STUDY Social Cohesion and the State in Times of Austerity GIANCARLO DENTE February 2014 „ „ The Italian economy is suffering from the effects of the recession. GDP fell by 2.6 per cent in 2012 and estimates show that the fall was likely to continue in 2013. Fiscal consolidation became the most urgent issue in the sovereign debt crisis, which started in July 2011. The pursuit of fiscal consolidation entailed the approval of three austerity packages in a short period, involving mainly tax increases, such as VAT and on property and investments. „ „ Complex reform processes have been launched to reorganise the public administra­tion and to foster efficiency and quality of public expenditure. The reorganisation of the state is clearly intertwined with the high level of public debt, which represents one of the main constraints on good policymaking and hence is a factor limiting Italy’s growth. „ „ The reform of the labour market has introduced several important regulatory changes to tackle labour market segmentation, improve work-family life reconciliation and increase social protection. Overcoming the consequences of the crisis and of the austerity measures requires that these measures be completed. However, achieving this ambitious goal requires that public spending cuts be carried out in other areas and that the fight against tax evasion be pursued more effectively. More needs to be done to simplify the tax system and to tackle undeclared and irregular work, which involves about 12.2 per cent of the workforce.