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Matteo Renzi leaves a convalescent Italy

40778254.1 (40778723) - 05_12_2016 - CORRECTION-ITALY-VOTE-REFERENDUM-CONSTITUTION.jpg
Matteo Renzi, who formally quit as Italian Prime Minister on Wednesday, once gave himself 1,000 days to change the country and make it stronger and more competitive.

[ROME] Matteo Renzi, who formally quit as Italian Prime Minister on Wednesday, once gave himself 1,000 days to change the country and make it stronger and more competitive.

He passed the 1,000 day mark but the pledge on the economy, made six months after he took office in February 2014, was not to be fulfilled. While Italy denounces austerity in Europe, the country is in a state of economic convalescence.

After 1,000 days of Renzi's government, gross domestic product rose 1.6 per cent and household consumption by three percent while the deficit fell 0.4 per cent, according to official figures.

With growth projected at 0.8 per cent this year, Italy lags behind many in Europe.

Market voices on:

The main problem is a decline in competitiveness. While many small- and medium-sized enterprises are doing well, particularly in agriculture and luxury goods, other sectors, such as textiles, are not able to compete internationally "It's a problem that one legislature cannot solve," said Pietro Reichlin, professor of economics at Luiss University.

The other big structural problem in the Italian economy is the weakness of its banks, too many in number and wracked with debts - 360 billion euros (S$549 billion) across the sector.

Faced with a messy system, Finance Minister Pier Carlo Padoan has moved to group many of them together.

The banks have set up their own relief fund, the Atlante Fund. But its resources are limited and the banks have said they do not expect to return to it.

The Italian banking index has fallen 50 per cent on the Milan stock market since the beginning of the year and stocks remain febrile.

Despite opposition from unions and a leftish fringe, the Renzi government in 2015 adopted a "Jobs Act", a labour market reform which made it easier for companies to make employees redundant but also allowed them to hire people on permanent contracts.

According to Mr Renzi, Italy has 656,000 more people in employment, 487,000 of them on permanent contracts, but another 665,000 are graded as inactive. The unemployment rate fell more than one per cent to 11.7 per cent.

Massimo Gibelli, an official at CGIL, Italy's largest trade union, gives different figures.

"In three years we gave about 35 billion euros to companies, some 18 million for the creation of jobs and little more than 250,000 were created. It's little compared to the cost."

In the most important social reform of recent years Italy granted status to same sex couples this summer, the last major European country to do so, having faced resistance from the Catholic Church.

Stopping short of marriage, Italy allowed civil unions. Though it grants rights similar to marriage it does not, as in the initial draft law, allow adoption of the spouses' natural children.

Administrative reform simplified life for citizens and businesses, in what was a small revolution for Italians who often spent years waiting for answers.

The fight against corruption was also boosted with the creation of an ad hoc administration and a legislative arsenal to combat exploitation of agricultural workers.

Some taxes were abolished or lowered but the great promise of fiscal reform never happened. There was also some judicial reform.