Italy’s Panetta Says EU Needs Immigration to Grow the Economy
(Bloomberg) -- European countries including Italy need to allow economic migration if they want to overcome the challenge of aging populations and improve growth durably, European Central Bank Governing Council member Fabio Panetta said.
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“Measures that favor an influx of foreign legal workers constitute a rational response from an economic point of view,” Panetta, who is also Bank of Italy governor, said on Wednesday. “The entry of regular migrants should be managed in a coordinated way within the European Union, balancing productive needs with social equilibrium and reinforcing integration of foreign citizens into the education system and labor market.”
His remarks during a speech in Rimini, Italy follow open clashes within Premier Giorgia Meloni’s governing coalition over who has the right to become an Italian citizen. Matteo Salvini’s right-wing League last week attacked Forza Italia, a more centrist coalition party founded by the late Silvio Berlusconi, for supporting an opposition-sponsored measure to allow naturalization for non-citizens who’ve completed most of their education in the country.
Panetta said Italy is among the weakest links economically in Europe with “many of the EU’s structural weaknesses” to be found there. This makes action essential in areas including competition, productivity, higher employment levels for young people and women, and “adequate migratory policies.”
He added that the crucial issue for the euro area’s third-biggest economy remains lowering its public debt-to-GDP ratio, and that the way to do this successfully is through good budgetary and fiscal policies but mainly economic growth.
With few exceptions, notably for world-class athletes, Italy has some of Europe’s most restrictive laws on citizenship. Unlike in the US, where anyone born in the country is recognized as a citizen, non-citizens born in Italy can only apply for naturalization after their 18th birthday. On the other hand, family descent can provide a shortcut for those with distant Italian ancestors — even if they’ve never lived in Italy or can’t speak the language.
Meeting Promises
Meloni and Finance Minister Giancarlo Giorgetti have successfully kept the economy stable since taking power in 2022, though they’re struggling with high debt and deficit numbers that limit their ability to cut taxes and meet promises to help the country’s less affluent.
Recent data showed that the Italian economy grew just 0.2% in the second quarter, decelerating slightly as net exports and industry acted as drags. Analysts see it picking up again to 0.3% this quarter, and the period kicked off with a stronger-than-anticipated reading for industrial production in July.
That may allow sufficient momentum to reach Giorgetti’s growth target of 1% for this year, with the Bank of Italy slightly less optimistic at 0.9%.
Part of the problem is a pandemic-era home-renovation tax incentive that’s been phased out but is still weighing on the deficit, opening Italy up to criticism from the EU, which has started an Excessive Deficit Procedure against it.
On the bright side, the country is still spending its EU pandemic recovery fund cash, which should help compensate for a more restrictive fiscal stance.
Panetta said the EU needs to continue issuing common debt to favor growth, particularly in fields like the digital and green transitions that require significant investment. For its part, Italy must do its job in using the funds effectively, he said.
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