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Ahead of the upcoming unquote” Italia Private Equity Forum on 4 November in Milan, Kenny Wastell speaks to Fabrizio Pagani, head of the office of the Ministry of Economy and Finance for Italy, about the country’s economy and the role of private equity in its recent recovery.
Kenny Wastell: Italy's growth forecast has recently been revised upwards to 0.9% and 1.6% in 2015 and 2016 respectively. What have been the key market drivers behind the recovery?
Fabrizio Pagani: The recovery has to do both with a favourable external environment – the value of the euro, oil prices, the European Central Bank's measures – and the internal changes brought forward by the government. We see a virtuous circle at work; thanks to the government's measures, additional resources transferred to households are beginning to be spent. Confidence is coming back, so finally there are key improvements in external demand. At the same time, Italy has experienced a flow of private capital and investment, in several foreign direct investment flagship projects.
KW: What challenges remain to be overcome, in terms of boosting Italy's economic growth?
FP: We see our work on reforms as a big construction site. Much has been done; some reforms have been implemented at all levels, such as the labour market reform, while others are starting to show their impact, such as civil justice reform. In other sectors, much work of implementation still needs to be done, in the public administration reform, for instance. We also need to strengthen the recovery, in turn boosting investment – private investment in particular.
KW: Given how actively the Italian government has implemented economic reforms, what will be the impact of the EU's Capital Markets Union action plan?
FP: We are keeping our contribution to the EU's Capital Markets Union project in line with our domestic reforms, particularly regarding non-banking sources of financing. Indeed, a key part of Italy's reforms is what we call "Finance for Growth". This is a detailed set of measures approved by the government to help companies, particularly SMEs, throughout their lifecycle: credit liberalisation and alternative sources of credit, tax credits for investment and specific measures to help stock-market listing.
KW: Relative to its economic scale, Italy typically has lower levels of private equity activity than comparable European markets. What role does private equity have to play in the future Italian economy?
FP: We have already seen more interest from private equity players in the Italian economy in 2015, across several sectors. Thanks to the recent reforms approved by the government, we also expect more interest in the banking system. The new measures aim to strengthen the alternative sources of credit for firms, and private equity will play a more important role in the development of the real economy.
KW: What are your hopes for the year ahead?
FP: In the next year we will see more results of the measures taken by the government so far to foster competitiveness and boost the recovery on a solid base. As this year, in 2016 we can hope to have higher-than-expected GDP growth and will work for this to happen in the coming months.