Europe News

Italy economy in ‘acute emergency’: Ex-PM Monti

Former Italian First Minister and Member of the Italian senate of the new Italian Government Mario Monti.
Laura Lezza | Getty Images

Italy is still embroiled in a financial crisis—but one that is insufficiently severe to convince the public that reforms are urgently needed, the country's former prime minister told CNBC on Friday.

"The acute emergency that we now have in the real economy, and in the employment situation, is there. It bites deeply into society," Mario Monti, the economist who led an Italian technocrat government between 2011 and 2013, told CNBC from the annual economic Ambrosetti Forum in Italy.

"But of course, it is not so visible as an emergency that brings the whole of public opinion to rally around a tough political project to introduce the structural reforms that are needed to slowly go out of that crisis."

The Italian economy is seen shrinking again this year, after contracting 0.2 percent in the second-quarter.

Unemployment remains above both the euro zone and the Europe-wide average, hitting 12.6 percent in July. The country needs to create 2.5 million new jobs to meet the European Union target of 75 percent employment by 2020, according to Ambrosetti economists.

Despite this, both Monti and his successor Matteo Renzi have struggled to free up Italy's high restrictive labor market. Firms currently lack flexibility in hiring and firing and are inhibited by the practice of nationwide collective bargaining.

Italy's 'whipped cream' reforms

Corrado Passera, the minister of economic development under Monti, said that both governments had failed to make meaningful changes.

"So far, we haven't given Europe and the world and the markets the evidence that we are very serious about the real reforms," he told CNBC at Ambrosetti on Friday.

"We wasted six months on two institutional reforms that were not urgent. The senate reform, and the electorate reform, in both cases, the reforms were very old politics kind of reform."

Italy needs labor reforms: UniCredit CEO

The CEO of UniCredit, one of Italy's largest banks, agreed employment was the area most in need of improvement, but was more optimistic about Renzi's prospects.

"I think Renzi is doing quite a lot," Federico Ghizzoni told CNBC on Friday, also from Ambrosetti.

"The decisions taken up to now, they go in the right direction...I think Renzi will eventually have the reforms in place."

—By CNBC's Katy Barnato