Italy - Economic analysis of government's policies, investment climate and political risk.






ITALY: Economic Policy Analysis

This site presents an analysis of the Italy government's economic policies compared to a revised list of 34 economic policies as prepared by student Ashish Neupane with the McKeever Institute of Economic Policy Analysis (MIEPA)in May 2014. To read the analysis scroll through this site. To learn more about the background policies, click here  Introduction and Policy Recommendations

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Ashish Neupane, an Italian citizen who currently [May 2014] lives in San Francisco, has completed a study of the home country government's economic policies as compared to the MIEPA list of policies as outlined above. The study on Italy is shown below. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2013. Used herein with permission]

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Comparison of Italy's economic policies to MIEPA criteria as prepared by native student of Italy, Ashish Neupane, studying in the US in May 2014.



        1               3.0           9.0             15.0        60%

        2               2.0           6.0             15.0        40

        3               1.0           3.0             15.0        20

        4               2.5           7.5             15.0        50

        5               4.0          12.0             15.0        80

        6               4.0          12.0             15.0        80

        7               1.5           4.0             15.0        30

        8               3.0           9.0             15.0        60

        9               2.0           6.0             15.0        40

        10              5.0          15.0             15.0       100

        11              3.5          10.5             15.0        70

        12              5.0          10.0             10.0       100

        13              3.0           6.0             10.0        60

        14              5.0          10.0             10.0       100

        15              4.0           8.0             10.0        80

        16              2.0           4.0             10.0        40

        17              3.0           6.0             10.0        60

        18              1.0           2.0             10.0        20

        19              3.5           7.0             10.0        70

        20              5.0          10.0             10.0       100

        21              4.4           8.8             10.0       100

        22              4.0           8.0             10.0        80

        23              3.5           7.0             10.0        70

        24              0.5           1.0             10.0        10

        25              1.0           2.0             10.0        20

        26              3.5           7.0             10.0        70

        27              3.0           6.0             10.0        60

        28              4.0           8.0             10.0        80

        29              3.0           3.0              5.0        60 

        30              3.0           3.0              5.0        60

        31              4.5           4.5              5.0        90

        32              3.0           3.0              5.0        60

        33              3.0           3.0              5.0        60

        34              4.0           4.0              5.0        80

   TOTAL             107.4          225.3            365.0        61.7%
                      =====        ======            =====        =====

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1) Freedom from Internal Control: 5.0

The internal control in Italy is favorable to the citizen since they are free to move within the boundaries of the country without facing any kind of control. They are free to act within the limit of decency without being restricted to some sort of provision. Since Italy is also part of EU, also moving around Europe is extremely easy; in fact, there is no necessity of any kind of visa to visit most of the european countries. Also in case of international travel, Italians have full right to immigrate and return to the country without facing any sort of consequences. ; personal

2) Freedom of speech: 3.0

Even though the Italian constitution and law protect the freedom of speech, the population is not able to say always what they want to. The means of communication are extremely controlled since Newspapers always tend to protect one side of the government, whereas Radio and Television are owned by people who are in the government themselves. Rai and Mediaset are the two categories of television channels in Italy which have 3 channels for each category. Rai is public, so government has some control of what is said on these channels; Mediaset, instead, is owned by family Berlusconi which makes it even worse since he controls most of the broadcasted elements.;

3) Effective fair police force: 4.0

Police control is almost fair, even though often there are complaints of abuse of power of the police officers towards the population. In case of abuse, the citizens are protected by law. Police force is enough effective in Italy. There are 4 different categories of police force: Carabinieri (Military police), Polizia dello stato (National Police force), Polizia Municipale (Municipal Police) Guardia di Finanza (Boarder and Financial control agency). Each of these police categories has specific role in the community. Each category has a different type of uniform, which is however, same in all over the country. The emergency number for police, fire, and ambulance is 112.;; personal

4) Private Property: 3.0

Private property is extremely easy to gain in Italy since banks are offering loan without major controls on the backgrounds of individuals. Once the property is owned it is very hard for the government to revoke it from the citizen because the constitution protects the private property. Banks, in case of non-paid loans can get the property back from the person only if their income in enough high to sustain themselves and their family for the future six months to a year. In case of presence of children in family, the bank cannot evict the family.


5) Commercial banks 4.0

Commercial banks in Italy cover the needs of the population if they want to start a new business or invest some money in one. These banks are monitored by the Italian central bank which ensures to maintain the financial stability of the country. The oldest commercial bank is Banca Commerciale Italiana, founded in 1894. Some recent commercial banks are Intesa San Paolo, and Banca Carige. Loans are provided to citizen only with the proof of employment. There is no background and credit check involved. Citizens also have extremely facilitated use of their saving and checking accounts.;

6) Communication systems 5.0

The most popular means of communication in Italy are Internet, TV, and cellphones. After 2001, the country began to have a huge request for internet since different providers were allowing the population to have better connection at better price. After 2009 when first smart phone began to enter the market, internet became more popular and every shop, bar and restaurant provide free internet service to attract more customers. TV is still the most popular influencer in the country. Different shows, news and movies are very followed by the population. Also there are different newspapers and magazine which keeps the population up to date on what is going on in the country and the world. Almost 100% of the population is covered with advanced communication system such as cell phones, land lines, internet and television.;

7) Transportation 4.9

Transportation is very efficient in Italy; from the urban buses and cables to the high speed train which cover the long distance between major cities such as Milan and Rome in few hours make it extremely easy for the population to move around the country. The train system is considered one of the best in Europe; however, only the most high cost trains tend to be on time. Airway system is not as efficient. The country's most popular airline company, Alitalia went almost bankrupt but was able to save itself with alliance with other companies. The prices for the transportation are average. A bus or a subway ride cost is of 2 Euros. A ride from Milan to Rome in “Freccia Rossa” train is 100 Euros. A flight from Milan to Sicily has the cost of 150 Euro.; personal

8) Education 4.0

Education in Italy is very good, as it is in rest of European countries. High priority and preference is given to public school rather than private institutions which are considered “good only for rich people”. The school system differs from USA: there is a total of 13 years of school which is divided in 5 years of elementary school, 3 years of junior and 5 years of high school. This allows the student to complete their school education at the age of 18. When a student finishes a level of study, he has to do an exam and pass it in order to go to the next level. After high school there are 3 years of university to gain a Bachelor degree and 2 years to receive a Master’s degree. In 2010 only the 15 percent of the students who began college continued to a masters degree. 80 percent completed the 3 years degree (Bachelor degree); and only 1.1 percent did the old educational system 3 years + 2 years and completed the master.; personal

9) Social Mobility 3.0

Because of the good education system, most of the population has the high school diploma. A few years ago it was sufficient to be able to get a job and get paid enough to maintain the family within a decent social status. Nowadays, due to the high competition, even those people who have completed the university study aren't able to afford a well-paid job. Starting a new business is hard due to the economic situation where people do not want to take risk and invest their savings. Young people therefore, are moving rapidly out of the country to be able to find more job opportunities. Thanks to their education preparation, most of them have success in whichever country they go to.;; 10) Freedom from outside control: 3.0 Italy is an independent country and the population is free of control from other countries. However, European Union and NATO have huge influence on the government which has to follow the directives that are dictated by these institutions.; personal

11) Protection of Domestic Enterprise: 2.0

Italy is going down economically because the government is not either creating new job or keeping the existing opportunities for the younger population. Young citizens are feeling obligated to immigrate to other countries in Europe or in other continents to find opportunities for which they worked hard. They are also escaping form the outrageous taxes the government is applying to recover the economic disaster of 2009. The country tries to grow only under few industries such as fashion, and culinary arts however the government doesn't support fully these industries which are known to the world due to the popularity they have gained from past.; personal

12) Foreign currency Transaction: 5.0

Most of the businesses are done with the national currency, which is Euro. Since 2002 Italy has been Euro and due to the popularity it has gained among the years, it is a great challenge for the US dollar which still is considered the “world-wide” currency.


13) Border Control: 2.0

Italy has one of the worst border controls among the European countries. Population of North Africa, such as Egypt and Morocco come to the country on boats and are able to make it to enter the country. The coast guard is not always efficient and illegal immigrants are finding new ways to cross the border. The government, however, is not able to send them back to their countries since they do not carry any legal document with them. On the north part of Italy immigrants from eastern Europe try to enter the country without permission. Corruption to get legalized into the country has been documented several times where people were asked to pay a certain amount of money to get into the country and get the stay permit.;

14) Currency: 5.0

Since Euro was declared the official currency of the country, Italy has been able to have more economical power. The previous currency, Lira, was not very powerful. Since Italy has introduced Euro, the population doesn’t seem to be very happy because the price of product has increased while the salary has remained the same. The value of the currency is $1.38 for €1.00.; personal

15) Cultural, Language Homogeneity 4.0

Culturally, Italy is very rich and this richness is shared among the population from north to south. However, due to a huge number of immigrants that came to the country after 2002, there are new traditions that Italy has to integrate within its own culture. These most vast populations are Chinese, Moroccan, Egyptian, and Indians. The official language of the country is Italian spoken by the majority of population. However, there are parts of countries where dialects are still spoken. In these regions people communicate only with the dialect and they don't have the knowledge about the Italian language.


16) Political Effectiveness 3.0

Even though in the past years, especially under Berlusconi's government, Italy was seen as one politically ineffective country, in 2011 with Monti it was possible to see the true action the government could take to make the country politically and economically stable. There is always a lot of disagreement between the right and left wings of the government, which seems to be always in opposition because belonging to different parties; however, Monti took control of the situation and took action to make the country, which was in a huge decline, more stable.; personal

17) Institutional Stability 4.0

Due to the unorganized government, often, Italy had to suffer of unstable institution especially under the educational point of view. With minister Gelmini’s reform, there were different changes in the school and university system. There had been different protest against the new changes but the government did not take any action to accommodate the citizens. Other institutions such as Postal service, water are more stable; however it is common to hear and see strikes due to dissatisfaction of the service provided.;

18) Honest Government 1.0

Italian government is very well known for how dishonestly they act with the citizens. Since Berlusconi’s government the population has grown mistrust towards the government and this cause a huge number of immigration to other European countries or USA. Different promises towards citizens were made, such as improvement of life, growth in economy etc. just to win the elections. After reaching the desired position, politician would rather follow their personal interest rather than listening to citizens. Also post Berlusconi government caused a lot of problems since to improve the economy of the country; they started to apply taxes only to the middle class causing unhappiness among the population.


19) Common Laws 4.0

Italy has common laws and regulation which are dictated by the Parliament. Every region of the country has to follow the same basic rules. Being part of EU, Italy also has to follow the rules of the European community which controls the movement of the parliament for big changes. Law is same for everyone. ;

20) Central Bank: 4.0

Banca d'Italia is the central bank of Italy and is the institution that used to print money for the country. When Lira was still the national currency, the government had power on the central bank; however, after Euro € was introduced, the central bank is completely separate from government influences since it has to accommodate the rules and regulation dictated by the European Union, which are the same for all governmental banks in countries which are in the Union. These rules have the function of protecting the economy of the union and grow the value of the currency in the world.;

21) Domestic Budget management: 4

Italy suffered from huge inflation in price since 2002 when Euro was introduced. The price of products and services maintained the nominal value of the old currency but the salary and profits went down. The government, however, recognized the need of helping the population and the money collected in taxes were used to create new job and help elder people. The sanitary system is completely free and is paid with the money that the population paid in taxes. Improvement of roads, bridges, and UNESCO sites are some of the expenses that the government pays to create job and improve the country.; personal

22) Government Debt: 1.5

Italy's national debt of almost 2 trillion, for the gross external debt and the debt-to-GDP ratio of 130 % for public debt made for Mario Monti very difficult to be re-elected. Even though the prime minister tried his best to cover these by applying new taxes and increasing interest rate, the government is still not able to recover totally. However, the situation got better from the 2010 when Italy was the European country with highest public debt after Greece. ;

23) Economic Statistics: 2.5

In 2012 the real GDP growth of Italy was of -2.5 which give us the idea of the economic status of the country. Since 2008 there has been a very low growth in GDP and the lowest point was touched in year 2009 where the real GDP of the country touched -5.5. However, The most known and important decline in the Italian economy was due to the failure of Parmalat Italia. The prevision and statistics on the economy of the country has been not very reliable, which lead different companies, such as Parmalat and Alitalia to fail.;

24) Protection of Public health and Safety: 4.9

Italy has one of the best Public health system in the world: it was ranked 2nd best healthcare system, after only France, by World Health Organization. It is free and efficient. Healthcare spending in Italy accounted for 9.0% of GDP in 2006 of which 75% is public. Many countries, including the U.S. have tried to apply similar sanitary system. The infant mortality rate has decreased of 2.05% since 2010. The average life expectancy is of 82 years. ;

25) High wage policy 2.5

The wages in Italy are high if compared to the standards of the world, but compared to other EU countries, it is fairly low. Especially after the recession that hit the country, the population has been living in a period of crises, and the spending power has gone very low. Between 2012 and 2013 several millions of people did not go to vacation because of the economic problems that they were facing which gave them only enough money to buy the living necessity.;

26) Environmental Protection: 4.5 Italy has 49 UNESCO heritage sites and several natural sites which attract millions of tourists. It is also the country that has witnessed the most important historical events that took place. The government is concerned about the damage that pollution may occur on these and established several laws in order to protect them. These laws are respected by the population who are equally aware of the historical importance the pieces of art and natural beauty the country have to offer.; Personal

27) Strong army: 3.0

The Italian army, known as Esercito Italiano is the defense force of the country. Until 2004 men had mandatory military service. The right to conscientious objection was legally recognized in 1972 so that a "non-armed military service", or a community service, could be authorized as an alternative to those who required it. The Italian parliament approved the suspension of the mandatory military service in 2004, with effect starting from 1 January 2005, and the Italian armed forces will now be entirely composed of professional volunteer troops, both male and female, except in case of war or serious international military crisis, when conscription can be implemented. Italy also is part of NATO which is an alliance that protects the country from external treats.; Personal

28) Foreign trade impact: 4.5

“Made in Italy” represents in the world the synonymous of quality and affability of products and has become a sort of brand, as it is 3rd well-known brand after Coca Cola and VISA. In order to protect this brand name in 2009 a law which establish that the “Made in Italy” trademark can be used only for products that are totally made in the country. Italy has a high import rate but also has a lot of exports around the world. Fake made in Italy, in time, however has ruined its reputation. The total trade in 2013 was 6,382,000 and GDP is 2,071,868 which is 32%.; Personal

29) Management of foreign currency budget: 5.0

As part of EU (European Union), the current currency of Italy is Euro which has almost the predominant value in the world. As of today, compared to the US dollars, 1 Euro equals to $ 1.38, having a net advantage over the american currency, which is still considered the International currency. The export revenue for the year 2013 was of € 38136.48 mil. In 2013 the export expenditure was of 38526.50.; personal

30. Layers of Collective action 5.0

The first constitution of Italy states “Italy is a democratic Republic founded on labor. Sovereignty belongs to the people and is exercised by the people in the forms and within the limits of the Constitution”, demonstration of the fact that the country is extremely democratic. People are free to start organizations and help the community without having governmental controls. These institutions are free of any governmental control. They, however are restricted by rules and law that are dictated by government. The politics of Italy is conducted through a parliamentary, democratic republic, where multiple parities support the government that is chosen by the population through a regional voting system. The president of the republic is elected every seven years by the parliament in a joint section. The current president, Giorgio Napolitano was the first to be re-elected for the president position in the history of the country.; Personal

31. Pro-business climate 1.0

Due to the economical crash and the political instability which hit on Italy, since a few years the country has become one of the less business pro regions within the European community. Many businesses started closing since 2008 during the period known also as the Long Recession and the country had difficulty on returning back on the track till 2013. Still today there hasn't been a complete recovery of the economy and several businesses are still closing. In 2013, 32 thousand commercial businesses have closed and 18 thousand in the tourism field. With the total of 50 thousand businesses closed the unemployment rate has increased drastically, and people are moving out of the country looking for a better future. Italy, as of now, is absolutely not a best country to do business in. The government does not incentive business owner to keep on doing their work. ;

32. Government Enterprises 2.5

The number of government enterprises Italy has are not many if compared to other EU countries. Many companies are going private and this had a direct and proportional effect of the economy of the peninsula. There are only a few organization that are still saved from being private and these are L'Azienda di Stato per le foreste deminiali (ASFD) and Amministrazione Autonoma dei Monopoli di Stato (AAMS). Enterprises that in the past were part only of the government are the telecommunication and the train transportation system.;; personal

33. International Security Agreement 5.0

Since part of NATO (North Atlantic Treaty Organization), EU (European Union), and European Community, Italy has one of the best International security systems. The domestic intelligence of Italy, Agenzia Informazione e Sicurezza Interna (AISI), replaced the old intelligence Servizio per le informazioni e la sicurezza democratica (S.I.S.De.) in 2007, and allied with NATO in the same year.;

34. Protection of domestic enterprises from government mandated costs 2.0

After the recession of 2008 the country was able to recover somehow with the new government, where Mario Monti, an economist, to bring the country back to the normal economical level and save it to the failure caused by Berlusconi's government, imposed more taxes to the population. This also caused poverty among people who were forced to pay taxes that were not imposed before. Most of these taxes were applied to enterprises that not being able to keep up, since the revenue were going down caused by the increasing number of unemployment. However, thanks to the maneuver the country was able to rise a little bit economically, however this caused dissatisfaction among the population which bought them to vote again and choose a new government in 2013.



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