ITALY
Economic Freedom Score
25
World Rank:
86
Regional Rank:
35
Least
free 0
taly’s economic freedom score is 60.9, making its economy
Ihigher
the 86th freest in the 2014 Index. Its overall score is 0.3 point
than last year, with improvements in investment free-
50
75
Most
100 free
60.9
Freedom Trend
64
dom and trade freedom counterbalanced by modest declines
in monetary freedom, business freedom, and freedom from
corruption. Italy is ranked 35th out of 43 countries in the
Europe region, and its score is above the world average.
Over the 20-year history of the Index, Italy’s economic freedom score has been stagnant. Gains in market openness and
government fiscal policy have been undermined by significant declines in property rights, freedom from corruption,
and labor freedom. Italy has been rated a “moderately free”
economy through most of the history of the Index. Its 2014
score is its highest in four years.
Despite repeated reform attempts, short-term legislative
reforms have not been implemented effectively, and the
economy remains burdened by political interference, corruption, high levels of taxation, and a rigid labor market. Due to
the complexity of the regulatory framework and the high cost
of conducting business, a considerable amount of economic
activity remains in the informal sector.
BACKGROUND: Italy held general elections in February 2013
to elect a new parliament. No clear winner emerged in the voting, but center-left Democratic Party leader Enrico Letta was
eventually chosen prime minister. He leads a coalition government consisting of the Democratic Party, the center-right
People of Freedom Party led by former Prime Minister Silvio
Berlusconi, and the centrist Civic Choice Party. The election
showcased a strong protest vote against austerity measures
put in place under former technocratic Prime Minister Mario
Monti. Persistent problems for the government include organized crime, a large informal sector, unemployment, and the
long-standing imbalance between the prosperous, industrialized North and the less-developed, agricultural South.
How Do We Measure Economic Freedom?
See page 471 for an explanation of the methodology
or visit the Index Web site at heritage.org/index.
63
62
61
60
59
58
57
2010
2011
2012
2013
2014
Country Comparisons
Country
60.9
World
Average
60.3
Regional
Average
67.1
Free
Economies
84.1
0
20
40
60
80
100
Quick Facts
Population: 60.8 million
GDP (PPP): $1.8 trillion
–2.4% growth in 2012
5-year compound annual growth –1.4%
$30,136 per capita
Unemployment: 10.6%
Inflation (CPI): 3.3%
FDI Inflow: $9.6 billion
Public Debt: 127.0% of GDP
2012 data unless otherwise noted.
Data compiled as of September 2013.
251
ITALY (continued)
THE TEN ECONOMIC FREEDOMS
Score
RULE OF
LAW
Country
World Average
Property Rights 50.0
Freedom from Corruption 38.5
0
20
40
60
80
Rank
1–Year
Change
53rd
70th
0
–0.5
100
Corruption and a culture of lawlessness and tax evasion remain central issues. In 2012, a court
sentenced former Prime Minister Silvio Berlusconi to prison for tax fraud. He is appealing the
sentence. The legal system is vulnerable to political interference. Property rights and contracts
are secure, but court procedures are extremely slow. Many companies choose to settle out of
court. Protection of intellectual property is below EU norms.
Fiscal Freedom 55.5
GOVERNMENT
Government Spending 25.6
SIZE
173rd
166th
0
20
40
60
80
0
+0.3
100
The top individual income tax rate is 43 percent, and the top corporate tax rate is 27.5 percent.
Other taxes include a value-added tax (VAT) and an inheritance tax. The overall tax burden is
43 percent of GDP. Public expenditures amount to about 50 percent of the domestic economy.
Italy has struggled to meet budget goals to rein in its burdensome public debt, which has grown
to 127 percent of GDP.
REGULATORY
EFFICIENCY
Business Freedom 75.5
Labor Freedom 52.5
Monetary Freedom 78.9
47th
128th
48th
0
20
40
60
80
–1.4
+0.5
–1.3
100
Completing licensing requirements takes over 200 days and costs more than the level of average annual income. Serious labor market rigidities constrain job growth, and the informal labor
market accounts for a large proportion of employment. Monetary stability has been relatively
well maintained, and the government has reduced subsidies for renewable energy sources.
OPEN
MARKETS
Trade Freedom 87.8
Investment Freedom 85.0
Financial Freedom 60.0
11th
13th
41st
0
20
40
60
80
+1.0
+5.0
0
100
EU members have a low 1.1 percent average tariff rate and, in general, few non-tariff barriers
to trade. Investment in some sectors of Italy’s economy may be screened by the government.
The financial sector provides a relatively wide range of services but remains subject to political interference. The banking sector has been strained by the European sovereign debt crisis.
Long-Term Score Change (since 1995)
RULE OF LAW
Property Rights
Freedom from
Corruption
252
–20.0
–31.5
GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending
+11.9
+22.0
REGULATORY
EFFICIENCY
OPEN MARKETS
Business Freedom
–9.5
Labor Freedom
–22.0
Monetary Freedom –2.2
Trade Freedom
+10.0
Investment Freedom +15.0
Financial Freedom +10.0
2014 Index of Economic Freedom