Renzimania: Will charm survive tough reforms?

The reform package announced by the new PM Matteo Renzi is likely to boost GDP growth by 0.2pps in 2014-15 to 0.4% and +0.9% according to our forecasts with possible positive surprises.

However, business insolvencies are expected to remain on the rise in 2014 (+4%), credit crunch is still on and payment delays will remain high (at 98 days on average).

Going forward, Renzi reform agenda is likely to focus on the labor market (Jobs Act), the housing market, the constitutional reform and a new electoral law.

Risks remain skewed on the downside given the weak governing coalition. Further reforms are needed to support credit, ease fiscal pressure on companies and reduce energy and transportation costs.