Social partners sign agreement on boosting the South
In November 2004, Italy's three main trade union confederations (Cgil, Cisl and Uil) and 13 employers’ organisations signed an agreement that calls for a range of measures aimed at relaunching the economy of the South of Italy. The social partners will present the document to the government and ask it to include a number of immediate interventions in the 2005 state budget law.
Since Italy’s unification in 1860, the South (Mezzogiorno) has developed differently from the rest of the country. The absence of industrialisation and a lack of investment in the land, which is predominantly agricultural, resulted in an economic backwardness that grew with the years and resulted in major migrations - after the First World War to the USA and South America, after the Second World War to Central and Northern Europe, and during the 1950s and 1960s to northern Italy. Migration and the stagnant economy have deeply marked the social and economic fabric of the Mezzogiorno, leaving room for organised crime to take root.
Migration remains a problem in southern regions where, in 2003, the employment rate was 44.1%, compared with 62.2% in the central and northern parts of Italy. About 70,000 people per year leave and this loss of 'human capital' is weighing more than before on the southern productive fabric because migrants are now generally highly educated young people who go to the central and northern regions, which offer more job opportunities and professional development.
In 2003, the ratio between companies that started a new business and those that closed down their activities was greater in the South than the Centre-North. However, despite this greater entrepreneurial activity of recent years Mezzogiorno products are little sold on the international markets. The South contributes only 10.5% to national exports, while typical southern products, especially those based on agriculture, represent 40% of domestic production but only 15% of the sector’s exports.
Investment in research stands at only 0.75% of gross domestic product (GDP) in the Mezzogiorno, compared with 1.11% for the whole country. The South also has very poor infrastructure: taking the national average as 100, the accessibility of airports rates only 5.8; and taking the enlarged EU average as 100, the accessibility of electrified double-track railway lines in the South rates 50.5, compared with 134.2 in the Centre-North.
Last but not least, there is a national rather than a regional problem of company competitiveness, and specifically the rate of taxation on companies' income, which in Italy is 30.6%, among the highest levels in the EU. The fiscal burden holds back foreign investment flows, which in Italy stand at only 1% of GDP, compared with 17.16% in Ireland and 3.06% in Spain.
On 2 November 2004, an agreement to relaunch the development and competitiveness of the South of Italy was signed by the three main trade union confederations - the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), the Italian Confederation of Workers’ Unions (Confederazione Italiana Sindacato Lavoratori, Cisl) and the Union of Italian Workers (Unione Italiana del Lavoro, Uil) - and 13 employers’ associations. The social partners will present the document to the government and lower-level authorities. The agreement was not signed by Confartiginato, the employers’ organisation representing the artisanal sector.
The agreement, after an introduction presenting and analysing the problems and resources of the Mezzogiorno, makes a distinction between medium/long-term actions and short-term ones that the social partners believe should be implemented immediately by including them in a set of laws to promote competitiveness linked to the 2005 state budget law (IT0408105N) .
The agreement states that the South already has the following resources, on which its measures will be based:
- natural, environmental, historical and cultural resources able to attract tourism and permit the development of companies;
- high-quality local products (in agriculture, industry, agriculture, food and artisanal industry) that can be launched on international markets;
- highly skilled and highly educated human resources;
- entrepreneurial dynamism;
- a strategic location within the Mediterranean basin;
- cooperative relations between public and private actors and associations - so far 231 territorial pacts (IT9704203F) have been signed, 11 'area agreements' (IT9803155N) and 130 local action plans (Piani di intervento territoriale, Pits); and
- availability of sites for new production plants.
The actions that the social partners want the government to include in the laws linked to the 2005 budget are as follows:
- introducing tax incentives for the Mezzogiorno and asking the government and the European Commission to open a debate on the issue;
- streamlining the administrative procedures for company activities;
- actions in favour of tourism - reduction of VAT, coordination of sectoral policies, realisation of a project for the promotion of tourism;
- urban renewal through targeted legislation for cities - involving streamlining of procedures, precise work schedules and creation of a fund for the South;
- support for research, innovation and collaboration among companies and universities - including tax credits for research and innovation expenses, elimination of researchers’ costs from the calculation of the Irap regional tax, and tax credits for research granted to universities; and
- tax reductions on southern companies' expenses for promotional activities abroad.
Medium- and long-term interventions
The social partners have identified three strategic priorities for intervention aimed at contributing to a relaunch of the southern economy: consolidating the 'entrepreneurial fabric'; attracting new investments; and improving the exploitation of cultural, environmental and productive features.
According to the partners, the key measures in consolidating the 'entrepreneurial fabric' are: increasing the size of companies; the creation of productive networks and districts leading to a 'synergy' between companies and research; and innovation and updating of products and patents. The government should introduce a package of measures, including: a tax bonus for companies that grow in size; tax credits for research projects; and tax deductions on expenses sustained in the promotion of products abroad.
Attracting new investments is seen by the agreement as a four-stage process, involving: identification of local potential by drawing up a map of the key factors; a marketing exercise for the area concerned, including analysis of the market, communication and promotion of opportunities; the identification of potential investors; and the formalisation of investments through contracts to locate in the South.
Improving the exploitation of cultural, environmental and productive features is seen as requiring: the 'de-seasonalisation' of tourism (which, at present, is concentrated in the summer period); and the improvement of tourism facilities through integrated projects and the coordination of tourism policies at national level. According to the social partners, a fundamental tool in the improvement and the enlargement of tourism is taxation. VAT should be reduced for all tourism and hotel companies and there should be an incentive system for quality-certified companies. Moreover, urban renewal projects should be included in tourism promotion plans in order to improve historic centres, rich in architectural interest, and the most dilapidated neighbourhoods, and to enhance the mobility of passengers and goods.
The measures that the social partners believe will foster the Mezzogiorno's long-term economic development are:
- tax incentives capable of attracting national and international investments;
- reform of incentives for companies, with a streamlining of procedures, precise time schedules and the promotion of innovative investments;
- the completion and the adaptation of infrastructure. This would involve the creation of a new 'Mediterranean corridor' towards the North-African countries, as well as harbours and airports and the development of the 'seaside highways' (Autostrade del mare) provided for by an EU project called Ten-T. Water and energy supply networks should also be strengthened. The partners ask the government to discuss with the EU institutions how to achieve a more flexible interpretation of the EMU Growth and Stability Pact in order to obtain a more favourable treatment of investments in important infrastructure projects;
- positive relations between banks and companies, greater transparency, and amendments to the functioning of the main public guarantee funds, to simplify access to credit for companies;
- close collaboration between universities, research and company innovation through measures such as the introduction of a 50% tax credit for researchers seconded by companies to universities or research centres, and tax reductions and funding for the promotion of public and private investments in the research sector;
- measures to assist businesses, such as improved safety conditions, enhanced judicial procedures, streamlined administrative procedures and combating the underground economy and irregular work; and
- a guarantee of appropriate financial resources (the social partners do not consider as sufficient the resources allocated for the Mezzogiorno by the 2005 state budget). According to the partners, there should be political, economic and institutional negotiations over the use of European Structural Funds, in order to improve the quality of their interventions.
The agreement ends by identifying, as a necessary condition for the relaunch of the Mezzogiorno, the renewal and consolidation of the social dialogue and concertation process at both national and local level.
The agreement was welcomed with satisfaction by all the signatories. The only social partners that expressed dissatisfaction with the agreement were the representatives of the artisanal sector. According to Giuliano Bolaffi, general secretary of Confartiginato, 'the lack of signature of the agreement on behalf of the organisations of the artisanal sector is a matter of both method and merit'. As regards the method, Mr Bolaffi believes that there was an unjustified rush to sign, which led to a premature agreement. As regards the merits of the text, according to Mr Bolaffi it underestimates the role of small and medium-sized industrial businesses
Luca Cordero di Montezemolo, the president of Confindustria, the main employers' confederation, called the agreement a very useful document, which adopts the correct method by not presenting random proposals to the government but recommendations developed and agreed upon jointly by the social partners. According to Maurizio Sella, president of the Italian Banking Association, (Associazione Bancaria Italiana, Abi). 'the agreement is the starting point for taking concrete actions'.
According to Guglielmo Epifani, the general secretary of the Cgil trade union confederation, 'this is the first significant agreement signed with the new Confindustria and it is correct to start with the South, which is living a dramatic reality'.
The agreement on the Mezzogiorno signed by the social partners takes on different meanings according to the point of view from which it is assessed.
From a political perspective it can be viewed as an attempt by the trade union and employers' organisations to have a political say in the allocation of public resources. The refusal of the centre-right government to reinstate any form of social concertation over the country’s economic management, and its adoption of a more populist approach - looking for political consensus through direct communication managed by Prime Minister Silvio Berlusconi - has reduced the role of the social partners. Previously, even the weakest governments managed to obtain a degree of 'social legitimisation' of their decisions through the processes of social dialogue and concertation, involving a political trade-off with the social partners. This practice is no longer used, due to an explicit choice by the current government, and the social partners no longer have the tools to influence the general political decisions of the government, many of which are opposed by both trade unions and employers' associations. The Mezzogiorno agreement is thus a form of extreme attempt by the social partners to influence the government’s general political decisions.
As regards its content, the agreement calls on the government to meet its responsibilities and to intervene in an adequate way in the South, whose situation can be considered as a national emergency. However, there are still many doubts as to the degree to which the document will influence the government's choices. The government seems more inclined to adopt a development policy based on tax cuts for citizens, even if this means reducing public support for companies and cutting direct investments in the southern regions. The social partners have expressed their opposition to these choices, preferring the use of resources aimed at supporting the Mezzogiorno and overcoming the structural gaps faced by these regions.
At present, it is not only the government's economic policy but the electoral future of the centre-right coalition that is in the spotlight. The tax cuts promised to families during electoral campaigns have proved an insurmountable constraint for the centre-right government, which is losing popular consensus. However, it can improve its chances in future elections only by keeping the promises previously made to citizens.
Within this context, the agreement on the Mezzogiorno signed by the social partners seems destined - at least in the short run - to have a limited impact. However, it may constitute, especially in Southern regions, the basis for a renewal of local social concertation processes that, in the medium term, will also influence the general political decisions of the national government. (Domenico Paparella and Vilma Rinolfi, Cesos)