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How to solve a 'long-term problem' like Italy

Following last week's nationwide strikes against government reforms, Italy's prime minister has called on his party to back radical measures to revive the moribund economy. However, economists are worrying that the proposed measures to free up the country's labor markets don't go far enough.

Prime Minister Matteo Renzi called on his ruling Democratic Party (PD) Sunday to unite in support of reform measures that would make it easier for companies to hire and fire workers. On Friday, more than 1.5 million members of trade unions and student organizations held nationwide strikes in protest against the reforms including measures to make it easier to fire workers.

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The protests have piled pressure on Italy's center-left leader as he tries to implement far-reaching reforms to the economy in order to return Italy to growth. Italy is still in recession, according to the latest growth data, and it has an unemployment rate of 13.2 percent in October. Youth unemployment, meanwhile, is at 43.3 percent.

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If Renzi's job was already hard, however, one analyst believed Italy needed far deeper reforms.

"This is the third year in a row that Italy has negative growth and clearly we have a long-term problem here in Italy," Anatoli Annenkov, Senior European Economist at Societe Generale, told CNBC.

"The labor market laws are one step in the right direction but we think much more is needed, unfortunately. We need much higher nominal growth in Italy to make sure the debt in Italy is sustainable or alternatively, tighter fiscal policy," he told CNBC.

As protests took place back home on Friday, Renzi told a meeting of entrepreneurs in Istanbul that if Italy postponed much needed reforms, "we condemn ourselves to a slow decline," the Italian ANSA news agency reported.

Italy's economy is still mired in recession although Economy Minister Pier Carlo Padoan said in November that he believed the country would see "positive growth" in 2015. In the meantime, the euro zone's third largest economy has seen its debt pile grow to become the second highest in the 18-country region, behind Greece, with a debt to GDP ratio of almost 134 percent.

Like other countries in the euro zone, such as Portugal, Ireland, France and Greece, Italy had been called on to implement far-reaching structural reforms in order to enable its economy to recover. Countries like Ireland and Portugal that had enacted reforms, had improved, Annenkov said.

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"(In countries like Ireland and Portugal) we can actually see some results, they are returning to growth but Italy doesn't have growth yet and that's a problem."

If Italy wanted to avoid receiving financial "assistance" from abroad, it would have to take deeper measures, Annenkov added. "Typically structural reforms take time to feed through into the economy, however if you can deliver them in a credible way with markets buying into it you can see positive short-term effects and that would be very beneficial (for Italy)."

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Italy has so far avoided asking for financial assistance from its European partners but with its economy set to remain in the doldrums for some time, analysts and expert still raise the possibility of some form of financial aid.

"Unfortunately, what we've seen so far is that it takes a little bit longer to get those reforms and it comes with a gradual approach," he added.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld.