Imagine a medium sized service company which has been making a small pre-tax profit in virtually all the last six years but that has declared a loss after tax every year, due to taxes on turnover rather than profits. Imagine an employee in this same company which has over 15 employees and is therefore not able to dismiss employees for almost any reason that has been suffering of a psychological condition that no doctor or hospital has been able to diagnose, and who has been on sick leave for about 180 days in each of the past two years. The law says that after 180 days of sick leave in a calendar year, the company can dismiss the employee. However, in practice the employer that takes advantage of this law may risk a countersuit by the employee stating that the condition was due to his working conditions and could conceivably ask for his ‘job’ back and compensation!
These facts that do take place in Italy are the main reasons why Italy is condemning itself to sub-par growth, or actually no growth at all, and inevitable un-competitiveness vis a vis its peers in Europe. There are no other reasons for Italy’s condition. Italians are in general hardworking, talented, creative, and elegant. Their cars, furniture, boats, jewellery are among the best in the world. As an industrial power, Italy is only second to Germany in Europe, and yet, its position is sliding by the day. We heard from a respected accounting firm that most of their non-routine assignments in the last twelve months have been managing liquidations of companies that have given up on Italy, and sometime simply close in Italy and re-open in Switzerland, Eastern Europe, or the Far East. Some even go to North Africa, despite the political uncertainty.
Until Italy’s politicians come to term with these basic facts, all their measures including this year’s stability bill are only going to be a drop in the ocean. Italy needs structural reforms in taxation and labour laws that will enable it to compete with its western peers, without needing to dismantle completely the welfare state, but by addressing the poor allocation of priorities and resources, chiefly imposed by the labour unions whose mandate is to keep the (poorly paid) jobs that are in place and not create new, better paying jobs for the young and unemployed.