EU Currents: Italy’s Struggle For Growth
engin akyurt
Background
Under President Giorgia Meloni’s leadership, Italy has enjoyed a period of relative political stability along with successfully hosting the 2026 Winter Olympic Games in Milano-Cortina. However, there has been some cause for concern in the economic realm. Increases in the nation’s gross domestic product have been below the European Union average of 1.5% each quarter. The nation’s best performance in this metric occurred during 2022, when the nation’s GDP grew by 4.82%.
However, the recovery slowed when the nation’s GDP only rose by 0.72% compared to the previous year. Numbers remained at that level for 2024 and took a dip in 2025, with final numbers putting Italy at a 0.44% GDP growth rate.
Earlier this month, the Italian National Institute of Statistics revised their estimates for Italy’s 2025 GDP growth. Though they initially estimated 0.7% growth, the figure was revised to 0.5%. This highlights the overall downward trend of the Italian economy – the numbers rank far below Spain, a nation one could consider to be a pacesetter in GDP growth, ranking above the EU average at 2.9%.
Geopolitical Concern And Domestic Shortcomings
Recent concerns like the conflict in Iran have triggered fears of inflation, especially as Italy already has the highest inflation-related costs in all of Europe.
A few weaknesses within the Italian economy have also been linked to these low growth numbers. These weaknesses include an aging population, no basic minimum income, low worker productivity, low wages and a shrinking populace.
The aging population, coupled with low birth and reproductive rates have plagued Italy and much of the EU for the last decade. Italy leads in these metrics, however, with the oldest average populace (48.4 years), lowest birth rates (7.0 births per 1,000 people) and the lowest fertility rates (1.2 children per woman).
Affordability is a key factor in Italy’s declining birth rate, despite attempts by the Meloni government to encourage young Italians to start a family.
The Italian government instituted the “Baby Bonus”, a €1,000 payment for babies born in 2025, along with a provision to pay €200 a month to parents in the first year of a baby’s life; however, many mothers still need to look to families for help with childcare.
Valentina Dottor, a young mother in the village of Fregona, needs to work to support her young daughter as her daughter was born before the Baby Bonus program was initiated. She is looking to have family members help take care of her daughter so that she can go back to work.
Regarding the lack of affordable childcare options, Valentina said: “There are not many babies, but not many kindergarten places either. I’m lucky to have my grandmother take care of my daughter. If not, I don’t know where I would leave her.”
A Shrinking Workforce
In addition to the demographic struggles, the Italian employment sector is slumping due to issues in worker productivity and participation. In a 2025 article, Lone Christiansen, an International Monetary Fund representative specializing in Italy, summarized the situation as such:
“The working-age population is projected to decline by double digits between 2024 and 2050. This compounds Italy’s long-standing weak productivity problems, with fewer people with the right skills to support innovation.”
Christiansen suggested that measures like increasing child-care options would help to boost women’s participation in the workforce. Additionally, providing on-the-job training opportunities to workers would encourage workers to shift into more technical, traditionally hard to fill employment sectors.
Citizens that cannot work due to childcare issues or lack of training to fill critical jobs are also not counted in official unemployment numbers. Italy’s unemployment rate has hit its lowest rate in 20 years, 5.1%. However, this masks a deeper issue.
The Hidden Numbers
Those workers who are unable to work and may not be looking for work are not considered to be unemployed, and in Italy’s case, this number accounts for just about one-third of the eligible workforce, around 33.9%.
Snapshot of the Italian Workforce
At the start of the new year, President Meloni pointed to the low unemployment rate of Italians along with the 62% employment rate as positive signs of growth in the economy.
Meloni stated, “The most significant number for judging the state of the real economy is jobs. And the data on employment is objectively encouraging.”
Looking at the chart above, President Meloni’s numbers do not seem to paint an encouraging picture. Though 62 percent of the eligible workforce is employed, more than half of that number are not seeking work.
Italy will surely see growth in their year-over-year GDP totals if this group of people is able to get back to work. Whether it’s an increase in wages or improved childcare schemes, the nation will be better served by giving this key group of individuals the security to enter the workforce.
Spain, Germany and France have encouraged job creation and wage growth, along with courting foreign investment and government subsidies for domestic industry. These tactics have placed them firmly at the top of annual GDP growth amongst the EU’s top five economic powers. If the Italian government can follow a similar blueprint, it may pay dividends for the nation in the long run.
