Italy is experiencing a nascent but weak economic recovery after a deep and long recession which widened further the economic performance gap with the rest of the EU. Unemployment is critically high among young people, women and in southern Italy. The economic crisis has exacerbated the long-standing socioeconomic divide between northern and central Italy on the one hand and southern Italy on the other, the latter traditionally the main recipient of ESI Funds. ESI Funds will help to address several of the EU policy recommendations made in the context of the European Semester, primarily those on education and labour market, ports and logistics, public administration and the justice system and management of the funds.

Main priorities and results

ESI Funds are channelled through 74 national, multiregional and regional programmes. These cover very different social, economic and administrative realities and challenges, requiring a highly diversified strategy in the use of resources. The funds’ main priorities are: developing an innovation-friendly business environment, putting in place efficient infrastructures and management of natural resources, increasing labour market participation, promoting social inclusion, improving education, improving administrative capacity and the management of ESIF programmes, in particular in less developed regions.

Almost EUR 3.8 billion in ESI Funds will be spent on research and innovation (R&I), helping Italy to reach its Europe 2020 strategy target to spend 1.53 % of GDP on R&I (current figure: 1.26 %). The spending on R&I, plus more than EUR 7.8 billion for SMEs in sectors including agriculture, fisheries and aquaculture, will provide a strong and coordinated boost to restoring Italy’s overall competitiveness. The EUR 2 billion to be spent on ultra- broadband infrastructures and IT services will also boost competitiveness, while enabling Italy to reach its digital agenda strategy objectives. More than EUR 2.7 billion will go on upgrading rail and maritime infrastructures in less developed parts of the country in order to ensure a real shift to sustainable mobility. In addition, almost EUR 4 billion will be spent on investments to promote Italy’s shift towards a low-carbon economy. This will help it to meet its Europe 2020 target of a 20 % reduction in primary energy consumption.

Investing in human capital and helping people enter the labour market will be a top priority, with a strong focus on fighting youth unemployment. Italy will spend over EUR 4.7 billion in ESI Funds to raise the employment rate to its Europe 2020 strategy target of 67- 69 %. This will include providing customised services to 560 000 young people not in employment, education or training in 2014 and 2015. EUR 4 billion will be spent on initiatives to reduce poverty and social exclusion for an estimated 2.2 million people. An additional EUR 4 billion will be spent on adapting education to labour market needs and reducing early school leaving to 16 % by 2020. This will benefit over 2.8 million pupils and students.

ESI Funds will benefit rural areas by promoting the competitiveness of the agricultural and food industry sectors, the sustainable use of natural resources, biodiversity and climate action. A significant contribution will also be made towards meeting digital agenda objectives.

ESI Funds will also support new growth opportunities within the ‘blue economy’, in particular under the EU strategy for the Adriatic and Ionian region. EMFF funds will support the implementation of the new common fisheries policy, with emphasis on the transition to better environmental sustainability of economic activities in fisheries and aquaculture. The EMFF will contribute to increase the net profit in fisheries by 30 % and to double the production of organic aquaculture.

Financial and territorial instruments

Around EUR 2.187 million will be delivered through financial instruments, in particular for SMEs and innovation and to a lower degree for energy efficiency as well as employment and labour market. This amount, supplemented with legacy resources from the previous programming period, is consistent with the investment strategies of the various programmes and with the absorption capacity demonstrated in the 2007-2013 period. Further opportunities to widen the scope and/or increase the volume of resources allocated to financial instruments will be explored as part of the outcome of the on-going ex ante assessments.

Italy’s urban development strategy will include a centrally managed component consisting of a national programme for 14 ‘metropolitan’ areas around the country. This will complement urban development strategies in regional programmes implemented mostly through dedicated axes and, in a few cases, through integrated territorial investments. A specific territorial strategy, to be implemented though regional programmes, has been drawn up for what are called ‘inner areas’. These are primarily rural areas defined using criteria such as demography, depopulation and level of services. The LEADER approach, financed through ESI Funds, will have an important role in the territorial development of rural communities and economies.

Key information

2. Pre-conditions for effective and efficient use of ESIFs

Italy has both national and regional ex ante conditionalities. These result from its constitutional set-up and resulting division of powers between national and regional authorities (albeit currently subject to reform). Italy has not fulfilled 3 general, 2 EMFF- specific and 10 thematic ex ante conditionalities. The general conditionalities (public procurement, environment and state aid) are of particular significance because legislation and practice in these areas are still a major source of irregularities, making it hard to use the funds in an effective manner. For the thematic conditionalities, action plans are required in areas such as smart specialisation strategies, IT, transport, energy efficiency and active inclusion.

3. ESIF management

Significant weaknesses in administrative capacity in the management of the funds have consistently hampered their effectiveness. This is particularly the case in the less developed regions of southern Italy, as identified by five consecutive policy recommendations in the context of the European semester since 2011. Taking this into account, EU co-funded programmes will have to be accompanied by administrative reinforcement plans. These are designed to guarantee that the authorities in charge of the funds have the basic structure and skills necessary to manage the resources entrusted to them. The ESIF programmes will address weaknesses in public procurement, state aid, the fight against fraud and corruption: these areas are crucial to ensuring that the funds are managed properly. The ESIF programmes will also include a national programme fully devoted to improving the public administration overall.

4. Simplification for beneficiaries

Managing authorities for ESI Funds are developing ways of reducing the administrative burden for beneficiaries and public administration. These include increased use of simplified costs and improving the dedicated information system.