Italy’s public sector reforms face uphill battle

Significance

The PNRR is vital to revive growth in the EU’s most fragile economy. In addition to providing foundations for a strong economic recovery from COVID-19, the PNRR also focus on broader structural reforms that have long constrained competitiveness. Among these, radical change to public administration is a key element.

Impacts

• Perceptions that the recovery plan is struggling would damage financial-market confidence in Italy’s capacity to survive in the euro-area.
• Slow progress on the recovery would also entrench opposition in northern Europe towards deeper EU fiscal integration.
• Polling support for the far-right League party has been declining, which could force it to withdraw from the Draghi government.