ITALIANS take to the polls this weekend to vote on reforming their political system. Reform of many sorts would certainly be welcome; the IMF recently declared that it would take some two decades for Italy to regain the economic footing lost since 2007. Whether the referendum set for December 4th by Matteo Renzi, the prime minister, authorising a constitutional reform to which attempts to loosen up a sclerotic legislative system, is the right medicine remains to be seen. Yet many Italians will be basing their votes not on the content of the referendum question, but on how they feel about Mr Renzi and a course of labour-market reforms adopted last year.
Those changes were meant to make it easier to hire and fire workers. They apply only to new hires, however, and thus disproportionately target young people who now look set to vote “no” amid a rate of youth unemployment of 37%. Perhaps more importantly, they have been insufficiently ambitious in their scope.
Philippe Aghion, an economist at Harvard University, reckons that rich economies (and Italy qualifies, despite recent stagnation) cannot grow in a rapid and sustained fashion if they do…Continue reading