European Parliament ---- continue with fiscal consolidation and anger further elements of the electorate, or reject austerity and potentially face the wrath of investors, who could drive Italian borrowing costs to unsustainable levels. Nevertheless, we hold to our view that over the long term, Italy s massive debt load means the country will have to face substantial austerity beyond our ---year forecast, which will have significant implications for the country s social fabric, as well as its standing among regional and global peers. ...Some of the policies made by Monti s government and subsequent administrations, although much-needed in order to attract investments in the medium term, will have strong detrimental effects on the more underdeveloped southern economy. In particular, although a tough fight against tax evasion and the grey economy was nec- essary to bring the fiscal accounts under control and ensure the progressive nature of the taxation system, this will likely wipe out part of the inefficient small- and medium-sized enterprises that had remained competitive thanks only to the grey economy. From a competitive advantage standpoint, these policies will form the foundations of a healthier economic model. ...We expect further cuts to headline defence spending, as fiscal constraints and low growth will render military spending highly unpopular. We have already observed the first signs of this trend with widespread protests against the government s decision to purchase --- F--- jets from the US defence firm Lockheed
...Italian Prime Minister Matteo Renzi gained much-needed legitimacy following a resounding win for his Democratic Party at European Parlia- mentary elections in May, bolstering his mandate to continue pursuing an ambitious structural reform agenda. However, powerful vested in- terests and marginalised political opposition will attempt to water down reforms, and we cannot rule out a return to the ballot box in the coming quarters should Renzi s progress falter. ...The PD won --.- of the vote � the highest share of a national vote for any Italian political party since the ----s. While the PD s resounding victory is likely to have cemented Renzi s role as the undisputed leader of the party, the outlook for reform remains precarious given that he needs the contin- ued support of smaller coalition partners, as well as that of increasingly marginalised opposition parties. The main pillar of Renzi s reform agenda � electoral and Senate reform � entail - Business Monitor International Ltd www italy Q- ---- ...While the PD s resounding victory is likely to have cemented Renzi s role as the undisputed leader of the party, the outlook for reform remains precarious given that he needs the contin- ued support of smaller coalition partners, as well as that of increasingly marginalised opposition parties. The main pillar of Renzi s reform agenda � electoral and Senate reform � entail - Business Monitor International Ltd www italy Q- ----
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