Raising a half-full glass to Renzi

MATTEO RENZI’S government is like a Ferrari, declared Giorgio Squinzi, the boss of Confindustria, Italy’s main business lobby, at a gathering this month. “It has a powerful engine,” he continued, “but now it must show what it can do on the road.” Mr Squinzi highlighted four areas in which the government must take action to revive the economy: institutional reform, European integration, industrial policy and industrial relations. He welcomed a recent directive allowing more flexible hiring by employers, but said that was just an “appetiser” for real labour reform. Mr Squinzi implored the government to act quickly and “give us a normal country”.

Since becoming prime minister in February at the age of 39, Mr Renzi has promised all sorts of business-boosting reforms, and has delivered a few. Firms can now hire 20% of their workforces on fixed-term contracts of up to three years. The government has cut income tax by about €80 ($109) a month for those on less than €26,000 a year, in a bid to boost demand, and cut electricity costs (which are higher than the European average in Italy) by around 10% for small- and medium-sized companies. On June 25th further measures, to make the civil service more meritocratic and to encourage lending to businesses, were passed. Long-term shareholders in companies are to be given extra voting power, to encourage family firms to list on the stockmarket and thus raise capital for expansion.

Buoyed by the European Parliament elections, in which his Democratic Party won 40% of votes cast in Italy, Mr Renzi is hoping to steam ahead with his agenda. Many businesspeople, in Italy and abroad, remain cautiously positive towards him. Giampaolo Trasi of Intesa Sanpaolo, Italy’s second-biggest bank, says Mr Renzi is deemed to be “greater than or equal to” his recent predecessors. The hope is that he will last longer in office than they did: Roberto Sammartin, boss of Maus, a machinery company, puts political stability top of his wishlist for Italy. Raffaele Legnani of HIG, a global private-equity house which opened its Milan office in January, says Mr Renzi is remedying the country’s biggest problem: pessimism. Even if he does 10% of what he promises, Mr Legnani says, he is sending a good message.

Others say that is not enough. Italy comes 65th out of 189 countries in the World Bank’s rankings for ease of doing business. Its bureaucracy is unwieldy, its labour market inflexible and its justice system slow: the average number of days required to enforce a contract is 1,185 compared with a rich-country average of 529. Radical change is required. Davide Serra of Algebris Investments, an asset manager, wants bigger cuts, such as a slashing of renewable-energy subsidies to reduce electricity bills further.

Businesspeople’s wishlist of reforms seems endless. There are calls for a more radical slimming of government; and a dramatic reduction and simplification of taxes. The gap between what a worker costs an Italian employer and what the employee takes home is the highest in Europe. Oscar Farinetti of Eataly, a delicatessen chain, suggests that exporters should get a 10% tax cut to encourage them to globalise, as he has; and that foreign multinationals should get ten-year tax exemptions if they invest in Italy’s poorer south.

However, entrepreneurs are aware that many past attempts at pro-business reform have been ill-thought-out or had perverse consequences. Nerio Alessandri of Technogym, a maker of fitness equipment, says the current system of sparing smaller firms from some burdens only discourages them from growing. Emil Abirascid of Startupbusiness, a web platform for new companies, says a well-intentioned law to introduce simpler procedures for firms deemed “innovative startups” was badly drafted and thus excludes plenty of deserving candidates. More fundamentally, legislation in Italy is too often made by emergency decree, resulting in an ever growing mass of regulation. So, says Mr Abirascid, it is as important for the government to remove existing laws as to add new ones.

Pier Carlo Padoan, Mr Renzi’s finance minister, promises there will be “tangible signs” of improvement in the business climate within six months. That will be important if the government is to retain credibility and capitalise on the current window of opportunity in which foreign investors are showing renewed interest in Italy. The Ferrari prime minister must keep his foot on the gas.