The 2005 Reform of the Stability and Growth Pact: Too Little, Too Late? Bruges European Economic Research (BEER) Papers 6/November 2006

This paper analyses the main critiques addressed by the literature and the policymakers to the 1997 Stability and Growth Pact. It further indicates to what extent the 2005 reform of the Pact meets those critics. It finally argues that the 2005 reform may be too little and arrive too late to restore the Pact credibility, ensure its enforceability and correctly set the derogations to the excessive deficit procedure on the nature of the shocks which cause the output gap rather than its size: a 3% of GDP limit on deficit spending may be a too binding constraint in front of a strongly negative demand shock, while it is irrationally large in front of a supply shock. Some empirical evidence is provided to identify in the last years strongly negative demand shocks from other shocks in the 25 EU Member States. Had this identifying method been adopted in November 2003, the European Commission and the Council would have both agreed to stop the excessive deficit procedure against Germany, but they would have both proceeded against France which apparently was not at the time hit by a strongly negative demand shock

La donna lavoratrice a 60 anni dalla Costituzione italiana

The Constitutional law on gender parity in the labour market registered a smaller evolution in Italy than in Europe and in the rest of Western countries, so that the present Italian primary laws are somehow more backward than they used to be 60 years ago. The European Union, however ,is pushing us in the right direction. Furthermore, the gap between the laws on gender parity and the real condition of men and women in the Italian labour market is large. If one observes the male-female effective differentials in access, treatment, wages, Italian women are penalized by cultural traditions and the home and children caretaking. Compared with the rest of Europe, the situation of Italian female relative to male workers is particularly discriminated in the career paths and in the horizontal and vertical segregation.

Un’analisi economica della mobilità sociale in Italia

This paper aims at providing an economic analysis of the intergenerational social mobility in Italy. The data come from ISTAT. We present absolute mobility and social fluidity tables. We also examine the cohort effect, finding for Italy an increase in intergenerational absolute mobility, and a stabilization in the cohort 1951-1960. Social fluidity goes up for the upper and the lower classes. Through multinomial logit models, we try to predict the variations in the probability of belonging to the different social destinations according to social origin, level of education, own talents, age and gender. We confirm the family background importance in Italy.

Mutual Recognition, Unemployment and the Welfare State. ENEPRI Working Paper No. 13, September 2002

Contents: 1. Introduction; 2. Rules and Regulations on Mutual Recognition in the European Union Markets; Mutual recognition, equivalence, competition and harmonisation; "Equal treatment" and "social dumping"; The minimum threshold; 3. Proposals for the Introduction of Mutual Recognition in the European Labour Markets and Welfare States; Existing general rules for social protection in Europe; Health care; Mandatory pension schemes; Supplementary pension schemes; Classical unemployment and labour mobility; Mutual recognition and labour market rigidities: A theoretical model; 4. Policy Conclusions. [From the Introduction]. In the post-war process of its economic and social construction, the European Union has been following different paths ranging between open assimilation to mutual recognition. The former arises in the attempts, either negotiated between partners or proposed by Community institutions, to attain harmonisation, coordination, convergence, strengthened co-operation, through peer pressures or moral suasion, looking at benchmarks or at best practices. These are all forms of mediation, compromise, variable geometry between Member States, which show a certain degree of success, but also many failures, mainly because they are unable to accept unity in diversity making the large, existing heterogeneity in Europe a form not of weakness but of wealth. This is indeed the very gist of the principle of mutual recognition: its symbolic value can be easily perceived simply by thinking that, if the American currency bears the caption "ex pluribus unum", the Euro motto becomes "unity in diversity", as stated in her May 4 2000 speech by Mme. Nicole Fontaine, Chairperson of the European Parliament.... In what follows we will analyse the main reasons for the observed facts concerning the advantages of mutual recognition in three out of the four European freedoms (Section 2). We will then see the disadvantages of using an oposite principle in Union’s labour markets and Welfare States. Some possible extensions of the principle of mutual recognition in these fields will thus be proposed: using a simple theoretical game theory model, the positive implications on labour mobility and on the fight against the European classical unemployment will be shown (Section 3). Section 4 will illustrate some policy conclusions

Economic Policy and Reforms in Contemporary Italy

This paper analyses the spectacular fiscal adjustment currently occurring in Italy. In 1990, the Italian General Government showed the second largest primary deficit-to-GDP ratio in Europe; in 1997 it is expected to have the largest primary surplus-to-GDP ratio, with a 3% overall deficit-to-GDP ratio. Inflation and inflationary expectations are beaten; the lira is firmly reintroduced in the EMS exchange rate mechanism and the interest rate differential on Treasury bonds with the rest of Europe is almost non-existent; in the budget process most of the traditional divergences between the appropriations approved by Parliament and the final cash expenditures are eliminated. Some qualitative shortcomings, however, appear in the Italian fiscal adjustment. They concern the excessive use of taxation, the cut of public investment, the insufficiency of structural reforms of the Welfare State and the slowness of concrete steps in the overall administrative reform and in the rethinking of the public sector role in a modern society (liberalizations, public properties’ rentability, privatizations).Fiscal Adjustment; privatizations; reforms; Welfare State

Excesses and Limits of the Public Sector in the Italian Economy. The Ongoing Reform

This paper provides factual evidence on the extent of public intervention in the Italian economy. It further illustrates the internal contradictions and weaknesses of public action in Italy. New policy proposals to solve old structural problems of the Bel Paese are then discussed. Among them, a major privatization programme decided since 1992 is analysed, together with drastic budgetary cuts aiming at curbing public debt to maintain sustainability. Finally, the paper tries to explain why, in spite of all the excesses and limits of the policy-making, the performance of the Italian economy is apparently quite brilliant. The conclusion is that Italian society is already doing de facto what I suggest in the text that the Government should allow it to do, primarily by introducing deregulation and flexibility in economic matters. Italy is achieving these goals through the underground economy, by evading taxes and union rules in small private enterprises, but it is largely failing to do so in larger companies and in the public sector. In short, the country is developing thanks to what the Italians call `l'arte d'arrangiarsi', their generalized talent for improvization, thus providing living proof that deregulation and flexibility work.Budget; Debt; Deficit; Regulation; Subsidies

A Cross-Country Analysis of the Tax-Push Hypothesis

A microeconomic theoretical model shows that two factors - the compensation and progressivity effects - produce the shifting (if any) of tax rates on wage formation. From an analytical viewpoint, they may be positive or negative and of equal or different sign. A microfounded nested macroeconomic wage equation is then tested for nine European countries for the period 1960-88. Three robust regularities seem to emerge from our econometric results. First, in general, small open economies such as Austria, Denmark and the Netherlands have negligible compensation and progressivity effects: to maintain their external competitiveness they fix a real labour cost target independent of tax rates. Second, larger and less open European economies, in contrast, transfer indirect and social security tax rate increases on the real labour cost in the long run, except Italy and the UK; in these greater economies, a rise in the direct tax rate raises the steady-state gross real wage, both where the compensation and the progressivity effects move in opposite directions (as in France, Germany and Sweden), and a fortiori where (in Italy and the UK) the compensation effect is approximately zero, like in very open economies, but the progressivity effect is positive. Third, all European countries show a weakening of tax shifting on the real labour cost between the end of the 1970s and the beginning of the 1980s. This changing attitude on the part of unions usually runs parallel to the introduction of de facto fiscal indexation and a reduction in tax progressivity, which increasingly leads to the fixing of the steady-state wage rate so as to safeguard the country's external competitiveness.Fiscal policy; Taxation; Wages

Undesirable Redistributions in the Retirement-Public Pension Schemes: The Italian Case Study

This paper uses comparative statistics in a simple three-period overlapping generations model to show that any pay-as-you-go mechanism for public retirement pensions, when adopted in a dualistic economic system, penalises the most dynamic demographic groups, i.e., the developing rather than the developed labour markets, irrespective of their welfare level. Taking into account the fact that (net) natality growth rate is usually negatively correlated to family wealth, and that the rates of increase in real wages and employment are usually higher in the developing sub-sectors of an economic system, we argue that social security tends to lead to distortionary inter-intracohort redistributions within non- homogeneous countries. We show that the Italian case study, which compares the contributions/retirement pensions ratio of the poorer but more rapidly growing Mezzogiorno with that of the wealthier but more stationary North-Centre, provides support for this theoretical model.Italy; Pensions; Redistribution; Social Security

Il Mercato e le Politiche Economiche in Italia

All existing international indicators - both ordinal and cardinal - of structural nature signal that Italy is a country cronically characterised by great inefficiencies, though it succeeds in remaining among the 7 economically most powerful countries in the world. Both in cyclical terms and in the medium- and long-run, lights and shadows co-exist in our country. Traditional macroeconomic policies, in particular the monetary and fiscal ones, must not raise concerns. In Italy, a presumption of guilt should be set on microeconomic policies envisaging excessive allocations for some Welfare items and insufficient resources for pure public goods and for the public accumulation of both human and material resources. But, more than that, market regulation policies should be in the dock. Competition is hardly prompted, while there are too many "protections" granted by law to workers and firms, often to the detriment of consumers and outsiders (unemployed, young first job seekers, women, Southern people). As it is well know, in Italy both the Marxist and the Catholic traditions obstacle competition, as does a Crocian school of thought which is minoritarian in the country.Market, Economic Policies, Italy.