Renzi Faces Record Italian Unemployment as Policy Backlog BuildsLorenzo Totaro and Andrew Frye
Italian Prime Minister Matteo Renzi is facing renewed signs of economic weakness as his 100-day legislative remedy risks stalling in the divided parliament.
Italy’s jobless rate unexpectedly rose to a record high of 13 percent in February, Rome-based national statistics office Istat said in a preliminary report today. The premier needs the support of his four-party coalition, and in some cases the opposition, to win approval for his program including 10 billion euros ($13.8 billion) of tax cuts and relaxed labor-market rules’
Italy has suffered through 13 years of economic stagnation as fragmentation in Rome’s parliament handcuffed Renzi’s predecessors. The 39-year-old premier, who took office in February, is relying on stimulus measures like the tax cuts and the repayment of government arrears to forge consensus in the short term. More divisive issues like labor-market reform and a proposal to strip powers from the Senate will be faced later.
“In terms of the tax cuts and the arrears, all the measures Renzi has proposed are politically feasible,” said Federico Santi, an analyst with Eurasia Group in London. “With labor reform that’s where Renzi will face more push-back from parliament and from his own people.”
Italian 10-year bond yields declined 1 basis point to 3.29 percent at 12:35 p.m.
Renzi’s vision of a revatlized Italy was laid out in his inaugural speeches to the Senate and the Chamber of Deputies, the lower house of parliament, in February. Tax cuts, more support for entrepreneurs, a new electoral law and a speedier legislative process were among the priorities he said would be confronted in the first 100 days of his tenure.
The tax cuts, promised by May, are waiting on the preparation of Italy’s midyear financial statements, while the labor-market plan was handed over to parliament for discussion and amendment. The new electoral-law proposal and the overhaul of the Senate, which Renzi’s cabinet passed yesterday, have been criticized by some of the premier’s allies and must now face challenges in parliament.
“Parliamentary approval of these institutional reforms is unlikely to be smooth,” Chiara Corsa, an economist at UniCredit SpA in Milan, said in a research note today. “But we think that a positive outcome is likely.”
The 13 percent unemployment rate is the highest since the Istat data series began in the first quarter of 1977. The median estimate of eight economists surveyed by Bloomberg called for an unemployment rate of 12.9 percent in February.
UniCredit, the nation’s biggest bank, last month posted a record 15 billion-euro fourth-quarter loss and said it planned to cut some 5,700 jobs in Italy. Banca Monte dei Paschi di Siena SpA, the nation’s third-biggest lender and the world’s oldest, also said it plans to eliminate positions.
On Feb. 25, the European Commission revised down its gross domestic product forecast for Italy to 0.6 percent this year. It also estimated that Italy’s joblessness won’t decrease until 2015.
Renzi, who served as mayor of Florence 2009-2014, bypassed elections and took the premiership after toppling then-Prime Minister Enrico Letta, an intra-party rival. Letta followed Mario Monti, Silvio Berlusconi and Romano Prodi as the fourth premier in a row to fall after losing support in parliament.
Four recessions in the last 13 years left Italy’s GDP at 1.56 trillion euros last year, 2 percent lower in real terms than in 2001.