Paris and Rome Fiddle While France and Italy Burn

Debt Dominoes: France and Italy are moving too slowly on political and economic reform

by Satyajit Das
Market Watch

In both Italy and France, minimum wage levels, working hours, major entitlement programs and reform of the public sector remains largely taboo. To avoid a financial crisis, Italy and France both desperately need structural reforms to increase growth and competitiveness.

Italian Prime Minister Mateo Renzi has belatedly introduced labor market reforms. The measures include reduced employment security and new unemployment benefits that will be phased out over two years. But Italy’s generous benefits have not been eliminated, with entitlements and job protections increasing gradually with seniority. And the changes applies to new workers, not public-sector employees.

France, meanwhile, introduced cuts in employers’ payroll charges on low-paid workers. There has been modest pension reform, including increasing the period of service needed to qualify for a full pension. However, extra pension entitlements for demanding work are still granted.

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