The Italian economy is showing some positive signs, such as the continuous increase in the number of employed individuals, especially those with permanent contracts. Over the past year, the number of employed individuals with permanent contracts has increased by almost half a million (456 thousand out of a total of 23.7 million), despite a decrease of 5 thousand temporary employees.
However, there are also some negative aspects. The current situation in the labor market indicates that the productivity of the economy is not growing, and productivity is a key measure of an economy’s health.
This average productivity results from two very different trends: a contraction in employment in the manufacturing sector, where productivity is relatively high, and a strong expansion in the construction sector, where productivity is lower. As a result, the overall productivity is decreasing, which also explains the decline in already low real wages.
In the manufacturing sector, alongside the decline in production, investments have also stagnated, with a 1.1% decrease in the third quarter of 2023, continuing the negative trend of the previous three months (-1.3%). The underlying reasons for the lack of investment from entrepreneurs may not be related to the cost of financing, as nominal interest rates have been close to zero for more than a decade.
The government’s desire to have a more active role, without clearly outlining its scope of intervention, introduces further uncertainty into entrepreneurs’ decision-making. There is ongoing discussion about the State’s involvement in Stellantis, a company facing one of the most difficult decisions in its history: determining the right balance between electric, hybrid, and traditional cars in the technological transition.
However, this problem cannot be solved simply by purchasing some shares, even if the buyer is the State. It is also perplexing that the government did not consider the impact on the stock price in favor of current Stellantis shareholders.
The disagreements between the Ministry of Economy and Palazzo Chigi regarding the “capital” decree inject further uncertainty, especially concerning the governance of Generali Insurance and its potential impact on other major companies. The stated objectives of the announced privatizations are challenging to comprehend.
The President of the Council’s statement that “Privatizations do not solely aim to generate revenue to reduce public debt; they must be a tool of industrial policy,” raises concerns about the potential consequences. The recent financial and economic events highlight the numerous unresolved issues involving state-owned or invested companies, such as Tim, Mps, Ita, and Ilva.
Clearly defining the boundaries of public intervention is essential to prevent the State from intervening in the private sector without clear direction, and without bearing the consequences of its decisions.