%  of  employees,  slightly  below  the  EU 
averages of 10.5% and 12.9%.  

(limited 

to 

Business dynamics 

Italian firms have long struggled to scale up 
and innovate (see Annex 4). Mature Italian firms 

The  structure of  Italian  production  structure 
is  very  fragmented.  94.7%  of  companies  have 
fewer  than  10  employees  and  more  than  half  of 
the workers are employed in companies with fewer 
than  20  employees.  This  slows  down  aggregate 
productivity,  as  micro-enterprises  invest  less  in 
physical  capital,  innovation  and  technology,  have 
in  knowledge  and 
more  difficulty 
developing 
innovative  business  organisation 
models,  and  participate  little  in  global  value 
chains (161).  In  addition,  Italy  is  specialised  in 

investing 

(161) National Council of Economics and Labor (CNEL) – Annual 

(162) Calligaris S. at al (2018). “Poor productivity: An Italian 

perspective”.  

(163) Report on the Competitiveness of Productive Sectors (2025). 

(164) These  measures  help  address  the  2025  CSR  to  “promote 
growth and aggregation of SMEs and start-ups, also in light 
of  the  commitments  in  the  medium-term  fiscal-structural 
plan  (MTFSP)”.  Italy’s  MTFSP  includes  commitments  to 
increase  SMEs’  competitiveness  facilitating  business  size 
investment 
growth, 
orientation and skills matching. 

fostering  generational 

transition, 

(165) As defined by Eurostat, the business churn rate is the sum of 
entreprise births and death rates. High growth enterprises are 
enterprises  that  have  had  at  least  10  employees  at  the 
beginning  of  a  3-year  period  and  an  annual  growth  in  the 
number of employees above 10% during that period. 

Productivity Report 2025, September 2025. 

(166) IMF, Selected Issues, 2025. 

62 

 
 
 
 
 
 
in 

the  manufacturing 

are  significantly  smaller  than  in  other  countries, 
and  there  are  few  new  entrants  that  eventually 
become  market  leaders,  suggesting  barriers  to 
leading  firms  are 
scaling  up.  While 
Italy’s 
concentrated 
sector 
(machinery, automotive components, textiles), and 
few are active in the high-tech sector, the country 
has a below average share of start-ups). Start-ups 
account for fewer firms in Italy then in other peer 
country,  and  the  gap  is  driven  by  the  services 
sector.  According  to  OECD  data,  15.5%  of  service 
sector firms were start-ups in Italy (around 17% in 
peers)  and  this  gap  persisted  throughout  the 
period 2004-21) (167). Despite some recent positive 
signals, such as an increase in the average size of 
businesses, 
Italian  production  structure 
remains  dominated  by  micro-enterprises,  this 
consolidation  has  not  been  matched  by  a 
proportional improvement in productivity (168). 

the 

The  productivity  gap  between  large  and 
small firms is slightly higher in Italy than in 
peer countries. The average productivity of firms 
with  more  than  250  workers  is  33%  higher  than 
the productivity of small firms (20-49 workers) in 
Italy, compared to 26% in similar countries (169). In 
addition,  Italy  faces  a  widening  productivity  gap 
between young and older firms. The productivity of 
young firms aged 1-5 years is 31% lower than the 
average  productivity  of  firms  aged  10  years  or 
more in 2020. Policies to boost productivity would 
aim  at  reducing  size-based  regulatory  thresholds 
to  eliminate  growth  disincentives  to  help  firms’ 
growth,  expanding  access 
to  market-based 
financing  options,  such  as  venture  capital  and 
private  equity,  and  investing  in  research  and 
human capital (170).  

Business environment 

Investment  rates  remain  above  the  EU 
average and in line with peer countries. Total 
investment  reached  21.8%  of  GDP  in  2025  (EU: 

21.7%, Germany: 20.3). The three most important 
barriers  to  investment  for  Italian  companies  are: 
uncertainty  about  the  future  (78%),  energy  costs 
(73%) and the labour regulation (62%), in line with 
European  averages  (171).  Italian  businesses  are 
more confident about their sector’s prospects than 
their  European  counterparts,  with  32%  of  the 
firms  expecting  an  improvement  and  just  12%  a 
worsening (a positive gap of 20% compared to the 
0% of the EU).   

The  perceived  investment  gap  in  Italy  is  in 
line with the EU average, with less than 10% of 
Italian  firms  reporting  underinvestment  over  the 
past  three  years  (EU  average:  12%). 
Italian 
investments 
in  capacity  expansion  are  also 
comparable to EU levels (22% vs 23% in the last 
year)  although 
Italian  firms  dedicate  more 
resources  to  new  products  or  services  (19%  of 
their  investment  against  an  EU  average  of  13%). 
favourable  and 
Access 
borrowing conditions continue to ease, just 10% of 
Italian  firms  report  dissatisfaction  with  borrowing 
costs  (an  improvement  from  22%  in  2024), 
(172). 
investment 
supporting  firms’ 
However,  Italy’s  firms  still  rely  mostly  on  bank 
lending  and  equity  financing  is  low.  Expanding 
access  to  venture  capital  could  significantly 
enhance  intangible  investments  for  young  and 
high-growth firms. (see Annex 6). 

intentions 

remains 

finance 

to 

In 

Italy, 

capital). 

Italy  lags  significantly  behind  the  European 
average  in  intangible  investment  (such  as 
research  and  development,  and 
software, 
organisational 
intangible 
investment  reached  9%  of  GDP  in  2024  (it  was 
7.5%  in  1995),  well  below  peer  countries  like 
Germany (10.5% GDP) or France (15.6% GDP) (173). 
Furthermore,  between  2022  and  2024, 
ICT 
investments  grew  by  only  0.8%  per  year 
(compared  to  1.9%  in  the  previous  three  years) 
(174).  Only  30%  of 
Italian  companies  have 
introduced  a  product  or  process  innovation  in  the 
last three years. (175). 

(167) OECD insights on productivity and business dynamics. 

Country Notes: Italy OECD, 2025, Link. 

(168) CNEL. The productive system structure.  

(169) OECD MultiProd - Country note on productivity for Italy, 

2025. 

(171) EIB Investment Survey 2025: Italy overview. 

(172) EIB Investment Survey 2025: Italy overview. 

(173) World Intangible Investment Highlights (WIIH), 2025.  

(174) ISTAT 2025 Annual Report. 

(170) IMF, 2025, Selected Issues. Drivers of Subdued Firm-Level 

(175) National Council of Economics and Labor (CNEL) – Annual 

Productivity Growth.  

Productivity report 2025, September 2025.  

63 

 
 
 
Italy’s  coverage  of  very  high-capacity 
networks  (VHCN)  and  FTTP  reached  70.7%, 
marking  sustained  growth. 
It remains more 
limited for households in sparsely populated areas 
(reaching  36.8%). Overall  5G  coverage  stood  at 
99.49% and Italy has good results also in the 3.4-
3.8  GHz  band,  considered  strategic  for  advanced 
5G  performance. This  progress  in  the  deployment 
of gigabit networks has been supported largely by 
the implementation of the RRP, despite the delays 
experienced  in  implementing  the  Italia  1  Giga 
scheme. The  RRP  has  been 
complemented 
by several other actions taken at the national level 
to  accelerate  the  deployment  of  gigabit  networks 
(e.g.  the  ultra-broadband  plan,  experimentations 
for  hybrid  connectivity).  Moreover,  the  country 
deployed incentives for the development of stand-
alone  5G  services  to  strengthen  demand  for 
specialised  services  and  support  the  development 
of the core network. 

capacity 

is  near 

constraints 

the  main 

of  municipalities 

Italy  benefits  from  a  relatively  robust 
national  regulatory  framework.  OECD  Product 
Market  Regulation  (PMR)  indicators  show  the 
the  OECD  average  overall. 
country 
However, 
faced  by 
businesses  arise  at  the  implementation  stage, 
when  subnational  authorities  are  involved  (see 
Annex  18).  Italian  companies  would  benefit  from 
enhancing  the  digital  transformation  of  public 
services,  the  performance  of  commercial  courts 
and  insolvency procedures  (see  Annex  7),  and  the 
operational 
for 
permitting.  For  instance,  the  ease  of  starting  a 
business  is  linked  to  factors  such  as  the  overall 
cost of company registration and the transparency 
and  complexity  of  the  process.  Furthermore, 
permitting times for building permits are generally 
lengthy 
across 
municipalities.  Complex  administrative  backlogs 
and 
key 
shortcomings  and  permit  costs  also  vary  widely 
and  can  be  disproportionately  high.  Simplifying 
building  permit  fees,  making  schedules  publicly 
available  and  strengthening  coordination  among 
public  and  external  authorities 
integrate 
procedures  into  online  platforms  could  streamline 
In 
and  make  the  process  more  transparent. 
general,  there  are  substantial  differences  in  the 
provision  of  services  across  regions  (see  Annex 
18): while nationally only 5% of the firms identify 
business licensing and permits a severe constraint, 
the  percentage  doubles  in  several  regions,  line 

inefficiencies 

substantially 

coordination 

change 

and 

are 

to 

10% in Campania, Basilicata and Calabria or 18% 
in Sardinia and Sicily (EU average 9%) (176).  

In 2025, Italy enacted and advanced several 
critical 
legislative  measures  focused  on 
regulatory  simplification.  These  actions  are 
largely  driven  by the  RRP  and  a  broader  effort  to 
reduce  administrative  burdens  for  citizens  and 
"Simplification  Bill"  was 
businesses.  A  major 
finalised 
late  2025,  specifically  targeting 
in 
bureaucratic  hurdles  in  economic  sectors,  like 
cutting  work  permit  for  highly  qualified  non  EU 
citizens  (“EU  Blue  Card”)  processing  to  30  days, 
enabling  digital  application  procedures,  and 
introducing  the  possibility  of  tacit  consent  for 
building  permits  related  to  properties  subject  to 
heritage 
landscape 
environmental, 
restrictions (177).  In  addition,  a  best  practice  in 
terms  of  administrative  simplification  is  the  “ZES 
Unica”  (Single  Special  Economic  Zone).  In  2024, 
Italy introduced the concept of ZES Unica, unifying 
all previous regional free zones into one simplified 
framework  covering  southern  regions,  with  a 
single,  digital,  predictable  procedure.  The  key 
the 
to 
measure 
administrative  process  has  been  reduced  to  the 
essentials: a single electronic application form, one 
authority 
for  assessment  and 
verification  and  clear  time  limits  for  responses. 
The  new  governance  has  accelerated  procedures, 
cutting  the  average  time  to  obtain  all  permits 
required  to  launch  an  investment  from  over  98 
days to under 54 (178).  

responsible 

related 

that 

fact 

the 

or 

is 

Despite  progress,  complex  administrative 
procedures  remain  an  issue  for  businesses 
operating  in  Italy.  Regulatory  obstacles  and 
administrative  burden  are  the  top  concerns  for 
SMEs in Italy, with 69% of respondents identifying 
these as significant challenges, compared to 64% 
in  the  EU  (179).  Over  a  quarter  of  businesses 
reported  experiencing  increased  operational  costs 
and  minor  delays  linked  to  public  administration 
services. About 83% of Italian firms employ staff 
to  deal  with  regulatory  compliance  and  around 

(176) Subnational Business Ready in the European Union 2025: 

Italy. 

(177) Law  No.  182  of  December  2,  2025),  known  as  the 

"Simplification Law" (Legge Semplificazioni).  

(178) SVIMEZ Report 2025.  The  economy  and  society  in  Southern 

Italy, 2026. 

(179) Startups,  scaleups  and  entrepreneurship,  July  2025, 

Eurobarometer survey. 

64 

 
 
13%  of  firms  devote  more  than  10%  of  staff  to 
regulatory  requirements,  above  EU  average  of 
11% (180). 

supplier-reported 

The  late  payment  situation  is  improving  in 
Italy.  The  share  of  companies  reporting  issues 
due  to  late  payments  represents  48%  and  nearly 
returns to the 2021 low of 47%. Overall, the data 
point  to  a  sustained  positive  trajectory  over  the 
past 6 years, and a notable improvement from last 
year’s  results  (54%  in  2023)  (181).  On  business  to 
business  (B2B)  transactions,  Italian  companies 
experienced  shorter  payment  times,  59.6  days 
(down  from  62  days  in  2023),  lower  than  the 
European  average  of  60.3.  Italian  companies 
estimate  that  11.3%  of  their  total  revenues  are 
typically  paid  late  by  customers,  in  line  with  the 
overall European average, which stands at 11.4%. 
For  the  public  sector,  there  is  a  gap  between 
official  data  and 
figures. 
Companies report that the average days for actual 
payment for the public sector is 70 days, a figure 
that  has  been  quite  stable  for  the  last  6  years. 
However,  according  to  official  data  from  the 
Italian  Ministry  of  Economy  and  Finances  (MEF), 
public  administrations  shortened  their  payment 
periods  by  3  days  in  2024  compared  to  2023, 
bringing  the  average  settlement  period  down  to 
Italy  has  been  subject  to 
below  30  days. 
infringement  proceedings  by 
the  European 
Commission and, as a result, the country has taken 
extensive  action  over  the  years  to  address  the 
late  payments.  The  national 
public  sector’s 
payment system for the public administrations has 
also  been  profoundly  reformed  in  the  context  of 
the  implementation  of  the  RRP  for  Italy  (for 
instance, 
Italy  was  the  first  EU  country  to 
introduce mandatory e-invoicing), The result is that 
Italy has reduced payment periods from 43.4 days 
in 2019 to 26 days for the first semester of 2025, 
thus bringing them within the legal limit. However, 
some 
public 
still 
administration  as  paying  late  in  certain  sectors, 
like  construction  and  healthcare,  highlighting  the 
need  for  continuous  national  surveillance  of  G2B 
payment performance and further targeted action.  

companies 

perceive 

Improvement  in  late  payments  across  all 
company  sizes  and  in  most  sectors.  In  2024, 
micro-sized  companies  settled  46  %  of  their 
invoices  on  time,  compared  with  just  21  %  for 

(180) EIB Investment Survey 2025: Italy overview, 2025. 

improved 

large companies, as illustrated in the figure below. 
In  2024  there  was  an  increase  in  the  number  of 
invoices paid by the due date by all company size 
categories  compared 
to  2023.  Nevertheless, 
micro-enterprises remain more than twice as likely 
to  pay  on  time  compared  with  large  companies. 
Among  the  sectors  with  available  data,  ‘Financial 
and insurance activities’ leads in timely payments, 
with  55  %  of  invoices  paid  on  time.  ‘Retail  trade’ 
ranks  last  but  shows  an  improvement  in  timely 
payments  from  31% in  2023  to  36%  in  2024.  In 
2024,  all  sectors 
their  payment 
performance,  with  the  most  significant  increase 
for 
Italian 
companies  has  accepted  unfavourable  payment 
terms  to  protect  commercial  relationships  (above 
EU  average:  56%).  As  inflation  and  interest  rates 
have  gone  down,  50%  of  Italian  firms  report 
having  introduced  stricter  payment  terms;  this 
proactive  measure  is  slightly  more  prevalent  in 
Italy  than  the  overall  European  average  of  48%. 
Despite 
Italian 
businesses  show  stability,  as  only  19%  fear  they 
could be  forced to shut down within the next two 
years  if  economic  conditions  do  not  improve, 
below the European average of 23% (182). 

In  addition,  58%  of 

these  payment 

‘Wholesale’. 

challenges, 

Single Market 

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 
the  EU, 
the 
services 
representing  only  4%  of  the  GDP  in  2025,  below 
peer countries like Germany or Spain).  

is  among 

integration 

lowest 

(trade 

in 

Increased  global  trade  uncertainty  is  a  huge 
challenge  for  an  exporter  country  like  Italy, 
although  its  diversification  (both  geographically 
and  by  products)  could  limit  the  impact  of  any 
potential  adverse  shocks.  Italy’s  overall  exports 
amount  to  around  30%  of  GDP,  with  exports 
particularly  sizable  for  machinery  and  equipment; 
textile,  apparel  and  leather  products;  basic  and 

(181) European payment observatory, 2025. 

(182) European Payment Report 2025, Intrum, 2025. 

65 

 
 
 
fabricated  metals;  and 
transport  equipment. 
However, there are notable regional differences, as 
Northern  and  Central  Italy  accounts  for  close  to 
80%  of  Italy’s  exports,  particularly  in  traditional 
heavy  industries  and  high-export  value  sectors 
(183). 
In  that  respect,  the  flourishing  cluster 
landscape 
(with  104  organisations 
registered  on  the  European  Cluster  Collaboration 
Platform  (184)),  could  help  strengthen  existing 
international  value  chains  and  fostering  the 
development of new ones (185). 

Italy 

in 

Italy’s  performance  on  implementing  the 
deteriorated. 
Single  Market 
Its 
has 
transposition  deficit 
(the  percentage  of  all 
directives  not  transposed  into  national  law)  more 
than  doubled  (from  0.5%  in  2024  to  1.3%).  It  is 
now above both the EU average (1.1%) and the EU 
Council’s  1% target.  Its  performance  is  also  weak 
in  correctly  transposing  directives,  with  a  higher 
deficit (2.1% vs 1.8% in 2024), well above the EU 
average  of  1.1%  (186).  The  number  of  pending 
Single Market infringements is among the highest 
in  the  EU  (26th  out  of  27  Member  States).  Only 
the average delay in transposing directives as well 
as 
infringement 
proceedings  are  better  than  the  average  EU 
performance.  Italy  resolved  82.3%  of  the  SOLVIT 
cases  it  handled  as  lead  centre  in  2025  (EU 
average, 84.6%).  

the  average  duration  of 

Compliance  of  products circulating  in  the 
Single  Market  is  key  to  ensuring  a  level-
playing  field  for  law-abiding  companies  and 
the  safety  of  consumers  (187). In Italy,  the 
number  of  market  surveillance  investigations  has 
increased  compared  with  2019.  In  2025,  national 
authorities  reported  in  the  EU  system  for  market 
surveillance  (ICSMS)  a  total  of 9.4 investigations 
per one million inhabitants, which is lower than the 

(183) IMF, Italy, 2025. 

(184) European  Cluster  Collaboration  Platform,  Country  factsheet 

Italy, European Cluster Collaboration Platform. 

(185) European  Cluster  Collaboration  Platform,  Clusters  and 
Europe’s  Competitiveness,  ECCP  Summary  Report  2025, 
ECCP Summary Report 2025. 

(186) Part  of  the  barriers  highlighted  in  the  2025  Single  Market 
Strategy (“Terrible 10”), Single market strategy. See also the 
Annual Single Market and Competitiveness Report 2026. 

(187) Part  of  the  barriers  highlighted 

in  the Single  market 
strategy (‘Terrible Ten’)  and  the 2026  Annual  Single  Market 
and Competitiveness Report. 

to 

the 

to  a 

ICSMS 

result  of 

insufficient 

EU median  of  136,2.  The  number  of  notifications 
remains limited in absolute terms, which may also 
be 
IT  national 
the 
interoperability 
ICSMS  system.  The 
upcoming  revision  of  the  Market  Surveillance 
fully 
Regulation  will  upgrade 
interoperable  EU  digital  platform.  Furthermore, 
Italy’s competitiveness may be undermined by the 
country’s  repeated  non-compliance  with  the  legal 
obligations  under  the  Single  Market  Transparency 
Directive  (SMTD),  resulting  in  new  unjustified 
regulatory barriers to the free movement of goods 
and  services  in  the  Single  Market.  Regulatory 
fragmentation within the Single Market results in a 
less  predictable  environment  for  businesses, 
investors  and  consumers  alike  with  adverse 
effects  on  productivity.  Better  compliance  with 
Single  Market  rules  will  reduce  the  risk  for 
competitiveness for the businesses in Italy and the 
Single Market as a whole. 

the  competitiveness  of 

Italy’s standardisation system could enhance 
digitalisation 
to  stay  competitive.  The 
effectiveness  of  the  European  standardisation 
Italian 
system  and 
industries  depend  on  national  standardisation 
bodies (NSBs) mobilising a strong and diverse pool 
of  experts.  This  challenge  has  grown  as  rapid 
for 
technological  change 
expertise, not only in traditional sectors but also in 
emerging 
fields  such  as  AI  and  quantum 
computing.  According  to  its  latest  annual  report, 
the Ente Italiano di Normazione (UNI) could further 
boost  Italian  expertise  in  CEN  and  ISO.  Further 
digitalisation  of  Italy’s  NSBs,  in  line  with  ongoing 
improve 
initiatives 
participation  in  standardisation  and  help  develop 
standards  and  services  suited  to  the  digital 
economy through more flexible processes. 

ISO  and  CEN,  would 

increases  demand 

in 

Regulatory and administrative barriers to the 
Single  Market  persist  in  Italy,  affecting 
goods and services trade as well as freedom 
of  establishment. For  goods,  businesses  report 
that  packaging  and 
labelling  rules,  such  as 
national eco-labelling scheme, alphanumeric paint 
codes  (188)  and  shrinkflation  labelling  (189),  create 

(188) European  Round  Table  for  Industry  (ERT),  Single  Market 
Compendium  of  Obstacles,  21  May  2025,  Single  Market 
Compendium of Obstacles. 

(189) European  Commission,  Infringement  procedure  against  Italy 
(INFR(2025)4000),  12  March  2025,  March  infringements 
package: key decisions. 

66 

 
 
 
 
compliance  burdens.  In  services,  posting  workers 
(190). 
involves  complex  administrative  duties 
Business  establishment  is  hindered  by  restrictive 
practices,  such  as  limited  licensing  in  on-demand 
transport  and  complex  permitting  for  EV  charging 
infrastructure (191). 

Corruption Authority issued guidelines and reports 
on  risk  of  corruption  in  public  procurement and 
reviewed 
its  cooperation  with the  Guardia  di 
Finanza  and  the  Carabinieri  to  prevent  corruption 
in  public  contracts  to  ensure  a  level  playing  field 
for businesses (194).  

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.  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. In 2025, single 
bid procedures still made up 39% of the total bids 
(above the EU median of 27%). The share of direct 
awards is only around 2%, significantly below the 
EU  median  (7%).  Indicators  on  SMEs  participation 
in public procurement and duration of the process 
are also better than EU averages. 

is  expected 

improve 

the 

to 

Measures  were  taken  to  mitigate  corruption 
in public procurement, which remains a high-
risk  area.  In  Italy,  65%  of  companies  (EU 
average: 53%) consider conflicts of interest in the 
evaluation  of  bids 
in  public  procurement 
procedures,  and  65%  (EU  average:  58%)  tailor-
made specifications for companies, 'very' or 'fairly 
widespread' practice. Among companies that have 
experience 
in  a  public 
procurement procedure, 33% think that corruption 
has prevented them from winning a public tender 
or  a  public  procurement  contract  in  practice  (EU 
average:  25%)  (192).  Also,  81%  of  businesses 
perceive  that  the  level  of  independence  of  the 
(Regional 
public  procurement 
Administrative Tribunals and the Council  of State) 
is ‘very’ or ‘fairly good’ when it is reviewing public 
The National Anti 
procurement 

in  and  participated 

review  body 

cases 

(193). 

in 

for 

room 

improvement 

Italy's  fragmented  eProcurement  landscape 
and data quality issues have been addressed 
by  the  centralisation  of  the  system  through 
the  ANAC's  BDNCP  (National  Database  of 
Public  Procurement).  However,  there  is  still 
terms  of 
some 
interoperability and common standards. So far, an 
Italian economic operator still must use one of the 
twenty-one  separate  procurement  services 
in 
operation  to  participate  in  public  procurement 
procedures (195).  This  situation  also  affects  cross-
border  procurement.  The  once-  only  principle  is 
only  partially  implemented  at  national  level  (see 
Annex  7).  To  ensure  full  interoperability  and  the 
application  of  the  “once  only”  principle,  by  2026 
eProcurement  platforms  must  be  certified  in 
accordance with the requirements set by AgID. As 
buyers  across  the  EU  still  lack  access  to  relevant 
evidence, 
Italy 
continues  strengthening  the  once-only  principle 
functionalities in its national eProcurement system 
to  allow  easier  evidence  verification.  Italy  has 
started  to  introduce  full  digitalisation  of  the 
lifecycle  of  public  procurement  contracts;  it  is 
crucial that the authorities continue this path. The 
Italian  system  would benefit from a  dedicated 
government  department  for  public  procurement 
data  collection  and  analysis,  to  support  data-
driven oversight of the procurement lifecycle (196).  

is  therefore  essential  that 

it 

in 

Italy  has  taken  some  steps  to  increase 
competition 
services, 
local 
regulated  professions  and  retail  (197).  In  local 
public services, the Competition law 2025, part of 
the recovery and resilience plan, introduces stricter 
accountability, 
oversight, 

transparency, 

public 

and 

(190) German  Chamber  of  Commerce  and  Industry  (DIHK),  DIHK-
Umfrage 
2024: 
Dienstleistungen,  Waren  und  Investitionen,  2024,  DIHK-
Umfrage zu Binnenmarkthindernissen 2024.  

Binnenmarkthindernissen 

zu 

(191) Autorità  Garante  della  Concorrenza  e  del  Mercato  (AGCM), 
Relazione  annuale  sull’attività  svolta,  31  March  2025, 
Relazione annuale sull’attività svolta. 

(192) Flash  Eurobarometer  557  on  Businesses’  attitudes  towards 

corruption in the EU (2025). 

(193) Justice Scoreboard (2025), p. 53; Flash Eurobarometer 555, 

p. 39. 

67 

(194) Rule of Law Report- Country Chapter Italy (2025), p. 13. 

(195) As reported on the eProcurement matrix. 

(196) European  Court  of  Auditors,  Special  Report  28/2023:  Public 
Procurement  in  the  EU.  Less  competition  for  contracts 
awarded for works, goods and services in the 10 years up to 
2021,  2023,  Special  report  28/2023:  Public  procurement  in 
the EU. 

(197) These  measures  help  address  the  2025  CSR  (remaining 
restrictions on competition, including in local public services, 
business services and railways). 

 
 
 
particularly targeting "in-house" and direct awards, 
to  ensure  that  the  management  of  the  service 
remains  efficient  and  complies  with  the  required 
quality  standards.  In  regulated  professions  some 
measures  were  already  adopted  to  streamline 
market access, address skills shortages, and align 
with  EU  directives  (198).  However,  the  level  of 
restrictiveness  is  still  high  overall  for  several 
professional services (accountants, architects, civil 
engineers  and  real  estate  agents).  For  instance, 
there  are  quotas  for  foreign  workers  residency 
requirements for engineers (199) and limitations to 
the  service  offer  of  accountants  (200).  Following  a 
survey  carried  out  by  the  European  Commission 
between December 2025 and February 2026, Italy 
reported  it  had  fully  implemented  6  and  partially 
implemented  9  of  the  15  2021  Commission 
recommendations 
is 
currently  assessing  Italy’s  answers  to  measure 
in 
actual  progress 
the  2021 
In  this  regard,  the  Annual 
recommendations. 
Competition Law for 2025 aims at simplifying the 
requirements  for  incorporating  and  registering 
professional  companies.  Finally,  in  retail  some 
legislative  changes  have  introduced  substantial 
simplifications 
activities, 
particularly  regarding  clearance  sales,  promotions 
and  sales  below  cost,  effectively 
reducing 
the 
burden 
administrative 
regulatory framework remains complex as regional 
and local authorities continue to exhibit restrictive 
attitudes, for instance toward the authorization of 
large retail stores. 

(201).  The  Commission 

(202).  However, 

implementing 

commercial 

for 

renewing 

Ensuring  open  and  transparent  procedures 
infrastructure 
expired 
for 
concessions  remains  important  to  promote 
effective  competition.  Following  the  reforms 
included  in  the  RRP,  Italian  authorities  should 
ensure  that  public  concessions  are  allocated 
through competitive public tenders that guarantee 

(198) For  instance,  law  No.  190/2023,  introduced  under  the  RRF, 
established  a  unified  national  framework  for  the  profession 
of tourist guides. 

(199) OECD,  Services  Trade  Restrictiveness  Index  2026  –  Country 

Note Italy, Services Trade Restrictiveness Index: Italy. 

(200) European  Commission,  Infringement  decisions:  December 
package  of  infringement  procedures,  10  December  2025, 
December infringements package: key decisions.  

(201) European  Commission,  2021,  Communication  on  updating 
the  reform  recommendations  for  regulation  in  professional 
services, COM(2021)385. 

transparency,  impartiality  and  non-discrimination, 
with  procedures  designed  to  maximise  bidder 
participation  and  prevent  unjustified  barriers  to 
entry. The planned renewal of expiring (or expired) 
highway concessions makes it necessary to ensure 
open  and  transparent  tender  procedures  (203).  The 
Italian  Competition  Authority  (AGCM)  also  called 
for  more  competition  in  electricity  distribution 
concessions (204). 

Industry and economic security  

resilience 

Italian  manufacturing  maintains 
an 
important  role  in  the  international  context 
and for the national economy, generating 15% 
of Italian GDP. In addition, it accounts for 35% of 
investment in machinery and equipment and 50% 
of R&D spending. Manufacturing in Italy has a very 
high  degree  of  diversification  compared  to  other 
European  manufacturers,  which  helps  strengthen 
its 
Its  sectoral 
to  global  shocks. 
composition  has  remained  relatively  stable  in  the 
last  decade,  with  specialisation  concentrated  in 
medium  and  low  technology  intensity  sectors, 
which  account  for  about  60%  of  manufacturing 
value  added,  a  share  lower  than  that  of  Spain 
(64%)  but  higher  than  that  of  France  (51%)  and 
Germany  (39%).  The  main  exporting  sectors  are 
mechanics 
(17.1%  of  manufacturing  exports, 
2023-2024  average),  textiles  (10.8%),  food  and 
beverages  (9.8%),  pharmaceuticals  (8.6%)  and 
motor vehicles (7.3%) (205).  

The  cost  of  energy  remains  a  key  to  the 
competitiveness  of  Italian  industry.  Energy-
intensive industries have been particularly exposed 
to  a  price  differential  with  their  main  European 
partners.  In  2024,  energy  intensive  industries 
accounted  for  3.7%  of  Italy’s  gross  value  added 
(4.1%  in  2023).  In  Italy,  the  production  of  these 
industries has declined by around 12% on average 
since  2021  (see  graph),  with  the  highest  declines 
in  basic  metals  and  wood.  In  February  2026,  the 

(203) Italy  is  set  to  address  the  expiry  of  17  of  27  highway 
concessions  managed  by  the  Ministry  of  Infrastructure  and 
Transport, including A22 Autobrennero, A4 Torino-Milano, A4 
Brescia-Padova, and A33 Asti-Cuneo, over the next 15 years. 

(204) AGCM, AS2079, 30 April 2025. 

(205) Manifattura  in  trasformazione:  rimarra  ancora  competitiva? 

(202) Annual Competition Law 2022 (Law 214/2023). 

Confindustria, 2025. 

68 

 
 
 
to  administer  applications 

crucial 
for  streamlining  communication  and 
coordination among stakeholders. For the moment, 
Italy  has  not  confirmed  any  Net-Zero  Strategic 
Projects and has not established a national contact 
point 
that  could 
facilitate  the  advancement  of  those  projects. 
Finally,  Italy  has  not  expressed  an  interest  in  the 
acceleration  valleys  described  in  NZIA  regulation. 
However,  there  are  some  positive  steps,  as  with 
the  FER-X  Transitory  Decree,  Italy  has  been  the 
first country to apply NZIA criteria to a renewable 
energy  auction.  In  addition,  in  December  2025, 
Italy  approved  EUR  1.5  bn  of  Italian  state  aid  to 
support  strategic  investment  that  add  clean  tech 
manufacturing capacity, in line with the objectives 
of the Clean Industrial Deal.  

raw  materials, 

Regarding  critical 
Italy 
continues  to  rely  on  imports  for  a  large 
share  of 
its  demand  but  has  prioritised 
diversifying  suppliers  to  reduce  dependency  on 
China.  The  Italian  environmental  agency  (ISPRA) 
was  tasked  with  providing  an  updated  national 
minerals  map  to  guide  new  exploration  and 
investment. Italy launched a nationwide geological 
research  initiative  in  2025,  its  first  in  30  years, 
investing  EUR  3.5  million  in  14  research  projects 
(key  targets  for  domestic  extraction 
include 
lithium,  antimony,  cobalt,  titanium,  zinc  and 
manganese).  Furthermore,  in  2025,  the  European 
Commission officially recognised four major Italian 
recycling  initiatives  as  strategic  projects.  These 
projects  benefit  from  streamlined  permitting 
(maximum  15–27  months)  and  facilitated  access 
to finance. 

Italian  government  approved  the  Energy  Bill 
Decree. The decree allocates over EUR 5 billion to 
mitigate  high  energy  costs,  with  approximately 
EUR  1.4  billion  specifically  designated 
for 
businesses. 

Graph A5.1: Manufacturing production: total and 
selected sector, index (2021=100), 2015-2024 

Source: Eurostat 

in 

Italy  is  rapidly  advancing  its  clean-tech 
manufacturing industry by capitalising on its 
strong industrial base, strategic location and 
favourable  government  policies  (see  Annex 
18). Italy is one of the leading European countries 
in clean technologies, with a significant number of 
solar PV and wind manufacturing facilities (206). In 
addition, 
the 
it  participates  extensively 
Important  Projects  of  Common  European  Interest 
(IPCEIs)  for  batteries  and  hydrogen.  Solar  cell 
manufacturing  capacity  is  around  2  GW,  and  the 
country  has  announced  projects  in  the  battery 
sector that could enhance manufacturing capacity 
to 60.75 GW (207) (European leaders in battery cell 
manufacturing  are  Poland  and  Hungary,  with  a 
capacity  of  86  and  71.3  GW,  respectively)  (208). 
Furthermore, 
sector 
clean 
constitutes  a  significant  component  of  the  Italian 
labour market, employing around 65 000 workers 
in  2023, 
total 
representing  0.28%  of 
workforce (209). 

technology 

the 

the 

Italy could improve progress in implementing 
the Net-Zero Industry Act (NZIA). Italy still has 
not  designated  a  single  point  of  contact,  which  is 

(206) The  net-zero  manufacturing 

industry 

landscape  across 

Member States, European Commission, 2025.  

(207) Bruegel. European Clean Tracker, 2026. 

(208) European  Commission,  based  on  Bloomberg  New  Energy 

Finance (BNEF) data. 

(209) Bruegel. European Clean Tracker, 2026.  

69 

55657585951051152015201620172018201920202021202220232024ManufacturingManufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materialsManufacture of paper and paper productsManufacture of chemicals and chemical productsManufacture of rubber and plastic productsManufacture of other non-metallic mineral productsManufacture of basic metals 
           
 
Table A5.1:  Single Market and Industry 

Source: (1) Eurostat, (2) EIB Investment Survey, (3) EIF SME Access to Finance Index, (4) Intrum Payment Report, (5) SAFE survey, 
(6) OECD, (7) data up to 2024: Single Market and Competitiveness Scoreboard, 2025: Commission calculation based on TED data, 
accessible at the Public Procurement Data Space (PPDS) (*) the value represented here under EU average is the median, (8) Single 
Market and Competitiveness Scoreboard, (9) European Commission calculations. 

70 

POLICY AREA20212022202320242025EU-27 average102,8103,2101,299,196,1100,011,311,711,112,212,512,62,82,63,23,63,83,9Business environment and simplification34,334,123,616,822,034,00,600,650,530,63-0,430,060,130,200,08-0,1910,916,216,317,316,617,411,221,817,617,813,213,6from private entities in the previous or current quarter---45,146,647,1from public entities in the previous or current quarter---13,113,815,916,919,218,117,417,840,70,0640,0640,0640,0640,0640,0503537373439277653261,20,70,40,51,311,81,51,41,82,11,196,898,69184,382,384,64642433944250,15270,29460,21840,18050,19890,146238,239,039,2--32,718,918,819,219,4-25,246,648,147,646,6-22,419,320,221,121,6-12,2ItalyINDICATOR NAMEBusiness environment and investmentProductivity and investmentLabour productivity (GDP per hour worked in PPP terms), % of EU271Business investment (share of GDP)1Public investment (share of GDP)1Impact of regulation on long-term investment, % of firms reporting business regulation as a major obstacle2SME liquidityEIF Access to Finance for SMEs index - loans3EIF Access to Finance for SMEs index - equity3Late paymentsPayment gap - corporates B2B, difference in days between offered and actual payment4Payment gap - public sector, difference in days between offered and actual payment4Share of SMEs experiencing late payments, %5Industry and economic securitySingle Market IntegrationEU trade integration, average(intra-EU imports + intra EU exports)/GDP, %1EEA Services Trade Restrictiveness index6Public procurementSingle bids, % of total contractors7*Direct awards, % of negotiated procedures7*ComplianceTransposition deficit, % of all directives not transposed8Conformity deficit, % of all directives transposed incorrectly8SOLVIT, resolution rate per country, %8Number of pending infringement proceedings8Energy-intensive industriesElectricity prices for non-household consumers1Electrification (electricity as a share of total energy consumption in industry)1Share of energy from renewable sources (renewable energy generation as a share of overall energy consumption)1Critical raw materialsMaterial import dependency, %1Circular material use rate1Operational cleantech manufacturing capacity in 20259 - Solar PV (c: cell, w: wafer, M:module), GW1.921 (c ), 0.015 (w), 3.4844 (m) - Electrolyzer, GW0,090 - Heat pump assembly 0,2645 - Battery, GW- 
 
       
 
ANNEX 6: SAVINGS, INVESTMENT AND ACCESS TO FINANCE 

Table A6.1:  Savings and Investments Union summary diagnostic 

Source: OECD (pensions), Eurostat (households' financial wealth), FISMA CMU dashboard (VC and PE), national sources (capital 
taxation). End-2024. 

invest 

lending 

Italian  firms  rely  mainly  on  internal  funding 
and  bank  lending. The domestic  listed equity 
market  lacks  depth  and  is  relatively  small 
compared with GDP. Investments in government 
debt are tax-advantaged compared with equity or 
corporate  debt  and  dominate  the  local  debt 
market.  Italian  households  have  above-average 
in  bonds  and 
wealth,  but  prefer  to 
investment  funds  over  listed  shares,  while  the 
take-up  of  individual  savings  plans  (PIRs)  has 
waned  since  2019.  Italian  banks  increased  their 
to 
in  2025,  while  bank 
resilience 
households  and  corporates  started  to  recover. 
Insurers  and  pension  funds’ 
investments  are 
conservative,  tilted  towards  domestic  government 
bonds.  This  has  led  to  sub-par  real  returns.  Auto-
enrolment  for  second  pillar  pensions  in  Italy  has 
only modestly increased participation rates so far, 
creating  the  need  for  the recent  improvements in 
these  pensions.  Additional 
the  design  of 
contributions to second pillar pensions, beyond the 
transfer  of  the  annual  severance  pay  (TFR) 
accruals  under  auto-enrolment,  are  low.  If  early 
surrenders 
further 
disincentivised, it might alter the liability structure 
of  life  insurers  and  pension  funds,  incentivising 
long-term  equity  investments.  The  Italian  venture 
capital  (VC)  ecosystem  is  growing,  but  remains 
fragmented and does not fully meet the financing 
needs  of  start-ups.  Institutional  investors  provide 
limited  funding  to  VC  funds  and  start-ups.  Italy’s 
promotional  bank  is  trying  to  set-up  investment 
vehicles to ‘crowd in’ such investors, while new tax 
incentives  have  been  provided  to  supplementary 
pension funds investing in VC.  

and  withdrawals  were 

Business landscape and company 
funding 

Graph A6.1: Composition of non-financial 
corporations' funding 

Source: Eurostat. End-2024. 

Italian  firms  rely  mainly  on  their  own 
profitability  and  lending  for  their  funding. 
Unlisted  and  other  equity  (i.e.  a  measure  of  both 
the capital invested by firms’ owners and earnings 
retained)  was  equivalent  to  107.7%  of  GDP  in 
2024  (see  Graph  A6.1),  accounting  for  58.3%  of 
all funding vs an EU average of 45.7%. The other 
main  source  of  corporate  financing  in  Italy  is 
lending.  Loans  were  equivalent  to  47.1%  of  GDP 
as of end-2024, and at 25.5% of all financing for 
Italian  firms,  were  only  marginally  below  the  EU 
average  of  26.9%.  However,  Italian  non-financial 

71 

050100150200250ITEU% of GDPLoansTrade credit and advancesBondsListed sharesUnlisted sharesOther equityMain featuresRelative EU positioningAssets at 17.1% of GDP (32.3% in the EU)10-year real return: 0.2% (1.4% in the EU)A below EU average and median share in asset-backed pension assets has produced barely positive real returns over a 10-year period.EUR 97 758 per capita  (EUR 85 090 in the EU)o/w 8.6% in bonds (2.8% in the EU)                                              o/w 2.9% in listed shares (4.8% in the EU)o/w 14.6% in investment funds (11.0% in the EU)o/w 13.5%  in life insurance (13.4% in the EU)o/w 5.0% in pension claims (13.6% in the EU)Above EU average household wealth invested to a similar degree as EU peers, mainly through bonds and investment funds. Medium level of life insurance holdings, low level of IORP pension claims. Low share of direct equity holdings suggests a degree of risk aversion. Investment flows to Italian SIA (called PIR) have stagnated.VC at 0.032% of GDP (0.064% in the EU)PE at 0.447% of GDP (0.487% in the EU)Low share of venture capital and medium level of private equity investments.Capital gains tax (CGT): 26% for individuals, 24% for companies. A 95% CGT exemption from qualifying shareholdings for companies. Real estate CGT is 0% if first residence or 5 years holding period. Dividend and interest income tax: 26% withholding tax, variations based e.g. on residency. Interest and capital gains from government bonds of Italy or ‘white list’ countries taxed at 12.5%.Above-average capital gains tax (CGT) rate but participation exemption reduces CGT burden for corporates. For individuals, CGT exemption for real estate sales creates bias for real estate investment. No bias between equity and corporate debt investment but bias in favor of investing in government bonds. Taxation may vary in some cases e.g. based on residency, which reduces transparency and predictability.1-34-1011-1718-2425-27TopicAsset-backed pension schemesHouseholds' financial assetsVenture capital (VC)Private equity (PE)Capital taxationColours indicate the country's relative ranking based on five groups, ranging from the three best to the three worst performers. The relative ranking as regards an SIU diagnostic topic derives from a consistent cross-country comparison, the starting point of which is the average of the underlying main features. 
 
 
        
 
 
 
           
 
corporations’  (NFCs)  use  of  listed  shares  and 
bonds was much lower than the EU average, both 
as a share of GDP (24.2% at end-2024 vs the EU 
average  of  53.2%)  and  as  a  share  of  NFC 
financing (13.1% vs 23.5%). This is largely due to 
the small proportion of listed shares in the funding 
mix,  given  the  greater  significance  of  micro  firms 
and  SMEs  in  Italy  (see  Annex  5).  Overall,  NFC 
funding  stood  at  184.6%  of  GDP  in  2024,  below 
the EU’s 226.2%. 

Size and structure of the financial 
sector 

Graph A6.2: Capital markets and financial 
intermediaries 

Source: ECB, EIOPA, AMECO. End-2024. 

by 

insurance.  With 

Banks dominate the financial sector in Italy, 
about 
followed 
EUR 3.86 trillion in assets at the end of 2024, the 
Italian  banking  sector  remains  among  the  largest 
in  the  EU,  and  is  by  far  the  largest  part  of  the 
Italian financial system (see Graph A6.2). However, 
it  represents  a  decreasing  share  of  GDP  (175.3% 
in  2024  vs  202%  in  2022),  well  below  the  euro-
is  primarily 
area  average  of  266.3%. 
domestically  owned 
total 
banking-sector  assets  as  of  end-2024),  with  the 
five  largest  banking  groups  accounting  for  50.5% 
of  banking-sector  assets.  Insurance  companies, 
with  total  assets  equivalent  to  50%  of  GDP  at 
end-2024,  are  well  developed  in  Italy,  although 
their  relative  size  remains  below  the  EU  average 
(55%  of  GDP).  The  total  assets  of  investment 
funds  were  equivalent  to  24.5%  of  GDP  at  end-
2024, with occupational pension funds at 8.9%. 

It 
(roughly  91%  of 

The local stock market remains insufficiently 
deep,  with  limited  new  listings.  The  Italian 
stock  exchange  (Borsa  Italiana)  forms  part  of 
Euronext,  a  pan-European  market  infrastructure, 
and  its integration in the group  was  completed  in 
2024. Euronext is in the process of centralising its 
post-trading  infrastructure  and  ancillary  services, 
but  its  acquisition  of  Borsa  Italiana  has  not  yet 
provided  a  major  boost  to  Italy’s  equity  market. 
The  market  capitalisation  of 
listed 
companies as a share of GDP (210) stood at 39.4% 
of GDP as of September 2025, substantially short 
of the EU average of 70% (see Table  A6.2). Non-
financial  firms  accounted  for  about  60%  of  that 
capitalisation.  Market  liquidity,  as  expressed  via 
the  proxy  of  the  bid-ask  spread  of  listed  shares, 
has  been  below  the  EU  average  since  2022  (211). 
New listings have been limited in the main market 
in recent years, with several companies postponing 
or  withdrawing  planned  listings,  but  initial  public 
offering  activity  has  been  better  in  the  Euronext 
Growth Milan market.  

Italian 

The  bond  market 
is  dominated  by  the 
sovereign.  Outstanding  debt  securities  were  the 
equivalent  of  156.7%  of  GDP  at  end-2024  (see 
Graph  A6.2),  one  of  the  highest  in  the  EU. 
However,  marketable  debt  securities  issued  by 
NFCs  accounted  for  less  than  6%  of  the  total,  as 
government  debt  dominated  the 
local  bond 
market, accounting for 74% of the total. Financial 
firms  make  up  the  remaining  20%  of  debt 
securities in issuance. 

A  reform  of  the  Italian  capital  markets  is 
underway but will take time to bear fruit. The 
adoption  of  the  Capital  Markets  bill  (Decreto 
Capitali,  Law  21/2024)  in  February  2024  marked 
the  first  step  towards  a  reform  of  Italian  capital 
It  has  now  been  followed  by  the 
markets. 
publication  of  a  delegated  act (212)  that  updates 
the  Consolidated  Law  on  Finance  (TUF)  and 
amends  certain  key  corporate  law  provisions  of 
the Italian Civil Code. The delegated act addresses 
crucial  areas  such  as  takeover  bids,  corporate 
governance, disclosure, shareholders’ meetings, as 
well  as  mobility  between  regulated  markets  and 

(210) Irrespective of the stock exchange where they are listed. 

(211) See FISMA’s list of indicators to monitor SIU progress. 

(212) Legislative  decree  27.3.2026  n.  47.  A  second  legislative 
decree  —  specifically  concerning  administrative  proceedings 
and  sanctions  —  is  currently  pending  before  the  Italian 
Parliament. 

72 

Non-financial corporationsFinancial corporationsNon-financial corporationsMFIsInsurance  and pension fundsOther financialsGovernmentMFIsPension fundsInsurance corporationsInvestment funds020406080100120140160180200   Listed equity               Bonds                        Assets by sector% of GDP 
          
 
(ii) 

simplifications 

for  newly 
the 

multilateral trading facilities. It also facilitates the 
use  of  multiple  voting  rights  and  introduces:  (i) 
listed 
significant 
companies  and  SMEs;  and 
limited 
partnership  legal  form  for  VC  and  private  equity 
investment vehicles. The aim is to make the Italian 
capital  market  more  attractive,  fostering  the 
participation of retail investors, including in VC and 
private  equity  funds  (213).  Another  initiative,  the 
Fondo  Nazionale  Strategico  Indiretto  (FNSI),  a 
fund-of-funds launched in 2025 and managed by 
Cassa Depositi Prestiti (CDP), aims to invest up to 
EUR  1  billion  in  small  and  mid-cap  firms listed  in 
Italy  and  try  to  ‘crowd-in’  private  investors  as  an 
anchor investor in initial public offerings. 

Households’ participation in capital 
markets 

Graph A6.3: Composition of households' financial 
assets 

Source: Eurostat. End-2024. 

Italian  households  prefer  bonds  and 
investment  funds  over  listed  shares.  Italian 
households  have  a  higher  amount  of  financial 
assets than the EU average, both per capita and as 
a  share  of  GDP  (see  Graph  A6.3).  The  share  of 
household  financial  assets  held  in  pension  and 
investment 
financial 
funds  or  directly 
investment  instruments  is  only  slightly  below  the 
EU  average  (45%  vs  46.5%  as  of  end-2024). 
Compared with the EU average, Italian households 
have a higher share of financial assets invested in 

in 

(213) The new provisions are expected to enter into force in Spring 

2026, following parliamentary review. 

73 

bonds  (8.6%  vs  2.8%)  and  investment  funds 
(14.6%  vs  11.0%),  a  similar  share  invested  in 
insurance products (13.9% vs 14.2%, mostly in life 
insurance)  and  a  lower  share  invested  in  listed 
shares (2.9% vs 4.8%) and (occupational) pension 
funds  (5%  vs  13.6%).  Domestic  government  debt 
in  particular  is  a  popular  investment  for  Italian 
households,  which,  together  with  Italian  non-
financial  firms,  held  15%  of  Italy’s  outstanding 
general government debt as of September 2025. 

Italian  households  have  access  to  a  wide 
range of investment products, as well as tax 
benefits under individual savings plans.  Low-
cost, well-diversified investment products suited to 
retail  investors  are  available  in  Italy  through  the 
country’s  developed  investment  fund  industry. 
Since  2016,  Italy  has  also  created  individual 
savings  plans  called  piani  individuali  di  risparmio 
(PIR) which, subject to certain conditions (such as a 
minimum  lock-up  period  of  five  years),  confer 
substantial  tax  incentives  on  their  holders.  These 
include:  (i)  an  exemption  from  the  26%  tax 
typically paid on capital gains, dividend or interest 
income from financial instruments included in the 
PIR; and (ii) the non-applicability of inheritance tax 
on  the  PIR  assets  of  deceased  savers.  However, 
after  a  successful  start,  the  take-up  of  PIRs  has 
waned  since 2019. As of end-2024, only 1.5% 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 (214).  

Further  measures  have  been  adopted 
recently  to  facilitate  investment  by  retail 
investors. Italy has made use of the option under 
EU  legislation  (215)  for  a  simpler  registration 
system  (instead  of  a  more  complex  authorisation 
system) for alternative investment funds (AIFs) of 
fund  managers  with  assets  below  set  thresholds; 
the  recently  adopted  delegated  act  to  reform 
financial  legislation (212)  (i)  simplifies  the  relevant 
framework (216),  ii)  allows  retail  investors,  with  a 
minimum investment of EUR 500 000 and a total 
portfolio of financial assets of at least EUR 5 m, to 
invest  in  these  registered  alternative  funds,  thus 

(214) Alternative  PIRs,  adopted  in  2020,  require  at  least  70%  of 
assets  to  be  invested  in  SMEs,  often  including  illiquid  or 
unlisted assets via venture capital or private equity funds. 

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

(216) More  specifically,  registered  sub-threshold  managers  are  no 
to 

to  microprudential  supervision,  nor 

longer  subject 
transparency or conduct-of-business requirements. 

050100150200250300020406080100120ITEUITEUper capita (000 EUR) (lhs)% of GDP (rhs)Currency and depositsInsurance and pension fundsInvestment fundsBondsListed sharesUnlisted sharesOther equityHH Debt (liability) 
        
 
 
facilitating  investment  in  private  equity  and  VC 
funds;  and  (iii)  aims  to  limit  ‘gold-plating’  of  EU 
rules  to  promote  a  single  rulebook,  and  improve 
competition  and  the  availability  of 
low-cost 
investment funds for investors. 

Listed  equity  and  corporate  bonds  have  less 
preferential  tax  treatment  than  other  asset 
classes  in  Italy.  The  taxation  of  investment 
income  in  Italy  (capital  gains,  dividends,  interest 
income)  does  not  discriminate  between  shares  or 
corporate debt securities, with a flat 26% tax rate, 
albeit  with  variations  (e.g.  based  on  investor 
residency  for  dividends  or  due  to  the  95% 
exemption 
for  capital  gains  on  corporates’ 
qualifying shareholdings). However, both the lower 
from 
12.5% 
government bonds of Italy or ‘white list’ countries 
(217) and the capital gains exemption on real estate 
for  natural  persons,  subject  to  a  five-year 
non-primary 
period 
minimum 
residences, favour these investments. 

interest 

holding 

income 

rate 

tax 

for 

for 

Financial  literacy  levels  in  Italy  are  close  to 
the EU average. Italy has had a national strategy 
for  financial  literacy in  place  since  2017,  and  the 
capital  markets  bill  adopted  in  2024  introduced 
financial  education  into  the  school  curriculum. 
Various  public  authorities  (the  Bank  of  Italy, 
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 
showed that 18% of Italians have a high level  of 
financial  literacy,  64%  a  medium  level,  and  the 
remaining 19% a low level. 

The banking sector: resilience and 
financing of the economy 

The  Italian  banking  sector  has  improved  its 
resilience  and  is  thus  not  constrained  in  its 
role  of  funding  the  economy.  In  the  year  to 
September  2025,  Italian  banks  have  maintained 
an adequate capital position, in terms of size and 
quality  (see  Table  A6.2).  Banks’  liquidity  position 
remains  solid,  while  profits  are  strong  and  have 
been  resilient  to  the  normalisation  of  interest 
rates.  The  ongoing  process  of  banking-sector 

consolidation  in  Italy  should  also  support  profits 
through cost synergies and revenue diversification, 
improving  banks’  capacity  to  lend  (218).  Asset 
quality is stable, with a non-performing loan ratio 
of 2.6% as of September 2025 vs an EU average 
of  1.9%  and  a  falling  share  of  stage  2  loans  in 
recent  years.  Credit  quality  pressures  on  the 
corporate  side 
remain  modest  by  historical 
standards and provisioning levels are high, with a 
cash coverage ratio of 45.3% vs an EU average of 
42.1%.  Italian  banks  are  more  exposed  than  the 
euro-area average to increased US tariffs, but any 
impact  on  asset  quality  appears 
potential 
manageable.  However,  the  banks’  asset  quality 
outlook  is  subject  to  increased  uncertainty  due to 
the  current  conflict  in  the  Middle  East  and  its 
potential  impact  on  energy  prices  and  economic 
growth.  Despite  the  gradual  phase-out  of  COVID-
19-related  state  guaranteed 
loans,  domestic 
sovereign  bond  exposure  remains  greater  than 
most  euro-area  peers,  at  9.9%  of  banks’  total 
assets  in  December  2025  but  lower  than  the 
10.9% at end-2020 (219).  

timid 

lending 

recovery 

in  bank 

Bank  lending  to  households  and  corporates 
started  to  recover  in  2025.  There  was  a 
gradual, 
to 
households  and  corporates  in  the  second  half  of 
2024,  which  picked  up  speed  in  2025,  with  year-
on-year  credit  growth  rate  improving  from  -1.5% 
for households and -3.9% for NFCs in March 2024 
to 2.5% and 1.8% respectively in December 2025. 
is 
The  outlook,  particularly 
expected to improve further on the back of easing 
monetary policy. Moreover, recent credit upgrades 
of the Italian sovereign reflect positively on banks’ 
credit  ratings  and  reduce  funding  spreads.  They 
could also support cheaper credit to firms. 

for  households, 

Role of non-bank financial 
intermediaries 

Italian 

The 
insurance  sector  has  an 
investment  portfolio  heavily  tilted  towards 
is 
bonds. 
predominantly focused on life insurance, with life-
for 
insurance 

insurance  market 

accounting 

premiums 

Italian 

The 

(218) Consolidation,  especially  on  a  cross-border  basis,  allows  for 
the better allocation of resources and risk diversification. 

(217) Jurisdictions with agreements to exchange tax information. 

(219) ECB data, including state-controlled Cassa Depositi Prestiti. 

74 

 
 
 
EUR 110.5 billion at end-2024 (i.e. around 73% of 
total  gross  written  premiums)  and  non‑life  for 
about  EUR  40.9  billion  (the  remaining  27%)  (220). 
The  investment  portfolio  of  the  Italian  insurance 
sector,  one  of  the  largest  in  Europe  in  absolute 
terms,  was  EUR 1 070  billion  as  of  September 
2025.  This  was  invested  in:  (i)  in  government 
bonds  (34.1%);  (ii)  corporate  bonds  (15.3%), 
mainly issued by foreign NFCs; (iii) equity (11.5%); 
(iv) investment funds (32.4% evenly split between 
equity funds, bond funds and other types of funds 
(221));  and  (v)  cash  and  deposits  (3.5%).  Excluding 
unit-linked  products,  insurers’  exposure  to  bonds 
becomes  even  greater,  with  43.5%  invested  in 
government  bonds  (222)  and  19.4%  in  corporate 
bonds. In fact, Italian insurers hold roughly 10% of 
the outstanding stock of Italian government bonds.  

amount 

benefit  plans  are  restricted  to  pre-existing  funds 
and  are  not  open  to  new  members.  All  pension 
funds  need 
to  have  a  depositary  and  an 
agreement  with  an  external  investment  manager, 
which  can  only  be  an  insurer,  a  bank  or  an  asset 
manager.  The  supplementary  pension  funds’  tax 
regime  is  advantageous,  with  a  maximum  tax-
deductible 
combined 
employee/employer contributions of EUR 5 164.57 
per year (recently increased to EUR 5 300 from tax 
year 2026) (224). Retirees also pay a reduced 20% 
(instead  of  the  usual  26%)  dividend  and  interest 
income  tax  rate  and  a  reduced  15%  (instead  of 
26%)  tax  rate  on  accumulated  realised  gains 
during  the  payout  phase,  which  can  decrease 
progressively  to  9%  based  on  the  duration  of 
contributions. 

for 

Italy’s supplementary private pension system 
remains  fragmented.  According  to  the  national 
supervisor  of  private  pension  funds  COVIP,  the 
number  of  pension  funds  in  Italy  at  the  end  of 
2024  fell  to  291  from  302  in  2023  (and  387  in 
2020), with total assets of EUR 243 billion. These 
(i)  33  contractual 
pension  funds  comprised: 
closed-end funds (with assets of EUR 74.5 billion), 
set  up  by  workers’  unions  and  employers  at 
national, sector or company level; (ii) 38 open-end 
funds  (with  assets  of  EUR  37.3  billion);  (iii)  69 
personal  pension  plans  (PIPs)  (with  assets  of  EUR 
54.7 billion), i.e. life-insurance contracts with social 
security  purposes;  and 
(iv)  151  pre-existing 
pension funds (with assets of EUR 69.6 billion), i.e. 
pension 
on 
15 November 1992.  Excluding  the  latter,  there 
were  10.1 m  members  of  supplementary  pension 
funds  as  of  end-2024,  corresponding  to  a 
participation rate of 38.3% of the labour force, or 
27.6% excluding non active contributors. Only 29% 
of these members were below 40 years old, while 
participation  is  much  lower  among  the  self-
employed (223). 

existence 

already 

funds 

in 

Private  pension  funds  invest  conservatively, 
and  this  has  led  to  sub-par  real  returns.  At 
the  end  of  2024,  Italian  supplementary  pension 
fund  assets  were  invested  as  follows:  14.2%  in 
Italian  government  bonds,  24.3% 
in  other 
government  bonds,  17%  in  other  debt  securities, 
22.7%  in  equity  securities,  12.7%  in  UCITS,  2.3% 
in alternative mutual funds other than real estate 
funds,  3.7%  in  deposits  and  1.5%  in  real  estate 
(225).  Among  the  various  types  of  schemes, 
contractual  pension  funds  had  25.1%  invested  in 
equities,  open  funds  had  29.9% 
in 
equities,  and  ‘new’  PIPs  only  13.2%  in  equities. 
Domestic  investments  accounted  for  19.3%  of 
total  assets  (EUR  40.1  billion),  the  majority  in 
government  bonds,  while  investments  in  equity 
and  debt  securities  of  Italian  firms  were  limited 
(2.4%  of  total  assets)  (226).  This  conservative 
investment  allocation 
in  sub-par 
performance,  with  the  average  real  return  of 
Italian  private  pension  funds  in  the  period  2014-
2024 reaching only 0.2% per year, below both the 
EU  median  and  the  guaranteed  return  the  TFR 
severance  pay  would  have  provided  if  it  had 
remained with the employer (+0.5%) (227). Looking 

is  reflected 

invested 

Supplementary pension funds operate mainly 
on  a  defined  contribution  (DC)  basis  and 
benefit from a favourable tax regime. Defined 

(224) Contributions  via  the  trattamento  di  fine  rapporto  (TFR) 
severance  pay  in  second  pillar  pension  funds  do  not  count 
towards the cap on tax-deductible pension contributions. 

(220) Ivass: The main numbers of insurance firms in Italy 2024. 

(225) Table 16, COVIP - Supplementary Pension Funds in Italy at 

(221) EIOPA data.  

(222) December  2025  data  suggest  that  two-thirds  of  those 
holdings  are  Italian  government  bonds,  see  Banca  d’Italia 
Financial Stability Report No 1 2026, p.36. 

(223) Table  6,  COVIP  -  Supplementary  Pension  Funds  in  Italy  at 

end 2024 – Main data. 

end 2024 – Main data. 

(226) COVIP,  Supplementary  pension  funds  in  Italy  at  the  end  of 

2024: Main data. 

(227) OECD and COVIP data. If the TFR stays with the employer or 
the Italian National Social Security Institute (INPS) for larger 
firms,  it  offers  a  guaranteed  return  equal  to  a  fixed  1.5% 
plus 75% of the annual inflation rate. If it is transferred to a 

75 

 
 
 
 
at  the  different  types  of  private  pension  funds 
over  the  same  period,  contractual  pension  funds 
have  produced  +0.3%  average  annual  net  real 
return,  open-end  funds  +0.5%,  unit-linked  PIPs 
+1%,  and  non-unit-linked  PIPs  a  poor  -0.3%. 
Currently,  the COVIP  website provides  comparison 
data  on  returns  and  fees  of  individual  pension 
funds, but there is no pension tracking system for 
pension planholders to see the combined value of 
their  pension  entitlements  from  all  –  public  and 
private – pension schemes.  

Improvements  were  recently  introduced  to 
Italy’s  auto-enrolment  regime,  which  will 
apply from July  2026.  Since  2007,  newly  hired 
private  sector  employees  must  transfer  their 
trattamento  di  fine  rapporto  (TFR)  severance  pay 
to a supplementary pension fund of their choice or 
opt-out  within  six  months  and  leave  it  with  their 
old  company.  If  no  active  choice  is  made  within 
this time, the TFR will be automatically transferred 
to  the  contractual  closed-end  pension  fund  used 
by any existing collective agreement (228). However, 
the  new  2026  Budget  Law  reduces  this  time 
window to 60 days and strengthens the automatic 
nature  of  the  enrolment  for  all  private  sector 
employees.  In  addition,  the  default  investment 
option, if no active choice is made by a planholder, 
is  changed  from  a  guaranteed  sub-fund  to  an 
investment  profile  adjusted  to  take  into  account 
the time horizon of the investment and the age of 
the  member  (229).  In  an  effort  to  provide  more 
flexibility  in  the  payout  phase,  the  new  law 
increases  the  share  of  accumulated  wealth  that 
can  be  paid  as  a  lump-sum  (from  50%  to  60%) 
but  also  introduces  new  types  of  annuity  or 
gradual  payment  (fixed  term  annuity,  fractional 
payment),  in  an  effort  to  both  make  them  more 
attractive than lump-sum withdrawals and reduce 
pension  funds’  own  liquidity  needs.  The  new  law 
also improves mobility across pension funds, even 
when employees elect to join a pension fund other 
than  the  one  set  in  their  respective  collective 
strengthening 
bargaining 
competition. 

agreements, 

thus 

in 

rates 

contributions 

and 
funds,  beyond 

Auto-enrolment  has only  modestly increased 
to 
participation, 
supplementary 
the  TFR 
severance  pay,  are  low.  Since  auto-enrolment 
Italy’s 
was  adopted,  participation 
contractual pension funds have risen modestly, but 
from  a  very  low  base,  namely  from  only  5%  of 
Italian workers in 2006 to 16% in 2025 (230). This 
rates, 
suggests  significant  employee  opt-out 
particularly  among  younger  and  lower  income 
employees  and  in  more  ‘fragmented’  industries, 
with a larger number of smaller firms. In addition, 
the TFR tends to be used by smaller companies as 
a source of working capital, which may discourage 
its transfer to a pension fund by their employees. 
Additional  voluntary  contributions  beyond  the  TFR 
(231)  and  average  contributions  per 
are 
employee (from both employees and employers) in 
post-November  1992  supplementary  pension 
funds  are  less  than  half  of  the  personal  income 
tax (PIT) exemption upper limit set by law. Beyond 
the  unattractive  return  profile  of  contractual 
pension  funds  (see  above),  this  may  also  imply 
that current tax incentives are not so attractive for 
lower 
medium-to-low 
marginal PIT tax rates. 

income  earners  with 

low 

Taxation and liability structure influence the 
investment  strategy  of  pension  funds  and 
insurers. Overweight positions in the government 
bonds  of  Italy  and  ‘white  list’  countries  reduce 
these  investors’  tax  burden,  as  the  investment 
return  of  these  bonds  (interest  and  capital  gains) 
is  subject  to  a  lower  tax  rate  (12.5%)  than  other 
financial  instruments  (26%  or  20%  if  held  by  a 
pension plan). The low risk and predictable, stable 
returns  provided  by  bonds  also  allow  pension 
insurers  to  meet  their  stringent 
funds  and 
regulatory 
the 
requirements  while  matching 
average  duration  of  their  liabilities,  which  is 
impacted  by  early  surrenders  and  withdrawals  in 
life  insurance  and  pension  products.  The  risk  of 
early  withdrawals  is  increased  by  several  factors, 
including  the  absence  of  a  statutory  minimum 
notice  period  for  pension  funds,  but  these  early 

pension  fund,  then  the  returns  depend  on  the  employee’s 
investment profile choice. 

(228) In the absence of such a fund,  the TFR is transferred to the 

supplementary pension scheme set up by INPS. 

(229) Italian pension funds offer several investment profile options 
(guaranteed, pure bond, mixed bond, balanced, equity). 

(230) FISMA own calculations based on COVIP and ISTAT data. 

(231) Since 2015, employees may proceed to additional voluntary 
pension  fund  contributions  beyond  their  TFR,  with  an 
obligation  for  the  employer  to  also  contribute  based  on  the 
relevant national or sectoral collective agreement. 

76 

 
 
 
withdrawals  are  also  a  signal  that  current  tax 
disincentives are not sufficient (232).  

The  Italian  asset  management  industry  is 
reasonably  developed  and  has  a  balanced 
investment  profile.  As  of  Q3  2025,  the  assets 
under management of all funds distributed in Italy 
amounted to EUR 1 403 billion, up 6.1% year-on-
year (233). Of these, EUR 1 327 billion (94.6%) were 
open-ended  funds,  of  which  EUR  680  billion  were 
managed  by  Italian  management  companies  or 
groups (234) and the rest by foreign groups. Of the 
open-ended  funds,  31.5%  were  equity  funds, 
36.2%  bond  funds,  24.7%  balanced  or  flexible 
funds, 3.6% money market funds and 4.9% other 
types  of  funds.  Investment  funds  managed  by 
Italian  groups  have  a  higher  share  of  bond 
holdings  than  those  of  foreign  groups  distributed 
in Italy, while a larger part of these bond holdings 
is invested in domestic bonds than EU peers (40% 
in 2024 vs an EU average of 33.7%). However, the 
home  bias  of  Italian  investment  groups  for  their 
equity  holdings  is  less  than  the  average  EU 
investment  group,  with  12%  of  their  holdings  in 
domestic equities, compared to 19.4% on average 
in the EU (235). Italian and euro-area funds play an 
important  role  in  the  Italian  bond  market,  holding 
about  a  third  of  outstanding  NFC  bonds  and  a 
tenth  of  government  securities.  On  AIFs,  90%  of 
which  are  closed-end  funds  in  Italy,  the  total 
assets under management of non-real-estate AIFs 
amounted  to  EUR  57  billion  as  of  mid-2025.  Of 
these,  EUR  29.4  billion  belonged  to  private  equity 
funds. 

Venture capital ecosystem 

The venture and growth capital ecosystem in 
Italy is growing, but remains fragmented and 
does not fully meet start-up financing needs. 
The Italian start-up ecosystem is valued at around 
EUR 67 billion,  having  grown  twenty-five-fold  in 
the past 10 years. Both private equity (PE) and VC 

(232) For  supplementary  pension  plans,  existing  tax  disincentives 
include  the  forfeit  of  the  favourable  tax  treatment  on 
contributions and payout returns. 

(233) Assogestioni,  Mappa  trimestrale  del  Risparmio  Gestito,  Q3 
2025. This figure does not include discretionary mandates. 

(234) Banca d’Italia, Financial Stability Report November 2025.  

investment (with investments equivalent to 0.45% 
and 0.03% of GDP respectively in 2024, expressed 
as  a  three-year  moving  average)  have  gained 
traction  since  2022.  However,  these  figures  still 
lag  behind  the  EU  averages  of  0.49%  and  0.06% 
of GDP respectively, particularly for VC investment. 
With  a  prevalence  of  small  operators,  the  Italian 
VC  sector  does  not  sufficiently  cover  the  later 
stages  of the enterprise life  cycle.  In  this  context, 
foreign investors play a significant role in partially 
bridging the financing gap for successful start-ups 
that  want  to  scale  up.  In  2024,  of  the  297 
different  investors  active  in  Italy,  42%  of  them 
came  from  abroad  vs  35%  in  2023 (see  Annex  4 
for more details).  

Italy’s  national  promotional  bank,  CDP,  is 
creating VC investment vehicles to ‘crowd in’ 
institutional  investors.  CDP  Venture  Capital  (a 
subsidiary  of  state-owned  CDP)  plays  a  central 
role  in  the  Italian  VC  market,  with  EUR 4.7  billion 
of  assets  under  management  and  15  operational 
direct or indirect VC funds, with further investment 
planned  in  its  2024-2028  business  plan.  One  of 
the new initiatives is the Previdentia compartment 
in the new fund-of-funds VenturItaly II. Previdentia 
is  designed  to  attract  pension  fund  investment  in 
VC, by allowing them to invest in this asset class in 
a  cost-effective  and  risk-controlled  way,  drawing 
on CDP’s skills in fund selection and due diligence.  

trying 

Italian  authorities  are 

to 
The 
incentivise start-up and VC funding by Italian 
institutional  investors.  Only  0.1%  of  Italian 
insurers’ investment portfolios was allocated to PE 
funds  and  0.3%  in  other  AIFs  beyond  real  estate 
and  infrastructure  funds  as  of  September  2025. 
Similarly,  according  to  EIOPA,  0.3%  of  Italian 
occupational  pension  funds’  assets  were  invested 
in  unlisted  equity  and  another  0.3%  in  AIFs.  This 
led the Italian government to  legislate that, as of 
end-2024,  all  supplementary  pension  schemes 
and  first  pillar  Casse  di  Previdenza  will  benefit 
from  the  tax  exemption  under  Law  232/2016  on 
capital gains from qualified investments in shares 
and units of collective investment vehicles, only if 
VC investments make up at least 3% for 2025, 5% 
for 2026 and 10% for 2027 (236), of their qualified 
investments in the previous year. However, it is too 
early to assess the measure’s success. 

(235) EFAMA Asset Management in Europe, December 2025. 

(236) Thresholds as amended by Decreto Legge 95/2025. 

77 

 
 
 
Table A6.2:  Financial sector indicators 

(1) Annualised data. EU data for credit growth and pension funds refer to the EA average. 
Source:  ECB, Eurostat, European Insurance and Occupational Pensions Authority, DG FISMA CMU dashboard, AMECO. 

78 

20182019202020212022202320242025-Q3EUTotal assets of MFIs, % of GDP206.4206.3230.4216.2198.6177.1175.3177.8246.1Common equity Tier 1 ratio12.913.915.515.115.215.515.715.516.8Total capital adequacy ratio16.117.219.318.819.219.419.719.520.2Overall NPL ratio, % of all loans8.46.74.53.52.92.72.72.61.9NPL ratio, loans to NFCs14.211.77.85.74.54.34.14.23.5NPL ratio, loans to HHs6.55.14.03.62.82.62.42.32.1Return on equity ratio15.84.91.05.79.112.713.213.69.6Loans to NFCs, % of GDP44.541.847.843.333.930.428.627.929.3Loans to HHs, % of GDP37.637.741.438.734.631.831.130.743.6NFC credit growth rate, %1.5-1.88.51.7-0.2-3.7-2.31.12.5HH credit growth rate, %2.82.62.43.73.3-1.30.32.22.6Stock market capitalisation, % of GDP26.630.831.133.625.628.331.139.469.9Initial public offerings, % of GDP0.130.170.050.300.200.230.04-0.06Market funding ratio34.235.335.237.439.139.740.8-49.7Private equity, % of GDP0.3320.3370.3700.3790.4590.4580.447-0.487Venture capital, % of GDP0.0060.0080.0140.0180.0260.0300.032-0.064Financial literacy, composite index-----43.5--45.5Bonds, % of HHs' financial assets7.36.35.54.45.27.98.6-2.8Listed shares, % of HHs' financial assets2.12.32.52.82.52.72.9-4.8Investment funds, % of HHs' financial assets14.414.614.415.313.813.514.6-11.0Insurance/pension funds, % of HHs' financial assets22.923.423.621.919.618.918.9-27.8Total assets of insurers, % of GDP51.356.565.260.948.749.150.049.753.9Pension assets, bn EUR---323.3322.9349.9375.9-5813.8Pension assets, % of GDP---17.516.216.317.1-32.310y real return average of pension assets, %-----0.30.2-1.4Pension funds assets, ECB (% of GDP)-8.49.79.38.28.38.99.123.01-34-1011-1718-2425-27Colours indicate performance ranking among the 27 EU Member States.Banking sectorNon-banking sector 
 
     
 
ANNEX 7: EFFECTIVE INSTITUTIONAL FRAMEWORK 

trust  built  on 

institutional  framework 

An  effective 
is 
essential  for  competitiveness.  This  requires 
public 
integrity,  high-quality 
legislation,  regulatory  simplification  and  efficient 
services  for  people  and  for  businesses.  The  2025 
(CSRs) 
country 
highlighted challenges faced by Italy  in improving 
the  effectiveness  of  its  public  administration  and 
the  efficiency  of  the  justice  system,  tackling 
corruption and strengthening the capacity of local 
administrations (see also Annex 18). 

recommendations 

specific 

Public trust 

Graph A7.1: Trust in the justice system, regional / 
local authorities and in government 

(1) EU-27 since 2019; EU-28 before 
Source: European Commission, Standard Eurobarometer 
surveys 

Public  trust  in  government  in  Italy  remains 
around  the  EU  average  (Graph  A7.1).  Trust  in 
other public institutions is nearing the EU average, 
and  trust  in  regional  and  local  authorities  is 
increasing  at  a  faster  rate.  Both  businesses  and 
people trust the ability of public administration to 
handle data securely and responsibly (237). People’s 
public  administration  have 
perceptions  of 
improved  –  the  proportion  of  those  finding  it 
complex  and  burdensome  has  fallen  by  14 
percentage points since 2023 (Italy 39%; EU 38% 
in 2025).  

Quality of lawmaking and 
implementation 

Italy’s  lawmaking  framework  is  broadly  in 
line  with  best  practice  in  terms  of  reducing 
the regulatory burden and ensuring effective 
is  scope  for 
implementation,  but  there 
improvement.  (Table  A7.1).  Regulatory  impact 
assessments  (RIAs)  are  mandatory  for  major 
legislation.  RIAs  are  expected  to  cover  a  wide 
range  of  impacts,  and  the  costs  and  benefits  to 
companies,  people  and  the  government.  In  the 
case of government emergency decrees simplified 
RIAs  can  be  submitted.  As  these  are  extensively 
used,  the  implementation  of  the  better-regulation 
framework  is  undermined.  No  assessment  of  its 
effectiveness has been undertaken in the last five 
years. 
provides 
advice/feedback  on  RIA  quality,  without  issuing  a 
formal  opinion.  This  body  could  be  helped  by 
greater  autonomy  and  better  follow-up  of  its 
opinions.  RIAs  and  evaluations  remain  uneven  in 
quality and timeliness: weak points include impact 
analysis, transparency, consultation and approach. 
Regions  are  seeking  to  be 
in  the 
legislative  process,  to  ensure  proper  cooperation 
between different levels of government (238). 

independent 

involved 

body 

An 

(240)  and  has  strengthened 

Italy has launched a regulatory simplification 
reform  (239)  supported  by  the  Italia  Semplice 
portal 
the 
coordinated  simplification  agenda  between 
central and local authorities via l’Agenda per 
la  simplificazione(241).  Under  milestone  M1C1-
60  of  the  recovery  and  resilience  programme 
(RRP), Italy simplified and/or digitalised more than 
260  critical  procedures,  by  harmonising  rules 
across government levels. In so doing it managed 
authorisations, 
unnecessary 
to 

eliminate 

(238) Regioni.it - Conferenza delle Regioni e delle Province 

autonome - Regioni.it 

(239) Law 167 of 10 Nov 2025 introduced rules on regulatory 

simplification, public consultation and impact assessment 
procedures. 

(237) European Commission, 2026, Flash Eurobarometer surveys 
567 and 568 on satisfaction with administrative services. 

(240) Italia Semplice. 

(241) L'Agenda per la Semplificazione. 

79 

00,10,20,30,40,50,60,70,80,9AutumnSpringAutumnSpringAutumnSpringWinterSummerWinterSpringWinterSummerAutumnSpringAutumnSpringAutumnSpring202520242023202220212020201920182017Justice,  legal system EU-27Justice,  legal system ITRegional or local public authorities EU-27Regional or local public authorities ITGovernment  EU-27Government  IT 
 
       
 
 
 
 
Table A7.1:  Italy. Selected indicators on better regulation practices for primary legislation 

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

streamline 
burdens and support reforms(242) (See Annex 5). 

timelines, 

administrative 

reduce 

Public service delivery and 
digitalisation 

Graph A7.2: Most time-consuming aspects of 
service delivery 

Source: European Commission, 2026, Flash Eurobarometer 
surveys 567 and 568 on satisfaction with administrative 
services. 

Delivery  of  public  administration  services  is 
improving,  but  user-friendliness  still  less 
than 
ideal.  Satisfaction  with  administrative 
services is low, among both people and businesses 
(13% of people and 24% of companies, compared 
with  EU  averages  of  45%  and  42%  respectively). 

(242) European  Commission  –  Preliminary  assessment  of  7th 
fa5262e2-06ba-4b24-b024-

request 

payment 
072ad032dffd_en. 

i) 

include 

The  difficulties 
time-consuming 
procedures  (long  waiting  times),  ii)  preparing  the 
necessary  documents,  iii)  identifying  the  service 
needed  and  iv)  understanding  legislation  (Graph 
A7.2).  These  obstacles  lead  to  delays  in  business 
operations  more  frequently  than  the  EU  average 
(44%  vs  36%).  At  the  same  time,  a  substantial 
proportion  of  people  (Italy  70%;  EU  67%)  and 
companies  (Italy  75;  EU  73)  find  that  digital 
services  save  time.  Most  people  and  companies 
find  it  easy  to  use  public  administration  services 
while abroad in the EU.  

to 

this 

Italy  has  made  rapid  progress  with  making 
services  available  online  for  people  (Table 
A7.2).  Measures  to  simplify  access,  supported  by 
result, 
the  national  RRP  contribute 
exceeding  the  EU  average  (243).  The  availability  of 
electronic  health  records  has  risen  above  the  EU 
average  (score  of  84  vs  82)  (244).  E-government 
use remains below the EU average (Italy 63%; EU: 
76%),  but  82%  of  residents  have  eID,  providing 
access to an expanding range of services  such as 
taxation  and  municipal  services  (245).  Interactive 
help  (71%)  and  more  information  about  the 
progress  of  the  requested  service  (57%)  could 
make digital services more attractive.  

(243) European  Commission.  Digital  Decade  2025:  eGovernment 

Benchmark 2025 | Shaping Europe’s digital future. 

(244) European Commission, 2025, Digital Decade: eGovernment 

Benchmark. 

(245) European Commission, forthcoming, Simplification of key life 

events. 

80 

0%10%20%30%40%50%Time forresponsesServiceidentificationDocumentspreparationDocumentspreparationLegislationandobligationsTime forresponsesPeopleBusinessesEUTools for smart legislation: Share of possible impacts assessed for all primary laws when developing legislation 0Regulators are required to identify and quantify the benefits of a new primary law1Regulators are required to identify and assess the impacts of alternative non-regulatory options1Tools for effective implementation: when developing laws, regulators are required to:Assess the level of compliance1Identify and assess potential enforcement mechanisms1Specify the methodology of measuring progress in achieving the law's goals1Oversight of better regulation: There is an external  body responsible for reviewing the quality of RIAs and of ex post evacuations 1There are publicly available assessments of the effectiveness of RIA in modifying regulatory proposals 0There are reports on the level of compliance by government department with the requirements of RIA0There are indicators on the percentage of ex post evaluations that comply with guidelines0The effectiveness of ex post evaluations in improving the regulatory stock has been assessed in the last five years0 
   
 
 
 
        
 
Table A7.2:  Digital Decade key performance indicators: availability of digital public services 

(1) Digital Decade target by 2030: 100. (2) Publishing year, data was collected in the previous year 
Source: European Commission, State of the Digital Decade report 2025 

through  a  platform 

There has been an increase in the availability 
of  digital  public  services  for  businesses,  but 
it remains below the EU average  (Table A7.2). 
Access to these services for companies from other 
EU  countries  also  lags  behind  (Italy  63%;  EU 
74%) (246). 73% of businesses regularly use digital 
public  services  (EU:  68%).  Business  permitting  is 
handled 
that  enables 
interoperability  between  digital  one-stop  shops  at 
municipal  level  with  all the  public  administrations 
(247). 
involved 
However  the  time  it  takes  can  vary  considerably 
between  municipalities,  and  it  is  documentation-
heavy, time-consuming and lacks proper technical 
support.  It  is  managed  at  municipal  level,  where 
applications  for  permits  are  submitted.  In  theory 
all relevant authorities are involved, but in practice 
efficiency varies by region and municipality (248).  

in  administrative  procedures 

involved. 

Small  commercial  or  service  activities  are 
straightforward  and  relatively  fast  if  no 
major  construction 
Industrial, 
is 
environmental  or  new-building  projects  can  be 
(249), 
more  complex  and 
especially  if  emissions,  zoning,  fire  safety  or 
environmental  assessments  are  required.  Delays 
often  stem  from 
i)  complex  administrative 
backlogs,  ii)  lack  of  coordination  with  external 
authorities,  iii)  limited  technical  staffing  and  iv) 
incomplete or inaccurate applications.  

take  much 

longer 

One  major  shortcoming 
lack  of 
permitting 
integration 
platforms  and  external  agencies,  requiring 

between 

is  the 

online 

bodies,  which 

local  authorities  to  coordinate  separately 
adds 
with  multiple 
administrative  complexity  and  delays (249). 
Italy  has  received  RRP  support  and  has  made 
considerable  progress  in  its  regulatory  framework 
on  the  cloud  and  interoperability  (250).  However, 
only  7 900  out  of  22 000  central  and  local 
administrations  have  completed  the  enrolment 
process 
data 
platform (251)(252). 

national 

digital 

the 

for 

Italy  has  enabled  cross-border  data  and 
document  exchange  via  the  EU  once-only 
technical system (253). This will reduce the need 
for  people  and  businesses  to  manually  submit 
documents  across  Member  States  as  more  once-
only  services (254)  come  online.  Italy  has  yet  to 
identify  the  types  of  documents  and  data  to 
exchange through the system and explore ways to 
shift  from  the  submission  of  documents  to 
exchange  of  structured  data.  Currently,  Italy  has 
two  procedures (255)  connected  in  the  area  of 
business. Italy has connected authority registries in 
the field of population. 

(250) RRP – 3rd payment request – preliminary assessment 

C_2023_5284_1__annexe_EN.pdf. 

(251) European Commission, 2025, Digital Decade 2025: Country 

reports. 

(252) Stato di avanzamento|Agenzia per l'Italia Digitale. 

(253) European Commission, Once-Only Technical System 

(246) European Commission, 2025, Digital Decade: eGovernment 

Acceleratormeter, Ec.europa.eu. 

Benchmark, p.34. 

(247) http://www.suapsue.gov.it/ 

https://www.impresainungiorno.gov.it/.  

(248) Unimpresa, 2025, Più servizi pubblici online della pubblica 

amministrazione, ma resta il divario tra nord e sud. 

(249) World Bank, 2025, Subnational Business Ready in the 

European Union 2025: Italy. 

(254) Procedure  types  -  Annex  II  of  SDGR  (2018/1724/EU)  and 
directives  2005/36/EC,  2006/123/EC,  2014/24/EU and 
2014/25/EU. 

(255) European Commission, 2025, Once-Only Services going-live! 
Change  of  competent  authority  for  air-traffic  controllers  in 
Italy, Ec.europa.eu. 

81 

EU-272023202420252025686884827576818671838483Digital public services for citizens (0 to 100)Digital public services for businesses (0 to 100)Access to electronic health records (0 to 100)Italy 
 
 
 
 
  
 
Civil service 

temporary technical experts to help implement the 
RRP at regional and local level. 

Italy's public administration faces challenges 
due to its ageing workforce and limited skills 
renewal.  It  has  the  oldest  public  administration 
workforce in the EU,  with a growing proportion of 
civil  servants  over  49  and  over  55  (256),  creating 
risks  for  medium-term  capacity  and  service 
quality.  New  recruitment  has  not  yet  offset 
retirements.  Skills  renewal  is  limited  by  low 
participation in adult learning among civil servants 
(Italy 15% vs EU 19%) (257). There is also a small 
proportion of staff with post-secondary education, 
though  this  has  gone  up  slightly.  The  capacity  of 
the  Italian  public  administration  to  deliver  public 
services varies considerably from region to region. 
Italy  adopted  a  ministerial  directive  on  training 
(258) and allocated around EUR 20 million for skills 
development,  with  the  national  digital  platform 
Syllabus and initiatives such as PA 110 e lode and 
PerForma  PA,  but  training  at  local  level  remains 
limited (259).  

for 

and 

both 

central 

To address capacity gaps, especially at local 
level,  Italy  introduced  the  inPA  recruitment 
portal 
local 
authorities (260).  It  also  significantly  increased 
(almost  threefold  compared  to  the  year  before) 
authorised  local  recruitment  in  2025  (3 800  new 
positions  including  3 360  permanent  posts)  (261). 
is  also  supporting  the 
EU  cohesion  funding 
recruitment  of  specialist  staff  in  less  developed 
regions 
(e.g.  1 200  new  civil  servants  with 
specialised technical profiles). RRP Investment 1.9 
also  supported  the  recruitment  of  a  pool  of 

(256) European  Commission,  Eurostat,  2026, European  Union 
Labour Force Survey, Employed persons by economic activity 
(NACE Rev. 2) (2008-2026). 

(257) European  Commission,  Eurostat,  2026, European  Union 
Labour  Force  Survey,  Participation  rate  of  employees  in 
education and training (last 4 weeks) by NACE Rev. 2 activity 
(2008-2026). 

(258) Direttiva del Ministro in materia di formazione del 14 

gennaio 2025. 

(259) European Commission, 2025, European Public Administration 

Country Knowledge: Country Brief 2024 Italy. 

(260) Sub-investimento 2.1.1: Creazione di una piattaforma unica 

di reclutamento. 

(261) Commissione per la stabilità finanziaria degli Enti locali | 

Integrity 

the 

reported 

While  the  perception  of  corruption  in  Italy 
level  of 
remains  high, 
corruption  actually  experienced  is  low.  82% 
of companies see it as widespread (EU: 64%) and 
85%  cite  close  business–politics  ties  (EU:  76%), 
while  44%  say  this  affects  their  operations  (EU: 
35%) (262).  Public  procurement 
is  particularly 
vulnerable  to  corruption  (See  Annex  5).  However, 
no  company  has  reported  being  asked  for  bribes 
(Italy  0%;  EU:  13%),  and  more  firms  than  the  EU 
average  believe  bribery  is  punished  appropriately 
(Italy  38%;  EU:  33%),  suggesting 
low  direct 
exposure despite high perceived risk. 

Italy  is  making  further  progress  in  the 
prevention and detection of corruption. It has 
updated  its  national  anti-corruption  plan  (263), 
including  integrity  risk  assessments,  and  issued 
new  guidelines  on  revolving  doors.  Italy  has  also 
drawn 
strengthen 
whistleblower  reporting  (considered  effective  by 
23%  of  businesses  in  Italy;  EU:  29%).  However, 
integrity  safeguards  remain  incomplete,  due  to 
gaps 
lobbying  regulations  and  conflict-of-
interest rules for public officials (264). 

guidance 

new 

up 

to 

in 

is 

to 

taking  measures 

issued  177  convictions 

Italy 
improve 
prosecution of corruption, in response to the 
2025 CSRs. In 2024, Italy’s Court of Audits (Corte 
dei  Conti) 
totalling 
approximately  EUR 41  million  for  financial  crimes 
against  public  administration  services,  and  the 
European  Public  Prosecutor’s  Office  reported  51 
corruption  investigations. However, the  number  of 
suspended  convictions  remains  generally  high 
(67% in 2024). 

(262) European  Commission,  2025,  Flash  Eurobarometer  survey 
557 on Businesses' attitudes towards corruption in the EU. 

(263) Autorità  Nazional  Anticorruzione,  2026,  Piano  Nazionale 

Anticorruzione 2026-2028.  

Ministero dell‘Interno. 

(264) European Commission, 2025, Rule of Law Report. 

82 

 
 
 
Justice 

cases 

first-instance 

Overall, the justice system continues to face 
challenges in terms of efficiency. The expected 
time taken to reach a decision in litigious civil and 
commercial 
courts 
in 
increased to 584 days in 2024 from 511 in 2023, 
one  of  the  highest  in  the  EU.  The  estimated  time 
taken  to  resolve  administrative  cases  in  first-
instance courts decreased to 483 days (from 595 
days  in  2023)  but  remains  among  the  highest  in 
the  EU.  Italy  is  taking  additional  measures  to 
address  the  2025  CSR  on  further  reducing  the 
backlog and disposition time of the justice system. 
Italy  has  revised  the  rules  on  mediation  and 
assisted negotiation to further reduce the number 
of civil and commercial proceedings (265).  

The quality of the justice system is generally 
perceived  as  good  overall.  Although  persistent 
shortages  remain,  the  recruitment  of  magistrates 
and  administrative  court  staff  continues  аpace. 
Italy  has  introduced  i)  mobility  of  magistrates 
between  appeal  courts,  ii)  more  remote-working 
opportunities 
for 
judges, 
reassignment  of  cases  and  iv)  improved  training 
and induction of new magistrates.  

flexibility 

for 

iii) 

Italy  has  made  substantial  progress 
in 
digitising  its  justice  system.  First  instance 
criminal  proceedings  have  been  digitalised,  while 
further improvements could be made to complete 
the  digitalisation  in  all  instances  and  fully  enable 
online hearings. Italy is among the best performing 
countries in the EU in digital solutions for initiating 
and following proceedings in civil, commercial and 
administrative  cases.  However,  there  is  room  for 
in  arrangements  for  producing 
improvement 
machine-readable  judicial  decisions.  Better  online 
access 
increase 
transparency and trust in the judiciary (266).  

law  would  help 

to  case 

(265) 2026 Justice Scoreboard, forthcoming. 

(266) For  a  more  detailed  analysis  of  the  performance  of  the 
justice  system  in  Italy,  see  the  upcoming  2026  EU  Justice 
Scoreboard and the 2025 Rule of Law Report. 

83 

 
 
SUSTAINABILITY 
ANNEX 8: INDUSTRY DECARBONISATION, CIRCULARITY AND CLIMATE MITIGATION 

to 

recommendation 

Italy  faces  challenges  in  decarbonising  its 
industry,  reducing  emissions  in  the  effort 
sharing sectors including road transport, and 
on waste management. It still spends half of its 
revenue  from  the  EU  emissions  trading  system 
(ETS)  on  objectives  other  than  the  climate  and 
energy transition. In 2025 Italy received a country-
specific 
residual 
inefficiencies  in  waste  management  by  reducing 
infrastructure  capacity  gaps.  There  are  still  wide 
regional  differences  in  the  capacity  of  waste 
infrastructure 
extraordinary 
in 
governance  powers  are  in  use.  The  rate  of 
separate  waste  collection  varies  widely  by  region, 
as does the rate of anaerobic treatment of organic 
waste, varying enormously between the north and 
centre-south.  The  governance  structure  in  the 
waste  management  sector  is  fragmented,  with 
opportunities missed to unlock economies of scale. 

tackle 

Sicily, 

and 

euro  of  gross  value  added  (GVA),  in  line  with  the 
EU  average.  Between  2019  and  2023,  the  GHG 
emissions  intensity  of  manufacturing  in  Italy  has 
fallen  by  9%.  At  over  two  thirds  in  2023,  Italy’s 
share  of  energy-related  GHG  emissions  of  all 
industry  emissions 
remaining  share  of 
(the 
emissions  are  generated  by  industrial  processes 
and  product  use)  is  among  the  highest  in  the  EU, 
where  the  average  is  58%.  Between  2018  and 
2023, 
intensity  of  energy-related  GHG 
emissions  in  Italy’s  manufacturing  fell  by  8%  to 
179 g  CO2eq  per  euro  of  GVA,  above  to  the  EU 
average  of  163  g  CO2eq  per  euro  of  GVA  (that 
declined  by  20%).  In  that  period,  at  around  41%, 
electricity  and  renewables  generated  a  broadly 
stable  share  of 
in 
manufacturing.  In  the  five  years  until  2024,  the 
energy intensity of Italian manufacturing declined 
by about 10%, to 0.9 GWh per euro of GVA.  

the  final  energy  used 

the 

Industry decarbonisation 

Greenhouse gas emissions from industry 

it  accounts 

The  greenhouse  gas  emission  intensity  of 
Italy’s manufacturing sector is similar to the 
EU  average,  but 
for  a 
significantly  higher  share  of  energy-related 
emissions (267).  Manufacturing  generates  around 
18%  of 
(GHG) 
emissions, similar to the EU average (268). In 2024, 
manufacturing  emitted  244 g  CO2eq  of  GHG  per 

Italy’s  total  greenhouse  gas 

(267) This  Annex  discusses  the  transition  of  Italy's  manufacturing 
industry,  specifically  its  energy-intensive  industries,  to  low-
carbon  and  net-zero  modes  of  production,  which  is  key  to 
preserving  competitiveness  on  the  path  towards  climate 
neutrality  as  mandated  by  the  European  Climate  Law.  A 
broader  perspective  on 
the  current  competitiveness 
challenges  facing  Italy's  manufacturing  industry  is  provided 
in  Annex  5.  For  a  more  detailed  description  of  greenhouse 
gas  emissions  from  industry,  see  European  Commission 
(2025),  Commission  staff  working  document,  SWD  (2025) 
205  final,  Brussels,  4.6.2025,  Annex  A7.  Clean  industry  and 
climate mitigation, Link. 

(268) In 2023. Data on the manufacturing sector exclude the NACE 
division  C19  –  manufacture  of  coke  and  refined  petroleum 
products, for better match of the sectoral data from Eurostat 
(gross  value added)  with  those  from  the  UNFCCC  under  the 
Common  Reporting  Format.  Also  see  further  indicators  on 
industry  decarbonisation,  as  well  as  the  annotation  for 
further information, in table A8.1 at the end of this Annex. 

industries 

Italy’s  energy-intensive 
face 
challenges  but  their  output  remains  stable. 
industries (269)  accounted  for 
Energy-intensive 
12%  of  Italy’s  manufacturing  GVA  in  2022.  With 
the  exception  of  paper  and  paper  products,  the 
GHG  emission  intensity  of  these  industries  is 
moderate  by  EU  standards.  These  industries  are 
particularly  exposed  to  energy  prices.  Electricity 
prices  for  industry  are  high  and  have  increased 
significantly in Italy in recent years (270). 

Policies to promote industry decarbonisation 

incentives  with  support 

Italy  has  started  complementing  its  energy 
for 
efficiency 
industry decarbonisation, but more is needed. 
Italy has set up some schemes for power purchase 
agreements (271),  but  uptake  has  been  limited  as 
the  sector  has  been  partially  crowded  out  by 
contracts  for  difference.  To  address  this  problem, 

(269) 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 
high  levels  of  energy  both  on  site  and/or  in  the  form  of 
purchased  electricity  –  and  greenhouse  gas  emissions 
intensive, in various combinations. 

(270) See Annex 9. 

(271) See Annex 9. 

84 

 
 
 
 
 
 
 
40.5% reduction, leaving a gap  of 3.2 percentage 
points to the 2030 target, a 43.7% reduction. Italy 
could  bridge  part  of  this  gap  with  own  unused 
annual emission allocations from earlier years but 
would  also  need  transfers  of  allocations  from 
other  Member  States  to  achieve  compliance  with 
the Effort Sharing Regulation. Progressing towards 
climate 
swift 
require 
implementation  of 
the  additional  measures 
planned and new measures identified.  

neutrality 

will 

Graph A8.1: Greenhouse gas emissions in the 
effort sharing sectors, 2005, 2023, and 2024 

the  authorities  launched  the  'Energy  Release  2.0' 
scheme,  which  provides  renewable  energy  via 
contracts  for  difference  directly 
to  energy-
intensive  industries  at  the  bid  price,  in  exchange 
for  commitments  and  investments  in  additional 
renewable  energy  generation.  Despite  some 
interesting innovative projects providing long-term 
energy  storage  (e.g.  Energy  Dome),  Italy  has  not 
yet  tapped  the  full  potential  of  the  long-term 
energy  storage  sector,  nor  the  high  potential  for 
geothermal  and  waste  heat.  Further  action  is 
therefore  needed  to  bring  down  the  high  cost  of 
electricity  and  promote  industry's  shift  to  using 
electricity.  

in  full 

A major  opportunity  to  fund  decarbonisation 
Italy’s  auctioning 
is  to  allocate 
revenues from the EU ETS to the climate and 
energy  transition,  in  line  with  the  EU  ETS 
Directive.  Italy  still  allocates  50%  of  its  national 
revenues to servicing its public debt/deficit (fondo 
di ammortamento titoli di stato). 

Reduction of effort sharing emissions 

Source: European Environment Agency. 

Sustainable transport 

Compliance  with  effort  sharing  limits  with 
domestic measures 

Italy’s effort sharing emissions are projected 
to be above its target in 2030; earlier years’ 
unused  emission  allocations  will  not  suffice 
to cover the gap to achieve compliance with the 
2024, 
Effort 
greenhouse  gas  emissions  from  Italy’s  effort 
sharing sectors are expected  to have been 21.9% 
below  2005  levels.  By  2030,  current  and  planned 
policies  and  measures  are  expected  to  lead  to  a 

Regulation (272). 

Sharing 

In 

(272) The  national  GHG  emission  reduction  target  is  set  out  in 
Regulation (EU) 2018/842 (the Effort Sharing Regulation). 
It  applies  jointly  to  buildings  (heating  and  cooling),  road 
transport, agriculture, waste and small industry (known as 
the  effort  sharing  sectors).  The  emissions  from  effort 
sharing  sectors  for  2024  are  based  on  approximated 
inventory  data.  The  final  data  will  be  calculated  in  2027 
after  a  comprehensive  review.  Projections  about  the 
impact of current policies (‘with existing measures’, WEM) 
and  additional  policies  (‘with  additional  measures’,  WAM) 
as  per 
Italy’s  2025  reporting  under  Article  17  of 
Regulation  (EU)  2018/1999  (the  Governance  Regulation). 
Also  see  European  Commission  (2025),  Climate  Action 
Progress  Report  2025 
Information, 
– 
Commission  staff  working  document,  Brussels,  Chapter  9 
(pp. 111ff.), and in particular Tables 25 and 26, Link. 

Technical 

lags 

on 
car 

behind 
as 

electric 
ownership 

road 
Italy 
transport (273) 
is 
widespread (274)  and  road  transport  is  the 
dominant form of transport (275). In 2024, road 
transport  generated  40%  of  Italy’s  effort  sharing 
emissions  transport,  although  this  is  a  14% 
reduction  from  2005  levels (276).  The  uptake  of 
electric  vehicles  is  low; in 2025,  6.2%  of  new  car 
registrations were battery electric cars, roughly 1/3 
of  the  EU  average.  Battery  electric  vehicles  could 
provide 
flexibility  and 
contribute  to  peak-shaving  using  vehicle-to-grid 
technologies,  which  would  help  bring  down 
electricity costs and increase grid hosting capacity, 
thereby  optimising  grid  investments.  Italy  had 
charging 
installed 
infrastructure  for  cars  by  end-2025 (277).  The  lack 

crucial  demand-side 

only  25% 

electric 

of 

(273) European Commission, EU Alternative Fuels Infrastructure 

Observatory, Link. 

(274) Eurostat, Passenger cars in the EU, Link. 

(275) European Commission, 2025,  EU Statistical pocketbook 

2025, Link. 

(276) See Graph A8.1, and Table A8.1 at the end of this Annex. 

(277) Data on the fulfilment of AFIR Distance-based targets, 

Alternative fuels observatory, Link. 

85 

050100150200250300350400200520232024MtCO2eDomestic transport (excl. aviation)Buildings (under ESR)AgricultureSmall industryWaste 
 
  
 
for 

trucks 

infrastructure 

of  charging 
risks 
becoming  a  significant  bottleneck  for  the  uptake 
of electric trucks and the ability of manufacturers 
to  meet  their  legally  binding  sales  targets.  Zero-
emission  vehicles  are  not  yet  exonerated  from 
concession  tolls  nor  subject  to  the  optional 
assessments under Article 7(4) of the Eurovignette 
Directive (1999/62/EC). Italy has over 700 cars per 
1 000  inhabitants,  the  most  in  the  EU  and  still 
increasing.  It  has  the  second  highest  share  in  the 
EU of inhabitants who do not use public transport 
(68%)  (278).  In  2024,  Italy’s  competition  authority 
charging 
has 
infrastructure (279). 

signalled 

related 

issues 

to 

Vehicle  taxation  could  better  encourage  the 
transition  to  sustainable  transport.  Italy’s 
recurrent  taxes  on  vehicles  set  different  rates 
based  on  engine  power  and  European  emission 
standards,  but  do  not  explicitly  take  into  account 
vehicles’  CO2  emission  or  weight,  as  most  other 
Member States. In addition, vehicles older than 20 
years are subject to a 50% reduction, while those 
older than 30 years are exempt. Vehicle taxes are 
set  and  collected  by  regional  governments,  within 
a  framework  set  at  central  level.  A  central  surtax 
(so-called  “superbollo”)  also  applies  to  vehicles 
with  most  powerful  engines  (above  185  kW),  and 
progressively declines with the age of the vehicle. 
At  the  same  time,  Italian  cities  are  among  the 
most  polluted  in  the  EU  (see  section  (“Zero-
pollution industry”). 

The  share  of  freight  transport  by  road  is 
around  84%  (2023;  EU  average:  75%). 
Improving  modal  integration  and  the  offer  of  rail 
services  and  levelling  the  playing  field  among 
transport  modes  by  internalising  external  costs 
and  withdrawing  direct  and  indirect  fossil  fuel 
subsidies would help attain an efficient modal split 
of transport, in line with investments supported by 
the  national  recovery  and  resilience  plan.  As  for 
industrial  decarbonisation  (see  above),  EU  ETS 
revenues  are  an  untapped  resource  to  finance 
transport decarbonisation, in line with Article 10.3 
of  the  EU  ETS  Directive.  This  would  also  deliver 
long-term  benefits  by  tackling  the  persistent 
problem of air pollution. 

(278) 2024 data, Eurostat, Link.  

Decarbonisation of fisheries 

The  Italian  fishing fleet  is  among  the  higher 
emitting fleets in the EU in terms of total CO2 
equivalents,  amounting  to  an  average  of  786 
tonnes  CO₂eq  between  2018  and 
thousand 
2022 (280),  and  190.9  million  litres  of  marine  fuel 
consumed  in  2023.  In  view  of  climate  change 
mitigation,  both  the  fisheries  and  aquaculture 
sectors  face  the  dual  challenge  of  moving  away 
from  fossil  fuels  and  increasing  energy  efficiency 
to  enhance  sector  resilience.  This  requires  a 
comprehensive  energy  transition  strategy  that 
incorporates 
sources, 
technological  innovation,  adequate  infrastructure 
and  access  to  energy  sources,  and  improved 
energy practices across the sector's operations. 

renewable 

energy 

Sustainable industry 

Circular economy industry 

from 

electrical  and 

Italy  is  on  target  to  meet  all  EU  recycling 
targets  for  2025  apart  from  the  target  on 
waste 
electronic 
equipment  (WEEE).  The  rate  of  municipal  waste 
recycling  was  50.8%  in  2023 (281)  against  the  EU 
average  of  47.7%  (282).  However,  the  volume  of 
total  waste  generated  increased  slightly  between 
2022 and 2023 (from 486 kg per capita to 489 kg 
per  capita),  though  this  is  below  the  504 kg  per 
capita level recorded in 2018 (SDG 12).  

In terms of WEEE separate collection, Italy is 
well  below  the  EU  2019  target  of  65%, 
recycling  only  29.6%  in  2024,  down  from 
34% in 2022. The rate of professional collection 
is  much  higher 
the  household  waste 
collection rate. The WEEE Coordination Centre (283) 

than 

(280) European  Commission,  2026,  Study  on  greenhouse  gas 
emission (GHG) reduction costs, scenarios and pathways for 
EU fisheries to achieve net zero by 2050, Link. 

(281) Due to new reporting rules for calculating recycled municipal 
waste  under  Directive  2008/98/EC,  there  is  a  break  in  the 
time series compared to previous years. 

(282) More recent national data indicate a recycling rate of 52.3% 
in  2024,  still  below  the  EU  targets  of  55%  for  2025  and 
60% in 2030, see Institute for Environmental Protection and 
Research (ISPRA), Municipal Waste Report 2025, Link, Figure 
3.5, p.87. 

(279) Autorità Garante della Concorrenza e del Mercato, Link. 

(283) Centro di Coordinamento RAEE (CdC RAEE), Link.  

86 

 
 
 
announced  a  series  of  measures,  including  new 
drop-off  points,  extending  distributor  take-back 
obligations,  pilot  projects  to  intercept  incorrect 
WEEE  disposal  and 
registration 
procedures.  The  share  of  used  batteries  and 
accumulators collected in Italy in 2023 was low at 
35.5% (EU average: 48.8%) against the EU target 
of 73% by 2030 (284). 

simplified 

Italy is close to meeting the EU's 2025 target 
to 
recycle  50%  of  plastic  packaging, 
recycling  49%  in  2023  (285).  However,  plastic 
recycling facilities are not working at full capacity. 
This means that plastic waste storage facilities are 
in  turn  not  being  emptied  and  collection  has  to 
slow  down  due  to  the  lack  of  storage.  These 
difficulties  are  compounded  by  the  cost  of 
imported  virgin  plastic  from  non-EU  countries 
being lower than recycled plastic. 

its 

reduced 

landfilling 

rate 
Italy  has 
significantly,  from  46.3%  in  2010  to  15.9% 
in 2023. This puts Italy on track to achieve the EU 
landfilling target of a maximum of 10% by 2035. 
The  incineration  rate  has  remained  relatively 
stable  at  19.1%  in  2023,  a  slight  increase  since 
2022 (18.5%).  

Italy  has  untapped  potential  to  use  fiscal 
tools to improve waste management. The tax 
on  landfilling  and  waste  incineration  of  municipal 
solid  waste  without  energy  recovery  at  EUR 5.17-
25.82/tonnes  is  one  of  the  lowest  in  the  EU (286). 
Increasing  the  landfill  and  waste  incineration  tax 
and  applying  it  consistently  across  all  regions 
could  reduce  regional  disparities  and  increase 
revenue  by  EUR 200  million  by  2030,  double  the 
current level (287). 

in  the  2025  country-specific 
As  noted 
recommendation, there are still wide regional 
differences 
management 
performance  and  in  the  capacity  of  waste 

waste 

in 

(284) Eurostat, Recycling of batteries and accumulators, Link.  

(285) Eurostat,  Recycling rates of packaging waste for monitoring 
compliance with policy targets, by type of packaging, Link. 

(286) European  Commission:  Directorate-General  for  Environment, 
Camboni,  M.,  Markandya,  A.,  Tyrer,  D.,  Goonesekera,  S.  et 
al., Greening  the  European  Semester  –  Resource  and 
pollution taxes. Annex 6, Country factsheets,  2026, pp. 222-
223, Link. 

(287) Ibid., Table 71, p.232. 

87 

infrastructure,  with  the  north  generally  more 
advanced  than  the  centre-south  (Annex  18).  In 
2024,  the  rate  of  separate  municipal  waste 
collection  ranged  from  78.9%  in  Emilia-Romagna 
to  55.5%  in  Sicily (288).  Some  provinces  perform 
poorly  on  separate  waste  collection,  such  as 
Palermo  (36.9%)  (both  province  and  city),  Reggio 
Calabria  (43.8%),  Crotone  (46.4%)  and  Foggia 
(49%) in 2024 (289). In addition to ERDF support, at 
least  584  waste  projects  designed  to  improve 
waste collection, recycling and treatment, financed 
by  the  Recovery  and  Resilience  Facility,  will  need 
to be completed in 2026.  

The  rate  of  anaerobic  treatment  of  organic 
waste  fluctuates  greatly  between  the  north 
and  centre-south.  Rates  vary  between  almost 
24% in Lombardy to 1% in Campania in 2024 (290). 
This  is  due  to  a  lack  of  available  infrastructure, 
with  54  plants  in  Lombardy  against  only  five  in 
Campania  in  2022-2023  (291).  This  results  in 
organic  waste  being  transported  between  regions 
for treatment.  

In  2024,  waste  management  cost  more  on 
average per capita in the centre and south of 
Italy (292).  ARERA  has  brought  in  measures  to 
prevent  increases  in  costs  from  burdening  the 
most  vulnerable  groups:  the  social  waste  bonus 
was  introduced  in  2026  with  the  new  tariff 
method  (MTR-3)  (293).  Quantity-based  pricing  is 
becoming  more  widespread  as  the  pay-as-you-
throw TARIP gradually replaces TARI (294) especially 
in northern and central regions. Italy is still paying 
fines  for  European  Court  judgments  on  illegal 
landfills  and  waste  management  in  Campania. 
However,  both  fines  have  been  significantly 
reduced  over  time  to  recognise  the  progress 
made (295).  

(288) ISPRA, Municipal Waste Report 2025, Link, Figure 2.23, p.51. 

(289) Ibid.  Table 2.15, p.58. 

(290) Ibid., Figure 3.2.4, p.93. 

(291) Ibid., Table 3.2.2, p.98.  

(292) Ibid., Figure 5.4, p.242. 

(293) Autorità di Regolazione per Energia Reti e Ambiente, Link. 

(294) Ibid., pp.235-6; TARI: Tassa sui Rifiuti; TARIP: Tassa sui Rifiuti 

Puntuale. 

(295) For the Campania case, in January 2026, the daily fine was 

reduced from EUR 120 000/day to EUR 20 000/day.  

 
 
 
As reported in the 2025 country report, Italy 
total  additional 
is  estimated  to  need 
investment of at least EUR 3.3 billion a year 
to  fund  the  circular  economy  transition 
(including  waste  management),  representing 
0.15% of its GDP. This includes EUR 745 million 
for  recent  initiatives  such  as  eco-design  for 
sustainable  products,  packaging  and  packaging 
waste,  labelling  and  digital  tools,  critical  raw 
material  recycling  and  measures  proposed  under 
the amended the Waste Framework Directive. Italy 
needs  an  additional  EUR 2.1  billion  in  investment 
to unlock its circular economy potential (296). 

The governance structure in the waste sector 
is  fragmented  with  opportunities  missed  to 
unlock  economies  of  scale.  There  are  currently 
54  Ambiti  Territoriali  Ottimali  (ATOs)  across  the 
country.  While  65%  of  Italian  regions  have  one 
ATO  per  region,  there  are  notable  exceptions,  the 
most  per  region  being  in  Campania  (7)  and  Sicily 
(18).  A  higher  number  of  ATOs  can  indicate  more 
waste 
identified 
inefficiencies  in  this  system in terms  of  untapped 
economies of scale (297) (see Annex 18). 

operators. 

ARERA 

has 

Italy's  results  on  the  circular  economy 
indicators  are  in  sharp  contrast  to  the 
results on waste management. The explanation 
is that performance on circular economy indicators 
does not vary widely by region as it does for waste 
infrastructure  capacity  (298).  The  rate  of  circular 
use of materials was 21.6% in 2024 (EU average 
12.2%),  making  Italy  the  third  best  performer in 
the  EU(299).  At  EUR 4.51  generated  per  kg  of 
material  consumed  in  2024,  resource  productivity 
in Italy is well above the EU average of EUR 3 per 
kg and one of the highest in the EU. However, the 
import  material  dependency  in  Italy  at  46.6%  is 
double  the  EU  average  (22.4%)  in  2024,  albeit 
lower than the 49.2% in 2018 (300). 31% of Italy's 
GDP  depends  on  critical  raw  materials  (CRM), 

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

(297) ARERA,    Relazione  304/2025/I/RIF,  Link;  ISPRA,  Green  Book 

2025 - Data on waste management in Italy, Link. 

(298) Foundation for Sustainable development, European 
Semester fact-finding mission, 28 January 2026. 

(299) Belgium and Netherlands have a higher rate.  

(300) Eurostat, Link.  

88 

above the EU average of 22% (301) (see Annex 5). 
Confindustria has underlined Italy's vulnerability in 
the  supply  of  CRM  supply  in  its  work  on  the 
(302).  On  construction  and 
Cascade  project 
demolition  waste,  despite  high  levels  of  separate 
collection  above  80%  (303),  Italy  had  a  low  reuse 
rate  0.46%  in  2023 (304).  New  guidelines  on 
(305)  and  minimum 
sustainable  construction 
environmental 
public 
green 
for 
criteria 
procurement (306) were published in 2025. 

circular 

economy 
The  2022 
national 
(308) 
strategy (307)  and  related  timetable 
provides  a  roadmap  for  the  transition.  Many 
of  the  actions  are  in  the  national  recovery  and 
resilience  plan  (RRP) (309).  A  survey  of  800  small 
companies  showed  that  65%  employ  circular 
economy  practices,  double  the  rate in  2021.  61% 
of  businesses  surveyed  considered  that  circular 
economy measures generated cost reductions (310). 
By  contrast,  Italy  has  seen  only  a  2%  increase  in 
circular  economy 
jobs  between  2014  and 
2022 (311), with the sector accounting for only 2% 
of  total  employment  in  2023,  equal  to  the  EU 
average. Circular economy practices are estimated 
to  have  saved  EUR 18.3  billion  per  year (312).  Italy 
has  an  active  national  circular  economy  network 
(313),  stakeholder  platform  (314)  and  a  plethora  of 
regional  activities  (315)  worth  noting.  A  national 

(301) National Circular Economy Network, Link. 

(302)Confindustria,  Cascade  project,  2026,  Critical  raw  materials 

and resilience of supply chains, Link.    

(303) ISPRA,  Rapporto Rifiuti Speciali Edizione 2024, p.214, Link 

(304) Federbeton-Confindustria,  Rapporto  di  sostenibilità  2024, 

p.15, Link. 

(305) ISPRA,  EMAS  nel  settore  delle  costruzioni:  buone  pratiche  e 

circolarità, Link. 

(306) MASE, Criteri ambientale minimi,  Link. 

(307) MASE, 2022, National Circular Economy Strategy, Link. 

(308) A  related  timetable  addendum  (cronoprogramma)  contains 

targets to be achieved by 2027, Link. 

(309) Recovery and resilience plan, 2021, Link. 

(310) National Circular Economy Network, seventh report, Link. 

(311) Eurostat, Persons employed in circular economy sectors, Link. 

(312) Intesa San Paolo, Circular Economy Report 2025, Link. 

(313) National Circular Economy Network, Link.  

(314) Piattaforma Italiana degli attori per l'Economia Circolare, 

Link. 

(315) Italia circolare, Link.  

 
 
 
plan on sustainable consumption and production is 
under development (316). 

(2.0%,  up  from  1.2%  between  2018  and  2023) 
(322).  

Italy  has  extended  producer  responsibility 
schemes  in  operation.  There  are  five  schemes 
covering  oils,  packaging,  tyres,  batteries  and 
electronic  waste,  and  one  under  development  for 
single-use  plastics (317)(318).  Nevertheless,  sectors 
such as plastics, textiles, construction and e-waste 
are less robust due to uneven collection nationally 
with  lower  levels  in  the  southern  regions,  weak 
markets 
recycled 
materials (319).  When  facilities  are  limited,  inter-
regional  transfers  can  become  more  expensive. 
Furthermore,  a  tax  on  single-use  plastic  goods, 
which  was  supposed  to  enter  into  force  in  2021, 
to 
for 
has  been  delayed 
1 January 2027. 

the  eight 

demand 

time 

and 

low 

for 

Bioeconomy industry 

Italy's  bioeconomy  has  generated  broad-
based and increasingly dynamic growth, with 
value  added  outpacing  domestic  GDP  in 
recent  years.  The  bioeconomy  is  driven  notably 
by  bio-based  chemicals  and  plastics,  and  wood 
products and furniture, with the former registering 
the  highest  sub-sector  value  added  growth  at 
6.1%  between  2018  and  2023(320).  Employment 
trends are mixed: overall bioeconomy employment 
has  edged  downward,  but  bio-based  chemicals 
and  plastics  and  food  and  beverages  bucked  this 
trend  with 
job  growth  of  3.9%  and  0.7% 
respectively,  reflecting  the  expanding  industrial 
footprint  of  these  two  strategically  significant 
segments (321). Labour productivity stood at 81.1% 
of  the  national  average,  up  from  74.8%  in  2018, 
indicating  a  steady  convergence  with  the  broader 
economy  and  a  gradual  shift toward  higher-value 
activities.  R&D  investment  is  also  trending  in  the 
right  direction,  with  bioeconomy-relevant  sub-
sectors  growing  faster  than  the  national  average 

food  and  beverage  sector 

Structurally, Italy's bioeconomy is one of the 
largest in Europe with an annual turnover of 
approximately EUR 437.5 billion and 2 million 
employees  as  of  2023(323).  It  is  anchored  by  a 
dominant 
that 
from  agricultural 
increasingly  creates  value 
residues, complemented by a globally competitive 
bio-based  chemicals  and  plastics  industry  driven 
by  significant  private  investment  in  biorefineries 
and  biopolymer  innovation.  These  developments 
are  guided  by  the  Bioeconomy  Strategy  (BIT)  II 
Implementation Action Plan 2025-2027, approved 
in December 2024 (324). 

Zero-pollution industry 

Air  quality  in  Italy  remains  a  serious  cause 
for  concern  in  some  parts  of  the  country, 
notably  the  Po  River  basin  and  large  cities. 
The  latest  available  annual  estimates  for  2023 
attribute  43 083  deaths  each  year  (or  407 949 
years  of  life  lost  (YLL))  to  fine  particulate  matter 
(PM2.5),  and  9 064  deaths  each  year  (or  85 828 
YLL)  for  NO2,  the  worst  in  Europe  on  each 
parameter (325).  Environmental  risks  put  a  heavy 
toll  on  population  health,  causing  nearly  half  the 
health  impacts  that  smoking  does.  Combined, 
behavioural  risks  (i.e.  smoking,  harmful  alcohol 
use,  poor  diet  and  physical  inactivity)  and  air 
pollution  accounted  for  around  29%  of  deaths  in 
Italy  in  2021  underscoring  the  need  for  stronger 
and  more 
health 
measures (326). Labour productivity is estimated to 
have increased by 2.56% between 2000-2022 due 
to  a  4.7%  reduction  in  PM2.5  (327).  The  European 

comprehensive 

public 

(322) European Commission, Business expenditure in Research and 
Development  (R&D)  in  the  EU  bioeconomy,  JRC  analysis, 
Link.  

(323) Italian government,  Updated implementation action plan 

(2025-2027) for the Italian bioeconomy strategy (BIT II), p.6, 
Link,  Intesa San Paolo et al, La Bioeconomia in Europa, p.2,  
Link. 

(316)MASE, Piano d’Azione Nazionale per il Consumo e la 

Produzione Sostenibile (PAN CPS), Link. 

(324) Ibid. 

(317) Deliverables from LIFE4EPR mapping tool, Link.  

(318) Decreto Legislativo, 8 novembre 2021, n. 196, Link. 

(319) Assoambiente L’Italia che Ricicla, Link. 

(320) European Commission, Jobs and Wealth in the European 

Union Bioeconomy, Link. 

(321) Ibid. 

(325) EEA,  2025,  Harm  to  human  health  from  air  pollution  in 

Europe: burden of disease status, 2025, Link. 

(326) European Commission, 2025, State of Health in the EU Italy 

Country Health Profile 2025, p.5, Link. 

(327) Dechezleprêtre  A.  &  Vienne  V,  2025,  The  impact  of  air 
pollution on labour productivity: Large-scale micro evidence 
from Europe, p.36, Table 13, OECD Science, Technology and 
Industry Working Papers 2025/14, Link.  

89 

 
 
 
Court  has  delivered  two  judgments  for  non-
compliance with the Ambient Air Quality Directive: 
in 2020 for exceedances of PM10 limit values and 
in  2022  for  exceedances  of  NO2  limit  values.  In 
2024  the  limits  for  N02  were  reported  to  be 
exceeded in seven air quality zones (down from 10 
in 2023), PM10 exceeded in 23 zones (up from 19 
in 2023), and no exceedances of the annual limits 
for  PM2.5  (compared  with  1  in  2023).  A  new 
infringement  was  opened  in  December  2025  for 
excess  levels  of  NO2  in  Naples  and  Palermo.  The 
cost  of  air  pollution  from  the  main  pollutants 
organic 
(ammonia, 
compounds,  sulphur  dioxide,  NOx  and  PM2.5)  is 
estimated  at  EUR 42.4  billion  every  year 
in 
Italy (328). 
Italian  cities  are  among  the  most 
polluted in the EU, with 29 of the 76 cities in the 
lowest 90-100 European Air Quality ranking decile 
(329).  On  20 June 2025,  the  Italian  government 
approved  an  action  plan  for  2025-2027  to 
improve air quality with funding of EUR 2.4 billion 
(330).  The 
is  discussing  a 
dedicated  fund  to  reduce  air  pollution  in  the  Po 
Basin (331). 

Italian  Parliament 

non-methane 

volatile 

A  tax  on  emissions  of  sulphur  dioxide  (SO₂) 
and nitrogen oxides (NOx) was established in 
January  1998  paid  by  operators  of 
large 
combustion plants. It is estimated that incremental 
air  pollutant  charges  (NOx,  SO₂,  PM₂.₅)  applied  to 
large industrial emitters under integrated permits, 
could 
complementing 
increase  revenue  by  EUR 43  million  by  2030, 
double  the  current  level  (332).  Some  Italian  cities 

regulatory 

standards 

(328) European  Commission:  Directorate-General  for  Environment, 
IEEP,  Green  taxation  and  other  economic  instruments  – 
Internalising  environmental  costs  to  make  the  polluter  pay. 
pp. 32-33, Table 3, 2021, Link. 

(329) EEA,  European  City  air  quality  viewer,  Link;  cities  are  ranked 
by default from the cleanest to the most polluted city, based 
on  the  risk  of  mortality  associated  with  long-term  exposure 
to PM2.5, NO2 and O3 in the years 2023 and 2024, assuming 
that  the  total  attributable  risk  for  exposure  to  several 
pollutants is the sum of the attributable risk per pollutant. 

(330) Piano  di  azione  nazionale  per  il miglioramento  della qualità 

dell’aria 2025-2027, Link; Official Journal, Link. 

(331) Fondo  per 

il  finanziamento  di  specifiche  strategie  di 
intervento  volte  al  miglioramento  della  qualità  dell'aria 
nell'area della pianura padana. 

(332) European  Commission:  Directorate-General  for  Environment, 
Camboni, M., Markandya, A., Tyrer, D., Goonesekera, S.  et al., 
Greening  the  European  Semester  –  Resource  and  pollution 
taxes. Annex 6, Country factsheets,  2026, Table 71, p.232, 
Link. 

90 

(Milan,  Bologna  and  Palermo)  operate  congestion 
charging, which reduces air pollution. 

human 

weighed 

Water  pollution  from  industry  is  another 
critical  challenge.  Italy  has  the  highest  level  of 
pollutant  releases  into  water  in  the  EU,  with 
1.92 kg 
toxicity 
by 
factors/EUR billion  GVA  in  2022  (EU  average: 
0.86).  However,  it  has  achieved  a  30%  reduction 
between 2010 and 2023 in industrial heavy metal 
releases (Cd, Hg, Ni,  Pb), a 46% reduction in total 
organic carbon emissions, and a 43% reduction in 
total  phosphorus  as  reported  under  the  Industrial 
Emissions  Directive  (333).  A  national  phosphorus 
platform has been established(334). Water pollution 
by  Italian  industry  imposes  direct  and  indirect 
costs  of  EUR 3  billion  a  year,  not  yet  sufficiently 
borne by the polluters (335).  

As  of  January  2026,  the  European  quality 
standards  for  per-  and  polyfluoroalkyl 
substances  (PFAS)  in  drinking  water  applies, 
ensuring  harmonised  reporting  across  the  EU  of 
PFAS  monitoring  data.  PFAS  are  a  concern  across 
Italy (336)  with over 2 700 contaminated sites and 
2.5% of the population affected (337). Italy has set 
up  a  national  fund  for  monitoring,  study  and 
research  into  PFAS  pollution  with  a  budget  of 
EUR 0.5  million  in  2025  and  EUR 1  million  a  year 
in 2026 and in 2027 (338). 

In terms of governance, Italy has established 
essential technical performance levels for the 
National  System of Environmental  Protection  (339), 
covering different types of pollution but it has not 

(333) EEA,  Water  pollutant  releases  changes  from  2010  to  2022 

for the EU Member States, 2024, Link. 

(334) Italian Phosphorus Platform, Link.  

(335) European  Commission:  Directorate-General  for  Environment, 
IEEP,  Green  taxation  and  other  economic  instruments  – 
Internalising  environmental  costs  to  make  the  polluter  pay, 
2021, p.35, Table 5, Link. 

(336) ISPRA, PFAS – Inquinamento da sostanze perfluoroalchiliche 

nelle acque, Link.  

(337) European  Commission:  Directorate-General  for  Environment, 
Ricardo,  Trinomics  and  WSP, The  cost  of  PFAS  pollution  for 
our society – Final report, 2026, Table 3-9 p.58 & Table 2.1, 
p.14, Link. 

(338) Reply to Semester questionnaire (6.2.2026). 

(339) ISPRA,  Sistema  Nazionale  di  Protezione  Ambientale  (SNPA), 
2019,  Livelli essenziali delle Prestazioni Tecniche Ambientali 
(LEPTA), Link; Law 132/2016, 28.6.2016, Article 9, Link. 

 
 
 
Table A8.1:  Key clean industry and climate mitigation indicators: Italy 

Source:  Industry  decarbonisation:  All  data  are  from  Eurostat;  data  following the  UNFCCC  Common  Reporting Format  (CRF)  are 
from  the  European  Environment  Agency  (EEA),  republished  by  Eurostat.  (1)  Sectors  covered:  all  divisions  of  section  C  - 
Manufacturing - of the NACE Rev. 2 statistical classification of economic activities, except C19 (manufacture of coke and refined 
petroleum products). (2) GHG emissions as per UNFCCC Common Reporting Framework (CRF) categories 1.A.2 - fuel combustion in 
manufacturing  in  industries  and  construction  (that  broadly  correspond  to  the  broadly  correspond  to  the  NACE  sections  C  - 
Manufacturing  and  E  -  Construction,  excluding  C-19),  and  CRF2  -  industrial  processes  and  product  use.  The  figures  shows  the 
emissions  in  the  1.A.2  category  as  a  share  of  the  sum  of  CRF1.A.2.  and  CRF2  emissions.  (3)  Sectors  covered:  CRF  1.A.2  as 
described  above.  Gross  value  added  (GVA)  data  in  the  denominator  aligned  in  sectoral  coverage,  in  2020  prices.  (4)  Sectors 
covered:  NACE  section  C  excluding C19.  (5)  Nominator:  NACE  divisions  C17, 20, 23, 24;  denominator:  NACE  section  C  excluding 
C19 (see above). (6) GVA (denominator) in 2020 prices. Reduction of effort sharing emissions: Data source: European Environment 
Agency, greenhouse gas data viewer; European Commission, Climate Action Progress Report, 2025. For details, see the footnote in 
the  "Reduction  of  effort  sharing  emissions"  section.  Sustainable  road  transport:  (7)  Source:  Eurostat;  (8)  Source:  European 
Alternative  Fuels  Observatory;  (9)  Source:  Eurostat.  For  all  climate  mitigation  indicators,  the  trend  arrows  compare  the  latest 
available  data  (year  t)  with  the  data  four  years  earlier  (t-4).  Sustainable  industry:  Bioeconomy  value  added,  employment  and 
productivity:  JRC,  Developments  of  Economic  Growth  and  Employment  in  Bioeconomy  Sectors  across  the  EU.  Bioeconomy  R&D 
business  expenditure:  JRC,  Business  expenditure  in  Research  and  Development  (R&D)  in  the  EU  bioeconomy.  Damage  cost  for 
industrial pollution: EEA, The costs to health and the environment from industrial air pollution in Europe, 2024. Water industrial 
pollutants  releases:  EEA,  Industrial  releases  of  pollutants  to  water  and  economic  activity  in  the  EU-27,  2024.  Water  chemical 
status: WISE, Surface water bodies: Chemical status, 2024 and WISE Groundwater bodies: chemical status, 2024. Other indicators: 
Eurostat.  For  circular  economy  indicators,  the  trend  arrows  compare  the  latest  available  data  (year  t)  with  the  data  two  years 
earlier (t-2). 

yet  been  fully  implemented  as  an  implementing 
decree is pending. 

91 

Climate mitigationTrendIndustry decarbonisation201820192020202120222023202420182023GHG emissions intensity of manufacturing production, g/€ (1)285266279279262245244330-Share of energy-related emissions in industrial GHG emissions (2)65.164.365.068.069.669.1-55.557.9Energy-related GHG emissions intensity of manufacturing and construction, g/€ (3)194.0178.5189.4196.3193.2178.9-203.9163.0Share of electricity and renewables in final energy consumption in manufacturing, % (4)42.142.944.141.442.442.842.942.843.9Energy intensity of manufacturing, GWh/€ (4)1.011.011.131.040.940.900.901.271.05Share of energy-intensive industries in manufacturing production, % in GVA (5)14.1813.7514.3615.0514.9014.31---GHG emissions intensity of production in sector [...], g/€ (6)- paper and paper products (NACE C17) 851          801          842                 870            861                  770           -722             619            - chemicals and chemical products (NACE C20) 1,274        1,075       1,094              1,127         1,433                1,179         1,082          --- other non-metallic mineral products (NACE C23) 2,229        2,164       2,285              1,852         1,831                1,956         -2,495           2,352          - basic metals (NACE C24) 1,728        1,683       1,545              2,199         2,111                2,041         -2,842           3,099          Reduction of effort sharing emissions201820192020202120222023202420182023GHG emission reductions relative to base year, % -17.9-19.4-21.3-21.9- domestic road transport-18.1-17.2-32.0-19.4-15.1-15.0-13.7-1.4-5.6- buildings-13.7-16.2-17.8-15.0-24.4-28.7-27.9-20.3-33.520052021202220232024TargetWEMWAMEffort sharing: GHG emissions, Mt; target, gap, %343.1281.7276.4269.9267.8-43.7%-30.3%-40.5%Sustainable road transport2018201920202021202220232024202520182021New zero-emission vehicles, electricity motor, % (7)0.270.542.154.553.674.164.211.038.96Number of publicly accessible AC/DC charging points (8)--115642136530855411135818970039446956n/aShare of electrified railways, % of total (9)71.6271.6171.8972.2472.4072.5172.7455.4756.49Sustainable industryTrendEU-27Circular economy transition20182019202020212022202320242018latest dataMaterial footprint, tonnes per person10.910.49.410.911.29.910.114.813.7Circular material use rate, %18.3          18.7         20.1                19.3           20.2                  21.1           21.611.612.2Resource productivity, €/kg3.5            3.6           3.5                  3.5             3.8                    4.4             4.52.13.0Employees in circular economy2.1            2.12.2                  2.3             2.0                    2.0             -2.12.0Patents in circular economy21.9549.3         57.8                37.6           12.312.0Recycling rate            49.8           51.4                  51.4             51.9                   53.3            50.8 :46.4048.1Plastic recyling 44%45%44%48%47%49%-41%42%Construction and demolition waste (CDW) recovery 98-988889Bioeconomy industry 2018201920202021202220232024CAGR 2018-202320182023Value added, million EUR91,24993,44788,63897,770107,851115,810-4.1%642,438863,436Employment, total number of people employed1,941,3481,942,2161,908,3691,906,8151,918,8151,934,543--0.1%17,649,04017,085,642ProductivityValued added per worker, thousand EUR47.048.146.451.356.259.9-4.1%36.450.5Valued added per worker, % of national average74.876.077.178.280.181.1--62.270.7R&D business expenditureTotal bioeconomy (biomass producing and converting sectors)1,3841,5371,5161,4891,5481,5612.0%15,67223,335Total R&D business expenditure15,93416,58915,46715,64516,27017,156-1.2%196,587259,525Zero pollution industry201820192020202120222023202420182021Damage cost for industrial pollution35.432.731.732.0---414.9352.7Water industrial pollutants releases 2021change (2010)2021change (2010)2021change (2010)2021change (2010)75,735      -30%23,700,918      -29%20,725,082       -46%2,553,488    -43% Water chemical statusGood5,835              Good (%)0.8                    Poor1228.0Poor (%)16%EUTOCPhosporusItalyItalyCd, Hg, Ni, Pbnitrogen 
 
  
 
ANNEX 9: AFFORDABLE ENERGY TRANSITION 

in 

is 

EU 

on 

above 

average 

electricity 

burden 
undermining 
affordability  and  preventing  accurate  price 
signals  for  electrification.  In  the  first  half  of 
2025,  household  electricity  prices 
Italy 
increased  compared  with  the  previous  year, 
reaching EUR 0.329/kWh (the fourth highest in the 
the  EU  average. 
EU)  and  remaining  above 
increased, 
Similarly,  household  gas  prices 
at 
the 
remaining 
EUR 0.124/kWh.  The  share  of  industrial  electricity 
demand in overall demand in Italy is 42.65% (340). 
Retail  electricity  prices  for  industrial  consumers 
(EUR 203/MWh)  also  increased,  remaining  well 
above  the  EU  average  (EUR 164/MWh)  and  the 
third highest in the EU,  while industrial gas prices 
also  increased  but  were  in  line  with  the  EU 
average.  While  wholesale  costs  account  for  61% 
of  the  industrial  electricity  price,  network  costs, 
carbon  costs,  and  taxes  represent  10%,  11%  and 
18%  respectively  of  electricity  bills.  Nevertheless, 
final  energy  prices in  Italy  during  the  first  half  of 
2025 remained imbalanced,  partly due to a fiscal 
burden 
towards 
electricity. For large businesses, electricity was 3.7 
times more expensive than gas in the first half of 
2025,  with  taxes  and  levies  (excluding  VAT) 
accounting for 18% of electricity bills and only 3% 
of gas bills. By contrast, for household consumers, 
taxes  and  levies  had  a  slight  positive  balancing 
effect  on  the  electricity-to-gas  price  ratio,  which 
would have increased from 2.7 to 2.8 if taxes and 
levies  were  excluded.  This  was  the  case  despite 
taxes  being  skewed  towards  electricity  whereby 
taxes  and  levies  combined  represented  nearly 
30% of electricity bills as gas bills (341). 

disproportionately 

skewed 

in 

by 

reducing 

including 

the  electricity  grid. 

This  annex  outlines  the  progress  made  and 
the  ongoing  challenges  faced  in  enhancing 
energy  affordability,  while  advancing  the 
transition  to  net  zero. 
It  reflects  the 
implementation  of  past  energy-related 
Country-Specific  Recommendations 
(CSRs) 
and  notably  the  2025  CSR  which  called  on 
Italy 
to  accelerate  electrification  and 
intensify  its  efforts  to  deploy  renewable 
energy, 
the 
fragmentation  of  its  permitting  process  and 
investing 
The 
decarbonisation  of  the  Italian  energy  system  is 
progressing,  but  challenges  persist.  Fossil  fuels 
still  account  for  a  large  share  of  total  energy 
imports,  despite  the  major  potential  represented 
by renewable energy installations. Electricity prices 
remain  high  as  gas  price  traditionally  sets  the 
marginal  wholesale price of electricity (more than 
60%  of  the  price).  Italy  has  been  working  to 
increase  its  grid  interconnection  capacity  and  has 
delivered  non-fossil 
flexibility  solutions,  e.g. 
through its successful procurement mechanism for 
energy storage capacity. Renewables play a pivotal 
role in electricity generation in Italy, however there 
is scope to improve their integration into the grid. 
Italy has already taken steps in this regard, e.g. by 
preparing  a  unified  regulatory  framework  for 
renewable  energy  (the  ‘Single  Text’),  setting  up  a 
single  digital  platform  for  renewable  energy 
permitting  (the  SUER  platform)  (Reform  1,  in 
Mission 7 of the National Recovery and Resilience 
Plan),  setting  up  the  FER-X  renewables  support 
scheme,  and  adopting 
to 
establish  a  power  purchase  agreement  (PPA) 
dedicated  market  (Reform  4,  in  Mission  7  of  the 
National  Recovery  and  Resilience  Plan).  The  trend 
in positive energy efficiency initiatives has slowed 
over  the  past  year.  A  new  future-proof  support 
framework for energy efficiency, including for the 
energy  performance  of  buildings,  is  needed  and 
must be clear in order to give certainty to both the 
banking  and  industrial  sectors.  As  shown  during 
the energy crisis, Italy has a strong record when it 
comes to diversifying its energy supply. 

legislation  aiming 

Energy prices and costs 

Despite  continued  government  support  to 
help lower final energy bills, retail household 
energy prices in Italy have risen since 2024, 
while  the  disproportionately  higher  tax 

(340) Industrial electricity demand =124.8 TWh; overall 

demand=292.7 TWh, source: official statistics 2024. 

(341) Analysis based on S1 2025 Eurostat data. 

92 

 
 
 
 
 
Graph A9.1: Electricity and gas prices for 
household and non-household consumers, first 
half of 2025 

(i) For household consumers, the consumption band is DC for 
electricity and D2 for gas. 
(ii) For non-household consumers, the consumption band is ID 
for electricity and I4 for gas. VAT and recoverable charges are 
not displayed for non-household consumers as these are 
typically recovered by businesses. This also applies to the ‘% 
of taxes and levies’, which is shown excluding VAT and 
recoverable charges for non-household consumers. 
(iii) ‘Without taxes and levies’ indicates the retail price 
excluding all taxes and levies. It always includes the 
energy/supply and network cost components, which are not 
disaggregated in Eurostat’s six-monthly price dataset. 
Source: Eurostat 

Due  to  Italy’s  dependence  on  costly  natural 
gas for electricity  generation and its limited 
non-fossil  flexibility  and 
interconnection 
capacity,  its  average  wholesale  electricity 
price  was  EUR 116/MWh  in  2025 (342)  (vs  EU 
average  of  EUR 85/MWh),  the  highest  in  the 
EU. Fossil fuels continued to account for 52.3% of 
electricity  generation  in  Italy  throughout  the  year 
(the fifth largest share of fossil fuels in a country’s 
electricity  mix 
in  the  EU),  maintaining  their 
structural  role  as  the  dominant  marginal  price-
setting  technology  and  keeping  costs  elevated 
(88% of price setting hours for 58% of electricity 
generation).  Average  day-ahead  electricity  prices 
in  Italy  increased  by  12%  in  2025  amid  rising 
limited 
natural  gas  procurement  costs  and 
renewable output. Short-run marginal costs (343) of 
natural  gas  in  the  EU  rose  from  EUR 96/MWh  in 
2024  to  nearly  EUR 103/MWh  in  2025.  Although 
daytime prices have fallen in recent years owing to 

(342) Ember. 

(343) Short Run Marginal Costs (SRMC) are the sum of the variable 
costs  associated  with  producing  electricity  using  hard  coal 
and  fossil  gas.  These  are  fuel  costs,  carbon  costs  and 
variable  operating  and  maintenance  costs.  Estimates  are 
provided by Ember. 

Italy 

neighbouring  markets, 

the  growing  incorporation  of  solar  power  in  Italy 
remains 
and 
vulnerable  to  severe  price  spikes  during  peak-
demand hours. This is because falling solar output 
in  the  evening  and  early  morning,  combined  with 
limited  non-fossil  flexibility  often  means  that 
thermal  plants  must  significantly 
ramp  up 
generation to cover the supply–demand gap. Price 
spreads (344)  in  Italy  averaged  EUR 46/MWh  in 
2025, down 36% from 2024. 

Graph A9.2: Low-carbon electricity generation vs. 
electricity wholesale prices, 2025 

Unavailable data for Cyprus and Malta. Wholesale price is 
given as average of day-ahead electricity prices over 2025. 
EU-27 average is calculated as consumption-weighted. EU 
low-carbon share is calculated out of total EU electricity 
generation. Low-carbon share by country is calculated out of 
total public electricity generation. Low-carbon includes 
renewables and nuclear. 
Source: Eurostat 

Flexibility and electricity grids 

capacity. 

interconnection 

A number of projects are ongoing to increase 
Italy’s 
Italy's 
electricity  interconnection  rate  stands  at 
5,13% and is one of  the  lowest in  the  EU  — 
below  the  15%  target  and  well  below  the 
EU’s top performers such as the Netherlands 
Italy’s 
(over  25%)  and  Nordic  countries. 
electricity transmission grid is interconnected with 
neighbouring  countries  through  30  cross-border 
power  lines.  Italy  is  a  significant  net  electricity 
importer  (18%  of  own  consumption).  It  exports 
some  volumes  to  Malta  but  imports  significant 
volumes  from  Switzerland  and  France.  In  2025, 

(344) Spread  refers  to  the  difference  between  the  highest  and 
lowest hourly day-ahead electricity prices in a single day. 

93 

 
 
 
 
 
 
56.71 GWh  of  electricity  was  exchanged  through 
cross-border interconnections, of which 51.80 GWh 
were  imports  and  4.91 GWh  were  exports (345), 
Core and Greece-Italy capacity calculation regions 
(CCRs).  Member  States  must  ensure  that  a 
technical  cross-border 
minimum  of  70%  of 
capacity  is  available  for  trading.  The  use  of 
allocation 
import 
possibilities  into  Italy  North  from  neighbouring 
countries.  

constraints 

limited 

has 

A  derogation  allowing  lower  levels  of  trade 
for  a  limited  time,  if  needed,  has  been 
granted  to  the  Italian  transmission  system 
operator,  Terna,  for  operational  security  reasons. 
Regarding  the  Greece-Italy  CCR,  the  impact  of 
exchanges  with  non-EU  countries  is  limited,  as  is 
the  impact  of  exchanges  across  other  borders 
within the region. The permit-granting process for 
cross-border 
Italy 
in 
infrastructure  projects 
reforms 
complex  despite  EU-level 
remains 
intended  to  accelerate  permitting.  The  multi-
layered approval  process covers national,  regional 
and  local  authorities  and  can  last  from  3  to  5 
years  due  to  Italy’s  fragmented  approach  to 
environmental 
public 
assessments 
consultations,  and  a  lack  of  coordination  with 
neighbouring countries under Projects of Common 
Interest/Projects of Mutual Interest frameworks.  

and 

Terna  has  plans  to 
invest  more  than 
EUR 25 billion  in  Italy’s  power  grid  by  2034, 
with the aim of integrating data centres and 
around  70 GW  of  renewables,  but  is  faced 
with  the  problem  of  grid  saturation,  with 
more  than  350 GW  of  pending  connection 
requests.  Delays  continue  to  be  caused  by 
permitting  bottlenecks  and  regional  congestion, 
limiting cross-border capacity in 2026 (e.g. France-
Italy decreased by 54% to 457 MW).  

Nevertheless,  on  20 February  2026,  Italy 
adopted  Decree-Law  No 21/2026  which  is 
intended  to  directly  target  these  grid 
bottlenecks. 
streamlines 
The  Decree-Law 
permitting  by  slashing  the  timelines  from  24-
36 months  to  under  12 months  for  strategic 
transmission  projects  by  fast-tracking  strategic 
environmental  assessments.  In  2024,  curtailment 
of  renewable  energy  reached  around  338 GWh 

(mostly  solar  energy  in  the  south),  the  equivalent 
of  around  1-2%  of  total  renewables  output. 
Projections  for  2025  suggest  500-800 GWh  of 
curtailment  against  a  background  of  more  than 
7 GW  of  new  capacity,  with  peaks  during  low-
demand/high-production  periods  (e.g.  on  the main 
islands).  Remedial  actions  cost  EUR 1.2-1.5  billion 
in  2024-2025,  caused by thermal  plants  ramping 
up generation to balance renewables.  

the 

grid 

also 

next 

requires 

integrate 

renewables, 

to  be 
renewed 
system  operators 

Recent financial reports from Terna, indicate 
significant  investment  and  strong  financial 
performance,  which  align  with  the  range  of 
€500–700  million  in  quarterly  capital  expenditure 
and  earnings,  rather  than  annually.  The  electricity 
distribution 
substantial 
investment,  estimated  at  EUR 6 billion  annually 
to  modernising 
over 
decade, 
infrastructure, 
increase 
digitalisation, and boost  resilience against climate 
risks (346). 
Italy’s  2025  Budget  Law  allows 
for  electricity 
concessions 
distribution 
the 
through 
submission  of  ‘extraordinary  investment  plans’ 
rather  than  competitive  tenders  by  area  as 
envisaged  by  Legislative  Decree  No  79/1999. 
Where  such  extensions  are  the  only  viable  option 
for carrying out urgent investments, they must be 
the 
essential,  cost-efficient  and  go  beyond 
planned  investments  or  publicly  subsidised  works. 
Moreover,  the  extension  must  be  limited  to  the 
time  needed  to  carry  out  the  works.  Given  the 
changing  role  of  distribution  system  operators  in 
the  context  of  growing  prosumerism,  it  could  be 
justified to increase the monitoring of them and to 
strengthen  their  independence  in  terms  of  their 
legal  form,  organisational  structure,  and decision-
making  processes,  from  activities  unrelated  to 
distribution.  

Italy  has  taken  steps  to  support  non-fossil 
flexibility.  Currently  power-storage  capacity  is 
around 9.04 GW of operational but is hampered by 
a  lack  of  information  on  ancillary  services  to 
develop a storage business plan that is not based 
on  the  energy  market  alone.  Recent  reforms  to 
unlock  non-fossil  flexibility  potential,  include,  on 
the  one  hand,  MACSE  storage  auctions  (first 
awards  in  2025  for  10 GWh  of  new  batteries  for 
the  2028  delivery  period)  to  support  renewables 
integration and ensure system stability and, on the 

(345) 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. 

(346) ENEL-TEHA study, 2024, The role of electricity distribution for 

a safe energy transition, Link. 

94 

 
 
 
("Testo 

the  TIDE 

other  hand, 
Integrato  del 
Dispacciamento  Elettrico")  dispatching  framework 
(effective since January 2025) to promote demand 
response in the provision of ancillary services. This 
energy  storage  capacity  procurement  mechanism 
is  intended  to  support  the  installation  of  the 
necessary  power-storage  capacity  to  achieve  the 
country’s  renewable  energy  target  of  50 GWh 
storage  by  2030.  The  new  regulatory  framework 
on  dispatching  formally  entered  into  force  on 
1 January  2025,  including  new  rules  on  the 
contribution  of  demand  response  in  the  provision 
of ancillary services.  

A consolidation phase for the new framework 
is  scheduled  from  1  February  2026  until 
2028,  during  which  the  rules  will  be 
progressively  developed  and  fine-tuned. 
Despite  the  improvements  made  by  the  TIDE 
reform,  participation  of  aggregators  on 
the 
balancing  markets  and  services  may  still  be 
restricted  due 
requirements. 
to  participation 
Moreover, 
further  efforts  are  still  needed 
concerning  the  participation  of  aggregators  on  all 
Interest  of  utility-scale 
wholesale  markets. 
resources  in  the  Italian  MACSE  has  been  steadily 
increasing  over  time,  with  an  additional  auction 
scheduled  for  2026  targeting  batteries  and 
pumped hydro, building on the success of the first 
round  and  in  perspective  also  new  auctions  for 
pumped hydro. 

has 

strengthened 

Italy 
consumer 
empowerment  on  the  energy  markets  while 
stepping  up  electrification.  Dynamic/hourly 
contracts  for  households  have  grown  to  around 
15-20%  of  the  market  (up  from  less  than  5%  in 
2023),  driven  by  wholesale  price  exposure  and 
optimisation  apps;  fixed-price  deals,  which  ensure 
price stability, still dominate at 70-75%, according 
to  data  trends 
identified  by  the  Regulatory 
Authority  for  Energy,  Networks  and  Environment 
(ARERA).  Around  1.2-1.5 million  households  (12-
15%) are prosumers with rooftop photovoltaic and 
storage systems, boosted by renewable incentives 
Self-consumption 
communities. 
and 
exceeds  50% 
rooftop 
installed 
recently 
in 
photovoltaic  systems  (primarily  since  2023).  Over 
95%  of  households  have  2G  smart  meters  (‘e-
distribuzione’ rollout completed in 2024), enabling 
real-time data, although full remote reading/active 
demand  is  still  at  80-85%,  pending  upgrades  to 
second-generation smart meters. 

energy 

In  2024,  electricity  accounted  for  22.7%  of 
Italy’s  final  energy  consumption  (FEC) (347), 
slightly  below  the  EU  average  of  23.4%,  a 
share which has remained largely unchanged 
over  the  last  decade,  partly  due  to  the 
unfavourable  electricity-to-gas  price  ratio 
that  disincentivises  electrification  and  cost-
effective  decarbonisation.  Electricity  accounts 
for  21.1%  of  household  FEC  and  40.0%  of 
industrial  FEC  (see  Annex  8).  In  the  transport 
sector,  the  share  of  FEC  accounted  for  by 
electricity remains negligible at 2%. 

Renewables and long-term contracts 

The  difference  between  Italy’s  share  of 
renewables  in  2023  and  its  2030  target  is 
one  of  the  largest  in  the  EU.  This  is  due  to 
Italy’s  ambitious  targets  which  were  revised 
upwards following the adoption of the REPowerEU 
strategy 
(e.g.  63.4%  coverage  of  electricity 
consumption  by  renewables,  requiring  more  than 
70 GW  additional  capacity),  but  also  due  to  slow 
growth  in  renewables  between  2023  and  2025, 
(e.g.  solar  capacity  increased  by  5-7 GW  annually 
although a total of 54 GW was needed, roll-out of 
wind  energy  stalled,  and  grid  permitting  delays 
slowed  the  deployment  of  renewables).  Despite 
impact, 
the 
saturation of the grid (stalling more than 350 GW 
of 
(8-10%) 
exacerbated  this  problem.  A  further  positive 
contribution  came  from  Decree-Law  No 21/2026 
(the  ‘Decreto  Bollette’),  which  amended  Decree-
Law  No 190/2024  by  giving  renewables  and  data 
centres  priority  grid  access  via  provision 
connections  and  allowed  projects  under  1 MW  to 
benefit  from  queue  prioritisation.  It  also  fast-
tracked authorisations for data centres tied to grid 
reinforcements,  thereby  promoting  the  role  of 
prosumers (1.2-1.5 million households). 

‘Single  Text’  having  a  positive 

interconnections 

power) 

and 

In  2025,  renewables  covered  47.7%  of 
electricity  generation  in  Italy,  slightly  above 
the  overall  figure  for  the  EU  of  47% (348). 
Hydropower accounted for 15.8% of the electricity 

(347)CAGR  (compound  annual  growth  rate)  of  0.31%  between 
2015  and  2024  and  minimum/maximum  share  of  22%  and 
23%, respectively (Source: Eurostat).  

(348) Yearly electricity data, Ember. 

95 

 
 
mix,  biomass for 5.9% and solar for 16.6%. Wind 
accounted for 7.9%.  

Graph A9.3: Italy’s installed renewable capacity vs 
electricity generation mix 

Electricity mix is given as net electricity generation (gross 
electricity production minus consumption of power stations’ 
auxiliary services). Electricity produced in pumped hydro 
plants is excluded from total net electricity production, as it 
was previously counted as electricity produced from another 
source. 
“Other” includes renewable municipal waste, solid biofuels, 
liquid biofuels, and biogas. 
Source: IRENA, Eurostat 

Installed  capacity  for  renewables  in  Italy 
represented 78,277 MW in 2025, an increase 
of  9.0%  compared  to  2024  (71,841  MW). 
Installed  capacity  for  wind  energy  grew  to  13.6 
GW  in  2025  (compared  to  13.0  GW  in  2024, 
+4.7%),  whilst  installed  capacity  for  solar  grew 
significantly (+16.2% compared to 2024), reaching 
41.2  GW.  Italy’s  updated  national  energy  and 
climate plan sets a target of 131 GW of renewable 
capacity  by  2030  (including  28 GW  of  wind  and 
79 GW  of  solar),  and  228 TWh  of  renewable 
generation (including 98 TWh (or 43%) from solar 
and  65 TWh  (or  28%)  from  wind).  In  addition, 
Terna  estimates  that  Italy  would  need  8.9 GW 
(71 GWh)  of  energy  storage  (including  pumped-
its  2030 
hydropower) 
storage 
decarbonisation targets. 

to  meet 

The  already  mentioned  ‘Single  Text’  (Testo 
Unico), adopted by way of Legislative Decree 
No 190  of  25  November  2024 (349),  as 
amended 
of 
21 November 2025 (350) is intended to collect, 
compile  and  consolidate  existing  legislation 
and  provisions  on  renewables  deployment 
and  thus  to  supersede  all  previous  related 

by  Decree-Law  No 175 

(349) Legislative decree from 25 November 2024, n. 190, Link. 

(350) Decree law n. 175 from 21 November 2025, Link. 

is 

to 

this 

reform 

includes  extensions 

legislation.  Through 
Italy  has 
harmonised  the  previously  fragmented  permit-
granting  framework  and  has,  at  the  same  time, 
established  a  minimum  number  of  ‘renewable 
acceleration areas’ (as required by the Renewable 
Energy  Directive  III)  and  ‘suitable  areas’  (as 
required by Italian legislation) which are subject to 
faster  permit-granting  procedures  and  which 
regional  authorities  are  only  allowed  ex.  The 
reform,  which 
the 
aforementioned  areas,  is  still  yet  to  be  fully 
implemented  by  the  regional  and  provincial 
authorities.  Moreover,  the  stability  of  the  legal 
framework 
fundamental,  but  has  been 
challenged  by  a  considerable  number  of  disputes 
stemming  from  the  regions.  As  part  of  the  same 
reform under the National Recovery and Resilience 
Plan,  Italy  will  be  setting  up  a  single  digital 
platform,  called  the  SUER,  intended  to  support 
project developers and permit-granting authorities 
with  the  permit-granting  process  and  to  ensure 
interoperability between permit-granting platforms 
at national, regional and local level. It is expected 
to  provide  concrete  benefits  by  simplifying  and 
accelerating  permit-granting  processes.  However, 
the  Single  Text  only  allows  photovoltaic 
installations  on  agricultural  land  in  specific  and 
very 
requires  such 
to  use  elevated  modules.  This 
installations 
restricts the possibilities for photovoltaic systems, 
especially  utility-scale  systems,  and  will  require 
deployment  of  solar  power  to  be  accelerated  if 
Italy  is  to  achieve  the  targets  set  in  its  national 
energy  and  climate  plan.  By  differentiating 
agricultural 
identifying 
degraded  or  unused  agricultural  areas  where 
photovoltaic  systems  could  still  be  installed,  and 
by  granting  more  flexibility  beyond  elevated 
modules  regarding  the  types  of  agricultural 
photovoltaic  systems  which  may  be  used,  this 
would enable faster deployment of solar power. 

limited  cases  and  also 

instance  by 

land,  for 

In  2025 
Italy  carried  out  auctions  of 
photovoltaic  and  wind  capacity  under  the 
transitional  FER-X  support  scheme.  The  result 
was  very  positive  for  photovoltaic 
(7.7 GW 
awarded  with  a  weighted  average  price  of 
EUR 56.825  and  1GW  awarded  under  the  NZIA 
procedure),  while  the  wind  auction  was  heavily 
undersubscribed. Italy is currently working with the 
European Commission to assess the compliance of 
two  further  mechanisms,  the  regime  FER-X  and 
the  FER-Z,  with  State  Aid  rules.  Under  the  regime 
FER-X  new  competitive  procedures  will  be 
launched  in  2026.  Italy  has  not  yet  provided  a 

96 

 
 
 
schedule  for  future  auctions  in  the  coming  years 
on  the  Union  Renewables  Development  Platform. 
Such  information  would  be  very  useful  to  help 
project developers plan for future investments. 

based 

years) 

power 

organised 

(generally  5–10 

By  way  of  Decree  No 152  of  the  Ministry  of 
the  Environment  and  Energy  Security  of  20 
June  2025,  Italy  committed  to  setting  up  a 
purchase 
dedicated 
agreement  (PPA)  market,  to  be  implemented 
by  the  energy  market  operator  GME  and 
overseen  by  the  energy  services  operator 
GSE  (in  accordance  with  reform 4,  mission 7 
of  the  NPRR).  This  market  will  be  integrated 
within  the  existing  forward  electricity  market  and 
is  designed  specifically  for  long-term  renewable 
on 
PPAs 
standardised  terms.  The  aforementioned  Decree 
also  introduced  a  ‘guarantee  of  last  resort’  to  be 
provided  by  GSE,  whereby  if  one  counterparty 
defaults on a PPA traded on the organised market, 
GSE  will  be  able  to  step  in  and  take  over  the 
contract, settling at a regulated ‘reserve price’. This 
to  reduce  credit  and 
mechanism 
counterparty  risk,  particularly  for  smaller  buyers 
and  project  special  purpose  vehicles,  and  directly 
adheres to the EU’s electricity market design rules 
that  call  on  Member  States  to  remove  barriers  to 
PPAs,  such  as  a  lack  of  guarantees  or  high 
collateral  requirements.  Regulatory  changes  in 
2025  (including  resolutions  issued  by  ARERA,  as 
the  sectoral  analyses)  have 
mentioned 
tightened  the  rules  on  grid  access,  metering  and 
congestion  management  to  better  accommodate 
fluctuating levels of renewable generation, making 
to  connect  and 
PPA-backed  projects  easier 
operate.  Italy  also  aligned  its  PPA  measures  with 
its  National  Energy  and  Climate  Plan,  explicitly 
recognising  PPAs  as  a  key  tool  for  mobilising 
private  capital  to  create  new  renewable  capacity 
and  for  reducing  exposure  to  fossil  fuel  price 
volatility. 

is  meant 

in 

increased  support  for 
Italy  significantly 
renewable energy communities (REC) in 2025 
by  expanding  regulation  and 
introducing 
incentives  under  the  recovery  and  resilience 
plan.  The  Decree-Law  No  19/2025  (converted  to 
Law  No  60/2025)  broadened  access  to  RECs  for 
municipalities  of  up 
inhabitants 
(previously  <5 000),  covering  some  7 750  towns 
and  unlocking  incentives  for  a  greater  number  of 
urban  areas.  Updated  ministerial  rules  (pending 
the approval of the Court of Auditors in mid-2025) 

to  50 000 

97 

the  NRPP 

raised  advance  payments  for  qualifying  REC 
solar/wind  projects  from  10%  to  40%,  alongside 
non-repayable  grants  covering  up  to  40%  of 
eligible  costs  for  small  plants,  extending  the 
application  deadline  under 
to 
November 2025.  GSE's  updated  operational  rules 
(post  2024)  allow  RECs  to  be  registered  digitally. 
Moreover,  2025  saw 
first  major  REC 
activations under the tariff scheme established by 
Decree  No 414/2023  of  the  Ministry  of  the 
Environment and Energy Security offering support 
for up to 5 GW of capacity by 2027. This built on 
Legislative  Decree  No  199/2021  (transposing  the 
Renewable Energy Directive II) by positioning RECs 
as a decarbonisation tool in view of Italy's 131 GW 
renewable target.  

the 

including 

Self-consumption  in  Italy  grew  rapidly  in 
2025,  driven  by  regulatory  simplification, 
incentives  tied  to  the  NRPP,  and  the  phase-
out  of  net  metering  (‘scambio  sul  posto’), 
which  ended  for  new  requests  in  September 
2025.  ARERA  Resolution  No  727/2022  and  its 
subsequent  updates  have  enabled  ‘virtual’  hourly 
energy  sharing  for  collective  self-consumption 
schemes, 
energy 
communities,  with  GSE  managing  access  and 
incentives.  The  Decree-Law  No  19/2025  (the 
‘Decreto  Bollette‘  2025)  expanded  REC  eligibility 
thereby 
and  streamlined  grid  access 
boosting 
in 
adoption 
industrial/commercial settings as well as individual 
rooftop  solar  installations.  By  mid-2025,  over 
7 750 municipalities qualified for REC-linked self-
consumption,  setting  a  path  to  achieve  the 
131 GW  renewables  target  under  the  National 
Energy and Climate Plan and reducing grid strain. 

renewable 

rules, 

RECs 

the 

of 

Energy efficiency 

Italy made no significant progress on energy 
efficiency  in  2024,  reversing  the  positive 
trend  seen  notably  in  the  residential  and 
services sector since 2019. In 2024, Italy’s final 
(FEC)  decreased  slightly 
energy  consumption 
compared  with  2023, 
reaching  108.9 Mtoe, 
continuing  the  positive  but  declining  trend  seen 
since  2019.  Italy’s  FEC  in  2024  was  beyond  the 
expected 
trajectory 
contribution by 2030. 

to  meet 

needed 

its 

 
While  FEC  has  decreased  since  2019  in 
industry  (by  8.2%),  in  the  residential  sector 
(by  16.5%,  mostly  driven  by  milder 
temperatures)  and  in  services  (by  5.5%),  it 
in  the 
increased  over  the  same  period 
transport  sector  (by  6.2%).  At  the  same  time, 
according  to  data  from  2024,  FEC 
in  the 
residential  sector  and  in  services  saw  an  upturn 
following  a  sustained  decrease  over  the  period 
2019-2023  thanks  to  energy  efficiency  policy 
measures  and  financing  deployed  by  Italy.  This 
trend  can  be  attributed  to  the  phasing  out  of  the 
post-COVID-19  support  framework  for  energy 
efficiency  improvements  and  the  clean  energy 
transition under the NRPP which has not yet been 
followed  up  with  a  new  future-proof  support 
framework  for  energy  efficiency.  High  upfront 
costs,  financing  gaps,  and  slow  uptake  in  non-
residential sectors, alongside delays in transposing 
the  Energy  Performance  of  Buildings  Directive, 
have  compounded  the  situation.  While  Italy’s 
‘Transition 5.0’ tax credit scheme offers support to 
industry  for  investing  in  renewables,  renewed 
incentives  are  necessary  to  pick  up  the  weak 
momentum  in  this  field.  In  terms  of  new  policies 
and  financing,  in  September  2025  Italy  updated 
the  framework  for  its  national  energy  efficiency 
‘white  certificates’)  scheme, 
certificates 
extending it to cover the entire 2025-2030 period 
and  establishing  energy  savings  obligations  for 
energy  distributors  with  more 
than  50 000 
customers.  

(or 

Given that buildings are responsible for 37% 
of energy use in Italy they play an important 
role  in  improving  energy  efficiency.  Italy  is 
therefore  encouraged  to  submit  its  draft  national 
building renovation plan pursuant to the recast of 
the  Energy  Performance  of  Buildings  Directive  to 
ensure  a  clear  and  predictable  pathway  towards 
an  energy  efficient  and  decarbonised  building 
stock. 

Heating and cooling account for 79% (351) of 
Italy’s  residential  FEC,  with  renewables 
supplying  22% (352)  of  the  total  energy  used 
for  heating  and  cooling  across  all  sectors. 

Approximately  348 000  heat  pumps  were  sold  in 
2024, a decrease of 4% compared to the previous 
year,  taking  Italy’s  total  stock  of  heat  pumps  to 
around 4.2 million (353). 

in  2025.  This 

Italy  reported  153  eco-design  and  energy 
is  an 
labelling  checks 
improvement  on 
is 
considered  insufficient  relative  to  the  size  of  the 
country  and  overall  levels  of  non-compliance  in 
the EU. 

the  previous  year  but 

Italy  made  targeted  progress  on  energy 
poverty  through  private-public  partnerships 
and  by  extending  EU-funded  efficiency 
programmes.  Banco  dell'  Energia  organised  30 
projects  in  2025,  backed  by  EUR 13 million  in 
funding,  aimed  at  supporting  13 000  vulnerable 
persons,  by  providing  help  with  paying  bills  and 
replacing old appliances, and education on energy 
matters.  Under  Italy’s  Recovery  and  Resilience 
Plan,  EUR 2.2 billion  was  allocated  to  energy 
communities  and  self-consumption 
in  small 
municipalities,  with 
the  aim  of  generating 
2 500 GWh of community-led renewables by 2027 
to  ease  energy  poverty  in  underserved  areas. 
Incentives,  including  a  EUR 100 million  fund  for 
third-sector (354)  upgrades,  helped 
low-income 
retrofitting 
groups  access  energy  efficiency 
measures,  despite  earlier  credit  transfer  cuts. 
There  is  no  unified  national  strategy  for  these 
measures,  although  they  leverage  opportunities 
under  the  EU  Social  Climate  Fund  to  achieve 
scalability. 

Security of supply and diversification 

reliance  on  Russian  gas  has 
Italy’s 
significantly  decreased  since  2021,  with 
minimal volumes (less than 3% of its needs) 
Italy 
imported 
received  only  one  Russian  LNG  cargo  and  no 
pipeline gas following the end of Russian gas 
Italy’s 
transit 

through  Ukraine.  Key 

in  2024,  while 

in  2025 

to 

(351) Eurostat, 2025. 

https://data.europa.eu/data/datasets/uvygjkxev6pywqwbgmg
wyg?locale=en. 

(352) Eurostat, 2025. 

https://ec.europa.eu/eurostat/databrowser/product/view/SDG_
07_40?lang=en&category=sdg.sdg_07 

(353) European Heat Pump Association (EHPA), 2025. 

https://ehpa.org/market-data/. 

(354) The third sector includes non-profit organisations, 

cooperatives, social enterprises, foundations, and voluntary 
associations (e.g. charities, community groups) that pursue 
social goals rather than profit. 

98 

 
 
 
diversification strategy has been the phase-out of 
Russian  gas,  which  will  be  achieved  by  2025 
through  increased  imports  from  other  countries, 
primarily  Algeria,  as  well  as  Azerbaijan,  and  LNG 
imports  from  Qatar  and  the  US.  Domestic  gas 
production  stayed  roughly  constant  at  around  3-
4 bcm/y and accounted for a minimal share of the 
total supply against a backdrop of falling demand 
(demand  reduced  to  19%  over  the  period  2021-
2024 (355).  

routes 

To  support  its  diversification  efforts,  Italy 
has increased LNG imports and explored new 
pipeline 
than  pursuing 
rather 
upstream  growth.  The  floating  storage  and 
regasification  units 
in  Piombino  will 
(FSRUs) 
remain  in  operation  until  mid-2026,  with  plans  to 
relocate them to Savona (Liguria) by October 2026 
at  the  earliest,  while  the  FSRU  in  Ravenna  began 
operating  in  January 2026.  The  FSRUs  have  a 
combined  capacity  of  10 bcm/y.  Italy  successfully 
navigated  the  end  of  Russian  gas  transit  via 
Ukraine,  which  ceased  on  1 January  2025. 
Additionally, 
its  gas  demand  by 
approximately 18-20% between August 2022 and 
November  2025  thanks  to  sustained  efficiency 
measures,  milder  weather,  growth  in  renewables 
and cutbacks by industry.  

it  reduced 

Italy’s 

total  energy 

In  2024,  fossil  fuels  accounted  for  around 
80%  of 
supply. 
Specifically,  natural  gas  accounted  for  roughly 
39% of Italy’s energy mix, while oil accounted for 
34%.  By  contrast,  renewables  accounted  for  less 
than  20%  of  Italy’s  total  energy  mix  (or  gross 
inland  consumption).  Italy  is  advancing  legislative 
initiatives  to  assess  the  potential  relaunch  of  a 
national  nuclear  programme,  focusing  on  Small 
Modular 
advanced 
technologies.  This  shift  leverages  Italy’s  strong 
industrial  base,  which 
to 
strengthen  the  EU  energy  supply  chain  and 
enhance  domestic manufacturing  capacity  for  the 
net-zero transition. 

is  well-positioned 

Reactors 

(SMRs) 

and 

In  response  to  the  regional  crisis  in  the 
Middle  East,  Italy  has  introduced  temporary 
excise cuts of €0.25/litre on petrol and diesel 
and  €0.12/litre  on  GPL,  alongside  20%  tax 
credits  for  road  transport,  fishing,  and 
agriculture.  Italy  has  also  delayed  the  coal 
Italy 
phase-out 

from  2026 

to  2038. 

(355) ARERA Annual Report 2025: Summary_2025.pdf.  

99 

contributed  to  the  IEA  collective  action  to  release 
400 million barrels of emergency oil reserves.  

Fossil fuel subsidies 

In 

amid 

2024, 

energy 

Italy  continues  to  operate  high  levels  of 
fossil  fuel  subsidies,  mostly  natural  gas 
consumer  support,  exceeding  its  phase-out 
security 
commitments, 
environmentally 
challenges. 
harmful (356)  fossil  fuel  subsidies  without  a 
comprehensive  phase-out  plan  before  2030 
represented 0.29% (357) of Italy’s GDP (358). Overall, 
natural  gas  subsidies  account  for  the  majority 
(between 
fuel 
of 
subsidies (359).  Additionally,  Italy’s  2023  Effective 
Carbon  Rate (360)  averaged  EUR 100.05  per  tonne 
of CO₂, above the EU weighted mean of EUR 84.80 
(361). 

50-65%) 

fossil 

total 

(356) Explicit fossil fuel subsidies (e.g. direct transfers) and implicit 
fossil  fuel  subsidies  (i.e.  tax  expenditures  linked  to  forgone 
tax  revenues  that  have  an  identifiable  fiscal  impact  for  the 
central  budget)  that  support  fossil  fuel  energy  production, 
transmission and/or consumption.  

(357) European Commission calculation based on Study on energy 
subsidies  and  other  government  interventions  in  the  EU  – 
2025 edition, Enerdata. 

(358) 2024 Gross Domestic Product at market prices, Eurostat. 

(359) How the G7 Can Advance Action on Fossil Fuel Subsidies in 
2025 | International Institute for Sustainable Development. 

(360) 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. 

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

 
 
 
 
ANNEX 10: CLIMATE ADAPTATION, PREPAREDNESS AND ENVIRONMENT 

Italy is one of the EU Member States that is 
the most exposed to climate risks, and action 
to  improve  its  resilience  would  therefore 
help to preserve its competitiveness. In 2025, 
Italy  received  a  CSR  to  address  climate-related 
risks  and  mitigate  their  economic  impact  through 
enhanced  climate  insurance  coverage,  increased 
implementation  of  nature-based  solutions  and 
more  institutional  coordination.  The  CSR  also 
called  for  the  tackling  of  remaining  inefficiencies 
in  water  management  by  reducing  infrastructural 
gaps.  Relevant  progress  was  made  on  all  these 
fronts  in  2025  and  early  2026.  Insurance  for 
extreme  events  has  become  obligatory  for 
companies,  but  marine  storm  surges  are  not 
covered.  An  insurance  protection  gap  against 
natural  disasters  for  households  remains.  Nature-
based  solutions  are  being  increasingly  applied  as 
an  alternative  to  grey  infrastructure.  They  are 
supported  through  EU  financing,  but  there  is  no 
their  potential.  Soil 
national  assessment  of 
consumption  increased  even  faster  in  2024  than 
before  and  a  proposed  national  law  has  been 
blocked in the parliament for over 10 years. There 
are  concerns  regarding  the  quality  of  surface 
water  and  persistent 
in  urban 
infringements 
wastewater 
treatment,  despite  EU  financing. 
Leakage  rates  remain  high  for  water  supply 
networks and reservoirs. A fragmented governance 
structure  in  the  water  sector  results  in  missed 
economies of scale.  

Climate adaptation and preparedness  

related 

policy  measures 

National 
to 
adaptation  and  preparedness  have  improved 
in  recent  years,  but  additional  efforts  are 
still  required  in  Italy.  The  Observatory  on 
Climate  Change  Adaptation  was  created 
in 
December  2025  by  ministerial  decree (362).  The 
identify 
set 
Observatory 
interested parties and sources of financing, as well 
as  measures  to  remove  obstacles  to  adaptation; 
and  ensure  vertical  and  horizontal  coordination, 
involving the regions. These priorities, including the 
improved 
sub-national 
adaptation  planning,  as  well  as  a  consolidated 
investments  for  climate  change 
planning  for 

coordination 

priorities; 

should 

and 

(362)MASE, 
17 December 2025, Link. 

Decreto 

di 

istituzione 

dell'Osservatorio, 

adaptation  are  of  utmost 
importance,  as 
highlighted  also  by  the  National  Adaptation  Plan 
adopted  in  2023.  The  Observatory  also  has  a 
forum  that  involves  stakeholders.  One  important 
achievement in 2026 has been the creation of the 
integrated  monitoring  and  forecasting  system 
supported  by  the  recovery  and  resilience  plan 
(RRP).  This  provides  comprehensive  data  on 
climate-related risks (363). A fund with a budget of 
EUR 350 million  for  2026  has  been  set  up  at  the 
Ministry  of  Economy  and  Finance  to  support 
measures  to  reduce  Italy’s  exposure  to  natural 
risks  and  other  unforeseeable  events (364).  As 
indicated  in  the  2025  report,  several  regions  and 
municipalities  have  approved  their  own  climate 
change  adaptation  strategies  and  plans  and  are 
now  implementing  the  related  measures (365).  The 
share  of  Italy’s  population  covered  by  the  EU 
Covenant of Mayors signatories has been steadily 
increasing and stood at the very high level of 78% 
in  2024  (EU-27: 44%).  64%  of  Italy’s  signatories 
have  submitted  a  sustainable  energy  and  action 
plan (SECAP) for 2030-2050 (366). This indicates a 
high 
Italy’s 
municipalities  to  increase  climate  resilience  and 
adaptation.  However, 
and 
implementation can enhance the impact of climate 
action at the local level. 

commitment  among 

level  of 

further 

action 

is  highly  vulnerable 

Italy  is  strongly  exposed  to  extreme  events 
and 
in  hydrological 
terms,  and  most  of  its  areas  are  at  risk  of 
floods, droughts and heatwaves. Italy is in two 
out  of  three  macro-regions  that  have  been 
identified  as  hotspots  of  climate  risks  most 
affected by climate change – southern Europe and 
low-lying coastal regions (367). In 2024, 94.5% (368) 

(363)MASE,  Il  MASE  lancia  SIM,  infrastruttura  per  la  sicurezza 
ambientale, 11 February 2026, Link. 

(364)Dossier  del  Centro  Studi  della  Camera,  Legge  di  Bilancio, 
Profili  di  interesse  della  VIII  Commissione  Ambiente  A.C.  2750, 
commas 555-558, p. 31, Link. 

(365)Climate Adaptation, Link. 

(366)Covenant of Mayors, Link. 

(367)EEA, 2024, European Climate Risk Assessment, Link.  

(368) In  2024,  Italy's  river  basin  planning  identified  a  total  of 
28 801 km2 (9.5%) of areas at high and very high landslide, 
potentially affecting around 1.3 million people (2.2%). Flood 
hazard areas at medium hydraulic risk cover a total area of 
30 196  km2  (10%),  potentially  affecting  6.8  million  people 
(11.5%).  The  aforementioned  areas  at  high  and  very  high 
landslide hazard, medium probability flood hazard, as well as 
those affected by coastal erosion and avalanches, fall within 

100 

 
 
 
 
 
 
floods, 

coastal 

erosion 

Italian  municipalities  were  at 

of 
risk  from 
or 
landslides, 
avalanches (369).  In  2024,  Italy  had  one  of  the 
highest heat-related mortality rates in the EU (370). 
In  2025,  the  government  adopted  a  scheme  to 
mitigate  the  risk  to  workers  posed  by  extreme 
climate  conditions (371).  Available  water  fell  by 
19% in 2025 compared with 2024, and has fallen 
by  4%  over  the  past  30  years (372).  A  recent 
Commission study estimates that Italy will need to 
invest just over EUR 10 billion per year up to 2050 
(0.4%  of  annual  GDP,  below  the  EU  average  of 
0.5%) (373),  primarily  in  infrastructure  retrofitting 
and reinforcement (45% of the total), followed by 
ecosystems  restoration  (around  20%)  and  food 
(around 18%). 

Climate  risks  have  a  direct  and  significant 
effect  on  Italy’s  economy  and  mandatory 
insurance  coverage  for  companies  began  to 
be  rolled  out  in  2025.  The  specific  impacts  at 
regional  level  in  Italy  are  shown  in  Annex 18. 
Recorded economic losses caused by weather and 
climate-related  extreme  events  in  2024  were 
abnormally  low  (around  EUR 6 billion),  but  the 
values  for  2022  and  2023  (EUR 18.1 billion  and 
EUR 16.1 billion  respectively)  were  much  higher, 
and  so  are  the  provisional  data  for  2025  (in 
summer  2025  alone,  Italy  experienced  losses  of 
EUR 0.5 billion  gross  value  added  due 
to 
heatwaves,  EUR 4.6 billion  due  to  floods  and 

the  administrative  boundaries  of  94.5%  of 
municipalities. 

Italy's 

(369)ISPRA,  2025,  Dissesto  idrogeologico  in  Italia:  pericolosità  e 

EUR 6.8 billion due to droughts) (374). Italy has one 
of  the  highest  ratios  of  natural  catastrophe 
damage to GDP in the EU (375). Projections suggest 
a  cumulative  negative  impact  of  climate  change 
on  GDP  per  capita  of  3.7%  in  2050  and  8.5%  in 
2080,  across  all  economic  sectors (376).  Overall,  it 
is estimated that there were 376 extreme weather 
events in 2025 (a 5.9% increase on 2024 and up 
from  60  in  2015) (377).  The  macroeconomic  costs 
of  Cyclone  Harry  in  Calabria,  eastern  Sicily  and 
Sardinia on 20-21 January 2026 were reported in 
the media at EUR 1-2 billion (378). The government 
passed  a  decree  (the  Decreto  Maltempo)  for 
urgent  interventions  (EUR 90 million  in  2026  and 
in  2027) (379).  Another  serious 
EUR 25 million 
hydrogeological event occurred in early April 2026 
impacting especially Molise and Abruzzo. 

Only  4%  of  economic  damage  in  1980-2024 
insurance (380).  Provisions 
was  covered  by 
introduced  in  the  2024  budget  law  on mandatory 
company insurance for extreme events and natural 
disasters (Nat Cat) entered into force in 2025 and 
2026 (381).  A  short  extension  was  granted  until 
31 March 2026  for  fishing,  aquaculture,  food  and 
beverage  establishments  as  well  as  for  tourism 
and  hospitality  businesses.  Marine  storm  surges 
are  not  covered (382),  but  agricultural  activities 
have been covered since 2022 (383). Furthermore, a 
committee  has  been 
dedicated  monitoring 

(374)Usman S., Parker M. and Vallat M., 2025, Dry-roasted NUTS: 
early  estimates  of  the  regional  impact  of  2025  extreme 
weather, Tables 1, 2 and 3, Link. 

(375)ECB  and  EIOPA,  2024,  Towards  a  European  system  for 
natural catastrophe risk management, Chart 2, p. 8, Link. 

indicatori di rischio, Link.  

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

(370)Janoš, T. et al., 2025, Heat-related mortality in Europe during 
2024  and  health  emergency 
reduce 
preventable  deaths,  Nature  Medicine,  31,  Table 1,  p. 4069, 
Link. 

forecasting 

to 

(371)Ministry  of  Labour  and  Social  Policies,  2025,  Protocollo 
quadro per l’adozione delle misure di contenimento dei rischi 
lavorativi legate alle emergenze climatiche negli ambienti di 
Lavoro, Link. 

(372)ISPRA,  2026,  Nel  2025  risorse  idriche  in  calo  rispetto  al 

2024. ISPRA ne monitora e aggiorna l'evoluzione, Link. 

(373)European  Commission,  2026,  Assessment  of  EU  and 
Member States adaptation investment needs, Table 25, Link. 
The  study  provides  detailed  estimates  of  adaptation 
investment  needs  at  the  level  of  the  EU  and  individual 
Member  States  per  type  of  measure.  It  relies  on  a  common 
methodology  that  makes  estimates  comparable  across  the 
EU.  Four  accompanying  methodological  reports  provide  a 
detailed  description  of  how  the  results  were  estimated  to 
ensure full transparency. 

economy, p. 30, Link. 

(377)Legambiente, 30.12.2025, Il bilancio finale dell’Osservatorio 

Città Clima, Link. 

(378)Il Sole 24 ore, 4 February 2026, Link; ISPRA, Dissesto e frane: 

il quadro nazionale nei dati e mappe Ispra, Link. 

(379)Decree-Law, 27 February 2026, no 25, Link. 

(380)EEA,  2025,  Economic  losses  from  weather  and  climate-

related extremes in Europe, Figure 2, Link.  

(381)Italian  government,  2024  Budget  Law,  Articles 101-111, 
Link.; Decree-law 39 of 31.3.2025,  Link, for large companies 
obligatory from 1.4.2025, for medium sized companies from 
1.10.2025, for small and micro enterprises from 1.1.2026. 

(382)Institute for the Supervision of Insurance (IVASS), fact-finding 

mission, 27.02.2026. 

(383)Fondo  mutualistico  nazionale  per  la  copertura  dei  danni 
catastrofali meteoclimatici alle produzioni agricole causati da 
alluvione, gelo-brina e siccità (2022 Budget Law). 

101 

 
 
 
established by the Ministry of Enterprise and Made 
in  Italy  to  monitor  market  phenomena  related  to 
the  implementation  of  mandatory  insurance (384). 
In  the  event  of  a  catastrophic  event,  a  company 
that lacks this compulsory coverage does not have 
access  to  any  state  contribution,  subsidies  and/or 
facilities  for  reconstruction  or  recovery  after  the 
calamitous  event.  The  2025  country 
report 
summarised  Bank  of  Italy  studies  on  insurance 
against  flooding  and  the  impacts  of  climate 
change on manufacturing and housing. The current 
framework  does  not  envisage  structural  solutions 
to  tackle  the  climate  insurance  gap  in  residential 
housing,  but  comparative analysis  is  ongoing (385). 
A  new  study  on  the  expected  impact  of  coastal 
flooding 
that  adaptation 
measures  (particularly  the  Parco  del  Mare,  a 
flooding) (386)  are 
natural 
significantly  reducing  expected  losses  in  banking 
intermediaries’ residential mortgage portfolios. 

in  Rimini  showed 

solution  against 

climate-related 

The  Italian  Treasury  has  updated  its  green 
bond  framework,  placing  an  increased  focus 
on adaptation and resilience. This has involved 
expanding  categories  that  capture  a  wider  range 
of 
environment-related 
and 
investments  (including  those  tied  to  biodiversity 
and  water  systems).  Climate  resilience  is  now  a 
category  in  itself,  bringing  adaptation  measures 
(e.g. flood-defence 
wildfire 
prevention and emergency-response systems) into 
the scope core of eligible expenditure for the first 
time.  The  new  framework  contains  detailed 
disclosures regarding the EU Taxonomy (387). 

infrastructure, 

Comprehensive estimates are needed for the 
costs  of  climate  change 
in  all  sectors. 
Information  is  available  from  different  sources 
rather  than  from  a  single  source.  The  following 
paragraphs present impacts on agriculture, fishing 
and key infrastructure. 

Climate change continues to have substantial 
impacts  on  agriculture  in  Italy.  Crops  and 
livestock production show differing dynamics, with 

(384) Reply to Semester questionnaire, 6.2.2026. 

(385)The  government  is  currently  carrying  out  a  benchmarking 
exercise on Nat Cat insurance for private housing, Semester fact-
finding mission, 12 February 2026. 

(386)Bank  of  Italy,  Here  comes  the  flood:  the  climate  risk  of 
residential mortgages in Rimini, Occasional Paper 925, Link.  

(387)Ministry of Finance, 2025, Link. 

in 

extreme weather events having a strong impact on 
yields  and  quality (388).  Italy  has  the  highest  level 
of  annual  average  crop  loss  due  to  climate  perils 
in the EU (approximately EUR 2.9 billion per year). 
Over  50%  of  this 
is  due  to  drought 
loss 
events (389).  Fires  are  also  common 
Italy, 
especially  in  southern  regions  (51 424  hectares 
were  burnt  in  2024  and  33%  of  this  was 
agricultural 
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  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 (391). 

land (390)). 

In 

In 

each 

remain 

year (392). 

overfished (393). 

Italy’s fisheries and aquaculture sectors face 
persistent  sustainability  and  climate-related 
challenges.  Environmental  damage  is  estimated 
to  cost  the  commercial  fishing  sector  up  to 
EUR 200 million 
the 
Mediterranean  Sea,  a  large  share  of  fish  stocks 
(including several  key  demersal  and small pelagic 
stocks) 
Reinforcing 
fisheries  control  and  data  collection  is  key  to 
safeguarding  marine  biodiversity  and  ecosystems 
and to ensuring sustainable, traceable and resilient 
fisheries 
sea 
invasive  species  (see  the  sub-
temperatures, 
restoration)  and  marine 
section  on  nature 
heatwaves  are 
increasingly  affecting  stocks, 
making  fisheries  management  less  certain  and 
weakening  recovery  prospects.  The  2026  Budget 
Law adds the promotion of underwater dimension 
policies  to  the  objectives  of  the  Sustainable  Blue 
Economy and Growth Fund.  

aquaculture. 

Rising 

and 

has 

been 
Climate-proofing 
systematically  applied  across  sectors  and 
key  infrastructure.  This  is  partly  because  the 
National  Observatory  on  Climate  Adaptation  has 

not 

(388)Ibid, p. 23. 

(389)EIB,  2025,  Insurance  and  Risk  Management  Tools  for 
Agriculture in the EU, Figure 12, p. 16 and Figure 13, p. 25, Link. 

(390)ISPRA, 2025, Ecosistemi terrestri ed incendi boschivi in Italia: 
Anno 2024, p. 12, Link. 

(391)CREA, 2023, Annual yearbook 2023, p. 12 

(392)Confcooperative Fedagripesca, 10.9.2025, Link. 

(393)European  Commission,  2025,  Common  Fisheries  Policy 
Monitoring, STECF-Adhoc-25-01, Link. 

102 

 
 
 
only  been  recently  established  and  is  only  now 
instruments  and 
starting 
responsible  entities  for  implementing  measures 
under the national adaptation plan.  

identify 

the 

to 

recorded (394) 

On  transport,  regarding  TEN-T  alone,  Italy 
experienced  around  EUR 15 billion  losses  for 
railways  and  roads  due  to  coastal  floods, 
flash  floods  and  river  floods  in  2010-2022. 
This  was  the  second  highest  loss  in  the  EU.  Over 
45 critical  events  were 
(most 
recently river floods and wildfires in airports (395)). 
The specific costs of closure for Catania airport in 
July  2023  due  to  wildfire  are  estimated  at 
EUR 80 million (396).  It  has  been  estimated  that 
total  adaptation  costs  until  mid-century  for  the 
TEN-T  are  EUR 6.6 billion (397).  This  added  loss 
represents  a  medium  risk  according  to  the 
transport vulnerability index (TVI), with  heatwaves 
as  the  main  risk  factor.  Over  10 000 km  of  both 
rail and road TEN-T network will require upgrading 
in  order 
to  cope  with  climate  adaptation 
needs (398). A national study from 2022 estimated 
the  annual 
for 
infrastructure  in  Italy  at  around  EUR 2 billion  in 
2030 (399).  A  resilience  plan  and  database  for 
national  rail  and  road  transport  networks  to 
climate change is currently being prepared. For the 
energy sector, Italy has identified the electric grid 
as  being  vulnerable  to  heatwaves  (increased 
resistance  of  copper,  risk  of  fires)  and  drought 
(decreased  soil  humidity,  higher  temperature  for 
underground  cables  and  decreased  hydropower 
output). Italy has also assessed the consequences 
of future water availability and risks (400).  

costs  of  climate  change 

Nature-based  solutions  (NbS)  could  be  used 
more  widely  and  systematically.  NbS  and 
prevention play a key role in increasing resilience. 
In  2023,  Italy  launched  the  Nature  Network  (a 

(394)  European  Commission,  Directorate-General  for  Mobility  and 
Transport,  2024,  Support  study  on  the  climate  adaptation  and 
cross-border  investment  needs  to  realise  the  TEN-T  network, 
Figures 7.3 and 7.4, p. 156, Link. 

(395) Ibid., Table 7.1, p. 157. 

(396) Ibid., pp. 166-7.  

(397) Ibid., Figure 4.35, p. 121 and Table 4.28, p. 108. 

(398) Ibid., Table 9.4, p. 201. 

(399) MIMS 2022, Cambiamenti climatici, infrastrutture e mobilita, 
p. 17, Link. 

(400)MASE,  Piano  nazionale  di  adattamento  ai  cambiamenti 
climatici, pp. 80-82, Link. 

and 

Nature 

national  hub  for  NbS) (401),  the  Nature  Positive 
Network (402) 
Recovery 
the 
Network (403).  National  standardisation  based  on 
European norms work are under development (404). 
No attempt has yet been made to develop nature 
credits  in  Italy (405).  NbS  can  greatly  contribute  to 
Italy’s adaptation and resilience to climate change, 
and  reduce  its  high  vulnerability  to  hydrological 
and  hydrogeological  risks (406).  A  comprehensive 
national inventory and assessment of the potential 
for  NbS,  as  suggested  by  the  Commission 
roadmap  for  R&I  on  NbS (407),  is  nevertheless 
lacking (408).  Making  an  inventory  is  the  first  step 
for transparency and knowledge-building on NbS. 

Water resilience 

Large  areas  of  Italy  are  subject  to  water 
stress that is particularly due to demand for 
water  from  agriculture,  manufacturing  and 
electricity  cooling.  These  sectors  are  heavily 
dependent  on  the  water  supply  and  irrigation  is 
crucial 
In  2024, 
11 926 million m³  of  water  was  used  and 
collectively  managed  for  the  irrigation  sector  as 
recorded  in  SIGRIAN  (the  National  Information 

rural  areas. 

in  many 

(401) Nature Network, Link. 

(402) Foundation for Sustainable Development, Verso 
un’economia nature positive, Link. 

(403) Rete Italiana Ripristino Ecologico, Link. 

(404) Ente Italiano di Normazione (UNI), Soluzioni basate sulla 
natura, Link. 

(405)  European Commission, 2025 Nature credits, Link . 

(406) For example, the Serchio River Basin, the Portofino National 
Regional  Park  and  Milan  and  Turin  sustainable  urban  drainage. 
The  ERDF  has  helped  support  green  infrastructure,  for  example, 
in urban areas in Emilia-Romagna, Link. The RRP has supported a 
significant  investment  in  restoring  37 km  of  the  River  Po,  Link. 
LIFE  has  supported  renaturalising  the  Bacchiglione  River.  Aqua 
Publica  Europea,  Working  with  Nature  to  Restore  the  Water 
Cycle, p. 15, Link. 

(407)  European  Commission,  Link.  El  Harrak  M.  and  Lemaitre  F., 
2023, European Roadmap to 2030 for Research and Innovation 
on Nature-based Solutions, Network Nature, Link. 

(408)  For  example,  MASE,  Elenco  delle  zone  umide,  Link; 
Legambiente,  Ecosistemi  acquatici,  Link.;  WWF,  75%  of  Italy’s 
wetlands are already lost Link. 

103 

 
 
 
System  for  the  Management  of  Water  Resources 
in Agriculture) (409). 

use of NbS; and reducing pollution from nutrients, 
chemicals, metals and saline discharges (415)). 

Italy  is  one  of  the  worst  five  performers  in 
terms of the Water Exploitation Index+ in the 
EU (410). Its value of 10 in 2023 was almost twice 
the  EU  average  of  5.15 (411). 
Italy’s  water 
productivity (at EUR 45 per m3 of abstracted water 
in  2022)  is  considerably  lower  than  the  EU 
average  of  EUR 151  per  m3  in  2022.  In  2023, 
agriculture  and  public  water  supply  accounted  for 
48%  and  23%  of 
freshwater  abstraction 
respectively (412).  Total  water  abstraction  dropped 
by  around  12%  between  2022  and  2023.  It  is 
estimated that water scarcity, floods and systemic 
inefficiencies  are  costing 
than 
EUR 13 billion annually (413). The European Drought 
Risk  Atlas  shows  the  major  impact  of  drought  on 
crop production and hydropower in Italy (414). 

Italy  more 

Concerns  remain  regarding  the  quality  of 
surface  water  in  Italy,  but  the  status  of 
groundwater  has  improved  significantly.  The 
assessment  of  the  third  river  basin  management 
plans  (RBMPs)  shows  that  around  47%  and  16% 
of  surface  water  bodies  fail  to  achieve  good 
ecological  and  chemical  status  respectively.  Good 
progress  has  nevertheless  been  made  on  the 
quantitative  status  and  chemical  status  of 
groundwater  bodies  compared  with  the  second 
RBMPs. The Environmental Implementation Review 
sets  out  priority  actions  to  deal  with these issues 
(including  improving  river  continuity;  boosting  the 

to 

Reply 

Semester 

questionnaire, 

(409) 
(6.2.2026): 
11 926 million m3  is  not  the  total  figure  because  it  relates  to 
validated data that are currently available for 38.9% of irrigation 
districts,  corresponding  to  an  irrigated  area  of  approximately 
1.5 million hectares. Only about 58% of this volume is measured; 
the  remaining  42%  estimated.  This  is  lower  than  the  20% 
estimated  in  the  European  Semester  Country  Report  2025, 
footnote 228 on p. 93, Link. 

(410)  This  is  a  measure  of  how  much  water  is  being  used 
compared  with  the  total 
resources 
available for a given territory and period. 

renewable  freshwater 

(411) EEA, 2025, Link. 

(412)  EEA,  2025,  Water  abstraction  by  source  and  economic 
sector in Europe, Link. 

(413) Community Valore Acqua, 2026; Libro Bianco Valore Acqua, 
2026, Link. 

(414)  European  Commission,  2023,  European  Drought  Risk  Atlas, 
Link. 

Water leakage remains a significant problem. 
In 2022, around 9.1 billion m3 of withdrawals were 
made  (81%  of  this  volume  was  measured). 
However, only 8 billion m3 of water is fed into the 
network each year and only 4.6 billion m3 per year 
of this is distributed to authorised users (416). There 
is  a  ‘water  service  divide’,  with  leakages  ranging 
from  33.6%  in  north-eastern  regions  to  49.4%  in 
the  southern-island  regions (417)  (see  Annex 18). 
Campania and Apulia import the highest volume of 
water  from  other  regions (418).  In  addition  to 
considerable  investment,  the  RRP  has  introduced 
two  reforms.  One  has  strengthened  governance 
for  investment  in  water  infrastructure.  The  other 
has  established  a  central  public 
financing 
instrument for investment in the water sector (the 
national plan for infrastructure and security in the 
water sector – PNIISSI) (419), which has identified a 
need for EUR 12 billion for structural interventions 
for  water  security (420).  The  national  fund  for 
infrastructure investments and safety in the water 
sector (SFNIISSI) (421), which the RRP has supported 
with  EUR  1  billion,  has  the  primary  objective  of 
implementing projects selected in the PNIISSI and 
is  currently  being  established  by  law.  Water 
infrastructure  is  a  key  priority  for  the  2025-27 
strategic plan of the Cassa Depositi e Prestiti. The 
Autorità  di  Regolazione  per  Energia,  Rete  e 
Ambiente (ARERA) has taken environment resource 
costs  and  climate  change  into  account  in  its 
tariffs (422).  ARERA  has 
introduced  a  macro-
indicator  (M0)  to  require  operators  to  maintain  a 
strong  focus  on  the  sustainability  of  their  water 

(415) European Commission, 2025 Environmental Implementation 
Review, Link. 

(416)  European  Commission,  European  Semester  2025  Country 
Report, p. 94, Link. 

(417) Autorità di Regolazione per Energia Reti e Ambiente (ARERA), 
Rapporto Annuale 2024 – stato dei servizi, p. 386, Link. 

(418)  Confindustria,  2024,  Dall’emergenza  all’efficienza  idrica, 
pp. 19-20, Link. 

(419)  Ministry  of  Infrastructure  and  Transport,  Piano  nazionale  di 
interventi  infrastrutturali  e  per  la  sicurezza  nel  settore  idrico 
(PNIISSI), Link. The 2025 budget law increased PNIISSI resources 
by  EUR 950 million,  Link,  p. 171  and 
in  2026  a  further 
EUR 800 million is expected. 

(420) For example, the Horizon 2020 Oristano project, Link. 

(421)  Strumento  finanziario  nazionale  per  gli 
infrastrutturali e per la sicurezza nel settore idrico (SFNIISSI). 

investimenti 

(422) ARERA, Link. 

104 

 
 
 
is 

being 

policy 

programmes,  more 

supply.  Water  service  operators  are  therefore 
incentivised to secure water resources. ARERA also 
assesses  the  revenue  lost  from  leakages.  Within 
the  framework  of  the  2025  mid-term  review  of 
cohesion 
than 
to 
EUR 600 million 
investments  to  promote  secure  access  to  water, 
sustainable  water  management  and  water 
resilience  (including  further  reduction  of  water 
losses) (423).  District  metered  areas  (DMAs)  have 
been rolled out, creating smaller zones where flow 
and  pressure  can  be  closely  monitored  and 
controlled (424).  However,  metering 
is 
Italy 
limited outside the drinking water service (425). 

reallocated 

in 

Wastewater  treatment  is  a  persistent  cause 
for  concern.  Italy’s  overall  compliance  rate  with 
the  Urban  Waste  Water  Treatment  Directive  was 
only  50.8%  in  2022  –  down  from  55.8%  in 
2020 (426).  Four 
infringement  proceedings  are 
currently  open  for  failure  to  comply  with  the 
requirements  of 
the  EU  Directive,  currently 
covering more than 850 agglomerations (mostly in 
Sicilia,  Calabria,  Campania  and  Lombardia).  Two 
infringements  have  led  to  EU  Court  of  Justice 
rulings and fines (C-251/17 & C-515/23).  

substantial 

As mentioned in the 2025 country report, the 
investment  needs  for  water  protection  and 
management  are 
(with  a 
projected  gap  of  EUR 2.2 billion  per  year  by 
2027).  Between  2025  and  2034,  Italy  needs  to 
invest a total of EUR 3.65 billion to bring its urban 
wastewater 
into 
compliance  with  the  1991  Urban  Waste  Water 
Treatment  Directive.  Further  investment  will  be 
needed  to  meet  the  requirements  of  the  2024 
recast directive.  

collection  and 

treatment 

technical 

2014 no 133 are intended to limit the number of 
Ambiti  Territoriali  Ottimali  (ATOs)  identified  by 
each  region.  They  also  provide  that  there  should 
be  a  single  governing  body,  plan  and  water 
operator  for  each  ATO  (if  a  single  ATO  covers  an 
entire  region,  the  management  of  the  water 
service can be split into areas that are no smaller 
than a province or a metropolitan city) (427). There 
are currently 62 ATOs. The northern Italian regions 
and  Sicilia  have  more  than  one  ATO  per  region. 
Italy  has  more  than  2 000  water  operators (428). 
Financial  incentives  are  available  to  ATOs  that 
aggregate  their  services.  ATOs  can  also  use 
to 
specialised 
increase 
efficiency (429). 
management 
Fragmented 
structures  perform  less  well.  Smaller  operators 
capacity,  generally 
have 
resulting in a lower level of service to citizens (see 
also  Annex  18). 
In  order  to  deal  with  the 
emergency situation with drought and inadequate 
the  ordinary 
urban  wastewater 
administration  is  being  replaced  with  designated 
special 
commissioners  with 
delegated  extraordinary  powers  to  resolve  the 
situation  as  quickly  as  possible.  The  fact  that 
multiple  actors  are  dealing  with  flooding  and 
drought,  which  have  been  exacerbated  by climate 
change (430), would seem to call for better national 
oversight by the new Observatory (431). 

national-level 

investment 

treatment, 

support 

lower 

to 

improve  water 

Italy is still not fully using the tools that are 
available 
resilience 
practices. A wastewater effluent tax that reflects 
pollutant loads and is linked to performance-based 
funding  for 
treatment  upgrades  could  raise 
EUR 5.6 billion  per  year.  A  water  abstraction  tax 
could raise EUR 8 billion per year by 2030 (432). 

The  water  sector’s  fragmented  governance 
structure is resulting in missed economies of 
scale  and 
investment  capacity. 
Legislative Decree, 2006 no 152 and Decree-Law, 

limiting 

(423) European Commission, mid-term review – Italy, Link.  

(424)  World  Economic  Forum,  University  of  Cambridge  and  ACEA, 
2025,  Bridging  the  €6.5  Trillion  Water  Infrastructure  Gap: A 
Playbook, pp. 17-18 Link; presented at Davos, 21 January 2026, 
Link. 

(425)  Laboratorio  Ref.,  An  incentive-based  pricing  for  irrigation 
water consumption: the Italian case study, p. 5, Link. 

(426)  2022  data 
the 
implementation  of  Article 17  of  Directive  91/271/EEC, 
unpublished, OiEau and Ramboll consultant’s report. 

reported  by  Member  States  on 

(427)  Legislative  Decree,  3 April 2006,  no 152  (as  modified), 
Article 147,  Link.  Decree-Law,  12 September 2014,  no 133, 
Article 7, Link.  

(428)  OECD,  2015,  The  Governance  of  Water  Regulators,  p. 81, 
Link. 

(429)  Ministry  of  Economics  and  Finance,  Decree  28 April 2023, 
Link;  Legislative  Decree,  23 December 2022,  no 201,  Article 17, 
Link. 

(430)  Interreg  Adrion  project,  2025,  Urban  floods  in  a  changing 
climate, Link.  

(431) Italian Alliance for Sustainable Development (ASVIS), Policy 
i  danni 
brief:  dissesto 
aumentano, Link. 

idrogeologico:  poca  prevenzione,  e 

(432) European Commission: Directorate-General for Environment, 
Camboni,  M.,  Markandya,  A.,  Tyrer,  D.,  Goonesekera,  S.  et  al., 

105 

 
 
 
 
Nature restoration 

Nature degradation poses significant risks to 
Italy’s  economy  and  competitiveness.  As 
reported  in  the  2025  country  report,  Italy  has  a 
high  supply-chain  dependency  on  ecosystem 
services  of  21%  of  its  gross  value  added  (EU 
average:  22%) (433).  Overall,  41%  of 
Italy’s 
economy 
is  highly  dependent  on  ecosystem 
services  to  produce  its  gross  value  added  (EU 
average: 44%). 100% of the gross value added of 
several sectors (e.g. agriculture, forestry and water 
facilities) is dependent on ecosystem services. The 
annual 
costs  and  benefits  of  ecosystem 
restoration  and  maintenance  in  Italy  have  been 
estimated  at  EUR 0.26 billion  and  EUR 2.42 billion 
respectively (434).  In  Italy,  the  role  of  the  private 
sector  in  financing  biodiversity  is  increasingly 
recognised (435).  The  European  Central  Bank  has 
assessed 
the  dependency  of  non-financial 
corporations  financed  by  euro  area  banks  on 
nature.  It  has  also  studied  the  magnitude  and 
likelihood  of  shocks  caused  by  nature  depletion, 
identifying  northern 
important 
cluster (436). 

Italy  as  an 

in 

Action  on  nature  protection  and  restoration 
is  needed  in  order  to  meet  the  EU  goal  of 
protecting  30%  of  its  territory  by  2030.  As 
reported 
Italy 
the  2025  country 
(including  both  Natura  2000  and  other  nationally 
designated  protected  areas) 
legally  protects 
21.4%  of  its  land  (EU  average:  26%)  and  about 
9.7%  of  its  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 
its 
Directive  (equivalent  to  up  to  22.3%  of 

report, 

2026, Greening the European Semester – Resource and pollution 
taxes. Annex 6, Country factsheets, Table 71, p. 232, Link. 

(433)  Dataset  from  Commission/JRC,  based  on  Hirschbuehl  D.  et 
al, 2025, The EU economy’s dependency on nature, Link. 

(434) European Commission: Directorate-General for Environment, 
IEEP,  IUCN,  Trinomics  and  UNEP-WCMC,  Impact  assessment 
study  to  support  the  development  of  legally  binding  EU  nature 
restoration targets – Final report, Table 6-11, p. 85, Link. 

(435)  Etifor  Valuing  Nature  and  Università  degli  Studi  di  Padova, 
Biodiversità  e  il  settore  privato  in  Italia  tendenze,  politiche  e 
strumenti finanziari, 2024 edition updated for 2025, Link, p. 16. 

(436) Boldrini S., Ceglar A., Lelli C., Parisi L. and Heemskerk I., 2023, 
Living  in  a  world  of  disappearing  nature:  physical  risk  and  the 
implications  for  financial  stability,  ECB  occasional  series, 
pp. 17-18, Link. 

land) (437). In 2013-18, just under 10% of habitats 
and  44%  of  species  had  a  good  conservation 
status. The mean forest condition index was 0.6 in 
2018 (438).  Furthermore,  Italy’s  common  farmland 
bird  index  of  69.4  in  2022  was  below  the  EU 
average  of  68.2  in  2022  (a  steady  decline  since 
92.4 in 2011). 

affecting 

agriculture) (440). 

Nature  degradation  is  further  amplified  by 
invasive alien species. 54 were recorded in Italy 
in  2024 (439), 
inflicting  estimated  damage  of 
EUR 0.57 billion  between  1960  and  2020 
An 
(primarily 
infringement case is ongoing against  Italy for not 
having reported without delay the detection of the 
fire  ant  in  Sicily  and  the  measures  taken  to 
eradicate  it  and  their  effectiveness;  and  for  not 
having taken all necessary measures to prevent its 
spread (441).  Extreme  weather  events  such  as 
marine heatwaves and the proliferation of invasive 
Italian 
species  have  negatively 
fisheries  and  aquaculture  sectors,  particularly  in 
the  Adriatic  (see  Annex 18).  The  national  and 
regional  administrations  have 
taken  several 
measures  to  respond  to  these  challenges  (mainly 
in 
to 
the  form  of  state-aid  compensation 
operators).  The  best  known  invasive  alien  species 
is  the  blue  crab,  which  is  not  classified  as  an 
invasive species of EU concern but is nevertheless 
fish,  molluscs  and  other 
a  predator  of 
crustaceans (442).  Eutrophication 
to 
biodiversity  and  ecosystem  integrity)  has  partially 
improved,  with  the  areas  at  risk  declining  from 
84.5% in 2005 to 60.1% in 2023 (443).  

impacted  the 

threat 

(a 

(437)  European  Commission,  2022, 
Impact  assessment 
accompanying  the  proposal  for  a  Regulation  on  nature 
restoration, Link. 

(438)  On  a  scale  from  0  to  1,  where  0  represents  a  degraded 
ecosystem  and  1  represents  a  reference  condition  based  on 
primary or protected forests. 

(439) 
Implementation Review, Italy Country Report, Link.  

Commission, 

European 

2025, 

Environmental 

(440)  NeoBiota,  Economic  Cost  of  invasive  alien  species  across 
Europe,  2021,  Link,  and  European  Commission:  EMRC,  Logika 
Group and RPA Europe, Update of the costs of not implementing 
EU environmental law, 2025, Link, p. 62. 

(441) INFR(2024)2226. 

(442)  The  estimated  cost  of  damage  by  the  blue  crab  was 
estimated  at  EUR 100 million  Fedagripesca-Confcooperative, 
Link..  The  Italian  government  appointed  a  special  commissioner 
to deal with the issue in 2024.  

(443)  EEA  2024,  Eutrophication  caused  by  atmospheric  nitrogen 
deposition in Europe, Link. 

106 

 
 
 
free-flowing 

Aligning  with  the  EU  Biodiversity  Strategy 
would enable Italy to contribute to achieving 
the EU target of making at least 25 000 km 
of  rivers  free-flowing  by  2030.  Italy  has  not 
yet  made  any  pledges  to  restore  a  particular 
amount  of 
rivers.  The  nature 
restoration  plan (444),  which  is  to  be  submitted  by 
1 September 2026,  must  quantify  the  extent  to 
which  the  removal  of  artificial  barriers  will 
contribute  to  achieving  the  25 000 km  objective. 
These  efforts  support  the  Water  Framework 
Directive  in  restoring  freshwater  ecosystems  and 
the natural function of rivers, and in mitigating the 
impact of floods. Free-flowing rivers also generate 
broader 
including 
enhanced  rural  landscape  quality,  new  recreation 
and  tourism  opportunities,  strengthened  local  job 
creation, 
improved  water  quality,  and  better 
sediment  transport  that  protects  deltas  and 
coastal areas against erosion and rising sea levels. 

socio-economic 

benefits, 

Sustainable agriculture and land use 

from 

Italy’s carbon removals are broadly on track 
to  meet  its  2030  target  for  land  use,  land-
use  change  and  forestry  (LULUCF).  This  is 
particularly  due  to  the  increasing  growth  of 
forests,  despite  challenges 
increasing 
droughts  and  fires.  Additional  carbon  removals  of 
3.2 million  tonnes  of  CO2  equivalent  (CO2-eq)  are 
needed  in  order  to  meet  Italy’s  2030  LULUCF 
target (445).  The  latest  available  projections  show 
that Italy is very close to meeting this target (446). 
Investment  in  healthy  forests  and  soils  is  key  to 
building  resilient  bio-based  product  value  chains 
and  enabling  a  growing, 
competitive  EU 
bioeconomy. In particular, continued improvements 
to the system for monitoring net removal data will 
play  a  crucial  role  in  supporting  timely  and 
effective action in the sector. Italy is using the RRP 
to improve its carbon sequestration capacities with 
a  measure  for  planting  at  least  4.5 million  trees 
and shrubs (in 4 500 hectares). At least 3.5 million 

(444) Article 9 of the Nature Restoration Regulation requires this, 

Link. 

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

Regulation (EU) 2023/839, Link. 

(446)  Climate  action  progress  report  2025,  Link.  Italy  has 
submitted  updated  projections  that  take  methodological 
adjustments into account in its most recent NECP reporting 
in March 2025. 

of  these  trees  will  be  transplanted 
in  the 
14 metropolitan  cities  for  urban  and  peri-urban 
forestry (the RiforestAzione project). 

in 

(UAA) 

Italian 

is  not 

continues 

in  2018  to  56.2 kg 

Italian  agriculture 
to  have 
significant  impacts  on  air,  water  and  soils. 
The  utilised  agricultural  area 
Italy 
decreased  slightly  from  12 909 000  hectares  in 
2018  to  12 901 000  in  2024.  There  has  been 
some improvement in the overall nitrogen balance, 
with  a  drop  from  58.2 kg  of  nitrogen  per  hectare 
of  UAA 
in  2021.  An 
infringement  procedure  of  the  Nitrates  Directive 
nevertheless  remains  open  because  the  situation 
in  several 
improving 
regions 
sufficiently. The livestock density index in Italy was 
0.81 in 2020 (above the EU average of 0.75). Italy 
is  on  track  to  reduce  its  ammonia  emissions.  The 
level  of  ammonia  emissions  reported  for  2023 
indicates  that  the  agriculture  is  responsible  for 
91%  of  total  national  emissions  (349.20 Gg). 
Within this sector, livestock has the highest share 
(69.5%).  Italy  is  compliant  with  the  2020-2029 
Ammonia  Emission  Reduction  Commitment  (ERC), 
having  achieved  the  reduction  of  5%  relative  to 
the  2005  base  year.  Additionally,  the  reported 
data  indicates  that  Italy  is  already  meeting  the 
2030 ammonia ERC (16% reduction relative to the 
2005 base year). In 2018-2023, 41% of reported 
waterbodies  with 
EU 
in  rivers (447).  Pesticides  not  only 
thresholds 
threaten  aquatic  ecosystems  but  also  pose  long-
term risks to human health through contaminated 
drinking water and food chains. 

pesticides 

exceeded 

and 

water-induced 

Italy  is  highly  vulnerable  to  hydrogeological 
threats 
erosion, 
exacerbated by extreme weather events. Italy 
faces  the  highest  risk  of  water-induced  soil 
erosion in the EU. Regions such as Calabria, Sicilia, 
Marche,  Abruzzo  and  Molise  are  particularly 
vulnerable. Soil organic carbon content varies, with 
higher  levels  in  hilly  and  mountainous  areas. 
National statistics show that 23 ha/day of soil was 
converted  to  artificial  land  cover  (land  take)  in 
2024 – an increase on 2023. The estimated total 
costs  of  the  loss  of  ecosystem  service  flows  due 
to  land  consumption  in  2006–2024  range  from 
EUR 8.66 billion  to  EUR 10.59 billion  per  year (448). 

(447)  EEA,  Pesticides  in  rivers,  lakes  and  groundwater  in  Europe, 

Figure 2, Link. 

(448)  ISPRA,  2025,  Consumo  di  Suolo,  Dinamiche  Territoriali  e 

Servizi Ecosistemici – Edizione 2025, Link. 

107 

 
 
 
A  law  on  controlling  soil  consumption  has  been 
pending  in  parliament  since  2012 (449).  Emilia-
Romagna, Lombardia, Toscana, Umbria and Veneto 
have laws limiting soil consumption, and the Rome 
municipality  is  currently  adopting  a  law  to  stop 
further soil consumption (450). 

Italy  is  transitioning  to  a  sustainable  food 
system  by  implementing  policies  to  reduce 
the  environmental  impact  of  agriculture. 
11.7%  of  monitoring  points  have  average  annual 
nitrate  concentrations  greater  than  or  equal  to 
50 mg/l  (EU  average:  13.3%)  in  groundwater 
2020-23 (451).  Areas  of  intensive  farming  have  a 
higher  level  of  nitrates  pollution  in  groundwater. 
Italy’s  19.5%  organic  farming  share  in  2024  was 
the  third  highest  in  the  EU,  but  pesticide  use  is 
intensive 
in  several  regions.  Organic  farming 
covered  18.78%  of  agricultural  land  in  2023 
(primarily  in  the  south).  The  consumption  of 
organic  produce  is  rising  in  the  north.  This  is 
underlined in national reports (452). 

(449) Senate, Nuovo testo, NT2 alla congiunzione no 29, 761, 863, 

903, 1028, 42, 1122, 1131, Link. 

(450)  Reply  to  Semester  questionnaire,  6.2.2026;  one  third  of  

Rome municipality is classed as agricultural land. 

(451)  Member  State  implementation  reports  of  the  Nitrates 

Directive, period 2020-23, forthcoming. 

(452) ISMEA, 2025, Rapporto Bio in Cifre 2025, Link. 

108 

 
 
Table A10.1:Key Adaptation Indicators 

(1) EFFIS (European Forest Fire Information System), Link. 
(2) The climate protection gap refers to the share of non-insured economic losses caused by climate-related disasters, based on modelling of the risk from floods and wildfires, windstorms, and 
on the insurance penetration rate. Scale: 0 (no protection gap) – 4 (very high gap). EIOPA, 2025, Dashboard on insurance protection gap for natural catastrophes. 
(3) This 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 to or greater than 40 % indicate severe water scarcity. 
(4) European Commission, 2024, Seventh 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). 
(5) Indicator refers to concentrations of nitrate (NO3) in groundwater, measured as milligrams per litre (mgNO3/L). Nitrate 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 is limited to 50 mgNO3/L to avoid threats to human health. 
(6) Net removals are expressed in negative figures and net emissions are expressed in positive figures. Reported data are from the 2025 greenhouse gas inventory submission. The 2030 value of 
net greenhouse gas removals is taken from Regulation (EU) 2023/839 – Annex IIa. 
Sources:  Eurostat, EEA and JRC. 

109 

Climate adaptation and preparedness:EU-27201920202021202220232024latest dataDrought impact on ecosystems0.581.593.7718.171.83-2.76[area impacted by drought as % of total]Forest fires burned area (1)36,887     53,750     150,552   58,751     97,984     40,122     354,510     [burned area in ha. per year]Economic losses from extreme events5,409       2,792       703          18,112     16,072     5,972        40,452        [EUR million at constant 2022 prices]Insurance protection gap (2)---2              2              2               -[composite score between 0 and 4]Sub-national climate adaptation action34            36            39            45            46            46            34               [% of population covered by the EU Covenant of Mayors for Climate & Energy]Water resilience:EU-27201920202021202220232024latest dataWater Exploitation Index Plus, WEI+ (3)7.58         11.06       11.04       15.62       10.02       -4.53            [total water consumption as % of renewable freshwater resources]Water productivity---45            --151[EUR per m3]Water abstractionWater abstraction by source (% from surface water)------Water abstraction by sectorAgricultureElectricity coolingManufactu-ringPublic water supplyMining and QuarryingConstru- ction 47.97%10.99%18.08%22.97%0.00%0.00%Status of water bodies (4)[% of water bodies in a good status]Surface water bodies (ecological)-----44%38%Groundwater bodies (quantitative)-----79%93%Nature restoration:EU-27201920202021202220232024latest dataEcosystem dependency---41%--44%[% of direct dependency]Protected area21.421.421.421.421.426.4[% of terrestrial protected areas]Invasive alien species (IAS)-----5429.2[number of IAS of Union concern]Damage cost of IAS----0.571.69[EUR billion]Eutrophication 212212295[AAE of area at risk of euthrophication]Sustainable agriculture and land use:EU-272012-20182018-2021latest dataYearly net land taken by Member State462          397          670            [ppm of total urban surface per Member State]Land conversion in functional urban area [% of total land taken from 2018-2021]Arable land65%Complex and mixed cultivation0%Forests3%Herbaceous vegetation associations5%Open spaces with little or no vegetation0%Pastures18%Permanent crops8%Water1%Wetlands0%201920202021202220232024latest dataNitrates in groundwater (5)20.020.620.519.518.8[mgNO₃/l]Livestock density0.81:0.75(number of livestock units per hectare of utilised agricultural area)Ammonia emissions 91%92%92%91%91%-94%[% of total utilised agricultural area]Pesticide contamination on rivers and lakes water bodiesrivers41%27%[% of monitoring sites with pesticides exceeding thresholds, 2018-2023]lakes15%18%Pesticide contamination in soil 48%57%[% of samples with a concentration over 0.5 mg/Kg⁻¹]Net greenhouse gas removals from LULUCF (6)-47640.8-39791.4-38057.1-39233.3-53588.8--198,421 [ktCO₂-eq] 
 
  
 
FAIRNESS 
ANNEX 11: LABOUR MARKET 

remains 

constrained 

employment 

rates  have 

in  certain  sectors,  stark 

Italy’s  labour  market  has  been  improving, 
though  at  a  slowing  pace,  with  significant 
structural  challenges  still  weighing  on 
competitiveness.  While 
productivity  and 
improved, 
overall 
economic  growth 
by 
low  productivity  growth,  wage 
persistently 
stagnation 
regional 
differences,  demographic  change  compounded  by 
talent outflow, and continued under-representation 
of  some  groups,  particularly  women  and  young 
people,  in  the  labour  market.  As  Italy  works 
towards  achieving  its  2030  employment  rate 
target,  mobilising  untapped  potential,  tackling 
skills mismatches and improving job quality will be 
key  to  supporting  a  more  robust  and  inclusive 
labour  market  and  a  thriving  economy.  The  2025 
country-specific  recommendations  (CSRs)  for  Italy 
highlighted  the  need  to  address  demographic 
challenges,  also  by  attracting  and  retaining  high-
quality  workforce,  promote 
job  quality  and 
increase  labour  market  participation,  taking  into 
account regional disparities, and keep up efforts to 
tackle undeclared work (453). 

and 

substantial 

The  labour  market  continues  to  improve 
gradually  but  is  still  marked  by  structural 
challenges 
regional 
disparities.  The  employment  rate  reached  a 
record  high  of  67.6%  in  2025  but  remains  well 
below  the  EU  average  (76.1%)  and  below  the 
national  employment  rate  target  (73%  by  2030). 
This improvement was mainly driven by the higher 
(aged 
employment  rate  among  older  people 
55 and above) (454), while the employment rate of 
young  people  (aged  15-29)  declined.  The  labour 
force  participation  rate  continued  stagnating  at 
66.7%,  halting  the  post-pandemic  upward  trend 
and  further  widening  the  gap  between  Italy  and 
the  EU  average  (75.7%).  At  the  same  time,  the 
unemployment rate fell to 6.1% in 2025, marking 
a significant improvement. Nonetheless, long-term 
unemployment 
the  EU 
remains  higher 
average  (3.1%  vs  1.9%).  Regional  disparities  are 

than 

(453) CSR 2025.6.1 Promote job quality and reduce labour market 
segmentation, also to support adequate wages, and increase 
labour  market  participation, 
for  under-
represented groups, including by further strengthening active 
labour  market  policies  and  improving  affordable  access  to 
quality  child-  and  long-term  care,  taking  into  account 
regional disparities.  

in  particular 

particularly pronounced, with a gap of 21.9 pps in 
employment  rates  in  2025  between  the  North-
Islands,  mirrored  by  similar 
East  and 
the 
labour  force  participation  and 
in 
differences 
unemployment 
(see  Annex 16).  These 
rates 
disparities  are  driven  by  structural  weaknesses  in 
the  southern  regions,  such  as  inefficiencies  in 
public administration and a prevalence of smaller, 
less competitive and less innovative firms, leading 
to  fewer  job  opportunities  and  lower  overall  job 
quality and attractiveness (455). 

Graph A11.1: Key labour market indicators 

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

Low 
labour  market  participation  among 
women  and  young  people  weighs  on  the 
country’s  growth  potential.  The  employment 
rate  for  women,  at  58%  in  2025,  is  among  the 
lowest  in  the  EU  (71.4%)  and  characterised  by 
significant  regional  differences.  While  the  female 
employment  rate  was  68.2%  in  the  North-East  in 
2025,  the 
lowest  rates,  around  41%,  were 
recorded  in  the  South  and  the  Islands  (see 
Annex 18).  The  gender  employment  gap  is  nearly 
twice  the  EU  average  (19.1  pps  vs  9.6  pps)  and 
has  shown  no  improvement  since  2015.  Also, 
women’s 
is 
significantly  lower  than  both  the  EU  average 

force  participation 

labour 

rate 

(455) Banca d’Italia, 2019, Lo sviluppo del Mezzogiorno: una 

(454) OCSE, Prospettive dell'occupazione OCSE 2025: Italia. 

priorità nazionale. 

110 

0510152025010203040506070802019202020212022202320242025%ITActivity rate 15-64 (lhs)Employment rate 20-64 (lhs)Employment rate women 20-64 (lhs)Employment rate 15-29 (lhs)Unemployment rate 15-74 (rhs)Long-term unemployment rate 15-74 (rhs) 
 
 
 
  
 
 
(57.8%  vs  71.1%)  and  that  of  men  (75.6%),  with 
in  the  South 
inactivity  rates  among  women 
exceeding the respective employment rates. These 
gaps  are  linked,  among  other  factors,  to  the 
insufficient availability of childcare and long-term 
care  services  (see  the  2025  country  report, 
Annex 10).  Participation  in  formal  childcare  for 
children  under  three  years  of  age  reached  39.4% 
in 2024, slightly above the EU average and almost 
in  2021,  supported  by 
10  pps  higher  than 
investment  under  the  Recovery  and  Resilience 
Facility (RFF). However, in 2025 it dropped again to 
35.5%  (EU:  40.2%),  and  wide  disparities  between 
regions  and  socio-economic  groups  persist (456) 
(see  Annex  13). 
Italy’s  medium-term  fiscal-
structural  plan  commits  to  allocate  more  current 
spending  to  operating  new  facilities,  to  further 
expand  capacity  and  harmonise  access  rules  and 
user  fees  through  national  legislation.  Labour 
market  outcomes  for  young  people  remain  weak. 
In  2025,  only  38.6%  of  young  Italians  (aged  15-
29) participated in the labour market, down by 1.7 
pps  from the  year before,  and  significantly  below 
the  EU  average  of  55.6%.  Among 
those 
participating, 14.4% were unemployed, well above 
the EU average of 11.6%, even though that figure 
was still at a historically low level for the country. 
Youth  employment  rates  continued  to  decrease 
compared  with  2024,  and  only  a  third  (33.1%)  of 
young  people  were  employed  as  compared  with 
about half of people from this age group in the EU. 
Difficulties faced by young people in transitioning 
to high-quality, stable employment are reflected in 
the  still  high,  though  significantly  decreasing, 
share of young people neither in employment nor 
in education and training (NEETs) (13.3% vs 10.9% 
in  the  EU),  and  the  prevalence  of  temporary 
employment.  These 
reflect  structural 
challenges  such  as  low  job  quality,  limited  job 
from 
opportunities  and  difficult 
education to work. 

transitions 

trends 

above, 

described 

is  taking  measures  to  tackle  the 
Italy 
including 
challenges 
through  investments  in  ALMPs,  but  there  is 
scope for further action. With support from the 
RRF,  Italy  launched  the  ‘Guaranteed  Employability 
of  Workers’  programme,  a  reform  of  its  active 
labour  market  policies 
(ALMPs),  focused  on 
training  and  personalised  activation  support.  The 

increase 

European Social  Fund (ESF) and the ESF+ support 
access  to  employment  through  national  and 
regional  programmes.  Between  2014  and  2023, 
the  ESF  reached  over  7.1  million  people  outside 
the workforce and 4.1 million unemployed people, 
including 1.4 million long-term unemployed. Italy’s 
‘Plan for Nurseries and Preschools’, also supported 
by RRF funding, aims to create over 150 000 new 
places  in  childcare  establishments  by  2026  to 
the 
support  work-life  balance  and 
employment of women. The higher participation of 
children  under  three  years  of  age  in  formal 
childcare  in  2024  can  be  partly  attributed  to  a 
combination  of  these  government  policies  to 
support  families  and  address  low  birth  rates.  At 
the  same  time,  access  to  ECEC  is  still  strongly 
dependent  on  the  place  of  residence.  There  are 
large disparities in childcare provision between the 
Centre-North  and  the  South,  and  between  large 
urban  and  smaller  peripheral  municipalities,  also 
due  to  different  levels  of  demand.  According  to 
national  data  for  the  2023/2024  school  year, the 
average  coverage  rate  ranged  from  40.4%  in  the 
Centre to 19% in the South (457). There is scope for 
further  policy  action  to  address  other  drivers  of 
the  limited  participation  of  women  in  the  labour 
market,  including  measures  to  further  expand 
childcare in the South and the Islands and access 
to  long-term  care,  to  extend  the  duration  of 
paternity 
leave  and  full-time  schooling,  and 
increasing  flexible  work  options.  While  ALMP 
expenditure  was  above  the  EU  average  in  2023, 
only limited measures were taken to help increase 
employment  rates  and  retain  young  talent,  for 
example by improving the quality of job offers and 
outreach  activities,  including  streamlining  public 
employment  services,  aligning 
training  and 
education  with 
labour  market  needs,  and 
enhancing  support  to  job  quality  creation  and  job 
transitions, taking regional disparities into account. 

sectors, 

persistent 

Labour  shortages  in  labour-intensive  and 
high-growth 
skills 
mismatches  and  underuse  of  skilled workers 
may  reduce  potential  productivity  gains.  Job 
vacancy  rates  have  remained  stable,  standing  at 
1.9% 
the 
significant  under-representation  of  certain  groups 
in  the  labour  market,  labour  shortages  persist,  as 
vacancies 
in 
accommodation and food service activities (3.6%), 

(EU:  2.1%).  Despite 

in  Q4-2025 

particularly 

remain 

high 

(456) See ISTAT 2025, Report sui servizi educativi per l’infanzia in 
Italia, and European Commission, 2025, Education and 
Training Monitor - Italy.  

(457) ISTAT,  Offerta  di  nidi  e  servizi  integrativi  per  la  prima 

infanzia, 2026. 

111 

 
 
 
in 

in 

skilled 

higher 

labour 

relevant 

(2.6%),  as  well  as 

construction 
in  arts, 
entertainment and recreation (2.4%). Shortages of 
health  professionals  are  a persisting  challenge 
(see  Annex 15). This  reflects  both  the  low  job 
quality in labour-intensive sectors and insufficient 
fast-growing 
supply  of 
sectors (458).  Notably,  the 
ICT  sector  remains 
underdeveloped,  with  ICT  specialists  estimated  to 
account  for  3.8%  of  total  employment  in  2025, 
compared  with  5%  in  the  EU,  also  marking  a 
decrease  of  0.2  pps  from  2024.  Demand  for  ICT 
specialists  remains  high  and 
is  expected  to 
increase  across  all  sectors,  with  a  growing  focus 
on  AI-related  profiles,  while  supply  continues  to 
lag behind demand. This is also partly due to low 
enrolment 
education 
programmes  (see  Annex 13).  Women’s  under-
representation in ICT-related professions, also due 
to  their  lower  participation  in  STEM  disciplines, 
may exacerbate labour market segregation (459). At 
the  same  time,  skills  mismatches (460)  remain 
among the highest in the EU, especially for young 
people. 
the  macroeconomic  skills 
mismatch  rate  stood  at  25%,  far  above  the  EU 
average of 19.2%. The employment rate of people 
with tertiary education lags behind the EU average 
(83.4% vs 88.4%), and recent university graduates 
face  even  greater  challenges  (78.7%  vs  87.0%), 
pointing  to  barriers  in  transitioning  to  the  labour 
market.  Over-qualification  remains  a  structural 
issue, with more than one in five tertiary-educated 
workers  employed  in  a  position  that  does  not 
require  their  level  of  education.  Particularly  high 
over-qualification  rates 
in  administrative  and 
support  services  highlight  weaknesses  in  the 
responsiveness  of  the  education  and  training 
systems  to  changing  labour  market  needs  and  to 
to  effectively 
limited  capacity  among  firms 
harness 
significant 
improvements,  Italy  also  lags  behind  the  EU  in 
terms  of  digital  skills  in  the  general  population, 
with  only  54.3%  of  people  aged  16-74  having  at 
least basic digital skills in 2025.  

labour.  Despite 

In  2025, 

skilled 

is 

Italy 
demographic 
developments  and  a  significant  outflow  of 

facing  adverse 

recent 

abroad, 

young  talent.  While  the  pace  of  population 
decline has recently slowed,  Italy has experienced 
a  net  loss  of  1.22  million  residents  since  2015, 
and  the  birth  rate  is  at  its  historic  low (461).  Many 
Italians  seek  better 
young,  highly  qualified 
figures 
as 
opportunities 
demonstrate (462),  which  amplifies  the  existing 
trends.  Between  2011  and  2024,  about  630 000 
young  people  (aged  18-34)  emigrated,  yielding  a 
net migration balance of 441 000, representing an 
estimated  EUR 160 billion  or  7.5%  of  GDP. 
Moreover,  the  outflow  of  talent  has  intensified 
over  time.  In  2024  alone,  78 000  young  people 
left and between 2022 and 2024, around 42% of 
those  who  left  held  university  degrees,  with  that 
share  having  increased  compared  with  previous 
years. Improving job quality, especially career and 
pay prospects for young graduates, is instrumental 
to  retaining  talent  in  the  domestic  labour  market. 
At  the  same  time,  vulnerable  groups,  including 
second-generation 
low-qualified 
immigrants  and  persons  with  disabilities,  face 
barriers  to  labour  market  integration  (see  the 
2025 country report, Annex 10) (463).  

adults, 

In  this  context,  better  integrating  under-
represented  groups  and  attracting  and 
retaining a high-quality workforce are key to 
supporting  growth  and  competitiveness  as 
the  population  ages.  By  the  end  of  2025,  the 
‘Guaranteed Employability of Workers’ programme 
reached  over  3  million  people,  of  whom  55.5% 
were  women  and  45.9%  were  people  aged  under 
30  or  over  55.  The  voluntary  nature  of  the 
programme  requires 
individual  activation  and 
registration. As nearly 2 million individuals outside 
the  workforce  do  not  participate 
the 
in 
programme,  effective  outreach 
remains  a 
challenge.  Together  with  other  relevant  measures 
under  its  recovery  and  resilience  plan  (RRP),  Italy 
also  aims to  address  gender  gaps  in  employment 
in  high-skilled  professions,  notably  in  STEM  jobs. 
Moreover,  changing  labour  market  requirements 
high-skilled 
and 
professionals  pose  challenges  with  regard  to 
upskilling and reskilling and for stronger alignment 
training  and 
of 

labour  market  needs  with 

growing 

need 

the 

for 

(458) Banca d’Italia, 2024, Labour shortages in Italy: determinants, 

firms’ responses and employment prospects.  

(459) INAPP, 2025, Rapporto annuale su mercato del lavoro e 

politiche di genere. 

(460) This indicator highlights the relatively higher difficulty of low- 
and medium-qualified people in entering the labour market, 
as compared with the highly qualified. 

(461) ISTAT, Indicatori demografici - Anno 2025, 2026. 

(462) CNEL, 2025, Italy’s attractiveness to young people from 

advanced countries. 

(463) CSR 2025.6.2 Keep-up efforts to tackle undeclared work, 

particularly in the most affected sectors.  

112 

 
 
 
In 

this 

education  programmes  (see  Annex 13).  However, 
despite  significant  efforts  in  recent  years,  often 
supported by the ESF+ and the RRF, to improve the 
integration  of  under-represented  groups  and 
activate  those  outside  the  labour  force,  Italy 
recorded  one  of  the  highest  numbers  of  shortage 
occupations  in  the  EU  in  2024 (464).  Demographic 
developments  are  expected  to  have  a  profound 
impact on economic growth. Banca d’Italia expects 
that  an  increased  labour  market  participation  of 
under-represented groups would merely offset the 
reduced  supply  of  labour,  even  under  optimistic 
scenarios (465). 
context, 
Italy  has 
increasingly 
to  non-EU 
issued  work  permits 
nationals.  Between  2026  and  2028,  it  plans  to 
receive almost 500 000 applications from non-EU 
nationals  to  enter  for  work  purposes (466).  With  a 
view to addressing emerging shortages, in addition 
to the measures to activate and integrate currently 
untapped  labour  market  potential,  there  is  a 
growing  need  to  also  boost  legal  migration,  for 
example  by 
recognition  of 
qualifications,  validation  of  skills  and  tackling 
integration  issues  (see  Annex 12).  Attracting  and 
retaining talent is key to sustaining human capital, 
especially  in  labour-intensive  sectors  such  as 
construction and tourism, and high-growth sectors, 
such  as  ICT  and  STEM.  Moreover,  Italy  benefits 
form  the  support  of  the  Technical  Support 
Instrument  to  improve  its  capacity  to  align  and 
match  workforce  skills  with  current  and  future 
labour  market  needs  and  develop  an  improved 
model  for  contracted-out  employment  services  to 
increase service coverage (467).  

improving 

the 

Recent  real wage  increases  have  only partly 
offset  past  losses,  while  low  work  intensity 
and  a  high  prevalence  of  atypical  work 
continue to negatively impact job quality (468). 
Productivity growth has long been hindered by low 

(464) ELA, EURES report on labour shortages and surpluses 2024.  

(465) Banca d’Italia, 2025,The Governor's Concluding Remarks for 

2024.  

(466) OECD, International migration outlook 2025.  

(467) Strengthening public-private partnerships in the delivery of 
employment services in Italy - Reforms and Investments 

(468) CSR 2025.6.1 Promote job quality and reduce labour market 
segmentation, also to support adequate wages, and increase 
labour  market  participation, 
for  under-
represented groups, including by further strengthening active 
labour  market  policies  and  improving  affordable  access  to 
quality  child-  and  long-term  care,  taking  into  account 
regional disparities.  

in  particular 

levels  of 
in  R&D, 
investment,  particularly 
innovation  and  human  capital  (see  Annex 1) (469), 
constraining  wage  growth  (see  the  2025  country 
report).  After  rebounding  by  2.3%  in  2024,  real 
wages increased by 1.1% in 2025, reflecting both 
moderate inflation and comparatively low nominal 
wage  growth.  However,  these  gains  do  not  yet 
fully  compensate  for  prior  losses,  leaving  real 
wages 3.5% below 2019 levels. On the other side, 
low  wage  growth  over  the  past  decade  has 
enabled  cost-competitiveness  gains  (470).  Over 
2026-27, wage growth is expected to moderate to 
below  3%,  as  renewed  inflationary  pressures  are 
not fully passed through to wages, amid softening 
labour  demand  and  the  lagged,  partial  indexation 
(471).  Despite  significant 
of  wage  contracts 
improvements over recent years, including a rise in 
the number of permanent jobs and a fall in fixed-
term  contracts,  atypical  work  remains  common. 
This includes a high share of involuntary part-time 
(8.5%  vs  EU:  3.3%)  and  temporary  (11.3% vs  EU: 
6.4%)  work,  with  a  high  prevalence  of  temporary 
contracts  among  young  employees  (aged  25-34, 
21.8%  vs  EU:  16.6%),  with  low  job  security  and 
work  intensity.  These  conditions  exacerbate  the 
risk  of  in-work  poverty,  currently  at  10.2%  (EU: 
8.3%),  and  undermine  the  accumulation  of  firm-
specific  human  capital  and  the  financing  of 
adequate  social  protection  coverage.  Moreover, 
undeclared  work 
(see 
Annex 12 and the 2025 country report).  

remains  widespread 

Italy’s  collective  bargaining  system  faces 
limitations that hinder wage and productivity 
growth.  In  the  absence  of  a  statutory  minimum 
wage,  collective  bargaining  plays  a  key  role  in 
setting  minimum  wages.  Effective  dialogue,  and 
negotiation  dynamics  between  the  social  partners 
are  key  to  ensuring  adequate  wages  and  working 
conditions.  Trade  union  density  was  30.2%  in 
2024,  while  employer  organisation  density  stood 
at  77%  in  2018.  Collective  bargaining  coverage 
was  100%  in  2024.  Yet,  factors  such  as  contract 
fragmentation,  lack  of  transparency  and  clear 
representativeness  criteria  hinder  the  functioning 
of 
increasing  number  of 
agreements  signed  by  smaller  unions  intensifies 

the  system.  The 

(469) European Commission, 2025, In-Depth Review 2025 – Italy. 

(470) European Commission, Labour market and wage 
developments in Europe - Annual review 2025.  

(471) European Commission, Spring 2026 Economic Forecast – 

Italy.  

113 

 
 
 
like 

less 

logistics, 

cleaning, 

representative  contracts 

‘contractual  dumping’  (472),  fuelling  downward 
pressure on wages and working conditions (473). In 
2024,  of  1 017  agreements,  803  were  signed  by 
smaller  unions,  covering  4%  of  workers  and 
offering  lower  wages.  The  wage  gap  between  the 
is 
more  and 
estimated at 14.6%, affecting especially low-wage 
sectors 
retail  and 
hospitality.  These  challenges  are  even  more 
widespread  in  the  South  and  in  vulnerable  areas, 
which  may  exacerbate  regional  disparities (474).  In 
addition, at the end of 2025, 42.2% of employees 
were  on  expired  contracts,  contributing  to  wage 
stagnation.  Second-level  collective  bargaining  at 
firm and territorial level could support productivity 
growth  by  boosting  investment  in  upskilling  and 
reskilling  and  improve  working  conditions (475). 
Decentralised collective bargaining is characterised 
by  strong  regional  disparities,  with  74%  of 
contracts having been concluded in the North and 
only  9%  in  the  South (476).  To  address  these 
shortcomings, Italy would benefit from reforms to 
promote  transparency  and  representativeness  as 
well  as 
collective  bargaining. 
Moreover,  despite  the  existence  of  formal  and 
informal 
the 
participation  of  social  partners,  including  trade 
unions and the National Council for Economics and 
Labour (CNEL), remains limited, and their influence 
on policymaking is weak.  

mechanisms, 

second-level 

consultation 

reduce 

quality, 

Additional  measures  are  needed  to  improve 
labour  market 
job 
segmentation,  and  support  adequate  wages. 
The  2026  Budget Law  reduced  Italy’s  high  labour 
social-security 
tax  wedge,  granted 
contribution  relief  for  hiring  workers  on  open-
ended  contracts  or  for  converting  fixed-term 

partial 

contracts  into  permanent  ones,  and  introduced 
temporary  fiscal  provisions  aimed  at  promoting 
renewals  of  national  contracts  for  2026.  The 
Budget Law also provided for incentives to firms in 
Italy’s Special Economic Zone (ZES) in the Southern 
and  two  Central  regions.  In  addition,  the  decree-
law  62/2026  established  new  provisions  linking 
fair wages to collective agreements signed by the 
most  representative  organisations.  Nevertheless, 
text  does  not  outline  adopted 
the 
enforcement procedures in case of underpayment 
and  non-compliance.  While  these  measures  are 
steps  in  the  right  direction,  several  challenges 
remain  also  with  regard  to  access  to  social 
protection  for  non-standard  workers  and  self-
employed (see Annex 12).  

legal 

Italy faces several labour market challenges 
in  the  transition  towards  climate  neutrality. 
Employment in mining and quarrying decreased by 
7.3%  in  2024  from  the  previous  year  (to  27 900 
workers).  In  the  automotive  sector,  employment 
decreased  by  15 000  between  2011  and  2023. 
The  energy-intensive 
industries  accounted  for 
3.3% of total employment as of 2023 (EU: 3.5%). 
At  the  same  time,  the  employment  share  of  the 
environmental  goods  and  services  sector  was 
4.5%  in  2022,  above  the  EU  average  of  3.1%. 
Estimations  also  show  that  new  job  creation  in 
wind  and  solar  generation  can  create 
jobs 
amounting to over 0.1% of the total workforce by 
2030 (477).  

(472) Contractual dumping is a practice involving the reduction of 
workers’  remuneration  and  employment  conditions  due  to 
the  presence  of  substandard  collective  labour  agreements 
which,  in  a  significant  number  of  cases,  do  not  effectively 
represent  or  protect  a  genuine  collective  interest  within  the 
meaning of Article 39 of the Italian Constitution. CNEL XXVI 
Report 2025 

(473) Michele  Faioli  e  Claudio  Lucifora,  2026,  Strategie  di  “non” 
equivalenza  contrattuale  collettiva  nel  terziario  e  nel 
turismo. 

(474) Confcommercio,  2025,  Il  peso  insostenibile  del  dumping 

contrattuale e dei "contratti pirata". 

(475) Eurofund,  2025,  Collective  bargaining  beyond  pay:  An 
analysis  of  collective  agreements  in  selected  low-paid 
sectors. 

(476) CNEL, 2025, Mercato del lavoro e contrattazione collettiva. 

(477) European Commission, Publications Office of the European 
Union, 2025, Estimating labour market transitions and skills 
investment needs of the green transition – A new approach. 

114 

 
 
 
 
ANNEX 12: SOCIAL POLICIES 

Italy  faces  persistent  challenges  in  reducing 
poverty,  inequality  and  labour  exploitation. 
Despite improvements, poverty, particularly among 
children, and inequality remain relatively high. The 
2025 country-specific recommendations called on 
Italy  to  expand  childcare  and  long-term  care 
services  and  further  limit  the  use  of  early-
(478).  Although  childcare 
retirement  schemes 
provision has improved and some early-retirement 
schemes  have  been  discontinued  (Opzione  donna, 
Quota 103), long-term care remains insufficient to 
meet  rising  demand.  Moreover,  cases  of  labour 
exploitation,  particularly  affecting  migrants,  are 
frequent,  and  access  to  social  protection 
is 
incomplete.  Italy’s  tax-benefit  system  also  has  a 
limited  redistributive  effect.  Addressing  these 
improve  social  mobility,  reduce 
issues  would 
poverty and inequality, and limit the loss of human 
capital,  thereby  supporting  inclusive  growth  and 
competitiveness. 

Poverty  and  social  exclusion  improved  in 
2025,  but  with  pronounced  and  widening 
regional disparities. The proportion of people at 
risk  of  poverty  or  social  exclusion  (AROPE)  was 
22.6% in 2025 (EU average: 20.9%) decreasing by 
0.5 pps since 2024. In absolute terms, around 13.3 
million  people  were  at  risk  of  poverty  or  social 
exclusion,  i.e.  260  000  less  than  in  the  previous 
year.  This  is  the  lowest  value  since  2015  and 
represents about half of the 2030 national poverty 
reduction  target.  Income  poverty  remained  the 
main driver of the risk of poverty, affecting 18.6% 
of  the  population  (compared  with  16.3%  in  the 
EU),  with  a  slight  decrease  of  0.3  pps.  The 
percentage  of  people  living  in  households  with 
very  low  work  intensity  decreased  to  8.2%,  down 
by 1.0 pps and close to the EU average of 7.9%. In 
contrast,  severe  material  and  social  deprivation 
increased  by  0.6  pps  and  reached  5.2%,  though 
still  below  the  EU  average  of  6.3%.  The  most 
affected  groups  were  single  parents  (44.4%), 
couples  with  three  or  more  children  (39.3%), 
tenants (39.4%) and foreigners (38.6%). According 
to  the  most  recent  national  statistics,  absolute 
poverty (479)  affected  8.4%  of  households  and 

(478) CSR  2025.1.7:  Mitigate  the  effects  of  ageing  on  potential 
growth  and  fiscal  sustainability,  including by  further limiting 
the use of early-retirement schemes (…). 

CSR  2025.6.1:  (…)  increase  labour  market  participation,  in 
particular  for  underrepresented  groups,  including  by  (…) 
improving  affordable  access  to  quality child-  and  long-term 
care, taking into account regional disparities. 

(479) See ISTAT (2024), La povertà in Italia - Anno 2024. 

9.8%  of  individuals  in  2024,  which  is  broadly 
stable  compared  with  2023.  Large  regional 
disparities  persisted,  with  the  AROPE  rate  ranging 
from  11.3%  in  the  North-East  to  40.5%  on  the 
Islands  –  a  gap  of  29.2  pps  that  has  been 
widening  since  2021.  These  disparities  are  driven 
by  differences  in  labour  market  performance,  a 
higher  concentration  of  low-paid  and  seasonal 
jobs  and  higher  levels  of  inactivity  among  young 
people  in  certain  regions,  and  the  persistent 
emigration  of  skilled  people  from  regions  with 
limited economic opportunities. The AROPE rate is 
higher  in  rural  areas  (24.0%)  than  in  towns, 
suburbs  (23.0%)  and  cities  (21.3%).  The  depth  of 
poverty declined by 1.4 pps and reached 24.6% in 
2025, against an EU average of 22.5%. To address 
the 
the  multiple  dimensions  of  poverty, 
implementation  of  a  comprehensive  approach,  as 
set  out  in  the  EU  Anti-Poverty  Strategy,  can 
support  progress  towards  achieving  the  national 
anti-poverty target. 

Social  benefits  reduce  poverty  only  to  a 
limited  extent,  and  the  minimum  income 
scheme  provides  uneven  support  across 
household  types.  In  2025,  social  benefits  other 
than  pensions  reduced  the  at-risk-of-poverty  rate 
by 30.6%, a decrease of 0.7 pps compared to the 
previous year, remaining below the EU average of 
33.2%.  The  2026  Budget  Law  has  increased  the 
Carta  dedicata  a  te  fund,  which  provides  low-
income households with basic material support, by 
EUR 500 million per year in 2026 and 2027. It has 
also  slightly  increased  monetary  support  for  low-
income  pensioners.  However,  challenges  remain 
regarding  minimum  income  support.  The  2023 
reform  of  the  minimum  income  scheme,  now 
known as the Assegno di Inclusione (ADI), reduced 
both adequacy and coverage, and restricted access 
to specific household types (see the 2025 country 
report).  In  2024,  only  18.5%  of  people  at  risk  of 
poverty  received  minimum  income  benefits,  and 
just  70.7%  of  people 
jobless  households 
received  social  benefits  of  any  type  -  well  below 
the  EU  average  of  83.2%  and  lower  than  in 
previous  years.  The  benefit  integrates  household 
income  up  to  a  set  threshold,  but  Italy  lacks  a 
transparent  and  robust  methodology  for  setting 
and  adjusting  it  regularly.  Nonetheless,  in  2025 
the  average  benefit  amount  increased  by  22.6% 
and the number of individual recipients by 6% (480), 

in 

(480) INPS, Osservatorio su Assegno d’Inclusione e Supporto 

Formazione e Lavoro, January 2026. 

115 

 
 
 
 
 
also  due  to  an  ad-hoc  increase  of  both  benefit 
levels  and  the  eligibility  means  test.  The  recent 
abolition of the suspension period between annual 
ADI renewals has reduced income discontinuity for 
vulnerable  households,  although  the  benefits  are 
still  reduced  by  50%  during  the  first  month  after 
renewal. 
Support 
the 
Instrument,  Italy  has  requested  support  to  better 
understand  the  reasons  of  the  non-take-up  of 
integrate 
minimum 
artificial  intelligence  (AI)  technologies  into  the 
operations of the National Social Security Institute 
(INPS). 

income  benefits  and 

Technical 

Through 

to 

of 

labour 

invested 

exploitation,  which 
Cases 
particularly  affects  migrants 
in  certain 
sectors,  are  frequent  and  lead  to  extreme 
poverty and social exclusion (481). An estimated 
10 000 exploited workers, mostly migrants, live, or 
are forced to live, in informal settlements that lack 
essential  services  such  as  water,  sanitation  and 
electricity,  and 
characterised  by 
that  are 
overcrowding,  unsafe  housing  and  poor  hygiene 
(482). Under the recovery and resilience plan (RRP), 
Italy  has  implemented  the  national  plan  to  tackle 
undeclared  work  and  has 
in  urban 
integration  plans,  including  housing  solutions  for 
agricultural  workers.  However,  Italy's  Court  of 
Auditors  has  found  that investments  to  overcome 
informal settlements in agriculture have produced 
inaccurate  mapping, 
limited 
to 
results,  due 
local 
fragmented  governance  and 
capacity (483).  Recent  research  highlights  how 
restrictive migration policies have exacerbated the 
problem  by  leaving  many  migrants  without  legal 
status  or  access  to  regular  employment,  pushing 
exploitative 
them 
arrangements (484). 
persistent 
undeclared  work  and 
recurrent  breaches  of 
occupational  safety  and  health  rules,  Italy  will 
receive  technical  support  to  strengthen  labour 
inspections  through  a  more  coordinated,  risk-

and 
address 

insufficient 

irregular 

into 

To 

(481) CSR 2025.6.2 Keep-up the efforts to tackle undeclared work, 

particularly in the most affected sectors.  

(482) Ministero del Lavoro e delle Politiche Sociali, ANCI e Cittalia, 
Le condizioni abitative dei migranti che lavorano nel settore 
agroalimentare, 2022. 

(483) See  Corte  dei  Conti,  Deliberazione  25  luglio  2024,  n. 

81/2024/G. 

(484) Pomponi,  F.,  Main  Policy  Orientations  that 

Impact  on 
Undeclared Work of Foreigners in Italy, 2024. See also CNEL, 
Osservazioni  e  Proposte 
in  materia  di  caporalato  e 
prevenzione delle forme di sfruttamento lavorativo, 2026. 

based  enforcement  model  that  makes  better  use 
of data and analytics. 

Child  poverty  remains  a  challenge,  with 
larger families facing higher poverty risks. In 
2025, 27.1% of children were at risk of poverty or 
social exclusion, which is above the EU average of 
24.3%  and  did  not  change  for  the  second 
consecutive  year.  The  risk  of  poverty  increases 
steadily  with  family  size:  for  couples  without 
children,  the  AROPE  rate  was  16.2%  (compared 
with  14.4%  in  the  EU),  increasing  to  18.7%  for 
couples  with  one  child  and  22.9%  for  those  with 
two children, while average EU rates increase only 
marginally  with the first two children.  For couples 
with  three  or  more  children,  the  rate  increases 
sharply to 39.3% in Italy, compared with 32.4% in 
the EU. Single-parent households remain the most 
vulnerable, with an AROPE rate of 44.4%. Overall, 
people  in  households  with  children  face  a  higher 
poverty risk (25.5%) than those without (20.2%), a 
gap  more  than  twice  the  EU  average,  pointing  to 
shortcomings 
family 
allowances. 

the  adequacy  of 

in 

Access to childcare has improved and family 
policies  have  been  expanded,  but  progress 
remains uneven. In its mid-term fiscal structural 
plan, Italy committed to expanding early childhood 
education and care (ECEC) coverage and improving 
its  affordability.  However,  participation  in  formal 
childcare decreased in 2025, and strong disparities 
remain  between 
regions  and  socio-economic 
groups,  exacerbating  inequalities (485)  (see  Annex 
13).  As  of  2026,  family  policies  have  been 
broadened  through  extended  parental  leave  up  to 
the age of 14, doubled unpaid leave for the illness 
of  children  aged  8–14,  and  additional  funding  to 
support  access  to  socio-educational  services, 
summer  camps  and  sports  activities  and  the 
purchase  of  school  textbooks.  Revisions  to  the 
calculation  of  the  index  of  equivalent  economic 
situation  (ISEE),  an  economic  indicator  commonly 
used in Italy for means-testing social benefits and 
services,  have  also  improved  access  to  social 
protection  for  large  families  by  increasing  the 
equivalence  scale  factors  for  children.  To  achieve 
further  progress  in  reducing  child  poverty,  Italy 
would  particularly  benefit  from  expanding  access 
to  school  meals  in  line  with  the  Child  Guarantee. 
This  would  require  further  investment  in  school 

(485) European Commission, Education and Training Monitor - Italy, 

2025. 

116 

 
 
 
canteens  and  full-time  schooling  (see  Annex  13), 
as  well  as  recurrent  funding  to  sustain the  1 300 
school  canteens  built  under  the  Recovery  and 
Resilience Facility. 

in  keeping 

figures  also 

reveal  strong 

Energy  and  transport  poverty  are  below  the 
In  2025,  8.6%  of  households 
EU  average. 
reported  difficulties 
their  homes 
adequately  warm.  While  this  value  is  in  line  with 
the  EU  average  of  8.8%,  the  situation  varies 
significantly by income level, with 20.9% of lower-
income households facing this challenge compared 
with  only  5.8%  of  higher-income  households. 
These 
regional 
disparities, with values ranging from 16.0% on the 
Islands to 5.1% in the North-East. Furthermore, as 
fuels covered by the upcoming extension of the EU 
emission  trading  scheme  to  buildings  (ETS2)  – 
primarily gas – account for 52% of final household 
energy  consumption,  compared  with  just  42% 
across  the  EU,  heating  costs  in  Italy  are  expected 
to  rise  slightly  more  than  the  EU  average. 
Transport  poverty,  measured  by  the  share  of 
people  unable  to  afford  a  car,  is  also  relatively 
low,  at  4%  in  2025  (compared  with  5.5%  in  the 
EU). Under ETS2, transport fuel spending in Italy is 
expected to rise by less than the EU average. Cars 
are  often  the  only  option  given  the  lack  of 
adequate  public  transport  (see  Annex  19),  which 
poses environmental challenges (see Annex 8). 

to  12  months,  only  45.1% 

Uneven  access  to  social  protection  exposes 
unemployed  people  and  self-employed  and 
atypical workers to high poverty risks. Among 
people  aged  15-74  registered  as  unemployed  for 
receive 
up 
unemployment benefits (against 58.7% in the EU). 
Only 39% of unemployed people and 20.6% of the 
economically inactive population receive any form 
of support (against 52.8% and 40.3% respectively 
in  the  EU).  This  leads  to  an  at-risk-of-poverty 
(AROP)  rate of 49.8% for unemployed people  and 
32.2%  for  the  economically  inactive  population. 
While  self-employed  workers,  such  as  farmers, 
face  a  lower  AROP  rate  (17.7%  vs  EU:  20.9%), 
significant  coverage  gaps  persist:  only  11.5% 
receive  any  social  benefits,  compared  with  35.7% 
for  employees,  and  most  were  not  covered  by 
unemployment  (79%)  or  sickness  benefits  (68%) 
in  2022.  Although 
temporary  workers  are 
comparatively  more  likely  to  receive  benefits 
(51.9%)  than  their  EU  peers  (38.3%),  they  are 
more exposed to poverty (20.4%) than permanent 
workers (6.9%). Part-time employees are both less 
likely  to  receive  benefits  (26.6%)  than  in  the  EU 

(30.1%)  and  more  likely  to  face  poverty  (15.7% 
compared with 12.9% across the EU) (486). 

professionals 

Recent  reforms  have  expanded  access  to 
social  protection,  but  significant  coverage 
and  adequacy  gaps  persist.  Measures  adopted 
since  2020  have  strengthened  unemployment 
protection  for  atypical  workers.  These  include 
longer  unemployment  benefit  duration  for  certain 
categories  of  self-employed  workers  (DIS-COLL), 
broader  coverage  of  the short-time  work  scheme, 
and  a  permanent  income  support  scheme  for 
(ISCRO).  Moreover, 
freelance 
maternity  and  parental  leave  rights  for  the  self-
employed have been expanded, alongside targeted 
extensions  for  cultural  workers  and  students  in 
to 
learning.  However, 
work-based 
unemployment,  sickness  and  work-injury  benefits 
for  the  self-employed  remains  limited,  while  very 
short contracts continue to weaken benefit access 
and  adequacy  for  temporary  workers,  with  one  in 
four  temporary  contract  workers  on  contracts 
lasting  six  months  or  less.  Low  take-up  and 
insufficient  benefit 
levels  further  reduce  the 
effectiveness of unemployment support. 

access 

Income  inequality  improved,  while  wealth 
inequality  is  on  a  worsening  trend,  and  both 
remain  high.  In  2025,  the  income  quintile  share 
ratio  (S80/S20)  declined  to  5.13,  the  lowest  level 
since  2004,  but  remained  well  above  the  EU 
average  of  4.62.  The  middle-to-bottom  income 
ratio (S50/S20) decreased to 2.35, compared with 
2.17  in  the  EU,  indicating  that  lower-income 
households  gained  ground  relative  to  the  middle, 
while the top-to-middle ratio (S80/S50) decreased 
to  2.19  (EU:  2.12),  signalling  a  modest  narrowing 
at  the  top.  While  gross  market  income  inequality 
decreased  markedly  (from  9.35  to  8.67),  the 
impact  of  taxes  and  transfers  remained  stable 
(see below). In contrast, wealth inequality is on the 
rise: in the third quarter of 2025, the top  10%  of 
households owned 60.1% of net wealth, while the 
bottom  50%  owned  7.4%  of  it,  compared  to 
57.2% and 5.1% in the euro area, respectively. The 
share  of  net  wealth  owned  by  the  top  10%  has 
been  increasing  at  a  fast  pace  since  2020,  by  a 

(486) This paragraph contains data on recipient rates of individual 
cash  benefits  for  the  population  (16-64,  unless  specified 
otherwise)  at  risk  of  poverty  before  social  cash  transfers 
(excluding  pensions).  Source:  Eurostat,  EMPL  special 
extraction. 

117 

 
 
total of about 5 pps, while the share owned by the 
bottom 50% has slightly decreased. 

Recent  changes  to  taxes  and  benefits  in 
contributed  to  some  progress  in  reducing 
income  inequalities.  The  National  Statistical 
Institute  estimates  that  changes  to  taxes  and 
benefits  implemented  in  2025  have  reduced  the 
Gini  index  from  31.41  to  31.17  (487).  Offering  a 
longer-term perspective, simulations performed by 
the European Commission's Joint Research Centre 
estimate that, between 2022 and 2025, unindexed 
progressive  tax  parameters  would  have  raised 
revenues  by  EUR  56.6  billion  without  policy 
changes, but fiscal reforms limited the increase to 
EUR  18.4  billion.  Indexing  tax  brackets  at  this 
stage would reduce revenues by a further EUR 4.5 
billion  and  would  have  a  strongly  regressive 
distributive 
impact.  By  contrast,  the  reforms 
implemented  since  2022  have  had  a  slightly 
progressive  effect,  remaining  broadly  neutral  for 
the  three  lowest  income  deciles  while  reducing 
disposable  income  among  higher-income  groups 
(488).  In  this  context,  the  2026  Budget  Law  has 
lowered the second personal income tax rate from 
35%  to  33%,  easing  fiscal  pressure  on  middle-
income earners.  

its 

low, 

reflecting 

Nonetheless, the overall effectiveness of the 
tax-benefit  system  in  reducing  inequality 
remains 
limited 
redistributive  capacity.  In  2025,  taxes  and 
benefits 
income 
(excluding  pensions)  reduced 
inequality by 40.8%, well below the EU average of 
48.1% and in line with previous years. Both social 
benefits  (27.3%  vs  34.8%)  and  taxes  (15.5%  vs 
16.9%) contributed less than in the EU. This partly 
reflects  the  tax  system’s  structure:  since  2019, 
most  self-employed  people  have  been  subject  to 
flat-tax  regime,  which  was  extended  in  2023  to 
include  those  with  revenues  below  EUR 85 000. 

(487) ISTAT,  La  redistribuzione  del  reddito  in  Italia,  March  2026. 
The  analysis  considers  (i)  the  shift  from  partial  social 
contribution  relief  for  employees  to  a  tax  bonus  and  an 
additional  tax  deduction;  (ii)  the  transition  from  full  social 
contribution exemption for working mothers to the “mothers’ 
bonus”;  (iii)  the  adjustment  to  the  cost  of  living  of  the 
amounts  and  related  thresholds  of  the  Universal  Allowance 
(AUU),  the  newborn  bonus,  and  the  changes  to  the  nursery 
bonus;  (iv)  the  changes  to  thresholds  and  amounts  of  the 
Inclusion  Allowance  (ADI)  and  the  Support  for  Training  and 
Employment (SFL); (v) the extraordinary €200 contribution to 
support energy expenses and the update of social bonuses. 

(488) The simulation was performed by the European Commission, 
Joint Research Centre, based on the EUROMOD model, J2.0+. 

creates 

horizontal 

Under this system, taxable income is calculated as 
a  fixed  percentage  of  revenues,  and  a  single  tax 
rate  of  15%  (or  5%  for  new  businesses)  applies 
instead  of  a  progressive  schedule.  This  weakens 
progressivity, 
inequities 
between employees and self-employed people and 
across income thresholds, and risks distorting work 
incentives 
self-
employment.  Preferential  treatment  of  rental  and 
capital income, together with low taxes on wealth 
and 
the 
redistributive  role  of  fiscal  policy.  Sustainably 
further 
reducing 
increasing the overall progressivity and fairness of 
the tax mix. 

inequality  would 

inheritances (489), 

encouraging 

require 

further 

bogus 

limits 

and 

Graph A12.1: Impact of taxes and benefits (excl. 
pensions) on the S80/S20 income share ratio 

Source: Eurostat, EMPL calculations.  

The  delivery  of  essential  social  services  is 
being strengthened, but territorial disparities 
and  gaps 
in  the  service  offer  remain. 
Introduced  in  2021,  the  minimum  set  of  social 
that  municipalities  must 
assistance  services 
guarantee uniformly across the country (LEPS) has 
been strengthened by the 2026 Budget Law, which 
aims  to  set  up  a  monitoring  system  with 
law  also 
measurable  service  objectives.  The 
allocates  EUR  200  million  per  year  from  2027  to 
psychologist 
guarantee 
30 000 
inhabitants 
socio-pedagogical 
one 
professional  educator  per  20 000  inhabitants  in 
each  multidisciplinary  team.  Nonetheless,  LEPS 
remain  scattered  across  several  legal  acts  and 
some  essential  services,  such  as  'housing  first' 
(see  Annex  16). 
included 
services,  are  not 
Municipalities with lower administrative and fiscal 
capacity, most often in the South (see Annex 19), 
struggle to deliver high-quality social services. Full 
implementation  would  benefit  from  legislative 

and 

one 

per 

(489) See OECD 2021, Inheritance taxation in OECD countries. 

118 

10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%55.0%2022202320242025Italy - taxesEU - taxesItaly - transfersEU - transfersItaly - combinedEU - combined 
 
   
 
codification,  a  clear  division  of  responsibilities 
across  government  levels  and  adequate  financing 
to  expand  the  service  offer  and  bridge  territorial 
disparities. 

Italy faces rising long-term care needs amid 
population  ageing,  but  service  provision 
remains  insufficient  and  fragmented.  People 
aged  65  and  over  accounted  for  24.3%  of  the 
population  in  2024,  with  28.7%  reporting  severe 
difficulties  in  daily  activities  in  2019 (EU:  26.6%). 
Public  expenditure  on  long-term  care  stood  at 
1.6% of GDP in 2022, below the EU average, and 
was  projected  to  remain  unchanged  by  2030(490). 
Access  to  care  is  constrained  by  high  out-of-
pocket costs (see Annex 15) and a benefits system 
income  or 
that  does  not  vary  according  to 
dependency 
is  not  conditional  on 
level  and 
purchasing  care,  leaving  many  households  unable 
to  afford  professional  home  care.  Home  care 
service  intensity  is  low,  focusing  mainly  on  basic 
personal  care,  while  instrumental  daily  activities 
are  often  unmet.  Fragmentation  between  health 
authorities  and  municipalities  limits  coordination 
and  produces  uneven  territorial  coverage  (see 
Annex  15).  Long-term  care  spending  is  heavily 
skewed  towards  cash  benefits,  while  home  and 
residential  care  remain  underfunded.  The  long-
term care workforce ratio, standing at 1.5, is much 
lower  than  the  EU  average  of  3.3 
(2024). 
Residential  care  is  particularly  scarce  in  southern 
regions,  and  many  older  people  report  unmet 
needs,  especially  in  towns,  suburbs  and  rural 
areas. Poor working conditions reduce the sector’s 
attractiveness  and  lead  to  workforce  shortages, 
forcing  families,  mainly  women,  to  provide  high-
intensity  informal  care,  with  negative  effects  on 
health, employment and future pension adequacy. 
Although the long-term care system was reformed 
in 2023 under the recovery and resilience plan, the 
funding  necessary  to  build  an  integrated  system, 
expand services, and introduce new models of care 
remains insufficient. While measures have recently 
been  taken  to  create  a  fund  to  support  family 
caregivers (EUR 1.15 million in 2026 and EUR 207 
million  from  2027),  reliance  on  monetary  support 
alone,  without  an  adequate  service  offer,  risks 
labour  market, 
perpetuating 
especially among women. 

inactivity 

in  the 

(490) European  Commission  and  SPC  ISG,  Monitoring  Framework 
on  the  Council  Recommendation  on  access  to  affordable 
high-quality long-term care, 2025. 

119 

 
 
ANNEX 13: EDUCATION AND SKILLS 

in 

in 

Italy  continues  to  face  structural  challenges 
across  the  education  and  skills  system, 
particularly  affecting  disadvantaged  groups. 
Despite  gradual  progress  on  key  education 
indicators, weaknesses persist in basic skills, adult 
participation 
the  alignment 
training  and 
between education and labour market needs. Skills 
shortages 
technical,  digital  and  science, 
technology,  engineering  and  mathematics  (STEM) 
fields  coexist  with  a  still  developing  system  of 
tertiary  and  vocational  education  and  training 
(VET).  Socio-economic  inequalities  and  marked 
regional  disparities  continue  to  affect  educational 
outcomes. 
country-specific 
recommendations  for  Italy  called  for  improving 
access to quality childcare, strengthening VET and 
adult learning, promoting work-based learning and 
improving  educational  outcomes,  with  particular 
attention to disadvantaged learners.  

2025 

The 

in  household 

Participation  in  early  childhood  education 
and  care  (ECEC)  continues  to  increase,  but 
regional  disparities 
remain  pronounced. 
Access  to  ECEC  for  children  under  three  remains 
higher  in  northern  regions  than  in  the  South, 
reflecting  differences 
income, 
parental education and employment status (491). In 
2024,  participation  among  children  aged  0-2  was 
39.4%, up 4.9 percentage points (pps) from 2023 
and  broadly  in  line  with  the  EU  average  (39.2%), 
approaching  the  revised  2030  Barcelona  national 
target  of  41.7%.  However,  significant  regional 
disparities  persist (492),  and  in  2025  participation 
dropped  again  to  35.5%  (EU:  40.2%).  Three-year-
olds’  participation  in  the  first  year  of  compulsory 
education  reached  94.0%  in  2024  (EU  average: 
95.0%).  However,  this  is  still  below  pre-pandemic 
levels.  Under  the  recovery  and  resilience  plan 
(RRP),  over  150 000  ECEC  places  are  expected  to 
be  created  through  EUR  3.2  billion  of  investment, 
with  a  strong  focus  on  municipalities  with  the 
largest shortages. These measures are expected to 
reduce territorial gaps, but because not all eligible 
municipalities  are  participating,  evidence  on  the 
impact on access for disadvantaged children is still 
emerging.  Expanded  provision  may  contribute  to 
more  equitable  participation  and  future  skills 
development,  depending  on  the  availability  of 

(491) ISTAT (2023). I servizi educativi per l’infanzia in un’epoca di 

profondi cambiamenti. 

(492) See ISTAT, Il benessere equo e sostenibile in Italia 2024.  

qualified  staff,  adequate  quality  standards  and 
sustainable local financing (493). 

risen 

training 

Progress  in  reducing  early  leaving  contrasts 
with  persistently  weak  and  unequal  learning 
outcomes,  varying  strongly  by  school  type, 
region  and  socio-economic  background.  In 
2025,  the  share  of  early  leavers  from  education 
(ELET)  among  18-24-year-olds 
and 
continued  its  positive  trend  and  fell  to  8.2%  (EU 
average:  9.1%),  already  meeting  the  EU  2030 
target of 9%. The rate, however, remains relatively 
high in the South (8.4%) and especially the Islands 
(13.7%)  and  is  overall  characterised  by  strong 
disparities across genders and between those born 
in  and  outside  Italy (494).  Regarding  basic  skills, 
in 
underperformance  has  significantly 
mathematics, 
reversing  progress  made  since 
2006. In addition, proficiency levels remain shaped 
by  socio-economic  background,  with  students  in 
the  bottom  ESCS  quarter  three  times  more  likely 
to underachieve in mathematics, compared to non-
disadvantaged students. More in general, territorial 
divides  remain  a  major  obstacle  to  equity,  with 
almost  half  of  all  students  (46%)  in  the  South 
failing  to  achieve  basic  proficiency  and  less  than 
3%  reaching  top  performance  (495).  Implemented 
over the 2024/2025 and 2025/2026 school years 
the  Recovery  and 
and  partially  funded  by 
Resilience  Facility  (RRF),  the  Agenda  Sud  initiative 
aims 
reduce 
educational  disparities,  including  early  leaving  in 
southern  regions  (496).  The 
involved 
around 2 000 schools, including the 245 identified 
as  ‘critical’  by  Invalsi  on  the  basis  of  student 
finances 
performance  data.  The  RRF  also 
structured  socio-educational  interventions  in  the 
South  to  combat  educational  poverty,  providing 
services  to  minors,  thus  increasing  access  to 
childcare  and  educational  opportunities,  and 
preventing  school  dropout  and  early  leaving  (497). 

improve  basic  skills  and 

initiative 

to 

(493) ISTAT (2025) BES Sintesi per la stampa_2025. 

(494) See Education and Training Monitor 2025 – Italy. 

(495) See Country Report Italy 2025 and OECD, PISA, 2022. 

(496) CSR.2025.6.4: Improve educational outcomes, with a focus 
on disadvantaged students, including by strengthening basic 
skills. 

(497) CSR.2025.6.1: Promote job quality and reduce labour market 
segmentation, also to support adequate wages, and increase 
labour  market 
for 
underrepresented  groups,  including  by  further  strengthening 
active  labour  market  policies  and  improving  affordable 
access  to  quality  child-  and  long-term  care,  taking  into 
account regional disparities. 

participation, 

particular 

in 

120 

 
 
 
 
 
 
Law  79/2025, 

In  June  2025,  Italy  converted  Law  Decree  n.  45 
introducing  RRP-linked 
into 
structural  measures  to  strengthen  the  school 
system.  Additional  well-designed  measures  could 
lead  to  long-lasting  improvements  in  basic  skills 
across regions and backgrounds.  

limited 

regions 

opportunities 

languages  and 

While  some  measures  have  been  taken,  the 
attractiveness  of  the  teaching  profession 
remains  low.  TALIS  2024  confirms  a  rapidly 
ageing  workforce:  50.5%  of  lower  secondary 
teachers are aged 50 or over (EU average: 39.9%), 
while the share of young teachers remains limited. 
Despite  declining  student  numbers, 
teacher 
shortages persist also due to regional imbalances. 
in  science, 
Shortages  are  particularly  acute 
learning 
mathematics,  foreign 
support,  and  are  more  pronounced  in  northern 
regions,  while  some  southern 
face 
oversupply  (498).  Teachers’  salaries  remain  well 
below  those  of  other  tertiary-educated  workers, 
while  career  progression  is  mainly  based  on 
seniority,  with 
for 
differentiated  roles,  despite  recent 
initiatives 
introducing  functions  such  as  docente  orientatore 
(career  guidance  teacher)  or  animatore  digitale 
(digital 
while 
In 
improvements  have  been 
introduced,  schools 
continue  to  rely  on  temporary  contracts.  The 
cumbersome  and  lengthy  process  for  obtaining  a 
standard  teaching  contract  hampers  schools’ 
ability to hire and retain good candidates. Italy has 
introduced a set of policy measures under the RRP 
to  enhance  the  teaching  workforce,  including  a 
recruitment  reform,  and  investments  in  training. 
These include the extension and monitoring of the 
Carta del Docente to support professional learning 
and  access  to  training  and  digital  tools,  and 
measures  to  strengthen  induction  and  mentoring 
for  teachers  and,  more  generally,  the  overall 
school  staff.  Further  improvements  in  working 
conditions and career prospects would help attract 
and  retain  qualified  professionals  and  support 
teaching quality in the long run. 

entertainer). 

addition, 

Despite  recent  efforts,  the  labour-market 
relevance  of  VET  remains  constrained  by 
limited  work-based  learning  and  declining 
participation.  The 
share  of  medium-level 
education  students  attending  programmes  with  a 
vocational  orientation (51% in 2024)  has steadily 
decreased  over  the  last  decade  (down  8.4  pps 

(EU  average:  80.2%). 

compared  with  2013).  Among  them,  only  36.4% 
reflecting  persistent  gender 
were  women, 
stereotypes  and  early  educational 
choices. 
Moreover,  very 
recent  VET  graduates 
few 
experience  work-based  learning  (22.0%  vs  EU 
average:  66.0%  in  2025),  hindering  their  smooth 
transition  to  work.  At  the  same  time,  the 
employment  rate  of  recent  VET  graduates  has 
increased  in  line  with  general  employment  trends 
but, at 64.9% in 2025, is among the lowest in the 
EU 
In  turn,  at  upper 
secondary  level,  44.5%  of  VET  students  are 
enrolled in STEM-related fields, higher than the EU 
average  of  39.1%.  The  Labour  Decree  (48/2023) 
introduced  skilling  and  career-guidance  pathways 
to  better  align  education  with  labour  market 
needs. In parallel, under the RRP, Italy reformed its 
VET 
private-sector 
strengthening 
involvement,  also  through  a  targeted  investment 
building  up  a  dedicated  national  digital 
platform (499).  This  direction  is  further  reflected  in 
Law  Decree  No.  127  of  September  2025,  which 
strengthens  the  link  between  schools  and  the 
world  of  work.  However,  the  orientation  offer 
remains  fragmented,  contributing  to  disjointed 
pathways and misaligned information (500).  

system, 

level. 

Italy  is  strengthening  its  skills  agenda  also 
by expanding ITS academies and investing in 
STEM education. Under the RRF, Italy introduced 
an  integrated  4+2-year  pathway  linking  technical 
or  vocational  upper  secondary  education  with  ITS 
specialisation.  Given  its  positive  labour  market 
outcomes,  the  pathway  has  been  expanded  to 
cover  all 
ITS 
ITS  schools  at  national 
academies  provide  professional  courses  at  the 
European Qualifications Framework levels 5 and 6. 
Since  2022,  the  focus  has  been  on  strengthening 
and 
institutions.  RRF 
funding  has  led  to  a  substantial  increase  in  the 
number  of  academies,  courses  and  participants. 
Yet, it will be essential to maintain support. Under 
the  RRP, 
is  also  strengthening  STEM 
education  through enhanced  digital  infrastructure, 
updated  teaching  methods,  and  targeted  VET 
aligned  with 
labour  market  needs.  While 
participation  in  vocational  STEM  programmes  is 

internationalising 

these 

Italy 

(499) CSR.2025.6.3:  Continue  promoting  postsecondary  VET  and 
in-work  training  in  high-demand  sectors  to  address  short-
term  skills  needs,  while  strengthening  adult  learning  by 
expanding work-based learning in high-growth sectors. 

(500) INAPP,  L'offerta  di  orientamento  in  Italia.  Una  mappa 

(498) EY (2025) Forecasting the Teaching Workforce in Italy. 

aggiornata dei servizi. 

121 

 
 
 
high, 

STEM 

(ICT),  and 

relatively 
enrolment, 
tertiary 
particularly  in  information  and  communications 
technology 
representation 
remain  below  EU  targets.  Persistent  gender 
stereotypes  and  early  educational 
choices 
contribute to these gaps, highlighting the need for 
early interventions. 

female 

Graph A13.1: Selected indicators on tertiary 
education and VET 

Source: Eurostat, [edat_lfse_03, educ_uoe_enrt03, 
edat_lfs_9919, educ_uoe_enra03]. 

to  challenges 

(12.6%),  pointing 

Tertiary educational attainment has steadily 
increased but it remains low, notably in STEM 
fields. In 2025, 31.1% of 25–34-year-olds held a 
tertiary qualification, up from 25.6% in 2016. The 
increase  has  been  mainly  driven  by  women. 
Despite  this  progress,  Italy  remains  among  the 
countries  with  the  lowest  attainment.  Attainment 
is  particularly  low  among  foreign-born  people, 
whether  from  EU  countries  (12.2%)  or  non-EU 
countries 
in 
integration and in attracting highly qualified talent 
from abroad. The employment rate of recent (one 
to  three  years)  tertiary  graduates  continued  to 
grow in 2025 but remains among the lowest in the 
EU  at  78.7%  (EU  87.0%).  This  also  contributes  to 
Italy  experiencing  a  significant  outflow  of  highly 
educated young people (see Country Report 2025). 
Italians represented 9% of all EU-movers (citizens 
of an EU country who live and work in a different 
EU  country) 
in  2024,  while  returns  remain 
comparatively  limited,  resulting  in  a  progressive 
loss  of  skilled  human  capital.  Moreover,  tertiary 
enrolment  in  STEM  fields  remained  below  the  EU 
average  in  2024  (25.0%  vs  27.1%).  Enrolment  is 
particularly low in ICT (2.4%), among the lowest in 
the EU, and female participation – while generally 
above the EU average (37.0% vs 32.2%) – in some 
STEM  disciplines  remains  limited,  despite  recent 

policy  efforts  under  the  RRP  to  strengthen  STEM 
pathways across education levels. Socio-economic 
background  continues 
to  shape  educational 
outcomes:  among  25-34  year-olds,  63.4%  of 
those  with  at  least  one  tertiary-educated  parent 
had attained tertiary education in 2023, compared 
with  just  14.6%  of  those  whose  parents  did  not 
complete  upper  secondary  school.  Since  the  RRP 
led  to  an  increase  in  scholarships  for  students 
from  disadvantaged  backgrounds,  a  particular 
attention  could  be  paid  to  how  their  scope  and 
level develops beyond 2026. 

Shortages of skilled labour remain prevalent 
and  are,  connected  to  skills  mismatches, 
among  other  things.  Although  overall  vacancy 
rates are below the EU average and on a declining 
trend  (see  Annex  11),  in  April  2026,  according  to 
the  Excelsior  Information  System  data,  44.6%  of 
all job vacancies were difficult to fill (down by 2.6 
pps  from  April  2025),  due  to  a  shortage  of 
candidates  (27.7%)  or  inadequate  preparation 
(13.3%)  (501).  In  2024,  Italy  reported  shortages  in 
180  occupations  (502).  The  most  difficult  positions 
to fill required technical skills (indicated by 57.1% 
of  participating  companies)  and  manual  tasks 
(46.3%), with higher incidences in industry than in 
services  (503).  Between  2022  and  2025,  among 
occupations with relevance to the green transition 
and  climate  adaptation,  there  were  persistent 
shortages  of  industrial  and  production  engineers, 
electrical  mechanics  and  fitters,  welders,  and 
flame  cutters.  Recent  survey  data  indicate  that 
more  than  two-thirds  of  participating  companies 
experienced 
These 
persistent  mismatches 
patterns 
between  labour  demand  and  the  available  skills 
base. Italy also faces a substantial structural skills 
mismatch, with one of the highest macroeconomic 
skills mismatches  in  the  EU  in  2025  (25  vs  19.2) 
and  only  43.6%  of  young  people  (aged  25-34) 
reporting a high or very high match between their 
field  of  study  and  their  current  or  last  main  job 
(EU:  59.5%).  Several  databases  monitor  labour 
market trends, but data on the skills development 
needs  of  currently  employed  workers  are  not 
collected.  Connecting  existing  databases  with  a 
focus  on  skills  demand  (e.g.  SIISL,  AppLI,  ISTAT’s 

recruitment 

underscore 

difficulties. 

(501) Union  Camere  -  Ministero  del  Lavoro  e  delle  Politiche  Sociali, 

Sistema Informativo Excelsior, 2026. 

(502) Labour  shortages  and  surpluses 

in  Europe  -  EURES 
(EURopean Employment Services), accessed on 2026-05-06. 

(503) Confindustria, Confindustria survey on work in 2025, 2025. 

122 

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%20162025201520242021202520152024Overall attainmentSTEM enrolmentExposure of graduates towork-based learningSTEM enrolment in initialmedium-level VETTertiary educationVETItalyEU 
       
 
labour  force  survey  database,  INPS  and  regional 
labour  market  observatories)  could  help  address 
this issue (504). Moreover, creating a national skills 
observatory  or  other  effective  skills  anticipation 
tools,  aligning  methodologies,  time  horizons  and 
definitions  of  skills,  could  strengthen  skills 
intelligence  and  help  address  regional  disparities. 
As  part  of  a  multi-country  project  with  Czechia, 
Italy  benefits  from  support  through  the  Technical 
Support  Instrument  to  enhance  skills  assessment 
and forecasting through the development of a tool 
matching  workforce  skills  and  improved  skills 
governance. 

consultancies  and  participating 
initiatives,  such  as 

Italy  is  taking  action  to  better  align  the 
education  system  with  labour  market  needs, 
learning. 
through  work-based 
including 
According  to  Confindustria, 
Italian  companies 
address labour shortages and skills mismatches by 
strengthening  internal  staff  training,  relying  on 
in 
external 
territorial  educational 
ITS 
academies,  pathways  for  transversal  skills  and 
orientation,  and  curricular  internships (505).  Under 
the  RRP,  in  March  2024,  Italy  adopted  the  Piano 
nuove competenze e transizioni, to better align the 
planning  of  the  training  offer  with  labour  market 
needs,  promote  work-based  learning,  recognise 
prior  learning,  introduce  micro  credentials,  and 
strengthen 
policies 
(ALMPs) (506). Its implementation is expected to be 
completed  by  early  2026.  Moreover,  in  December 
2024,  the  third  edition  of  the  Fondo  nuove 
launched,  providing  over 
competenze  was 
EUR 1 billion 
to  bring 
themselves  in  line  with  major  European  skills 
frameworks.  The  effects  of  recent  changes  to 
ALMPs will need to be monitored. Yet, cooperation 
across regions remains a challenge with territorial 
disparities remaining a significant barrier.  

Italian  companies 

labour  market 

active 

to 

Skills 
shortages  and  mismatches  are 
exacerbated  by  limited  labour  mobility,  low 
graduate wages and difficulties in attracting 
high-skilled  talent  from  abroad  (507).  In  high-

productivity areas, wage growth has not kept pace 
with  rising  housing  prices  (see  Country  Report 
2025  and  Annex  16),  presenting  an  additional 
hurdle  for  skilled  workers.  Immigration  could  help 
address  shortages,  especially  in  sectors  such  as 
construction  and  tourism.  However,  Italy  ranks 
among  the  least  attractive  countries  for  highly 
skilled  workers  in  the  EU  (31st  out  of  38  OECD 
countries) 
country’s 
Enhancing 
attractiveness  to  young  and  highly  qualified 
migrants  could  entail  faster  and  more  coherent 
recognition  of  qualifications  and  skills  obtained 
abroad. (509). CEDEFOP projections indicate that by 
2035  Italy’s  labour  market  will  be  dominated  by 
medium- and high-skilled jobs, but skills supply is 
expected  to  remain  heavily  misaligned,  with 
shortages of high-skilled workers and surpluses at 
lower skill levels (510). 

(508). 

the 

in 

for 

productivity 

Italian  adults  lag  behind  their  European 
in  basic  and  digital  skills,  with 
peers 
implications 
and 
competitiveness.  2023  OECD  data  show  that 
Italian  adults  perform  worse  than  adults  from 
literacy, 
other  participating  EU  countries 
numeracy  and  problem-solving 
(see  Country 
Report 2025). Around one third of adults can only 
handle  simple  texts  or  basic  calculations,  and 
nearly half struggle with multi-step problems. The 
share  of  Italians  with  at  least  basic  digital  skills 
has  significantly  increased  in  the  last  two  years 
(from 45.8% in 2023 to 54.3% in 2025), although 
it  remains  below  the  EU  average  (60.4%).  RRP-
supported  measures,  such  as  the  network  of 
digital  facilitation  centres  or  the  Digital  Civic 
Service, might have contributed to this result (511). 
However,  large  gaps  remain,  especially  among 
people with lower levels of education, unemployed 
people  and  people  outside  the  labour  force, 
highlighting  an  urgent  and  continued  challenge 
with  regards  to  targeted  upskilling  (512).  Italy’s 
‘New  Skills  Fund’  was  recently  expanded  to 
strengthen  lifelong  learning  paths.  In  May  2025, 
Director’s  Decree  No.  243  provided  further  EUR 
319  million,  raising  total  resources  to  EUR  1.049 

(504) CEDEFOP,  Next  generation  skills 
learning and better matching, 2024. 

intelligence  for  more 

(505) Confindustria,  Mismatch,  and  Indagine  Confindustria  sul 

lavoro del 2024, 2025. 

(506) Ministero del lavoro, Fondo nuove competenze. 

(507) Fondazione  Nord  Est,  Nota  della  Fondazione  Nota  8  and 

Nota 6, 2024. 

(508) CNEL,  Italy’s  attractiveness  to young  people  from  advanced 

countries, 2025. 

(509) Banca d’Italia, N. 923 - Flussi e politiche migratorie in Italia e 

in altri paesi europei, 2025. 

(510) CEDEFOP, Skills forecast – Italy, 2025. 

(511) Respectively M1C1.I1.7.1 and M1C1.I1.7.2. 

(512) INAPP, Cognitive skills in adults, 2024. 

123 

 
 
 
funding 

billion  and  doubling 
individual 
enterprises. Training will be delivered by accredited 
providers, 
universities, 
strengthening  lifelong  learning  and  highlighting 
the strategic role of upskilling and reskilling. 

institutes, 

and 

ITS 

for 

in  adult 

Participation  in  adult  learning  is  low  and 
decreasing,  particularly  among  low-qualified 
people  and  people  distant  from  the  labour 
market.  Participation 
learning  has 
declined  and  stood  at  only  29%  in  2022  (EU 
average:  39.5%)  (513),  falling  short  of  the  2030 
national  target  of  60%  and  with  especially  low 
values  for  people  with  lower  education  levels, 
people  in  low-skilled  jobs  and  older  people  (see 
Country  Report  2025).  Recent  data  from  the 
Labour  Force  Survey  indicate  only  a  moderate 
increase  over  the  past  three  years.  Recent  policy 
responses  closely  follow  the  initiatives  introduced 
during  the  pandemic.  ALMPs  are  being  pursued 
through the ‘Employability Guarantee for Workers’ 
(GOL),  under  which  around  675 000  people  had 
been trained by the end of 2025, and the ‘Training 
and Job Support’ allowance (514). Most reforms are 
implemented  under  the  RRP,  including  the  New 
Skills-Transitions  Plan,  which  strengthens  labour 
market  analysis  and  forecasting  with  a  focus  on 
green  and  digital  skills.  Moreover,  currently  no 
national  qualifications  database,  in  line  with  the 
European Qualifications Framework is in place and 
there is no connection to Europass. 

(513) See European Commission, 2026,  Joint Employment Report, 

Publications Office of the European Union.  

(514) CSR.2025.6.3:  Continue  promoting  postsecondary  VET  and 
in-work  training  in  high-demand  sectors  to  address  short-
term  skills  needs,  while  strengthening  adult  learning  by 
expanding work-based learning in high-growth sectors. 

124 

 
 
 
 
ANNEX 14: SOCIAL SCOREBOARD 

Table A14.1:Social Scoreboard for Italy 

Update of 4 May 2026. 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 2026 for details on the methodology 
(https://employment-social-affairs.ec.europa.eu/joint-employment-report-2026_en). 
Source: Eurostat 

125 

29.08.254.313.319.15.1367.66.13.195.822.627.130.625.15.035.52.5Critical situationTo watchWeak but improvingGood but to monitorOn averageDynamic 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, 2025)Impact of social transfers (other than pensions) on poverty reduction(% reduction of AROP, 2025)Children aged less than 3 years in formal childcare (% of the under 3-years-old population, 2025)Self-reported unmet need for medical care (% of the population aged 16+, 2025)Disability employment gap (percentage points, population aged 20-64, 2025)Housing cost overburden (% of the total population, 2025)Adult 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 marketBest performersBetter than averageEarly leavers from education and training(% of  the population aged 18-24, 2025)Young people not in employment, education or training(% of the population aged 15-29, 2025)Gender employment gap(percentage points, population aged 20-64, 2025)Income quintile ratio (S80/S20, 2025)At risk of poverty or social exclusion (AROPE) rate (% of the total population, 2025)Employment rate(% of the population aged 20-64, 2025)Unemployment rate(% of the active population aged 15-74, 2025)Long term unemployment(% of the active population aged 15-74, 2025)Gross disposable household income (GDHI) per capita growth(index, 2008=100, 2024)At risk of poverty or social exclusion (AROPE) rate for children(% of the population aged 0-17, 2025) 
 
 
 
   
 
 
ANNEX 15: HEALTH AND HEALTH SYSTEMS 

health 

system 

Italy’s 
performs 
comparatively well with relatively low levels 
of  avoidable  mortality.  However,  significant 
challenges  persist  in  accessing  healthcare  with 
evidence  suggesting  deterioration  in  recent  years, 
driven  by 
regional  disparities,  high  private 
spending,  workforce  shortages  and  investment 
gaps. This in turn negatively affects the health of 
the population, social fairness and productivity.  

Life  expectancy  at  birth  in  Italy  was  among 
the  highest  in  the  EU  in  2024,  reflecting 
relatively  low  levels  of  preventable  and 
treatable mortality. Cardiovascular diseases and 
leading  causes  of  death. 
cancer  are 
Pronounced 
life 
expectancy persist, with people in northern regions 
enjoying  longer,  healthier  lives  than  those  in  the 
south.  This  divide  also  reflected  in  access  to 
healthcare. 

the 
north-south  disparities 

in 

Italy’s 

good 
avoidable 

performance 
deaths, 

in 
Despite 
preventing 
some 
concerning trends are emerging. Adult smoking 
has  stabilised  to  just  below  20%  but  shows  a 
slight  upward  trend,  while  young  people  smoking 
remains  very  high,  with  27%  of  15-year-olds 
reporting having smoked in the past month, one of 
the  highest  rates  in  the  EU.  E-cigarette  use  has 
also  surged,  rising  from  13%  in  2019  to  23% 
among  15-16-year-olds  in  2022.  Measures  to 
increase cigarette prices have yet to be assessed. 
Overall  alcohol  consumption  is  moderate,  but 
heavy  binge  drinking  affects  10%  of  adults  and 
one  in  six  young  people.  Adult  obesity  remains 
rates  of 
relatively 
adolescents  that  are  overweight  in  Italy  conceal 
significant regional disparities and a very low level 
of  physical  activity,  particularly  among  boys.  A 
2023  national  survey  found  that  19%  of  children 
aged  8–9  were  overweight  and  nearly  10%  were 
considered  obese,  pointing 
to  a  possible 
deterioration in younger cohorts. In October 2025, 
the  Italian  Parliament  approved  a  law  formally 
recognising  obesity  as  a  chronic  disease  and 
including  obesity-prevention  services 
the 
Essential  Levels  of  Assistance  (LEA).  Mortality 
linked to air pollution is high (see Annex 8).  

low.  The 

relatively 

low 

in 

The  health  system’s  strong  performance 
conceals  some  challenges.  Treatable  mortality 
was  30%  below  the  EU  average  in  2022,  driven 
mainly  by  lower  mortality  from  ischaemic  heart 
disease,  colorectal  cancer,  and  breast  cancer. 
However,  cancer  screening  participation  in  Italy 

remained  below  pre-COVID-19  pandemic  levels in 
2023  with  stark  regional  inequalities  and  a  lower 
uptake of cancer screening in southern regions. 

Despite its organisational strength, there are 
some issues with access to outpatient care. A 
well-developed primary care system allows Italy to 
maintain  among  the  lowest  hospital  admission 
rates for chronic conditions in the EU. Almost 70% 
of  general  practitioners  (GPs)  operated  in  group 
practices  by  2023.  Despite  these  achievements, 
challenges  remain.  In  2023,  elective  care,  which 
could  be  provided  in  outpatient  settings  made  up 
40%  of  all  admissions,  and  hospitalisations  for 
conditions better managed in ambulatory  settings 
increased  from  1.63  million  in  2022  to  1.71 
million  in  2023  (515).  Limited  public  coverage  of 
outpatient and dental care in Italy has led to high 
private spending driven mainly by direct payments 
to  private  providers,  often  exacerbated  by  long 
waiting times. 

Graph A15.1: Healthcare infrastructure investment 
by year 

Source: Country Health Profiles - Dashboard 

Low  healthcare  investment,  coupled  with 
persistent  regional  gaps,  especially  in  the 
south,  underscores  the  need  for  targeted 
funding  and  stronger  governance  to  ensure 
fairer  access.  Italy’s  health  spending  per  capita 
and  as  a  share  of  GDP  is  below  the  EU  average. 
Only  around  three  quarters  of  total  health 
funded.  Total  health 
spending 
infrastructure investment per 100 000 inhabitants 
in Italy is below the EU average (see Graph A15.1), 
which is coupled with relatively low availability of 
medical imaging equipment. Since 2020, Italy has 
monitored  regional  compliance  with  the  LEA 
through the New Guarantee System, which scores 
regions  on  prevention,  community  care,  and 

is  publicly 

(515) OECD/European Observatory on Health Systems and Policies 
(2025), Country Health Profile 2025: Italy. State of Health in 
the EU. 

126 

10.49.811.211.413.113.415.114.615.019.619.519.720.421.521.421.921.922.9201520162017201820192020202120222023EUR million per 100 000 populationItalyEU 
 
       
 
 
 
significant 

improvement, 

the  southern 

hospital  services.  Regions  must  meet  minimum 
standards  or  face  corrective  measures  and 
potential funding losses. While 2023 results show 
overall 
regional 
disparities  remain:  10  regions  met  all  standards, 
regions, 
but  11,  particularly 
underperformed  in  at  least  one  area,  mainly  in 
prevention  and  community  care.  Marked  regional 
disparities  continue  to  also  drive  patient  mobility, 
particularly  from  southern  regions.  In  2023,  21% 
of  acute  care  admissions  in  Calabria,  29%  in 
Basilicata and 32% in Molise occurred outside the 
region of residence (516), reflecting persistent gaps 
in local hospital infrastructure (see Annex 18). 

Italy is a major beneficiary of EU funding for 
health.  Italy’s  recovery  and  resilience  plan  (RRP) 
invests nearly EUR 16 billion in structural reforms, 
upgrading 
infrastructure  and  digital  systems, 
expanding  community  care  through  telemedicine 
and  strengthening  the  health  workforce.  The 
2021-2027 Cohesion Policy funds complementary 
investments amount to EUR 1 billion. Italy benefits 
from  initiatives  under  the  EU4Health  programme, 
focused on cross-border health threats, EHDS and 
health  workforce  planning,  and  EU-funded 
technical support to accompany reforms.  

Italy’s  heavy  reliance  on  out-of-pocket 
spending  creates  a  substantial  financial  and 
access  burden.  Out-of-pocket  payments  account 
for  a  greater  proportion  of  spending  on  health  in 
Italy  than  the  EU  average  (23.7%  vs  15%  in 
2023).  Nearly  half  of  all  out-of-pocket  payments 
result  from  the  restricted  health  coverage  for 
outpatient  care  (specialist  visits,  diagnostic  tests, 
dental  care).  Heavy  reliance  on  private  spending 
accounting  for  27%  of  total  health  spending  in 
2023,  is  driven  mainly  by  direct  payments  for 
outpatient  care  provided  by  private  providers, 
rather than formal cost-sharing, with long waiting 
times in the public system further pushing patients 
to private care. Only 58% of outpatient care costs 
were  publicly  financed,  below  the  EU  average  of 
77%.  However,  public  financing  in  Italy  strongly 
protects  patients  from  hospital  costs,  covering 
96%  of  hospital  spending  in  2023,  above  the  EU 
average.  Public  coverage  for  medicines  is  also 
relatively  comprehensive.  Direct  payments  for 
private  alternatives 
to  public  services  are 
particularly  high  in  regions  with  more  limited 
public health service capacity. Italy has the highest 

rate  of  catastrophic  health  spending 
(8.6% 
households) in  Western  Europe,  disproportionately 
affecting 
(60%  of 
low-income  households 
households in the lowest income quintile) (517).  

Graph A15.2: Out-of-pocket payments: share in 
healthcare spending and categories, 2023 

Household out-of-pocket payment: direct payment for 
healthcare goods and services from the household primary 
income or savings, where the payment is made by the user at 
the time of the purchase of goods or the use of the services 
(Eurostat). VHI: voluntary health insurance. 
(1) Others: eyeglasses, hearing aids, lab tests... 
Source: Eurostat and Country Health Profiles - Dashboard 

Social  inequalities  and  waiting  times  remain 
key  barriers  to  healthcare  access.  In  2025, 
4.5%  of  Italian  adults  who  needed  medical  care 
reported  unmet  needs,  a  level  above  the  EU 
average  of  3.6%.  People  at  risk  of  poverty  were 
2.6 times more likely to experience unmet medical 
needs than the general population, well above the 
EU average ratio of 1.6. Barriers were even greater 
in  dental  care.  Long  waiting  times  concern  in 
particular  specialist  consultations  and  diagnostic 
tests,  affecting  2.7  million  people  in  2023  (518). 
Even  though  surgical  delays  are  relatively  short, 
the  main  bottleneck  lies  in  the  diagnostic  and 
referral  stages.  Since  2024,  legislation  requires 
regions  to  appoint  Regional  Healthcare  Managers, 
and  establishes  financial  incentives  for  regions to 
meet  waiting-time  targets.  At  the  same  time, 
efforts 
the 
differentiated  autonomy  are  ongoing,  but  the 
effects  on  healthcare  governance  and  regional 
disparities  remain  uncertain.  The  2025–2027 
National  Plan  for  Waiting  List  Management 

implementation 

the 

for 

of 

(517) WHO (2025) Can people afford to pay for healthcare? New 

evidence on financial protection in Italy. 

(516) Country Health Profile 2025: Italy - see earlier footnote. 

(518) Country Health Profile 2025: Italy - see earlier footnote. 

127 

73%24%3%27%41%11%18%4%Gov. & CompulsoryOut-of-pocket (OOP)Voluntary (VHI)PharmaceuticalsOutpatient careLong-term careOthersInpatient careShare of spendingOOP BreakdownOOP share -EU-27 average:15% 
 
       
 
Table A15.1: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 2023 data (or latest available). 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 Portugal (licensed to practice) and Slovakia (professionally active). Latest data 
update on nurses for Belgium and Sweden: 2022; for France: 2021; for Luxembourg: 2017. 
** latest available 10-year trend: ratio 2023/2014 or 2024/2013; a factor of 2.00 means that it has doubled in 10 years. 
***‘Available hospital beds’ covers somatic care, not psychiatric care. 
Source: Eurostat 

established  in  2025  the  National  Waiting  List 
Platform,  which  has  some  limitations,  affecting 
the  scope  and  depth  of  analysis.  The  monitoring 
dashboard  shows 
that  urgent  services  are 
delivered  effectively.  However,  less  urgent  care  - 
over  75%  of  demand  -  faces  significant  delays, 
such  as  cardiology  consultations.  Cardiology 
consultations  cleared  only  75%  of  lists  after  an 
average  of  90  days  against  a  30-day  target.  The 
plan establishes legally binding “patient protection 
pathways”,  requiring  local  health  authorities  to 
offer  timely  alternatives  through  other  public  or 
private-sector  providers  at  public  expense. 
Supported  by  a  dedicated  budget  of  EUR  50 
million in 2025, rising to EUR 100 million annually 
from 2026, funds incentivise regions to hire staff, 
extend service hours, or contract private providers, 
reinforced  by  regional  oversight  and 
impose 
penalties for missed appointments. 

Diverging trends in doctor and nurse training 
and  geographical  disparities  risk  creating  a 
skills  imbalance  in  Italy.  Italy  has  one  of  the 
highest  doctor  densities  in  the  EU  (5.4  per  1  000 
population), but a comparatively low nurse density 
(6.9  per  1  000),  resulting  in  one  of  the  lowest 
nurse-to-doctor  ratios  in  the  EU  (1.3)  (519).  This 
in 
imbalance  reflects 
expanding  the  nursing  workforce,  compounded  by 
ageing,  retirements,  emigration, 
low  salaries, 
declining  interest  in  nursing  careers,  and  high 
attrition  rates  of  around  15%  in  the  first  year. 

longstanding  difficulties 

is  above 

Since 2018, Italy has expanded its medical school 
intake and specialist training, easing bottlenecks in 
postgraduate medical education. However, student 
preferences  have  shifted  away  from  system-
critical specialties towards fields with better work-
life  balance  and  opportunities  of  working  in  the 
private  sector.  While  the  number  of  medical 
graduates 
the  EU  average  and 
postgraduate  training  bottlenecks  have  largely 
eased,  in  2024  one-quarter  of  residency  posts 
went unfilled, with particularly high vacancy rates 
(30%)  and  clinical 
in  emergency  medicine 
pathology  (15%),  compounded  by  about  9%  of 
residents  leaving  before  completing  training  (520). 
Nursing  graduate  numbers  declined  by  over  3% 
annually  between  2013  and  2022,  falling  to  less 
than  half  the  EU  average  and  resulting  in  fewer 
nurses  than  doctors  entering  the  workforce. 
However,  2023  saw  a  modest  recovery.  Despite 
growth  in  overall  doctor  numbers,  Italy’s  GP 
workforce  has  declined  by  around  13%  over  the 
past  decade.  This  has  led  to  significant  workload 
pressures,  with  over  half  of  GPs  exceeding  the 
in  2023  and  an 
contractual  patient  ceiling 
estimated  nationwide  shortfall  of  8-16%  (521). 
Geographic  disparities  add  to  the  challenges  in 
access to healthcare, with recruitment particularly 
difficult in rural and remote areas (see Annex 18). 
Shortages  of  GPs  are  pronounced  particularly  in 
the  North,  where  compliance  with  caseload 
thresholds  would  require  substantial  workforce 

(520) Country Health Profile 2025: Italy - see earlier footnote. 

(519) Country Health Profile 2025: Italy - see earlier footnote. 

(521) Country Health Profile 2025: Italy - see earlier footnote. 

128 

2020202120222023202410-year change**EU average* (latest year) Cancer mortality per 100 000 population227.0221.5218.7216.7n.a.0.88233.1 (2023)Mortality due to circulatory diseases per 100 000 population 281.1 266.9 270.3 247.4n.a.0.80313.0 (2023)Current expenditure on health, purchasing power standards, per capita2 6202 8282 9783 0863 1991.403834.9 (2023)Public share of health expenditure, % of current health expenditure 75.8 74.5 73.7 73.1 74.31.0080.6 (2023)Spending on prevention, % of current health expenditure 5.36.55.84.74.71.083.7 (2023)Available hospital beds per 100 000 population*** 310 304 301 296n.a.0.94440 (2023)Doctors per 1 000 population*4.05.35.45.4n.a.1.364.3 (2023)*Nurses per 1 000 population* 6.3 6.8 6.8 6.9n.a.1.287.6 (2023)*Mortality at working age (20-64 years), % of total mortality9.810.49.710.110.00.9214.3 (2023)Consumption of antibiotics in the community and hospital sectors,      defined daily doses per 1 000 inhabitants 18.4 17.5 21.9 23.1 22.30.9120.3 (2024) 
 
 
 
       
 
but 

rigid 

planning 

demographic 

regions  have 

health  workforce 

expansion.  Several 
introduced 
temporary measures such as extending retirement 
age  and  deploying  hospital  physicians 
in 
community  settings.  Reforms  currently  under  way 
aim  to  improve  the  attractiveness  of  general 
practice  by  aligning  GP  training  with  medical 
specialisation, 
projections 
indicate  further  declines,  especially  in  southern 
regions. These challenges are further exacerbated 
and 
by 
deployment, as Italy’s 31 legally recognised health 
professions  create  a  highly  segmented  system 
that limits interoperability. Italy plans to gradually 
expand  undergraduate  medical  education 
to 
produce  30  000  additional  physicians  by  2032, 
starting from around 20 900 entrants in 2023/24 
(522).  From  2025,  the  traditional  multiple-choice 
entrance exam was replaced  with an open-access 
first-semester track, where continuation in the full 
medical  programme  depends  on  a  standardised 
national  test  at  the  end  of  the  semester. 
Insufficient  expansion  of  postgraduate  residency 
positions  could  leave  some  graduates  unable  to 
secure  a  residency 
in  order  to  qualify  as 
specialists. Rapid growth in first-year cohorts may 
put pressure on facilities, affecting training quality 
as well as budget pressures in universities. 

including 

infrastructure, 

Italy  has  stepped  up  investment  in  digital 
health,  yet  progress  is  limited,  especially  in 
some  regions.  The  proportion  of 
Italians 
accessing  their  electronic  health  records  has 
grown rapidly, reaching the EU average of 28% in 
2024.  This  progress  reflects  the  investments  that 
have  been  made  under  the  RRP,  supporting 
substantially  the  expansion  of  the  country’s  core 
digital 
the  electronic 
health records, the national telemedicine platform 
and 
the  emerging  health  data  ecosystem. 
However,  challenges  remain  regarding  regional 
fragmentation, 
decentralised 
to 
governance of the SSN. Capital spending on digital 
health per capita has also been about 30% lower 
than the EU average since 2015. Italy has adopted 
a  national  strategy  on  artificial  intelligence  (AI), 
including  healthcare  as  a  priority  area.  It  aims  to 
promote  the  ethical  and  trustworthy  use  of  AI  to 
improve  diagnosis,  treatment  planning,  health 
system efficiency, and data governance. 

due 

the 

More  rational  use  of  medicines  would  offer 
some  opportunities  for  efficiency  gains. 

Contrary  to  biosimilars,  the  uptake  of  generic 
medicines  remains  low,  accounting  for  only  29% 
of volumes in 2024, well below the EU average of 
over 50% and revealing a north-south divide (523). 
To  overcome  market  barriers, 
Italy  reformed 
pharmacy  remuneration  in  2024,  replacing  purely 
price-based margins with a mixed system of fixed 
fees  and  lower  ad-valorem margins  to  encourage 
generics.  Persistent  hospital  pharmaceutical 
overspending continues to challenge Italy’s SSN. In 
2023,  hospital  purchases  exceeded  the  8.15% 
allocation of the National Health Fund by over EUR 
3 billion,  while  retail  pharmaceutical  spending 
remained  below  its  ceiling,  triggering  payback 
mechanisms  shared  between  manufacturers  and 
regional  authorities.  Despite  raising  the  hospital 
ceiling to 8.5% in 2024, the overspending grew to 
over  EUR  4 billion,  partly  due  to  the  transfer  of 
financing  for  certain  innovative  medicines  from 
the Innovative Medicines Fund to hospital budgets. 
in  July  2025  a 
The  government  proposed 
comprehensive  reform  via  a  Consolidated  Act 
(Testo  Unico).  The  Act  aims  to  modernise  the 
payback  mechanism  into  a  proactive,  data-driven 
contingency tool rather than a routine response. 

in 

sector 

Employment 

pharmaceutical 

(15.5)  of  clinical 

trade  and  commercialisation, 

Italy’s 
shows 
economic  significance,  combining  modest  R&D 
investment - EUR 14 per capita in 2022, less than 
half  the  EU  average  -  with  strong  innovation 
outputs. 
pharmaceutical 
manufacturing  is  above  the  EU  average.  In  2024, 
Italy  reported  slightly  below  the  EU  average 
number 
trials  per  million 
population. Despite lower per capita figures due to 
its large population, the absolute clinical trial count 
is  substantial,  with  301  trials  recorded  in  2025. 
Regarding 
the 
industry  maintains  a  modest  but  fairly  stable 
share  of  extra-EU  exports  (11.6%  in  2025  vs 
13.9%  for  the  EU  average),  though it  has  not  yet 
mirrored  the  rapid  growth  observed  in  the  EU's 
top-improving  countries.  Italy’s  public  investment 
bank  and  regional  authorities  co-finance  biotech 
start-ups,  clinical  research  and  manufacturing 
upgrades,  often  in  collaboration  with  EU  funding 
instruments.  Italy  provides  quick  access  to  new 
medicines:  between  2020  and  2023,  patients 
received  EU-approved  drugs  over  four  months 
faster than the EU average. However, these figures 
mask regional disparities. 

(522) Country Health Profile 2025: Italy - see earlier footnote. 

(523) Country Health Profile 2025: Italy - see earlier footnote. 

129 

 
 
 
ANNEX 16: HOUSING 

Housing  affordability  issues  expose  some 
parts  of  Italy’s  population  to  difficult  living 
conditions.  While  house  prices  have  broadly 
stagnated  in  the  last  two  decades,  there  are 
affordability  issues  for  middle-  and  low-income 
households,  particularly  those 
in  some 
metropolitan cities and relying on rental contracts. 
The  significant  presence  of  short-term  rental 
supply  in  certain  tourist  cities  further  reduces 
available supply in the long-term rental market. 

living 

Housing-related policies are skewed towards 
homeownership, while the provision of social 
and  affordable  housing 
is  limited.  While 
primary  residences  are  exempt  from  property 
taxation, the limited availability of public support—
particularly  relevant  given  that  public  housing 
units  (Edilizia  Residenziale  Pubblica)  operate  with 
very  low  rents—has  contributed  to  a  slowdown  in 
the  renovation  of  the  public  housing  stock and  in 
the new constructions over the past decades. This, 
in  turn,  has  resulted  in  numerous  empty  public 
houses (needing renovation) and long waiting lists 
for the most vulnerable groups. At the same time 
affordable  housing  solutions  (such  as  Edilizia 
Residenziale  Sociale  or  housing  sociale)  – 
characterised  by  rents  at below market  rates,  but 
higher  than  those  for  public  housing  –  remain 
limited.  

Public  interventions  cover  a  wide  spectrum 
of  regulatory  and  investment  measures,  but 
remain  to  a  certain  extent  uncoordinated. 
Powers  are  divided  between  local,  regional  and 
national  levels,  while  responsibilities  for  housing-
related  matters  are  fragmented  across  different 
ministries.  At  the  same  time,  data  availability 
could  be  made  better  by  improving  coordination 
between  datasets.  Such  limited  coordination  may 
evidence-based 
hamper 
approach  and  reduce  the  potential  for  synergies 
across policies, instruments and stakeholders.  

comprehensive 

a 

have 

direct 

implications 

These  structural  weaknesses  in  the  housing 
system 
for 
homelessness,  which  remains  persistent. 
Limited  access  to  affordable  and  public  housing 
reduces the availability of stable exit pathways for 
people  experiencing  homelessness.  At  the  same 
time,  funding  cycles  to  fight  homelessness  are 
unstable,  and  there  is  a  lack  of  enforceable 
national 
long-term 
standards.  Consequently, 
structural solutions, in particular those based on a 
housing-led  approach,  struggle  to  reach  the  scale 

and  sustainability  needed  to  effectively  reduce 
homelessness. 

A  broader  alignment  of  cadastral  values  to 
market  values  is  still  missing.  Italy  has 
undertaken  to  continue  updating  the  cadastral 
register  by  mapping  properties  that  are  currently 
not included and by updating cadastral values for 
buildings that have benefited from public schemes 
for  energy  efficiency  and/or  house  renovation 
interventions (see Annex 3).  

In  May  2026,  the  national  housing  plan 
(Piano  Casa  Italia)  was  adopted.  It  aims  at 
renovating  the  public  housing  stock,  as  well  as 
supporting  in  particualr  affordable  housing  with 
the involvement of the private sector. 

Housing market developments 

in 

the 

remains 

remains  prevalent 
property 

in  particular  without  a 
Homeownership, 
Italy. 
mortgage, 
Residential 
primary 
component of household wealth in Italy, with 76% 
of people owning a house (EU average 68%). The 
share  of  homeowners  with  a  mortgage  is  below 
the  EU  average  (12.7%  vs  24.3%  in  the  EU  in 
2024).  Homeowners  decrease  to  64%  among 
‘poor’  households  –  those  with  an  equivalised 
disposable  income  below  60%  of  the  median 
equivalised 
this 
population  segment  there  is  a  higher  ownership 
rate  compared  with  the  EU  average  of  50%.  New 
bank  mortgages  for  house  purchases  decelerated 
over  2020-2024,  but  picked  up  slightly  in  2025 
(first three quarters).  

income.  But  even  among 

House  prices  have  broadly  stagnated  in  the 
past  two  decades.  House  price  levels  peaked  in 
2011.  Subsequently,  as  the  euro  area  sovereign 
debt crisis intensified, they declined by nearly 18% 
cumulatively  until  2019.  In  2020  they  started 
recovering,  gaining  back  15%  by  2025.  This 
indicates  a  fall  of  almost 25%  in  real  terms  over 
In  parallel, 
the  whole  period  2005-2025. 
household 
only 
albeit 
expanded, 
incomes 
moderately, resulting in a steadily falling price-to-
income ratio throughout 2012-2025. In 2025, the 
standardised  price-to-income  ratio  was  at  85% 
relative to its long-term average and 87% relative 
to  2015  (against  96%  and  106%  in  the  EU, 
respectively).  House  price  increases  are  largely 

130 

 
 
 
 
concentrated  in  Italy’s  main  metropolitan  cities 
(e.g.  Milan  and  Rome  +6.3%  and  5% respectively 
increase  at  Q4-2025 (524),  while  more 
yearly 
moderate dynamics prevail elsewhere. 

Rents have increased in recent years, after a 
long period of stagnation, pushed up by high 
inflation  in  2022  and  2023.  Rental  prices 
(including  existing  and  new  rental  contracts)  did 
not  slump  as  a  consequence  of  the  crisis,  but 
rather  stagnated  until  2016  and  then  rose  very 
gradually  during  the  following  five  years,  picking 
up  more  strongly  in  2022-24  and  reflecting  high 
consumer price inflation. Between 2015 and 2024, 
the  monthly  rental  price  index  rose  by  14.6% 
(December  to  December),  slower  than  household 
disposable income per capita, which rose by 28.4% 
over the same period. 

Graph A16.1: House prices, rents and price-to-
income evolution in IT and EU27 since 2005 

Source: Eurostat 

in 

Italy 
Housing  affordability  pressure 
remains  comparatively  contained,  but 
is 
surging  in  large  urban  centres  and  weighs 
heavily  on  tenants,  single  people  and 
individuals on a low income. Overall, the share 
of  disposable  income  devoted  to  rent  is  20.2%, 
rising  to  31.1%  for  people  below  the  poverty 
threshold,  while  arrears  on  rent,  mortgage  or 
utilities  affect  5.3%  of  people  and  11.3%  of 
people at risk of poverty. In 2025, 5.0% of Italians 
lived  in  households  spending  more  than  40%  of 
their disposable income on housing, below the EU 

(524) Istat dashboard on house prices, Link. 

average  of  7.7%  (525).  Tenants  renting  at  market 
prices  faced  the  greatest  pressure,  with  22.3% 
facing  housing  cost  overburden.  People  in  the 
lowest income quintile and single people under 65 
also  experienced  significant  strain,  at  20.6%  and 
16.3%  respectively.  The  risk  of  poverty  or  social 
exclusion  is  substantially  higher  for  tenants  than 
for  homeowners  (39.4%  vs  19.5%).  In  more 
productive  areas,  such  as  large  urban  centres, 
labour productivity dynamics have not kept up with 
the  growth  of  housing  prices,  and  the  average 
salary is not proportionate to the average dwelling 
labour  mobility 
hamper 
cost. 
(Confindustria,  2025 (526)).  Looking  at  employees 
in  the  non-agricultural  private  sector  (excluding 
managers),  a  study  by  Cassa  Depositi  e  Prestiti 
estimates the rent-to-income ratio at around 35% 
on average, with significantly higher levels in large 
cities,  reaching  76%  in  Milan,  65%  in  Rome  and 
48%  in  Bologna.  The  estimates  are  based  on  the 
monthly  rent  of  a  60 m²  apartment  in  provincial 
capitals,  and  should  therefore  be  interpreted  as 
indicative rather than representative of the overall 
rental market. 

This  may 

Investment  in  dwellings  has  been  growing 
since  the  late  2010s,  although  the  housing 
stock  remains  old.  It  has  reached  record-high 
levels in recent years (Graph A16.2), although this 
is largely due to tax credits for housing renovation, 
which  has  not  led  to  the stock  of  dwellings  being 
expanded.  In  2024,  1.7  new  dwellings  per  1 000 
inhabitants  were  completed,  which  was  the  same 
as  in  2023  but  still  higher  than  in  the  previous 
decade. More residential building permits are being 
issued (Graph A16.2). 72% of residential buildings 
were built before 1980 (e.g. 85% in Liguria), while 
43%  of  buildings  are  concentrated  in  climatic 
zones  requiring  significant  energy.  The  3.2 million 
most  inefficient  dwellings  are  estimated  to  need 
EUR 143.2 billion of investment to improve energy 
efficiency (527). 

(525)The overburden rate should be read together with the tenure 
structure  (homeowner,  tenants),  that  may  differ  across 
country and regions.   

(526) Confindustria, Soluzioni Abitative Sostenibili per i Lavoratori 

(2025). 

(527) Fondazione Symbola-CRESME: La riqualificazione energetica 

del patrimonio abitativo italiano, 2024. 

131 

751001251501752000507091113151719212325Index (2005 = 100)Nominal prices ITNominal prices EU27Rental prices ITRental prices EU27Price-to-income ratio ITPrice-to-income ratio EU27 
  
 
 
Graph A16.2: House supply indicators in IT since 
2005 

primary  residences,  is  12%  in  Florence,  11%  in 
Venice, 5.7% in Milan and 4% in Rome. Short-term 
rentals are, however, highly concentrated in certain 
areas attracting tourism: dwellings used for short-
term rentals exceed 20% of the total non-primary 
residences  in  the  historic  centres  of  Milan  and 
Venice,  and  even  surpass  40%  in  the  historic 
centre of Florence (530).  

Structural policies 

Source: Eurostat 

Italy  is  also  characterised  by  a  share  of 
unoccupied dwellings higher than in other EU 
Member  States  (around  27%  compared  with 
an  EU  average  of  19.7%).  This  national  rate 
hides  significant  differences  between  provinces, 
ranging  from  56%  (Sondrio)  to  8%  (Prato).  It 
includes  holiday  residences,  which  can  be  rented 
out  for  limited  periods  (e.g.  the  summer  months), 
or  used  occasionally  by  the  owners.  Unoccupied 
dwellings  (and  thus  potentially  available  for  rent) 
are  particularly  prevalent  in  less  populated  areas, 
with  only  18%  (fewer  than  1.8  million  dwellings) 
found 
in  cities  and  more  densely  populated 
municipalities (528).  As 
for  public  buildings, 
according to 2018 data, 7% of the stock of public 
buildings  owned  by  the  public  administration  are 
estimated to be empty (529). 

of 

Italy  is  characterised  by  a  high  presence  of 
short-term rentals, however the phenomenon 
is  particularly  strong  in  certain  cities and  in 
specific areas within those cities. According to 
Eurostat, in 2024 Italy came third in the EU for the 
number 
short-term 
accommodation booked via online platforms, with 
127 million (after France and Spain). Rome, Milan, 
Florence,  Naples  and  Venice  were  among  the  top 
20  cities.  According  to  the  Real  Estate  Market 
Observatory  of  the  Italian  Revenue  Agency,  the 
share  of  dwellings  offered  for  short-term  rental 
(on  Airbnb)  from  the  residential  stock,  excluding 

nights 

spent 

in 

in 

incentives.  Homeownership 

Housing  policy 
Italy  has  historically 
favoured ownership, including with dedicated 
increased 
fiscal 
tremendously  throughout  the  second  half  of  the 
last  century:  from  40%  in  1951  to  68%  in  1991 
(ISTAT).  Ownership  is  still  supported,  e.g.  the  first 
residence is exempt from annual property tax and 
a  Guarantee  Fund  provides  a  public  guarantee  of 
50%  for  first-home  purchases  by  vulnerable 
groups  and 
individuals  without  any  other 
residential  property  (mortgage  amounts  cannot 
exceed EUR 250 000). 

which 

delegated 

Housing policy competences are quite divided 
across  national,  regional  and  local  levels,  in 
particular  after  the  constitutional  reform  of 
2001 
greater 
responsibilities  to  regions  and  cities.  This 
transfer  of  responsibilities  was  not  accompanied 
by an allocation of structural resources to regions. 
Furthermore,  several  ministries  are  in  charge  of 
different  instruments,  highlighting  the  need  to 
ensure 
coordination  mechanisms. 
Aggregated  data,  in  particular  on  affordability 
issues,  are  also  scattered.  A  national  housing 
della 
observatory 
Condizione Abitativa) – announced already in 1998 
and then again in 2022 – has not yet been set up. 
Various  regions  have  their  own  observatories, 
however,  but  without  strong  coordination  (Corte 
dei Conti, 2020 (531)). 

(Osservatorio 

Nazionale 

effective 

Social  and  affordable  housing  solutions  are 
limited.  As  better  explained  in  the  section  on 
vulnerable  groups  below,  vulnerable  people  with 

(528) Corte dei Conti 2024, on ISTAT data, 2021. 

(530) Agenzia  delle  Entrate,  Osservatorio  Immobiliare.  Locazioni 
brevi: un’analisi del fenomeno in alcune città italiane (2024). 

(529) Ministero dell’Economia, Rapporto sui beni immobili delle 

(531) Corte  dei  Conti,  I  fondi  per  il  sostegno  all’abitazione  in 

Amministrazioni Pubbliche (2018). 

locazione per le categorie sociali deboli (2020). 

132 

0123456780204060801001201401600507091113151719212325% of GDPIndex (2005 = 100)Residential building permits in m2, indexResidential buildings producer prices, indexInvestment in dwellings (right-hand side axis) 
  
 
 
very  low  incomes  are  eligible  for  public  housing, 
whereas low- and medium-income households are 
often  not  eligible  for  public  housing  but  still 
struggle  to  pay  their  rent  at  market  prices. 
Affordable  housing  solutions  are  available  in  the 
form  of  Edilizia  Residenziale  Sociale  or  housing 
sociale.  This  type  of  housing  is  often  –  but  not 
always  –  based  on  some  form  of  cooperation 
between the private and public sectors, and allows 
households  to  rent  below  market  price  but  at 
prices  considerably  higher  than  those  for  public 
housing 
is 
implemented by regions and cities using their own 
frameworks.  Cooperatives  also  offer  affordable 
rent  schemes  and  have  helped  increase  housing 
supply. While there are no official aggregate data 
at  national  level  for  these  affordable  housing 
solutions, they are estimated  to be below 90 000 
units (532). 

(ensuring  greater  cash  flows). 

It 

Some  of  those  units  have  been  developed 
through the Fondo Italiano per l’Abitare (FIA), 
a fund of funds structure managed by Cassa 
Depositi e Prestiti Real Asset. With a budget of 
over EUR 2 billion, it contributed to the creation of 
28  different  funds,  typically  operating  at  regional 
level  and  focused  on  affordable  housing.  Similar 
instruments  exist  focusing  on  student  and  senior 
housing,  also  with  the  support  of  EU  funds,  such 
as the InvestEU Program.  

Regulated  rents  are  present  in  Italy  and 
cover  the  part  of  the  rental  market  just 
below  long-term  rental  at  market  price. 
Under  the  canone  concordato  regulated  rent 
system,  landlords  agree  to  charge  below  market 
rents  based  on 
territorial 
agreements  in  exchange  for  tax  incentives.  In 
2024,  23.9%  of  registered  rental  contracts  set  a 
canone concordato (533). The average reduced price 
corresponds  to  72.5%  of  the  average  long-term 
market  rate  rent,  though  the  difference  with  the 
market  rate  can  be  very  small in  certain  cities.  In 
Milan the use of regulated rents is marginal.  

locally  negotiated 

A  new  national  housing  Plan  (“Piano  Casa”) 
has been adopted in May 2026. The measures 
envisaged  are  based  on  three  pillars.  The  first 
pillar  provides  for  an  extraordinary  program  of 
interventions for the recovery and maintenance of 
the current stock of public residential housing. The 
second  pillar  of  the  Plan is  based  on  the  creation 
of a specific financial instrument with resources at 
national  and  European  level.  The  third  pillar 
introduces  bureaucratic  simplifications  and  fast-
track  procedures  for  investors  with  a  view  to 
activating private investment and building housing 
units  to  rent  or  sell  to  citizens  at  controlled 
prices. The 2023, 2024, 2025 budget laws provide 
a total of €970 million for the implementation of 
the  Plan.  The  Plan  may  also  mobilise  European 
resources such  as  cohesion  funds,  including  EUR 
1.1  bn  reprogrammed  in  the  context  of  the  Mid-
Term  review  and  the Social  Climate  Fund.  It  also 
intends to attract private capital.  

The  Italian  recovery  and  resilience  plan  features 
one  of  Italy’s  flagship  measures  for  housing (534) 
which  focuses  on  expanding  availability  by 
building,  purchasing  or  renovating  over  10 000 
units, coupled with urban regeneration of  at least 
1.8 million square meters of public spaces. 

The  2026  Budget  Law also  tightens  rules on 
short-term  rentals.  As  from  2026,  private 
individuals  may  rent  out  no  more  than  two 
dwellings  under  the  ‘private’  tax  regime;  renting 
three or more units is automatically classified as a 
business  activity,  requiring  VAT  registration  and 
corporate  tax  compliance.  Moreover,  income  from 
short-term  rentals  of  the  first  dwelling  remains 
taxed at 21%, while the second dwelling is subject 
to  a  26%  tax  rate.  Initiatives  are  also  starting  to 
be  developed  at  local  and  regional  level.  For 
example,  Florence  has  introduced  municipal  laws 
restricting short-term rental activities. 

to 

Efforts 
reintegrate  unoccupied  and 
abandoned  housing  into  the  market  are 
emerging, but are not structured. For example, 

(532) According  to  Fondazione  Housing  Sociale,  25 000  public 
housing units of public housing (Edilizia Residenziale Sociale 
typology)  are  managed  by  housing  companies,  around 
40 000 co-owned dwellings are owned by cooperatives, and 
around 20 000 units are managed by the Fondo Investimenti 
per l’Abitare. 

(533) Agenzia  delle  Entrate  and  Italian  Banking  Association  – 

Annual report on housing, 2025. 

(534) ”PINQUA”  -  Investment  6  -  Innovation  Programme  for 
Housing  Quality  of  Mission  5,  Component  2  of  the  Italian 
RRP.  Additionally,  following  the  November  2025  revision  of 
the NRRP, Italy has reinforced its commitment to affordable 
housing  introducing  a  new  measure  for  the  implementation 
of the Member State Compartment of the InvestEU Program. 
The  measure,  under  the  CDP  Social  Investments  and  Skills 
Window  Intermediated  Equity  Financial  Product,  will  finance 
investments targeting the Affordable Social Housing sector. 

133 

 
 
 
some  regions  like  Tuscany,  and  municipalities like 
initiatives  to  map  the 
Bologna,  have  taken 
unoccupied  housing  stock  and  provide  incentives 
to bring those properties back to the market, also 
in relation to policies to revitalise inner city areas. 
In parallel, a number of small municipalities facing 
demographic  decline  have  launched  ‘one-euro 
house’  schemes  to  encourage  buyers  to  renovate 
abandoned  properties.  In  addition,  a  task  force 
(cabina  di  regia)  was  set  up  in  November  2024 
under the Ministry of Finance to coordinate public 
efforts to valorise public property. 

Building and construction codes will be amply 
revised  in  2026.  In  December  2025,  a  draft 
enabling  law  was  approved  to  develop  a  new 
Building  and  Construction  Code,  which  must  be 
completed  within  12  months.  The  implementing 
law  being  drafted  aims  to,  among  other  things, 
reduce  administrative  complexity,  provide  greater 
in  building  permission  and  simplify 
certainty 
authorisations 

Vulnerable groups 

and 

pronounced 

Quality of housing remains an issue, marked 
by 
regional 
income 
disparities.  In  2024,  23.9%  of  residents  lived  in 
an  overcrowded  home,  against  16.9%  in  the  EU. 
Overcrowded  homes  are  much  more  common 
among tenants (43.7%), young people aged 16-29 
(40.1%), people at risk of poverty  (31.7%), and in 
cities  (27%).  This  can  partly  be  attributed  to 
delayed  household  formation,  as  young  people 
remain in the parental home until, on average, the 
age  of  30.  Severe  housing  deprivation  also 
affected  a  higher  share  of  the  population  in  Italy 
than in the rest of the EU in 2023 (5.8% vs 4%), 
especially  market  tenants  (11.5%)  and  young 
(10.2%).  The  share  of 
people  aged  16-29 
in  houses  with  structural 
population 
deficiencies such as leaking roofs and damp walls 
was  17.1%  in  2024,  above  the  EU  average 
(15.6%). The incidence of people living in damaged 
the  south  and  city 
in 
dwellings 
centres (535).  

is  higher 

living 

(535) Ministero 

infrastrutture, 
Innovativo Nazionale per la Qualità dell’Abitare, 2022. 

Rapporto 

delle 

Programma 

Housing  policy  for  vulnerable  people  has 
gradually lost centrality. This decline has been 
particularly marked following the end of structural 
financial  flows  to  social  housing  programmes 
through dedicated payroll contributions by workers 
(GESCal)  and  the  gradual  sale  of  the  public 
housing stock. The expenditure on social protection 
dedicated  to  housing  (comprising  mainly  social 
protection  payments  to  households  to  help  with 
the  cost  of  housing  as  well  as  the  operation  of 
social  housing  schemes) 
is  0.04%  of  GDP, 
considerably  lower  in  Italy  than  the  EU  average 
(0.3%).  

The  supply  of  social  housing  is  currently 
insufficient to cover the demand. According to 
the  latest  Eurostat  figures  (EU-SILC  2024),  the 
percentage  of  the  population  at  risk  of  poverty 
(those  earning  less  than  60%  of  the  median 
national income) who live in housing with reduced 
rent or for free is 13.0% for Italy, compared with 
22.6% for the euro area. Public housing accounted 
for just 2.4% of the housing stock in 2022, down 
from  4.2%  in  2010  (OECD).  Around  750 000 
housing  units  are  available  (i.e.  public  residential 
housing Edilizia Residenziale Pubblica). Fully public 
and  aimed  at  the  most  vulnerable  households, 
these  dwellings  are  managed  by  public  housing 
companies  owned  by  the  local  authorities  and 
rented  at  well-below  market 
(around 
EUR 100  per  month  on  average,  compared  with 
around  EUR 500  on  the  private  rental  market). 
Some 650 000 households are estimated to be on 
the  waiting 
list.  The  analysis  by  period  of 
construction  highlights  that  the  public  residential 
housing  stock  is  of  a  certain  age:  more  than  half 
of these units were built between 1960 and 1990, 
while  only  9.1%  were  built  after  2000,  and  only 
2.2%  of  the  stock  was  built  after  2010.  A 
significant  share  of  the  stock,  estimated  at  more 
than  63 000  units,  is  currently  vacant  due  to  the 
need for major maintenance works (536). 

rates 

National  instruments  aimed  at  preventing 
housing  exclusion  and  supporting  vulnerable 
tenants  in  the  private  rental  market  exist, 
but  financing  has  so  far  been  limited.  In 
particular,  the  Fondo  Morosità  Incolpevole  (Fund 
for  rent  arrears  due  to  no-fault  tenants)  aims  to 
prevent  evictions  by  supporting  tenants  who  are 
suddenly  unable  to  pay  their  rent  due  to  the  loss 

(536) Federcasa  and  Nomisma,  La 

centralità  dell’edilizia 

residenziale pubblica nelle politiche abitative, 2024. 

134 

 
 
 
or  reduction  of  their  household 
income  (for 
example due to unemployment). The allocations to 
the  fund  were  drastically  reduced  before  the 
COVID-19  pandemic  and  significantly  increased 
afterwards.  Budget  Law  2025 and 2026 allocated 
resources to the Fund for about EUR 22 million.  

Homelessness  in  Italy  remains  a  persistent 
and severe phenomenon. According to the most 
recent  permanent  census,  nearly  96 200  people 
were homeless in 2021, representing 0.16% of the 
population.  Among  them,  32%  were  women  and 
13% were under 18, almost half lived in the three 
largest  cities (537).  A  recent  ISTAT  field  survey 
conducted  in  the  14  main  metropolitan  areas 
found over 10 000 homeless people. Among them, 
78.6% were men and over two-thirds were foreign 
nationals.  Shelters  in  these  cities  were  found  to 
have  an  average  accommodation  capacity  of 
66.5%  of  the  homeless  population,  44.6%  of 
whom  were  found  living  on  the  street  (538). 
According 
of 
Organisations for Homeless People, 414 homeless 
individuals  died  in  2025,  a  figure  consistent  with 
previous years (539). The lack of recent census data 
makes it difficult to monitor homelessness trends 
and design targeted policies.  

Federation 

Italian 

the 

to 

Despite  the  progress  achieved  under  the 
national  recovery  and  resilience  plan,  there 
is  ample  scope  to  expand  the  delivery  of 
housing-first  interventions.  Under  the  plan, 
Italy  has  invested  in  housing-first  solutions  for 
more  than  1 300  people,  ‘post  stations’  offering 
essential  services  to  over  11 000  people,  and 
housing  solutions  for  agricultural  workers  to 
overcome  illegal  settlements  (see  Annex  12).  The 
European  Social  Fund  Plus  also  finances  housing-
first interventions via the national  programme for 
social inclusion and poverty reduction 2021-2027. 
However,  beyond  these  significant  programmes, 
funding  is  insufficient  and  several  challenges 
remain.  First,  housing-first  services  are  not 
included in the minimum set of social services that 
municipalities  must  guarantee  uniformly  across 
the country (see Annex 12), unlike the provision of 

(537) OECD, Data on homelessness 2024 - Country notes: Italy. 

(538) ISTAT, Le persone senza dimora: il conteggio nei 14 comuni 

centro di area metropolitana. Primi risultati, 2026. 

a  fictitious  residence  (540),  leading  to  territorial 
disparities  rooted  in  the  uneven  budgets  and 
administrative  capacity  of  municipalities 
(see 
Annex 19). Second, the shortage of public housing 
both limits homelessness prevention and hampers 
the scalability of housing-first interventions. Third, 
the  absence  of  a  comprehensive  national 
monitoring  framework  makes 
to 
systematically  track  homelessness  trends  and 
assess  the  long-term  impact  of  policies  and 
programmes.  These  gaps  are  only  partially  filled 
by 
third-sector  organisations.  Lastly,  many 
measures  still  focus  on  basic material  assistance, 
providing  short-term  relief  but  without  a  lasting 
structural impact.  

it  difficult 

The  supply  of  student  accommodation  is 
increasing  in  the  face  of  needs  that  remain 
high. Italy is an increasingly attractive destination 
for  foreign  students:  in  the  2024/2025  school 
year, around  110 000 international  students were 
enrolled  in Italian universities, 165% more than a 
decade  earlier (541).  The  share  of  domestic  mobile 
students  is  also  rising,  although  at  a  slower  rate. 
The  overall  supply  of  student  beds  is  at  83 000 
units,  most  of  which  are  publicly  owned  (69%), 
which  only  covers  about  4%  of  the  student 
population,  one  of  the  lowest  shares  in  the  EU. 
in 
There  has  been  a  significant 
investment  in  the  context  of  the  RRP,  reaching 
EUR 1.2 billion (542),  yet  the  related  expansion  in 
supply  is  not  expected  to  satisfy  the  rising 
demand,  especially 
largest  university 
in  the 
cities (543).  Under  the  recovery  and  resilience  plan, 
Italy  has  reformed  student  housing  regulations 
and  is  investing  in  providing  more  than  30 000 
new  student  beds  with  rent  at  least  15%  below 
market prices and 30% of the places reserved for 
disadvantaged  students.  A  financial  instrument  is 
supporting  the  creation  of  additional  units  for  a 
total  estimation  of  around  60 000  student  beds. 

increase 

(540) Fictitious  residence  is  a  right  for  people  experiencing 
homelessness  that  allows  them  to  register  in  the  municipal 
population  register  at  a  non-existent  address,  thereby 
ensuring access to identity documents, healthcare and social 
services. 

(541) National  agency  for  the  evaluation  of  universities  and 
research, Rapporto sul Sistema della formazione superiore e 
della ricerca (2026). 

(542) NRPP  -  M4C1 

Investment  5  (implemented  through  a 
dedicated financial instrument managed by Cassa Depositi e 
Prestiti S.p.A.) and M4C1- Reform 1.7. 

(539) FIO.PSD, Morti senza dimora, la strage invisibile, accessed on 

(543) Savills  (2025).  Italian  student  housing  market  –  Italy 

2026/05/05. 

Spotlight, June 2025.  

135 

 
 
 
Graph A16.3: Housing affordability selected indicators 

Source: Housing affordability selected indicators. The overburden rate should be read together with the tenure structure 
(homeowner, tenants), that may differ across country and regions. 

Italy  also  supports  equal  access 
to  higher 
education  through  scholarships  for  students  from 
lower  socio-economic  backgrounds,  also  with  the 
contribution of the European Social Fund Plus and 
the Recovery and Resilience Facility.  

136 

 
 
HORIZONTAL 
ANNEX 17: 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  increased  slightly 
Graph A17.1: Progress towards the SDGs in Italy 

but remains below the EU average (1.4% of GDP, 
against 2.2% in the EU in 2024; SDG 9). Real GDP 
per  capita  is  almost  on  a  par  with  the  EU 
(EUR 33 080  vs  EUR 34 110  in  the  EU  in  2025) 
and investments represent 21.8% of GDP (SDG 8), 
which is in  line  with the  EU  average (21.7%).  The 
percentage  of  households  with  a  high-speed 
internet  connection  in  2024  (70.7%)  was  well 
below the EU average (82.5%), despite significant 
progress  since  2019  (30%)  (SDGs 9  and  17).  The 
percentage  of  adults  aged  16 to  74  with  at  least 
basic  digital  skills  increased  but  remained  below 
the  EU  average  (54.3%  vs  60.4%  in  the  EU  in 
2024;  SDG 4). 
indicators 
related to 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 
public 
investing 
administration, justice, education and research, as 
in  the  tourism  and  cultural  sector. 
well  as 
the  digitalisation  and 
Measures 

Italy  progressed  on 

digitalisation 

supporting 

the 

of 

in 

For a detailed progress assessment towards the various SDGs, see the annual Eurostat report ‘Sustainable development in the 
European Union’; for extensive data on the short-term SDG progress of EU countries, see Key findings – Sustainable development 
indicators;  for  an  interactive  visualization  of  SDG  progress  of  EU  countries,  see  SDG  country  overview.  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  or  six  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 29 April 2026. Data refer mainly to the period 2019-2024 or 2019-2025. Data on SDGs may 
vary across the report and its annexes due to different cut-off dates. 

137 

 
 
 
 
 
 
 
competitiveness  of  manufacturing  and  research 
innovation  are  also  expected  to  boost 
and 
productivity. 

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,  7,  11,  12,  14).  In  Italy  the  use  of 
circular  material  is  higher  than  in  the  rest  of  the 
EU  (21.6%  of  material  input  for  domestic  use  vs 
12.2% in the EU in 2024), 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 
(10% vs 13.7% in the EU in 2023), the figure for 
marine  waters  affected  by  eutrophication 
is 
virtually  zero,  outperforming  the  EU  average 
(0.01%  of  the  exclusive  economic  zone  vs  0.38% 
in the EU in 2025; SDG 14). Italy performs well on 
energy  efficiency  and  consumption  (SDG 7),  but 
the  percentage  of  renewables  in  the  energy  mix 
remains  lower  than  the  EU  average  (19.4%  of 
gross final energy consumption vs 25.2% in the EU 
in  2024;  SDG 13).  Italy  also  faces  increasing 
climate-related  economic  losses  which  are  the 
third  highest  in  the  EU  (EUR 68.3  per  inhabitant 
expressed as a 30-year moving average vs EUR 49 
in the EU in 2024; SDG 13). 

Italy  still  needs  to  catch  up  with  the  EU 
average  indicators  on  clean  water,  industry, 
innovation  and  infrastructure,  sustainable 
cities  and  communities,  climate  action  and 
life  on  land  (SDGs 6,  9,  11,  13,  15).  Italy  is 
improving on financing climate action but needs to 
catch up with the EU average with 3.24% of bonds 
issued by corporates and the government labelled 
as  green  bonds  in  2024  (6.94%  in  the  EU).  On  a 
positive  note,  net  greenhouse  gas  emissions 
land  use  and  forestry  are 
removals  from 
improving compared to 2018 and are higher than 
the  EU  level  (-212.1 tonnes  CO2  eq.  per  km²  vs  -
54.7 tonnes  in  the  EU  in  2024,  SDG 13).  While 
Italy  performs  well  on  sustainable  agricultural 
production,  ammonia  emissions  from  agriculture 
remain above the EU average (25.5 kg per hectare 
of utilised agricultural area vs 19.1 kg in the EU in 
2023;  SDG 2).  Railways  and  inland  waterways 
accounted  for  a  much  lower  share  of  freight 
transport  than  the  EU  average  (10.2 percentage 
points  (pps)  difference  in  %  of  inland  freight 
tonne/km  in  2024;  SDG 9).  The  recycling  rate  of 
waste  at municipal level  is above the EU average 
(50.8% in 2023 vs 47.9% in the EU; SDG 11). 

in  the  EU 

Italy  is  moving  away  from  SDGs  on  clean 
water  and  sanitation  as  well  as  life  on  land 
(SDGs 6 and 15) and needs to catch up to the 
EU  average.  In  particular,  the  impact  of  drought 
on ecosystems increased from 2018 to 2024 and 
is  above  EU  levels  (10.7%  of  the  country  area  vs 
3.7% 
in  2024;  SDGs 6  and 15). 
Moreover,  Italy  needs  to  catch  up  with  the  EU 
average on water quality in rivers: the percentage 
of  waterbodies  with 
exceeding 
thresholds  has  increased  and  is  above  the  EU 
average  (27.9%  vs  23.3%  in  the  EU  in  2023, 
SDG 6).  While  biochemical  oxygen  demand  in 
rivers  (an  indicator  for  organic  pollution)  has 
improved, 
it  remains  above  the  EU  average 
(2.6 mg O2/litre vs 2.24 in the EU in 2023, SDGs 6 
and 15). 

pesticides 

For  SDG 15,  the  percentage  of  terrestrial 
protected  areas  has  remained  stable  and  is 
below  the  EU  average  (21.4%  of  total  area 
vs  26.4%  in  the  EU  in  2023).  Increased  soil 
sealing  had  a  significant  environmental  impact, 
and the area at risk of severe soil erosion by water 
is  well  above  the  EU  average  (24.4%  of  non-
artificial erodible area vs 5.1% in the EU in 2023; 
SDGs 2 and 15). The average performance in each 
dimension  of  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,  water  and  natural  resource 
management,  the  reduction  of  hydrogeological 
risks,  sustainable 
the  energy 
efficiency of buildings. 

transport  and 

Italy  is  improving  in  all  SDGs  related  to 
social  fairness  (SDGs 1,  3,  4,  5,  7,  8,  10).  It 
performs well on good health and well-being 
and  affordable  and  clean  energy  compared 
with  the  rest  of  the  EU  (SDGs 3,  7).  Labour 
market participation improved but wide  gaps with 
the  EU  average  remain.  The  percentage  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 
percentage  of  women  in  senior  management 
positions  (45%  in  2025  vs  33.6%  in  the  EU; 
SDG 5),  the  gender  employment  gap  (19.1 pps  vs 
9.6 pps in the EU in the population aged 20-64 in 
2025;  SG 5)  remains  much  higher  than  the  EU 
average. So does the participation gender gap due 
to caring responsibilities (0.9 pps vs 0.7 in the EU 

138 

 
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 
fairness-related SDGs. 

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  46%  of  the 
justice  system  as 
the 
population  perceiving 
independent,  and  the  perception  of  corruption  in 
institutions  is  above  the  EU  average  (SDG 16). 
There  has  been  some  progress 
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  (137.1%  of  GDP  vs  EU 
average  of  81.7%  in  2025;  SDG 17).  Several 
structural  reforms 
in  the  RRP  are 
included 
expected 
Italy’s  macroeconomic 
stability, particularly the public administration and 
justice system reforms and the measures to fight 
tax evasion. 

improve 

related 

to 

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

in  2025  in  the  population  aged  20-64;  SDGs 5 
and 8).  In  a  context  of  low  tertiary  education 
attainment and low labour market participation of 
women,  the  percentage  of  women  attaining 
tertiary  education  is  higher  than  that  of  men;  the 
gap  is increasing and higher than the EU average 
(13.1 pps  vs  11.3  in  the  EU  in  2025  in  the 
population aged 25-34; SDG 5). The percentage of 
employed  people  at  risk  of  poverty  slightly 
decreased  (11.8%  of  population  over  18  in  2019 
vs  10.2%  in  2024).  Fatal  accidents  at  work  also 
declined  slightly,  but  remain  higher  than  the  EU 
average (2.01 per 100 000 workers vs 1.63 in the 
EU  in  2023;  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). 

However, Italy needs to catch up with the EU 
average  on  most  indicators  (SDGs 1,  4,  8, 
10). Participation in early childhood education has 
slightly  decreased  in  Italy,  while  improving  at  the 
EU level (94% of children aged 3 and over vs 95% 
in the EU in 2024; SDG 4). Preventing early leaving 
from education remains a challenge, especially for 
students  with  a  migrant  background  (22.1 pp. 
difference  between  EU  and  non-EU  population 
aged  18-24  vs  16.8 pp.  difference  in  the  EU  in 
2025;  SDG 10).  Access  to  housing  in  terms  of 
excessive  costs  (SDG 1)  and  affordable  energy 
(SDG 7) improved in Italy, as the percentage of the 
population unable to keep their homes adequately 
warm  decreased,  falling  below  the  EU  average 
(8.6%  of  population  vs  9.2%  in  the  EU  in  2024; 
SDG 7).  The  percentage  of  people  at  risk  of 
poverty  or  social  exclusion  declined  but  remains 
slightly  higher than  in the  EU  (23.1%  of  the  total 
population  in  2024  vs  21%  in  the  EU).  Despite  a 
decrease  in  the  relative  median  of  the  at-risk-of-
poverty  gap,  Italy  remains  above  the  EU  average 
(26%  distance  to  poverty  threshold  vs  22.7%  in 
the EU in 2024; SDG 1). Healthy life expectancy at 
birth based on self-perceived health increased and 
is  above  the  EU  average  (79  years  vs  75.3  in 
2023).  The  percentage  of  people  perceiving 
themselves as healthy slightly increased, against a 
slight  decline  at  EU  level,  with  72.9%  of  Italian 
population  above  16  in  2019  (vs  68.6%  of 
population  in  the  EU),  and  75.5%  in  2023  (vs  EU 
68.5%). The obesity rate decreased to 7% of adult 
population  in  2025  (vs  16.3%  in  the  EU).  At  the 
same time, the proportion of households suffering 
from  noise  increased,  while  remaining  lower  than 
(SDG 3).  RRP  measures  on 
the  EU  average 

139 

 
 
ANNEX 18: COMPETITIVE REGIONS 

Regional development trends  

Map A18.1:  GDP per head compared to the EU 
average. 

While  economic  growth  at  national  and 
regional  level  has  converged  with  the  EU 
average  in  recent  years,  disparities  both 
internally  and  vis-à-vis  the  EU  remain. 
Despite  having  increased  since  the  pandemic,  the 
growth  rate  in  GDP  per  head  in  all  Italy’s  regions 
was below the EU average during the last decade. 
As a consequence, GDP per head (PPS) in all Italian 
regions  has  fallen  vis-à-vis  the  EU  average,  while 
the large gap between the North and the southern 
and 
insular  regions  of  the  country  remains. 
Although  post-pandemic  trends  have  shown  a 
modest  narrowing  of  growth  disparities,  GDP  per 
head (PPS) in the northern regions remained more 
than  50%  higher  than  in  the  southern  and  the 
island regions. In 2024, GDP per head was lowest 
in Calabria, at 57% of the EU average, and below 
70%  in  the  three  other  most  populous  southern 
regions (544) (see table A19.2).  

The  significant  regional  disparities  in  GDP 
per head are related to the important labour 
productivity  gaps  between  regions.  In  2023, 
labour  productivity  (measured  by  GDP  (PPS)  per 
hour  worked)  was  101%  of  the  EU  average  at 
national level. It reached 114% in the North-West, 
with  Lombardia  (120%)  and  Bolzano  (129%) 
standing  out,  and  exceeded  the  EU  average  in  all 
the central and northern regions. The index was at 
82% in the South and 83% in the Islands, with the 
worst  performance  in  Puglia  and  Calabria  (76% 
and 75% respectively). In terms of trends over the 
last  decade,  productivity  growth  was  slower  in 
Italy  than  the  EU  average  and,  in  general,  the 
regions of the North were doing better than those 
less  developed  in  the  South  despite  the  overall 
stability  in  regional  disparities  in  GDP  per  head. 
Lower  wages  in  the  Mezzogiorno  are  also  related 
to lower labour productivity (see Annex 11). 

(544) Campania, Puglia and Sicilia. 

Note: 2021-2023 average GDP per head in purchasing power 
standard compared to the EU average. 

Source: Commission calculations based on Eurostat 16 July 
2025 data 

Moreover,  productivity  growth  historically 
has  been  sluggish  vis-à-vis  the  EU,  most 
notably in the Mezzogiorno. Between 2013-23, 
Italy’s average annual real productivity growth per 
hour worked (0.1%) was significantly below the EU 
average  (0.7%).  Productivity  growth  was  lower 
than  the  national  average  (0.1%)  in  the  South 
(0.0%),  Centro  (-0.1%)  and  island  regions  (-0.2%) 
and  higher  in  the  Northern  regions.  This  reflected 
differences in regional economic structures: Italy's 
industrial  base  is  geographically  concentrated, 
with two-thirds of industry located in the North. In 
the Centre-North, a dense industrial base supports 
innovation  capacity  and 
higher  productivity, 
international  competitiveness.  Southern  regions 
are characterised by a predominance of micro and 
small  enterprises,  concentrated  in  traditional  or 
downstream  segments  of  value  chains,  with 
limited  international  openness  and  relatively  low 
productivity. 

In parallel to this historical economic under-
performance,  Southern  regions  and  the 
islands have seen demographic decline. In the 
decade from 2015 to 2024, the Italian population 

140 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
decreased  by  an  average  of  2.3  people  per 
thousand residents each year. In the same period, 
the  EU  population  grew  on  average  by  1.8  per 
thousand  residents.  Decline  was  most  marked  in 
Molise,  Basilicata,  Calabria,  Sicilia  and  Sardegna, 
with  an  average  decrease  between  4.9  and  7.8 
people per thousand residents per year. There are 
marked  differences  between  coastal  and  inland 
territories,  metropolitan  and  non-metropolitan 
areas, and island and mainland regions. There are 
strong  migration  flows  from  Southern  Italy  to 
Northern  and  central  areas  of  the  country  and 
abroad, mainly concerning the younger population. 
Intra-regional disparities. 

As  a  consequence  of  measures  put  in  place 
post-pandemic,  some  of  these  trends  have 
reversed,  with 
the  Mezzogiorno  seeing 
stronger  economic  growth  in  recent  years. 
The  combination  of  higher  public  investment,  tax 
incentives  and  regulatory  simplification  measures 
targeted  to  the  Mezzogiorno  have  contributed  to 
higher economic growth in Southern Italy than the 
rest  of  the  country  between  2019-24  and 
convergence  with  the  EU  average.  This  has 
contributed also to stronger employment growth in 
the  Mezzogiorno  and  a  shift  in  migration  trends, 
with  fewer  Southern 
in  the 
northern-central  regions.  As  some  of  the  factors 
driving  this  resurgence  such  as  the  National 
Recovery  and  Resilience  Plan  are  phased  out,  a 
renewed push in investments and reforms focused 
on  these  regions  could  consolidate  and  build  on 
these positive recent developments.  

Italians  working 

Key challenges for regional 
competitiveness 

innovation  capacities 

R&D  and 
remain 
limited  in  the  South,  hindering  its  long-term 
economic  and  competitiveness  potential. 
Southern  regions  show  increased  activity  among 
SMEs  in  product  and  process  innovation,  digital 
adoption,  and  collaborative  projects.  However, 
limited  non-R&D  innovation  investment,  lower 
patent  rates,  and  smaller  firm  sizes  continue  to 
constrain productivity and technological gains (545). 

(545) ISTAT (2024). BES 2023, Il benessere equo e sostenibile in 

Italia. 

There 
is  an  uneven  distribution  of  research 
excellence  and  technology-transfer  infrastructure 
(see  Annex  4  “Innovation  to  business”),  which 
contributes to weaker science–industry linkages in 
the  southern  regions.  Conversely,  the  North  and 
Centre  show  a  stronger  R&D  performance 
combining high R&D expenditure, strong patenting 
intensity (546) 
capacity,  and  high 
(compared  to  the  national  average,  although  still 
below  EU  average).  This  in  turn  supports  high-
value-added  manufacturing,  advanced  services, 
and favourable global value chain positioning.  

innovation 

in 

in  part  reflect  differences 

innovation 
These  regional  disparities 
capacity 
in 
productive  structures.  Other  than  the  agro-
industry,  value  chains  in  southern  Italy  show 
international  orientation.  This  reflects 
limited 
structural  weaknesses 
infrastructure 
including 
constraints, the prevalence  of  small  firms,  limited 
supply of advanced skills, a strong dependence on 
domestic  demand,  and  the  specialisation  in  less 
tradable  sectors,  such  as  construction,  transport 
and retail (547). Southern regions are also strongly 
oriented  towards  tertiary  sectors,  particularly  in 
activities  of  low-value  added  within  value  chains 
or in traditional industrial sectors.  

advanced 

This  picture  is  partially  compounded  by  the 
growth  of  certain  advanced 
industrial 
sectors  in  the  Mezzogiorno.  The  presence  of 
specialised 
services 
some 
manufacturing  hubs 
is 
regions 
expanding,  for  example  in  the  green  industry  and 
renewable  energy 
(solar,  wind,  photovoltaic, 
biogas) thanks to abundant natural resources. The 
aerospace sector in Puglia and Campania are also 
areas of excellence. 

and 
in  southern 

Attracting  more  major  players  in  high-value 
added  sectors with  specialised competencies 
could  be  a  driver  of  competitiveness  in  the 
Mezzogiorno. 
The  2025  Country  Specific 
Recommendations  for  Italy  point  to  the  need  to 
pursue  a  more  ambitious  industrial  policy  in 
southern  Italy  that  supports  productive  priorities 
and  strategic  specialisations.  In  this  direction, 

(546) Innovation  intensity  is  defined  as  the  number  of  innovation 
active or innovative firms, as a percentage of total firms by 
industry. 

(547) SVIMEZ Report 2024 - The Southern Economy and Society - 

Competitiveness and cohesion: time for policy. 

141 

 
 
 
 
Table A18.1:Main development trends, challenges and the concentration of resources. 

Source: European Commission based on Eurostat data; categories of regions based on Map A18.1. 

to  enhance 

Banca  d’Italia(548)  and  Confindustria(549)  highlight 
the  pivotal  role  of  large  players  in  driving  supply 
chain  development,  particularly  in  Mezzogiorno 
regions.  There  is  scope  to  capitalise  on  existing 
areas  of  excellence 
regional 
competitiveness  such  as  the  aerospace  sector  in 
Puglia and Campania, the renewable energy sector 
in  all  southern  regions  or  the  electronics  and 
semiconductors  sectors  in  Sicilia.  Exploiting  the 
potential  of  strategic  specialisation  in  new  value 
chains  and  sectors  at  the  technological  frontier 
such  as  semiconductors,  artificial  intelligence  and 
ICT 
foster  economic 
diversification of territories dependent on declining 
sectors.  

technologies  can  also 

to 

promote 

business 

Private  investment  into  the  country’s  most 
disadvantaged  areas  can  be  boosted  by  the 
focused  targeting  of  national  measures  and 
leveraging of cohesion policy. Most nationwide 
measures 
growth, 
internationalisation,  innovation,  access  to  finance, 
and  foreign  investments  have  disproportionately 
benefited  the  Centre-North  when  there  have  not 
been  provisions  earmarked  for  the  southern 
regions.  Transition  4.0  Plan  tax  credits  did  not 
include targeted  support for southern regions and 
saw  very 
‘Nuova 
Sabatini’ directed around 90% of incentives to the 
Centre-North  between  2014  and  2023  and  only 
~19%  of  Cassa  Depositi  e  Prestiti  venture  capital 
investments  were  in  the  South  (550).  Conversely, 
the  Budget  Law  2026  that  extended  for  three 

limited  uptake  there  while 

(548) Banca  d’Italia,  2022: 

“Il  divario  Nord-Sud:  sviluppo 

economico e intervento pubblico”. 

(549) Confindustria, 2025: « Check-up Mezzogiorno 2025 ». 

(550) Details on the geographical distribution of projects and 
incentives are provided by the SVIMEZ Report 2024. 

142 

Main development trendsLess developed regions (population 19.9 million)A persistent north-south divide marks the situation among the less developed regions in the Italian Mezzogiorno, where (i) macro-regional gaps remain significant generally in productivity (RCI 67% of the EU average in the South and 61.8% in the islands); (ii) employment (52.5% of population aged 20-64 in the south and  51.5% in the islands); (iii) innovation capacity and public service quality; as well as in (iv) infrastructure endowment, both in terms of accessibility and services for the productive sectors. In the Mezzogiorno regions, the productive sector remains characterised by micro and small firms, often family-run and concentrated in traditional or downstream segments of value chains, with limited international openness and low labour productivity. While some advanced services (ICT, professional services) and specialised manufacturing hubs exist, particularly in parts of Campania, Puglia, and Sicily, the overall presence of medium-sized and large enterprises, innovation infrastructure, and high-value manufacturing remains weak, constraining the regions’ ability to drive growth and fully participate in global value chains.Transition regions (population 7.9 million)In 2021-2023, four Italian regions had an average GDP per head (in PPS), at least 75% but less than 100% of the EU average, with Piedmont entering this group. The other three regions’ (Abruzzo, Marche and Umbria) GDP trends show that these regions’ performance is declining. This is in part due to low innovation, stagnating economic activities and structural difficulties in traditional industrial activities (i.e. automotive, textile and ceramics).More developed regions (population 31.3 million)In the Centre-North, a dense industrial base – anchored by medium and large firms, industrial districts, and strong integration into global value chains – supports higher productivity, innovation capacity, and international competitiveness. The strong industrial concentration also makes northern regions more exposed to European industrial slowdowns and energy price shocks, particularly given the weight of energy-intensive sectors. However, the industrial fabric of the more developed Italian regions is diverse, with higher technological innovation in Lombardy and Emilia Romagna and a more traditional industrial structure in Veneto. Marked internal differences are registered in these regions. For instance, the situation in Lazio relies strongly on the capital.  Specific territories Spatial imbalances are extremely relevant in Italy.  These include an urban–rural divide – driven by depopulation, ageing and reduced access to essential services in inner and mountainous areas – as well as marked differences between coastal and inland territories, metropolitan and non-metropolitan areas, and island (including minor islands) and mainland regions. Moreover, intra-regional disparities persist within both the northern and southern regions, and dynamic urban centres coexist with structurally weaker peripheral municipalities. Overall, Italy’s territorial imbalances are multidimensional and layered, combining macro-regional, geographical and functional differences, inaccessibility, and level of essential public services. These imbalances affect the country’s development potential and are linked to Italy’s depopulation trends and its brain drain. 
 
 
 
  
 
years  the  funding  of  the  Special  Economic  Zone 
(SEZ)  scheme,  provided  enterprises  with  some 
certainty  for  their  investment  in  the  SEZ.  Overall, 
the  South’s  share  of  key  support  instruments  is 
around  30%,  mainly  thanks  to  national  schemes 
such as the Development Contracts, the Guarantee 
Fund for SMEs and Smart & Start Italia, that were 
co-financed  with  cohesion  policy  resources  and 
had  a  specific  earmarking  for  southern  regions. 
Going  forward,  a  policy  framework  for  regional 
competitiveness  that  builds  on  past  effective 
practices  would  provide  long-term  financial  and 
regulatory  incentives  for  large  investments  in 
clearly  defined  sectors,  knowledge  domains  and 
geographic  areas,  in  line  with  the  needs  for  the 
Mezzogiorno. 

to 

challenges 

At the same time, some Northern and Centre 
regions  could  also  merit  targeted  support  in 
light  of  growing 
their 
competitiveness.  The  Italian  automotive  and 
manufacturing  sectors  which  have  been  at  the 
heart of the economic growth of many regions of 
the  North  and  Centre,  face  significant  challenges 
non-cost 
in 
competitiveness. Maintaining their competitiveness 
requires  significant investments in  innovation  and 
technology  and  a  skilled  workforce  proficient  in 
digital  skills and new technologies, with the latter 
often requiring targeted public support for training.  

terms 

both 

cost 

and 

of 

Low employment is a major constraint to the 
growth potential of the Mezzogiorno  and co-
exists  with  labour  shortages  in  some  high-
value  added  sectors.  These  regions  have  been 
historically  characterised  by  significantly  lower 
employment  rates  than  those  of  the  Centre  and 
North  of  the  country.  This  difference  has  not 
narrowed  down  over  time.  Female  employment 
rate  in  the  labour  market  remains  among  the 
lowest  in  the  EU  in  those  regions.  Insufficient 
availability  of  childcare  and 
long-term  care 
services are still a major challenge (see Annex 15). 
Additionally,  addressing  skill  shortages  in  ICT, 
engineering, technology and the green transition is 
increasingly 
labour 
market and productive system, in particular in the 
South. 

important  for  the 

Italian 

Transport  infrastructure  is  still  significantly 
underdeveloped  in  the  South.  It  is  insufficient 
in serving productive activities in the region. In the 
Mezzogiorno 
is 
insufficient  as  regards  the  multimodal  logistics 
and interports, as well as for rail freight terminals 

infrastructure 

endowment 

environmentally 

and yards to support a more efficient handling of 
cargo.  This  is  exacerbated  by  a  systemic  lack  of 
coordinated  infrastructural  development  planning. 
Transport  and  logistics  infrastructure  in the  North 
is  more 
and 
digitalised, thus providing more efficient networks 
and local transport mobility services typically offer 
a  better  coverage.  Given  however  the  reliance  of 
supply  chains  in  sectors  under  intense  global 
competition  (i.e  automotive)  on  highly  efficient 
transport  and  logistics,  tailored  public  investment 
may be needed also in northern/central regions.  

sustainable 

full  potential 
infrastructure 

Grid  infrastructure  suffers  from  significant 
weaknesses  in  the  South  constraining  the 
in 
development  of 
its 
is 
renewable  energies  The 
unevenly  exploited  throughout  the  country  with 
ample  weaknesses  in  the  Mezzogiorno  regions. 
According  to  the  Renewable  Thinking  Indicator 
(RTI) (551)  regions  such  as  Piemonte,  Lombardia, 
and Abruzzo, have already harnessed over 70% of 
their  renewable  potential  (mostly  in  hydropower), 
whilst  Sicilia  and  Sardegna  exploit  only  32%  and 
35% respectively of their potential despite having 
some of the best conditions for renewable energy 
development.  Weaknesses 
grid 
infrastructure  (i.e  lower  capacity,  density,  and 
interconnection  of  electricity  networks)  are  a 
significant  bottleneck  for  further  uptaking  and 
developing renewable energy in the South. There is 
also substantial scope to invest in the upgrade of 
electricity transmission network and in smart grids. 

the 

in 

remaining 

inefficiencies 

The  quality,  efficiency  and  availability  of 
water  infrastructure  and  water  services  are 
lower  in  the  Mezzogiorno.  Italy  received  a 
Country  Specific  Recommendation  in  2025  to 
tackle 
in  water 
management  by  reducing  infrastructural  gaps. 
Total  water  losses  are  highest  in  Basilicata, 
Sardegna,  Lazio,  and  Sicilia  -  regions  already 
subject to high water stress and drought risks. This 
is  mostly  a  consequence  of  the  lower  investment 
capacity  of  operators  located  in  the  southern 
regions compared to the North and the Centre, and 
of  a  mostly  fragmented  management  system  of 
important  signs  of 
water  services.  However, 
managerial  integration  have  emerged  in  Calabria, 
and Sardegna (Map A18.2) where water service is 
being consolidated into a single operator. In many 

(551) CVA and The European House Ambrosetti – TEHA (2025). 

Renewable Thinking 2025. 

143 

 
 
regions 

infrastructure. 

Italian 
there  are  still  considerable 
investment  needs  relating  to  modernising  and 
Regional 
upgrading 
water 
disparities  can  also  be  seen 
in  wastewater 
treatment 
infrastructure  with  significant  gaps 
again  in  the  South.  In  Sicily  only  76.5%  of  the 
population  were  connected  to  the  sewerage 
system in 2022 (compared to 89% as the national 
average) (552)(see Annex 10). 

Map A18.2:  Water services management in Italy 

Source: Utilitatis foundation 

There  are  significant  weaknesses  in  waste 
management in the regions of the Centre and 
South  of  the  country.  Italy  received  a  Country 
Specific  Recommendation 
in  2025  to  tackle 
remaining  inefficiencies  in  waste  management  by 
reducing  infrastructural  gaps.  Despite  significant 
progress  made  in  past  years,  also  thanks  to 
investment supported  by  cohesion  policy,  most  of 
central  and  southern  Italy  faces  a  treatment 
deficit.  Organic  waste  is  often  transported  to 
regions far from where it is produced. In addition, 
the  high 
level  of  fragmentation  of  waste 
management,  especially  in  the  south,  lead  to 
diseconomies  (see  Annex  8).  Conversely,  Northern 
Italy  drives  the  overall 
in  separate 
collection  waste  rates  and  the  decrease  in  the 
rates  of  waste  sent  to  landfills  (553).  Northern 
regions also benefit from better infrastructure for 
organic  waste  treatment  and  energy  recovery, 
both in terms of quantity and quality, and are able 
to treat more waste than they actually produce.  

increase 

(552) ISTAT (2025), Water statistics 2020-2024, Link. 

in 

the  availability  of 

Access  to  health  services  is  also  often 
difficult  in  the  South.  Historical  differences  in 
policy and financing have created marked regional 
imbalances 
resources 
(infrastructure  and  workforce)  affecting  both  the 
supply  and  quality  of  services  (554).  Territorial 
disparities are also evident in terms of healthcare 
personnel.  A  structural  under-allocation  and 
greater difficulties in meeting the Essential Levels 
of Care (LEA) in southern regions, call for a revisit 
of  the  resource  allocation  for  healthcare  across 
regions  by  integrating  socioeconomic  factors  (see 
Annex 15). 

Several  structural  weaknesses  remain  in 
relation to the blue economy, in particular in 
the  South  and  islands  (555).  Those  activities 
represent  a  significant  share  of  the  employment 
and  value  added  of  those  coastal  regions. 
Challenges  faced  by  them  include  environmental 
degradation,  over-reliance  on  seasonal  tourism, 
fleet 
declining 
and 
aging 
underdeveloped  port  hinterland 
connections, 
compounded by high exposure to climate change. 

stocks, 

fish 

lower 

is  a 

income 

Housing  affordability 
structural 
challenge  in  several  Italian  regions,  albeit 
with different territorial drivers. In the South, 
housing  affordability  constraints  are  more  closely 
associated  with 
levels  and 
insufficient  social  housing  stock.  In  the  Centre-
North, particularly in major metropolitan and high-
tourism  areas  such  as  Milano,  Firenze,  Bologna 
and  Roma,  sustained  demand  pressures  have  led 
to  significant  increases  in  property  values  and 
rental  prices.  Under  the  revised  mid-term  review 
priorities, Cohesion Policy will support investments 
of  1.1  billion  EUR  aimed  at  modernising  the 
existing  housing  stock  and  expanding 
the 
availability of affordable and social housing across 
Italian regions. (see Annex 16). 

regions  are 

Italian 
by 
substantial  asymmetries  in  fiscal  capacity, 
reflecting  differences  between  Special-
Statute (556)  and  Ordinary-Statute  regions. 

characterised 

(554) ISTAT  (2024).  BES  2023,  il  benessere  equo  e  sostenibile  in 

Italia 

(555) EU Blue Economy Observatory – Italy Country Profile link 

Osservatorio Nazionale sull’Economia del Mare - XIII National 
Report on the Sea Economy (2025) 

(556) Trentino-Alto Adige, Valle d’Aosta, Friuli-Venezia Giulia, Sicilia 

(553) ISPRA (2024). Rapporto Rifiuti Urbani Edizione 2024. 

and Sardegna. 

144 

 
 
 
 
 
 
regions 

recorded 

the  highest 
Special-Statute 
revenue  per  head  in  2023,  notably  Northern 
regions,  with  Valle  d’Aosta  at  EUR  17 400  and 
Sardegna  at  EUR  9 700.  Ordinary  statute  regions 
exhibited  substantially  lower  revenue  per  head, 
ranging  between  EUR  4 500  EUR  6 700 
in 
2023 (557).  The  reliance  of  southern  regions  on 
transfers  from  the  central  government  is  higher: 
state  transfers  per  head  were  particularly  high  in 
Molise (EUR 1 268), Sicilia (EUR 1 195), and Puglia 
(EUR  929),  whereas  Lombardia,  Veneto  and 
lower 
Emilia-Romagna 
transfers  per  head  (EUR  268–333).  Regions  such 
as Puglia, Molise, and Sicilia have the lowest levels 
of financial autonomy, as measured by the ratio of 
own-source revenues to total current revenues.  

received  substantially 

less  and  more  developed 

regions. 
between 
Moreover, 
the  envisaged  activation  of  an 
equalisation  fund  to  balance  resources  among 
regions  to  guarantee the coverage  of  expenditure 
needs  for  the  Essential  Levels  of  Services  (ELS) 
and to reduce differences in fiscal  capacity is not 
yet  achieved,  exacerbating  the  differences  in 
public  services  delivery  still  characterising  the 
Mezzogiorno from the rest of the country. Despite 
a  general  increase in  capital  expenditure  between 
2018  and  2023—supported  in  particular  by  RRF 
resources,  there  are  still  persistent  territorial 
disparities  between  Mezzogiorno  and  the  Centre-
North  in  infrastructure,  connectivity,  and  public 
service quality.  

including  a  high 

The  limited  fiscal  capacity  and  autonomy  of 
regional  administrations  in  the  Mezzogiorno 
constrain  investment  in  infrastructure  and 
local  public  services.  Structural  weaknesses  in 
fiscal  capacity, 
level  of 
indebtedness  of  local  administrations,  continue  to 
constrain  investment  capacity,  especially  in  the 
South (558).  Municipalities  in  the  Mezzogiorno  face 
greater  budgetary  and 
imbalances 
compared  with  Centre-North  ones,  driven  by 
systemic  weaknesses 
capacity 
technical 
particularly 
difficulties  have  slowed  down 
the  progress 
towards the completion of the regional federalism 
reform (560), 
trends 

revenue 
in 
in  Sicily (559).  Several 

the  convergence 

financial 

limiting 

(557) Elaborations based on Italian Ministry of Finance data. 

(558) Elaboration based on 2023 ISTAT data, for local authorities 

and for regions. 

(559) De  Toni,  A.  (2024).  Lo  stato  di  crisi  degli  enti  locali: 

evoluzione e prospettive, Link. 

the 

Its  purpose 

in  2001. 
revenue  and  expenditure  autonomy 

(560) Fiscal  federalism  originates  from  Delegated  Law  No. 
Italian 
implementing  Article  119  of 
42/2009, 
is  to 
Constitution  as  amended 
guarantee 
for 
municipalities,  provinces,  metropolitan  cities  and  regions, 
while  safeguarding  the  principles  of  solidarity  and  social 
cohesion;  to  gradually  replace,  at  all  levels  of  government, 
the criterion of historical expenditure; to make administrators 
more  accountable  in  the  use  of  public  resources;  and  to 
ensure  the  effectiveness  and  transparency  of  democratic 
oversight  over  elected  officials.  This  reform,  still  unfinished 
and included among the objectives of the NRRP, provides for 
the gradual replacement of state transfers with autonomous 
forms of taxation in financing the core functions of territorial 
entities. This is the so-called “fiscalisation” of state transfers, 
aimed at shifting from a system of derived finance to one of 
autonomous finance for each territorial level of government. 

of 

capacity 

aspects, 

Administrative  capacity  is  weaker  in  the 
regions  and  municipalities  of  the  South 
across  many 
exacerbating 
regional  competitiveness. 
to 
challenges 
Disparities 
public 
the 
in 
administrations  persist  in  key  areas  such  as 
digitisation, decision-making capacity, efficiency of 
public  financial  management  or  procurement. 
Southern  areas  lag  behind  in  rankings  assessing 
the  availability  and  quality  of  digital  public 
services for citizens and businesses (561). Delays in 
public  procurement  are  more  significant  in  the 
South  and  less  frequent  in  municipalities  where 
the workforce shows a higher presence of women 
and  young  workers (562),  showing  the  importance 
of  modernising  human 
in  public 
administrations.  Remuneration  remains  limited  in 
the  South  and  small  municipalities  or  those  with 
to  attract 
limited  fiscal  autonomy  struggle 
qualified  staff.  The  use  of  association  solutions 
between  municipalities  to  reduce  operating  costs 
and  secure  economies  of  scale  is  still  limited. 
Italy’s  2025  CSRs  included  a  recommendation  to 
increase the efficiency of the public administration 
and 
capacity, 
particularly  at  local  level,  which  are  yet  to  be 
tackled in a systemic manner. 

administrative 

strengthen 

resources 

(561) Banca d'Italia (2024). The economy of Italian regions: Recent 
dynamics and structural aspects. Economie Regionali, n. 22. 

(562) Banca  d’Italia  (2021).  La  realizzazione  dei  lavori  pubblici  in 
Italia: fattori istituzionali e caratteristiche regionali. Questioni 
di Economia e Finanza, n. 659. 

145 

 
 
 
 
 
 
 
 
Table A18.2:Selection of indicators at regional level in Italy 

Dark green - the indicator is 120% or more of the EU average. 
Light Green - the indicator is 100% or more, but less than 120% of the EU average. 
Yellow - the indicator is 90% or more, but less than 100% of the EU average.  
Light red – the indicator is 75% or more, but less than 90% of the EU average. 
Dark red – the indicator is below 75% of the EU average.   
This colour scale applies to ‘positive’ indicators, where higher values are favourable. 
For ‘negative’ indicators (where higher values are unfavourable), the colours are reversed 
Source: Eurostat and ARDECO (JRC) 

146 

GDP per head (PPS, index)Real GDP per head growthProductivity: GDP (PPS) per hour worked (index)Real productivity growth (per hour worked)R&D expenditurePopulation growthNet migrationFemale employment rate 20-64EU27=100Average annual % changeEU27=100Average annual % change% of GDPAverage annual change per 1000 residentsAverage annual change per 1000 residents% of women aged 20-6420242014-202420232013-202320232015-20242015-20242025EU1001.41000.72.241.83.571.3Italy981.31010.11.38-2.31.858.0Nord-Ovest1211.41140.21.40-0.93.867.2Sud661.4820.00.98-4.7-1.640.7Isole641.483-0.20.94-5.0-1.241.7Nord-Est1141.21070.41.58-0.23.868.2Centro (IT)1051.0103-0.11.52-1.92.964.6Piemonte1011.41020.02.09-3.52.867.7Valle d’Aosta/Vallée d’Aoste1250.8112-0.30.53-4.31.074.3Liguria1020.91080.41.44-3.94.966.6Lombardia1321.41200.21.190.84.066.9Abruzzo841.1890.21.10-4.40.956.6Molise721.5870.30.78-7.9-0.950.7Campania641.6850.21.20-3.9-2.036.8Puglia641.576-0.30.82-4.7-1.240.9Basilicata741.985-0.30.64-7.8-2.449.0Calabria570.975-0.20.64-6.2-2.737.7Sicilia611.483-0.30.98-4.9-1.637.5Sardegna731.6820.10.83-5.40.254.7Provincia Autonoma di Bolzano/Bozen1611.61290.90.654.13.274.3Provincia Autonoma di Trento1251.11170.41.591.63.572.8Veneto1091.21030.31.20-1.02.565.5Friuli-Venezia Giulia1021.21010.21.69-2.43.868.7Emilia-Romagna1171.11080.42.090.65.469.6Toscana1031.11000.11.37-2.23.669.2Umbria851.488-0.20.88-4.21.868.0Marche891.089-0.30.94-4.31.367.5Lazio1130.8110-0.21.80-0.63.060.5  
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 19: TRANSPORT 

Italy 

the  challenges 

This  Transport  Annex  presents  the  state  of  play, 
the 
and 
implementation  of  the  trans-European  transport 
network  (TEN-T),  the  European  railway  traffic 
management  system  (ERTMS),  the  roll-out  of 
Sustainable Aviation Fuels (SAF) and road safety. 

faces  with 

TEN-T 

– 

Sea 

Four European transport corridors cross Italy 
Rhine-Mediterranean, 
(North 
Mediterranean,  Baltic  –  Adriatic,  and 
Scandinavian  –  Mediterranean).  The  Italian 
TEN-T  rail  network  is  11 622 km  long  (5 730 of 
which  are  on  the  core  network).  The  TEN-T  road 
network is 10 735 km long (4 312 of which on the 
core  network).  Italy  has  912 km  of  TEN-T  inland 
waterways,  34  TEN-T  airports  (including  11  core 
airports), 50 TEN-T ports (including 17 core ports) 
and  50  urban  nodes (563).  Italy  fully  aligned  its 
national 
the  TEN-T 
European Transport Corridors. 

transport  planning  with 

Italy’s  rail  network  is  well  developed  but 
heavily  used  and  some  sections  require 
further investments, especially in view of the 
ongoing  upgrades  of  major  cross-border 
projects  to  France,  Austria  and  Slovenia.  The 
southern  part  of  the  country  remains  poorly 
connected.  Another  priority  will  be  to  address 
capacity  bottlenecks  in  the  surroundings  of  major 
urban nodes. 

The  ERTMS 
is  essential  to  efforts  to 
digitalise the railways and to modernise and 
harmonise railway operations across Europe. 
The ERTMS ensures the safety of rail networks by 
providing  a  unified  signalling  system 
that 
significantly  reduces  the  risk  of  accidents.  It  also 
provides  interoperability  between  national  rail 
systems, improving cross-border train movements. 
Finally,  ERTMS  enhances  network  capacity  and 
operational 
the 
competitiveness of the rail sector. 

efficiency, 

increasing 

The  ERTMS  was  operational  on  8.6%  of 
Italy’s  TEN-T  rail  network  by  the  end  of 
2024.  Based  on  its  national  plan  Italy  would 
require significant efforts to reach its ERTMS roll-

(563) TENtec Information System, according to Reg. 2024/1679. 

out  target  by  2035,  namely  deploying  ERTMS  on 
an  additional  length  of  8 104 km  and  to  pursue 
the  decommissioning  of  the  legacy  signalling 
system.  Of  particular  concern  in  Italy  are  the 
lengthy  and  expensive  testing  requirements  for 
ERTMS vehicles which, if streamlined, would avoid 
vehicle 
rail 
operations. 

authorisation 

bottlenecks 

for 

Italy,  the  priority  sections 
In  northern 
complete  the  European  transport  corridor 
between  the  Mediterranean  and  eastern 
Europe.  The  railway  lines  eastwards  of  Verona 
face significant capacity constraints and should be 
upgraded  given  the  future  traffic  increases  that 
the  cross-border  improvements  towards  Slovenia 
will bring. 

Furthermore,  the  line  between  Bologna  and 
Pescara  along  the  Adriatic  coast  needs 
upgrading  as  it  is  the  backbone  of  the 
railway  system  along  the  eastern  coast  and 
a  major  route  for  freight  transports.  In 
southern  Italy,  the  line  from  Salerno  to  Reggio 
Calabria  needs  further  upgrades  to  extend  the 
Italian  high-speed  network  to  the  southernmost 
regions and support the economic development of 
this area.  

in 

layers 

involved 

In  Italy,  the  timely  implementation  of  large-
scale  infrastructure  projects  is  affected  by 
overlapping  competencies  between  different 
administrative 
the 
relevant  permitting  procedures.  New  rules 
were 
in  2023  to  streamline  and 
procedures. 
accelerate 
However,  it  is  not  yet  clear  whether  they  will 
trigger  the  expected  results.  In  addition,  growing 
construction  costs  have  affected  budgetary 
planning  and  procurement  procedures  for  several 
big projects. 

procurement 

introduced 

public 

Together with Austria and France, Italy needs 
to  prepare  a  model  on  how  to  efficiently 
operate  railway  traffic  on  the  Brenner  and 
Lyon-Turin cross-border sections, especially to 
traffic  management,  maintenance  and 
cover 
operations  in  line  with  the  rules  of  the  single 
European railway area. Harmonising technical and 
operational rules with the minimisation of national 
rules  in  line  with  the  EU  directives  on  rail 
interoperability  and  safety  remains  critical  to 
ensuring seamless cross-border rail transport. 

147 

 
 
 
 
 
Table A19.1:ERTMS deployment in Italy. 

Source: Based on ERTMS – Third work plan of the European Coordinator Matthias Ruete. 

Map A19.1:  TEN-T Cross-Border & National Priority Sections in Italy 

Italy has a strong industrial base to produce 
sustainable aviation fuels (SAF). It is home to 
one  of  the  largest  SAF  facilities  in  Europe  with  a 
production  capacity  of  up  to  400kt/year  of  SAF 
from biological origin (bioSAF). Without investment 
support  to  kick  start  commercial-scale  eSAF 
deployment (hydrogen-based) and ramp up bioSAF 
reaching  the  targets  set  by  ReFuelEU  Aviation  is 
unlikely.  Making  use  of  EU  ETS  proceeds  and 
ReFuelEU  Aviation  penalty  revenue  to  support the 
deployment of eSAF as well as ramp up production 
of  advanced  bioSAF  would  represent  a  significant 
contribution.  Italy  could  also  join  the  eSAF  Early 

Movers  Coalition  to  contribute  financially  to  de-
risking  instruments  for  eSAF  production  such  as 
double-sided auction mechanisms.  

Road Safety 

Road  crashes  impose  an  enormous  social, 
economic  and  health  burden  on  the  EU 
economy.  The  external  socio-economic  costs  of 
fatal,  serious  and  minor  injuries  have  remained 

148 

 
 
 
 
 
 
 
 
 
persistently  high  despite  the  progress  made  in 
reducing  crash  frequency  and  severity.  These 
resources 
innovation, 
education,  healthcare  and  other  crucial  public 
investments (564). 

could  otherwise 

fuel 

In  2024,  Italy  was  above  the  EU  average 
(45),  with  51 
fatalities  per  million 
inhabitants.  Compared  with  the  EU  average,  the 
distribution  of  fatalities  in  Italy  showed  a  high 
proportion  of  accidents  involving  powered  two 
wheelers  and  fatalities  occurring  on  roads  inside 
urban  areas.  Over  the  2010-2019  period,  the 
categories of pedestrians and cyclists showed the 
lowest  reductions  in  both  fatalities  and  injuries. 
Based on the latest data, and the 5% decrease in 
fatalities  between  2019  and  2024,  progress 
remains  slow.  Italy  therefore  would  benefit  from 
accelerating the pace of change in its road safety 
measures to reach the 2030 target of halving the 
number of fatalities.   

Graph A19.1: Italy's road fatalities per million, 
2024 

Source: Report at the Mid-Point - Italy, SWD(2026) 47 final. 

The  map  below  presents  the  roads  with  poor 
is 
infrastructure  safety,  where  urgent  action 
required. 

Map A19.2:  Italy's road safety map 

Source: TENtec Information System and TEN-T map library – 
European Commission 

in 

to 

the  delays  met 

Overall  road  safety  performance  has  not 
improved sufficiently to meet the targets set 
for  this  period,  which  may  primarily  be 
attributed 
the 
implementation  of  the  road  safety  strategy. 
Italian  authorities  have  committed  to  carry  out  a 
mid-term evaluation of the road safety strategy’s 
implementation,  with  the  aim  of  identifying  the 
most effective actions to compensate for the gaps 
identified.  Within  this  context,  it  would  be  very 
useful  to  review  the  degree  of implementation  of 
the  actions  and  to  explore  any  other  relevant 
activities,  with  emphasis  on  crashes  inside  urban 
areas and VRUs (565).   

(564) Report on the implementation of the EU Road Safety Policy 

framework at the Mid-Point, COM(2026) 77 final. 

(565) More details in Report on the implementation of the EU Road 
Safety Policy framework at the Mid-Point – Italy, SWD(2026) 
47 final.  

149 

 
 
 
 
 
 
150