A more radical “serious adjustment” would only harm Italy

Financial Times, September 27, 2013. © The Financial Times Ltd.

Sir, Professor Christopher Gilbert in his letter of September 25 suggests that “some of the most important southern countries [including Italy] … do so little to help themselves” that they therefore should not seek greater co-operation from euro institutions, as advocated by Professors Emiliano Brancaccio and other economists including myself (Letters, September 23). Prof Gilbert himself does not offer suggestions on which further reforms should be implemented in Italy to restore prosperity through “serious adjustment”.

Italy has already undergone a major reform in its pension system, which implied a large structural reduction in perspective payments from the public sector. It should also be noted that the number of parttime workers has risen from about 13 per cent of total employment in 2004 to about 18 per cent this year, with full-time employment steadily declining since the beginning of the recession period in 2007, surely a sign of increased flexibility (“serious adjustment?”) in the labour market. Public employees’ wages have been frozen and public employment has been in free fall since 2007.

It seems that “more radical domestic efforts” in these directions, as advocated by Prof Gilbert, would surely imply a further increase in poverty and social exclusion, further weakening of the industrial structure due to depressed domestic demand and stronger political support to nationalistic parties, exactly the fears that motivated the letter of warning from economists.

Gennaro Zezza, Associate Professor, Università di Cassino, Italy