Renzi plans an economic blitz

Prime minister Matteo Renzi said he is planning three years of legislation to end Italy’s economic stagnation and cited Germany in 2003 as his inspiration.

Italy will present a proposal for broad changes to the public administration, the welfare system and the tax regime by September 1, Renzi said in a speech to parliament in Rome.

By repeatedly referencing Germany’s legislative overhaul a decade ago, Renzi simultaneously set the bar for success and signalled he expects the European Union to ease budget targets in return.

“Reforms carry a cost, as Germany knows,” Renzi said, citing the failure of Europe’s most-populous country to meet EU deficit limits while it fixed up its economy. He called for “a light easing of the eurozone’s restrictive economic policies”.

Italy’s economic stagnation has defeated four prime ministers since 2001 and exposed a performance gap vis-a-vis EU allies like Germany and the UK that have done more to free up activity. Renzi, strengthened by a landslide victory in Italy’s election for the European Parliament, has quelled internal opposition to broad changes and put himself in a position to win concessions from the EU.

In the speech, which also set out Italy’s strategy for a June 26-27 summit in Brussels, Renzi ridiculed the European Commission for its focus on budget minutia and the assumption that member states need its periodic policy recommendations.

He once again cited Germany in 2003, under then-chancellor Gerhard Schroeder, for its willingness to break the rules.

“Like Germany back then, we want to stop receiving the recommendations like a shopping list,” Renzi said. “It’s almost like this transforms Europe into an old, boring aunt who tells us what to do.”

Schroeder’s Agenda 2010 package unveiled in 2003 cut taxes, made it easier to fire staff, forced those out of work for more than a year to accept any reasonable job offer and reduced long-term benefits. The efforts helped German businesses turn around. Italy has had four recessions since 2001, and its GDP is 9% lower than it was at the beginning of the European debt crisis.

German chancellor Angela Merkel’s pro-budget-discipline stance was undermined in part by statements in support of greater flexibility delivered last week by her vice chancellor, Sigmar Gabriel. Outgoing EU president Herman Van Rompuy travelled to Rome last week to mediate with Renzi about his proposals.

- Bloomberg