By Simon Miller

Italy must maintain momentum on its economic reforms, OECD secretary geenral Angel Gurria said today.

In a speech at the International Conference on Structural Reforms in Italy, Gurria praised the effort Italy had made to speed up long-overdue economic reforms but it was essential to maintain the momentum.

“These reforms have been courageous, ambitious and wide-ranging, ” he said. “But,” Gurria added, “Resolute implementation and continuation of the reforms are crucial. The success of Italy in overcoming these challenges will be decisive not only for the Italian people but for Europe as a whole.”

The reforms already approved by the Italian government could raise the country’s GDP by up to 4 % over the next 10 years, according to the OECD. Continuing the reform process would boost growth even more.

OECD said analysis of the Italian economy presented at the conference underlined the scale of the challenge. Weak growth, high unemployment and high public debt has been compounded by slowing demand from trading partners and a persisting confidence crisis in the euro area.

Italy’s labour productivity over recent years has been the weakest among OECD countries. Low productivity growth has resulted in rising unit labour costs, which has in turn damaged Italy’s competitiveness and fuelled the current account deficit.

Improving Italian competitiveness required action on three fronts, according to the OECD: increasing productivity; keeping wage dynamics in tandem with productivity growth; and alleviating the tax burden on labour income – provided that this is done in a fiscally neutral manner.

The OECD said rigorous implementation of the reforms – across labour and product markets, and in the areas of innovation, education and public sector efficiency - is essential to boost productivity. "Such rigour must not just be at the national level but extend to the regions and localities," it added.

Among the measures the OECD recommends for aligning salaries more closely with productivity is decentralised wage bargaining.

Gurria added: Let’s be clear: structural reforms are a pivotal rung on the ladder to prosperity. OECD analysis shows that they can generate multiple, while concomitant, pay-offs: unlock entrepreneurship; induce competition; improve labour conditions; raise productivity; promote innovation and boost competitiveness. They can help put people back to work as more productive, skilled employees. They can help tackle labour market dualities to reduce inequality and strengthen pension systems."

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