On June 9, 2015 US-Italy Global Affairs Forum presented Carlo Cottarelli’s new book: ‘La lista della spesa: La verità sulla spesa pubblica italiana e come si può tagliare.’ Cottarelli – the former head of Italy’s public spending review, currently executive director at the International Monetary Fund – presented five big themes that are crucial in his analysis of Italy’s public spending.
Italy’s political debate on public spending is often based on myths and urban legends, rather than on real data. Cutting public expenditures is both possible and necessary, if Italy is to secure the resources it needs to give impulse to economic recovery. Indeed, expenditures have already been cut by roughly 10 per cent in real terms (i.e. in terms of purchasing power) between 2009 and 2013. More remains to be done.
Italy’s public sector is complex and hard to control. A system encompassing more than 10.000 publicly held companies, more than 8.000 municipalities, thousands of centralized and decentralized agencies is by nature opaque, expensive and easily permeable to corruption. The new law reforming the public sector needs to be passed and implemented as soon as possible.
The efficiency of public spending varies considerably across different Italian regions. Differences are particularly meaningful between North and South, and between ordinary and autonomous regions. Territorial differences need to be taken into account when cutting public expenditures.
Efficiency measures – necessary as they are – imply tough decisions. The problem of surplus staff in the public sector as a consequence of efficiency measures cannot be underestimated.
The fight against petty privileges has a crucial symbolic value, even though its economic significance might be marginal. Cutting the expenditures of Italy’s political machinery, it might be possible to generate a larger consensus on more meaningful cuts in different areas.
More cuts to public expenditures are needed – Cottarelli concluded – in order to cut taxes and provide momentum for Italy’s still feeble economic recovery. There is no immediate emergency in 2015, as it was the case in 2011. Italy, nonetheless, needs to seize the opportunity presented by this phase of relative calm, pushing ahead with structural reform.
