## 1itaea2026002

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---

### Introduction and framing
- Italy’s low productivity and growth reflect persistent human capital gaps driven by limited education spending and low spending efficiency, together with an aging population and rising demand for digital and adaptable skills.
- With high public debt constraining fiscal space, policies must raise both the adequacy and efficiency of education spending and prioritize areas that yield high returns within tight fiscal constraints.
- Emphasis on lifelong learning, stronger coordination and targeting, early childhood education, and vocational pathways to improve AI preparedness, support technological adaptation, and sustain inclusive growth.

### Key findings on spending adequacy and composition
- In 2024, Italy spent 4 percent of GDP in education, about 1.2 percentage points below the EU average.
- Education accounted for 8 percent of total public expenditure in Italy, the lowest among the EU4.
- General government spending per student (primary, secondary, tertiary) was USD 11.8 thousand in 2022 versus the EU25 average of USD 12.5 thousand.
- Tertiary spending per student in Italy was about USD 9 thousand versus the EU25 average of close to USD 16 thousand (about 40 percent lower).
- Italy spent 0.9 percent of GDP in tertiary education (0.6 percent excluding R&D) compared to the EU22 average of 1.2 percent of GDP (0.8 percent excluding R&D).
- Italy invests about ½ percentage point of GDP less than the EU3, a gap spread across spending categories.

### Efficiency of education spending
- Outcomes relative to spending are weak and system inefficiencies reduce returns; centralized governance, complex administration, and insufficient focus on teacher skills and evaluation mechanisms are cited as contributors to low efficiency.
- Data Envelopment Analysis (DEA) suggests Italy’s PISA scores could be 117 points or 8 percent higher while spending broadly unchanged (example benchmark: Estonia).
- Hungary, Portugal, and Spain show similar PISA outcomes while Hungary’s spending per student (on the efficiency frontier) is about 40 percent lower.
- Demographic changes:
  - Student enrollment declined 6.2 percent between 2021–22 and 2025–26.
  - Classes reduced by 2.8 percent over the same period.
  - Staffing rose by 6.7 percent over the same period as savings were reallocated to support teachers, physical education, and additional classes.
- The 2024 Budget Law realigned staffing starting 2025–26 by reducing common teaching posts (cut of 5,660 posts) while expanding support teachers and other staff.

### Education outcomes and labor market implications
- PISA performance: long trailed the euro area average; reading above, math aligned with OECD average, science below; large regional disparities, pronounced north–south divide, and within-region inequalities (90th–10th percentile score gaps exceeding 200 points).
- Early school leaving (ELET, ages 18–24):
  - Declined from 15 percent in 2014 to 9.8 percent in 2024 and further to 8.2 percent in 2025 (Istat data), below the EU average of 9.1 percent.
- About one-fifth of 25–34-year-olds still lacks an upper secondary education, down from about 24 percent in 2019.
- STEM share among tertiary graduates rose modestly from 24.5 percent in 2018 to 25.4 percent in 2024 vs EU25 rise from 25.4 to 28.3 percent; Italy ranks among the lowest in ICT-related education.
- Completion rates of new entrants to bachelor’s programs by the end of theoretical duration: 37 percent for Italy versus EU25 average of 44 percent in 2023 (OECD 2025).
- NEET (ages 15–29): fell to 13.3 percent in 2025 from 23.5 percent in 2020; 2025 NEET remains above EU average (11 percent) and EU target of below 9 percent by 2030.
  - NEET in 2025: young women 14.9 percent; young men 11.8 percent.
- Female share of tertiary graduates is 58 percent; employment among tertiary-educated young women about 73 percent (comparable to 75 percent for male peers); employment for young women without upper secondary education 36 percent (72 percent for young men).

### NRRP reforms, implementation, and absorption
- NRRP Mission 4 (M4C1 school system reform; M4C2 research and higher education) targets infrastructure, digitalization, curricular reform, early-childhood expansion, teacher recruitment and training, and vocational/tertiary measures.
- NRRP measure “New skills and new languages” is €1.1 billion to strengthen STEM competencies and promote gender equality across the education system.
- Implementation notes (uneven):
  - By end-    , the Ministry of Education (C1) had recorded about €1 .  billion in spending of €1 .  billion, ~   percent, and the Ministry of University and Research (C2) about € .  billion of €1 .  billion, ~   percent. (implementation progress noted as uneven)
  - €1 .  billion was reallocated in 2025 from slower-moving to higher absorption projects (Mission 4 received €1   million for scholarships).
  - Just above 40 percent of territorial investments are directed to Southern Italy, meeting the NRRP’s    percent “South quota” target.
  - EU Cohesion Policy funds complement NRRP with around €  .  billion allocated over the     –2025 programming cycles to improve academic performance, reduce dropout, and strengthen staff training (including Agenda Sud and Agenda Nord).

### Reform horizon and institutional capacity
- Futura is designed as a time-bound (2021–2026) accelerator; sustained improvement requires continued reforms beyond NRRP and additional reform initiatives.
- Italy’s Medium-Term Fiscal Structural Plan (MTFSP) extends the reform and investment horizon to 2029, supporting continuity in childcare expansion, education reforms, and labor market policies.
- Building permanent institutional capacity—especially in lagging regions and for complex programs—is required to translate resource allocations into outcomes.

### NRRP education commitments and execution patterns
- Execution rates vary markedly, with absorption differing across measures and regions—pointing to uneven regional implementation and administrative capacity constraints.
- Selected execution observations:
  - School system reform (M4C1): Scholarships for university access (~82 percent), innovative schools/labs (79 percent), and school–university transition orientation (~65 percent) are top performers; student housing and higher education staff training show near-zero spending execution.
  - Research and higher education (M4C2): PRIN (95 percent) performs well; IPCEI (~18 percent) and the Digital Transition Fund (~18 percent) lag.
  - Across regions: allocations are broad and uneven; spending accounts for a fraction of allocations and is unevenly distributed across projects.

### Table 1 — Education reforms: growth impact, risk, and time horizon (summary)
- Early childhood education — GDP Impact: H; Risk: M; Time Horizon: L
- VET expansion — GDP Impact: H; Risk: M; Time Horizon: M-L
- Teacher reform — GDP Impact: M; Risk: H; Time Horizon: M-L
- STEM/curriculum reform — GDP Impact: M; Risk: L; Time Horizon: M/M-L
- Digital pedagogy change — GDP Impact: L-M; Risk: H; Time Horizon: M
- Governance/accountability — GDP Impact: L-M; Risk: H; Time Horizon: M
- Digital Infrastructure — GDP Impact: L-M; Risk: L; Time Horizon: S-M/M

### Potential macroeconomic gains from closing education and skills gaps
- Channels: raising skill levels; improving labor market matching efficiency; expanding labor supply (via childcare/early childhood education); generating productivity spillovers through innovation and technology adoption.
- Back-of-the-envelope estimate: a comprehensive, sustained overhaul could raise long‑run GDP by about 5–7 percent in a central scenario materializing over about two decades. Estimates are sensitive to assumptions.

### Early childhood education and VET (policy focus)
- Early childhood education and childcare provision tend to be positively associated with higher female labor force participation.
- Expanded vocational education and training (VET) could act as structural growth drivers; expansion and consolidation of ITS and related pathways are underway but full impact will take time.
- Continued coordination across NRRP, Cohesion Policy, and MTFSP is needed.

### Lifelong learning: status and challenges
- Adult learning participation was around 10.4 percent in 2024, below the EU average (13.5 percent), and far below Nordic levels (Sweden 37.5 percent, Denmark 31.2 percent, Finland 29.1 percent).
- The EU’s target of 60 percent adult learning participation remains distant.
- Participation inequality: low-skilled 10.3 percent vs high-skilled 60.2 percent.
- Italy’s system is less employer-led; GOL and interprofessional training funds provide support but uptake is uneven.
- Training funds financed by a 0.3 percent payroll levy appear uneven in utilization and not consistently directed toward reskilling purposes.
- NRRP’s GOL has made progress linking training of the unemployed to ALMPs, but long-term sustainability after NRRP funding is uncertain.

### Distribution of non-formal learning activities by provider, 2022 (percent of all non-formal learning activities of adults aged 25–64)
- 34.7
- 29.0
- 25.7
- 14.6
- 19.9
- 26.9
- 9.9
- 9.7
- 7.0
- 19.2

### Annex I — Selected NRRP reform implementation highlights
- Early Childhood Education (M4C1):
  - Project target: Create 150,000 new childcare places by 2026Q2.
  - Progress as of end-2025: Number of new places financed had increased to around 150,000; most regions on track to exceed the 33% childcare coverage target by 2025; Campania and Sicily projected to reach about 20% (an increase of about 10 percentage points from 2021).
- “Scuola 4.0” – Digital Classrooms and Labs (M4C1):
  - Project target: Transform 8,000 schools.
  - Progress by late 2025: 8,254 schools equipped; more than 100,000 classrooms digitized and over 2,800 next-generation labs created (103% of the target).
- Combating Learning Gaps and School Dropout (M4C1):
  - Project target: Tutoring/mentoring for at least 820,000 students.
  - Progress as of end-2025: Nationwide tutoring program implemented; target on track.
- Teacher Training and Digital Skills (M4C1):
  - Targets: 8,000 STEM orientation programs; 1,000 specialized teacher-training courses; train 650,000 school staff in digital skills by 2025.
  - Progress by 2025: 8,171 schools launched STEM programs (102.1%); 1,123 teacher training courses completed (112.3%); training of 650,000 school staff achieved.
- Recruitment of New Teachers (M4C1 – Reform):
  - Target: Recruit 70,000 new permanent teachers through merit-based hiring.
  - Progress: By end-2024, 20,000 teachers hired under the new system; extended to a third nationwide competition to reach 70,000.
- University Student Scholarships (M4C1):
  - Targets: 55,000 scholarships by 2024; revised to 83,000 by 2026Q2 after additional €1   million allocation.
  - Progress: By 2023/24, 61,213 scholarships awarded; funding increase to support reaching 83,000.
- Student Housing (M4C1):
  - Target: Create 30,000 new affordable student bed places by 2026.
  - Progress: Student Housing Fund (€    million) established with Cassa Depositi e Prestiti; rents must be at least 15% below market and 30% of places reserved for students eligible for need-based aid.
- National Research Projects – PRIN (M4C2):
  - Progress by mid-2025: 5,533 PRIN projects selected (103%); 916 Type B researchers hired (102%).
- Young Researchers “Seal of Excellence” Grants (M4C2):
  - Progress: 588 grants awarded (107%).
- Extended Partnerships (M4C2):
  - All 14 national research partnerships launched; 1,698 researchers recruited (121%); about 45% women.
- Innovative Doctorates (M4C2):
  - Progress by mid-2025:  ,    “innovative doctorate” scholarships awarded (96.3%).
- Innovation Agreements and IPCEI (M4C2):
  - Innovation agreements: all 32 in final stages.
  - IPCEI: 20 projects approved and co-funded for a total of €1.  billion, fully achieved by 2025 deadline.

### Fear of failure, entrepreneurship, and skill gaps limiting technology adoption
- 49.5 percent of Italian respondents report fear of failure being a deterrent from entrepreneurship (Global Entrepreneurship Monitor, 2024).
  - Comparative: United States 44.4 percent; France 42.7 percent; Germany 45.3 percent.
- Consequences: low risk-taking, weak skill accumulation, limited innovation, underinvestment in intangible capital and worker upskilling, potential emigration of high-skill workers.
- Digital literacy and firm-level training constraints:
  - Only 45.8 percent of the population possesses at least basic digital skills (Digital Skills and Jobs Platform).
  - Eurostat: share with at least basic digital skills rose from 45.6 to 54.3 percent in Italy between 2021 and 2025.
- Emerging skills:
  - Defined as a skill if less than 1 percent of job postings that list this skill from 2010 to 2024 in the United States are posted in 2010–11.
  - Most emerging skills are IT-related; Italy ranks near the bottom among advanced economies in both demand and supply of emerging skills.

### Thin risk capital markets, intangible investment, and innovation dynamics
- Intangible investment (intellectual property products) increased 21 percent in Italy between 2019 and 2024, compared with 29 percent in France and 17 percent in Germany.
- Venture capital ecosystem constraints:
  - Share of firms receiving VC financing in Italy is about half of the EU level and roughly one-eighth of the U.S. level.
  - Italian VC-funded firms receive about half the amount obtained by U.S. counterparts.
  - VC investors are predominantly domestic (70 percent) vs 40–50 percent in EU peers and 30 percent in the U.S.
  - Italy hosts two clusters in global top-100 (Milan 56th; Rome ~82nd).
- Evidence on VC effects:
  - Establishment of Cassa Depositi e Prestiti (CDP) Venture Capital SGR in 2019 coincided with increases in private risk capital participation.
  - Event-study: a 17 percent increase in probability of patenting among firms in sectors targeted by CDP VC funds relative to non-targeted sectors; patenting increase materializes about three years after announcement.
  - Back‑of‑the‑envelope: economy-wide VC funding equivalent to 0.06 percent of GDP is associated with a one percent rise in sectoral TFP.
- Partial equilibrium estimates (Brandao-Marques and others, 2026):
  - VC inflows in Italy could increase by about 5 percent through legal harmonization (proxying elements of a 28th corporate regime).
  - VC inflows in Italy could increase by about 40 percent through withholding tax reforms.

### Structural reforms, EU integration, and mobilizing institutional savings
- Expanding VC supply alone is insufficient; deeper structural reforms and EU integration are critical to generate investable projects and unleash risk capital’s productivity potential.
- Role of institutional investors and regulatory reforms: lowering financial frictions for pension funds and insurers could expand funding for startups; tax incentives and life-cycle investment strategies can help.
- SIU initiatives could mobilize long-term savings and reduce fragmentation.

### Policy measures and innovation financing under the NRRP and Budget Law
- NRRP and programs (Transition 4.0/5.0) rely on tax credits and fiscal incentives to stimulate tangible and intangible investment and the green transition.
- New instruments and initiatives: Italian Science Fund (FIS), PRIN Hybrid, Synergy Grants, CDP Venture Capital, expanded STEM/PhD initiatives, European Digital Innovation Hubs, STEP.
- Reforms to mobilize private pension savings and reduced administrative burdens in fund structures; 2026 Budget Law includes auto-enrollment for first-time entrants and life-cycle investment strategy.
- Policy predictability concerns: frequent changes (e.g., Transition 4.0 scaling back then partial expansion) add uncertainty.
- Recommendation: systematic ex-post evaluation of tax credits and NRRP instruments; maintain stable performance indicators and evaluation methodologies over time.
- Judicial and insolvency reforms underway but outcomes remain uneven across districts.

### Concluding messages and policy recommendations
- Prioritize high-impact, efficiency-enhancing interventions rather than across-the-board spending increases given limited fiscal space.
- Key priorities:
  - Early childhood education expansion to increase female labor force participation.
  - Stronger pipelines to higher learning and vocational education aligned with firms’ needs.
  - Scaled-up, coordinated lifelong learning ecosystem supported by repurposed public resources, private sector and employer co‑financing, and stronger coordination across national and regional programs.
  - Stronger monitoring, outcome reporting, and targeting to improve spending efficiency.
  - Rebalance spending composition across personnel, infrastructure, early interventions, and targeting disadvantaged students.
- Strengthen evaluation, policy predictability, and sustained reform efforts beyond NRRP to translate investments into durable productivity and inclusion gains.

*Source: Closing Education and Skill Gaps in Italy (June 30, 2026), IMF.*

### References _______________________________________________________________________________ 19

### 1itaea2026002 - References _______________________________________________________________________________ 19

### Introduction and framing
- Italy’s low productivity and growth reflect persistent human capital gaps driven by limited education spending and low spending efficiency, together with an aging population and rising demand for digital and adaptable skills.
- With high public debt constraining fiscal space, policies must raise both the adequacy and efficiency of education spending and prioritize areas that yield high returns within tight fiscal constraints.
- The paper emphasizes lifelong learning, stronger coordination and targeting, early childhood education, and vocational pathways to improve AI preparedness, support technological adaptation, and sustain inclusive growth.

### Key findings on spending adequacy and composition
- In 2024, Italy spent 4 percent of GDP in education, about 1.2 percentage points below the EU average.
- Education accounted for 8 percent of total public expenditure in Italy, the lowest among the EU4.
- General government spending per student (primary, secondary, tertiary) was USD 11.8 thousand in 2022 versus the EU25 average of USD 12.5 thousand.
- Tertiary spending per student in Italy was about USD 9 thousand versus the EU25 average of close to USD 16 thousand (about 40 percent lower).
- Italy spent 0.9 percent of GDP in tertiary education (0.6 percent excluding R&D) compared to the EU22 average of 1.2 percent of GDP (0.8 percent excluding R&D).
- Italy invests about ½ percentage point of GDP less than the EU3, a gap spread across spending categories.

### Efficiency of education spending
- Outcomes relative to spending are weak and system inefficiencies reduce returns; centralized governance, complex administration, and insufficient focus on teacher skills and evaluation mechanisms are cited as contributors to low efficiency.
- Data Envelopment Analysis (DEA) suggests Italy’s PISA scores could be 117 points or 8 percent higher while spending broadly unchanged (example benchmark: Estonia).
- Conversely, Hungary, Portugal, and Spain show similar PISA outcomes while Hungary’s spending per student (on the efficiency frontier) is about 40 percent lower.
- Demographic changes (student enrollment declined 6.2 percent between 2021–22 and 2025–26) reduced classes by 2.8 percent; staffing rose by 6.7 percent over the same period as savings were reallocated to support teachers, physical education, and additional classes.
- The 2024 Budget Law realigned staffing starting 2025–26 by reducing common teaching posts (cut of 5,660 posts) while expanding support teachers and other staff.

### Education outcomes and labor market implications
- PISA performance: Italy has long trailed the euro area average; reading above, math aligned with OECD average, science below; large regional disparities, pronounced north–south divide, and within-region inequalities (90th–10th percentile score gaps exceeding 200 points).
- Early school leaving (ELET, ages 18–24) declined from 15 percent in 2014 to 9.8 percent in 2024 and further to 8.2 percent in 2025 (Istat data), below the EU average of 9.1 percent.
- About one-fifth of 25–34-year-olds still lacks an upper secondary education, down from about 24 percent in 2019.
- STEM share among tertiary graduates rose modestly from 24.5 percent in 2018 to 25.4 percent in 2024 vs EU25 rise from 25.4 to 28.3 percent; Italy ranks among the lowest in ICT-related education.
- Completion rates of new entrants to bachelor’s programs by the end of theoretical duration: 37 percent for Italy versus EU25 average of 44 percent in 2023 (OECD 2025).
- NEET (ages 15–29) fell to 13.3 percent in 2025 from 23.5 percent in 2020; 2025 NEET remains above EU average (11 percent) and EU target of below 9 percent by 2030. NEET in 2025: young women 14.9 percent; young men 11.8 percent.
- Female share of tertiary graduates is 58 percent; employment among tertiary-educated young women about 73 percent (comparable to 75 percent for male peers); employment for young women without upper secondary education 36 percent (72 percent for young men).

### NRRP reforms, implementation, and absorption
- NRRP Mission 4 (M4C1 school system reform; M4C2 research and higher education) targets infrastructure, digitalization, curricular reform, early-childhood expansion, teacher recruitment and training, and vocational/tertiary measures.
- NRRP measure “New skills and new languages” is €1.1 billion to strengthen STEM competencies and promote gender equality across the education system.
- By end-    , the Ministry of Education (C1) had recorded about €1 .  billion in spending of €1 .  billion, ~   percent, and the Ministry of University and Research (C2) about € .  billion of €1 .  billion, ~   percent. (implementation progress noted as uneven)
- €1 .  billion was reallocated in 2025 from slower-moving to higher absorption projects (Mission 4 received €1   million for scholarships).
- Just above 40 percent of territorial investments are directed to Southern Italy, meeting the NRRP’s    percent “South quota” target.
- EU Cohesion Policy funds complement NRRP with around €  .  billion allocated over the     –2025 programming cycles to improve academic performance, reduce dropout, and strengthen staff training (including Agenda Sud and Agenda Nord).

### Policy implications and priorities under fiscal constraints
- With limited fiscal space, prioritize high‑impact, efficiency-enhancing interventions rather than across-the-board spending increases.
- Key priority areas identified:
  - Early childhood education expansion.
  - Effective pathways to higher learning and vocational training closely aligned with firms’ needs and growth-enhancing sectors.
  - Scaled-up, coordinated lifelong learning ecosystem to support reskilling amid demographic and technological change.
  - Stronger monitoring, outcome reporting, and targeting to improve spending efficiency.
  - Rebalancing spending composition across personnel, infrastructure, early interventions, and targeting disadvantaged students.
- Sustaining reform momentum and ensuring coordination across NRRP and cohesion funding streams is critical to translate investments into durable improvements in education outcomes.

*Source: Closing Education and Skill Gaps in Italy (June 30, 2026), IMF.*

### 15.      However, while Futura reforms

### 15. However, while Futura reforms show progress, lasting gains require extending reforms beyond the 2021–26 NRRP horizon and strengthening institutions and execution

### Reform horizon and institutional capacity
- Futura is explicitly designed as a time-bound (2021–2026) accelerator; sustained improvement in education outcomes will require continued reforms beyond the NRRP period and additional reform initiatives.
- Italy’s Medium-Term Fiscal Structural Plan (MTFSP) extends the reform and investment horizon to 2029, supporting continuity in key priority areas, such as childcare expansion, education reforms, and labor market policies.
- Sustaining reform implementation and ensuring durable gains will require building permanent institutional capacity—especially in lagging regions and for complex programs—to translate resource allocations into outcomes.

### NRRP education commitments and execution patterns
- The NRRP commits significant resources for education reforms, but execution rates vary markedly, with absorption differing across measures and regions—pointing to uneven regional implementation, administrative capacity constraints, and likely system inertia.
- Selected execution observations:
  - School system reform (M4C1): Scholarships for university access (~82 percent), innovative schools/labs (79 percent), and school–university transition orientation (~65 percent) are among the top performers in spending. Student housing and higher education staff training show near-zero spending execution.
  - Research and higher education (M4C2): Research projects of significant national interest (PRIN) (95 percent) perform well; Important Projects of Common European Interest IPCEI (~18 percent) and the Digital Transition Fund (~18 percent) lag.
  - Across regions: Allocations are broad and uneven; spending accounts for a fraction of allocations and is unevenly distributed across projects—suggesting that the gap is less about resource availability and more about constraints in implementation capacity.

### Table 1 — Education reforms: growth impact, risk, and time horizon
- Early childhood education — GDP Impact: H; Risk: M; Time Horizon: L
- VET expansion — GDP Impact: H; Risk: M; Time Horizon: M-L
- Teacher reform — GDP Impact: M; Risk: H; Time Horizon: M-L
- STEM/curriculum reform — GDP Impact: M; Risk: L; Time Horizon: M/M-L
- Digital pedagogy change — GDP Impact: L-M; Risk: H; Time Horizon: M
- Governance/accountability — GDP Impact: L-M; Risk: H; Time Horizon: M
- Digital Infrastructure — GDP Impact: L-M; Risk: L; Time Horizon: S-M/M

(High, Medium, Low impact and risk; Long, Medium, Short term)

### Potential macroeconomic gains from closing education and skills gaps
- Channels through which closing gaps supports growth:
  - Raising skill levels (strengthened early childhood education, teacher quality, curriculum)
  - Improving labor market matching efficiency (strengthening VET and the Istituti Tecnologici Superiori (ITS) system)
  - Expanding labor supply (expanding childcare and strengthening early childhood education to increase female labor force participation)
  - Generating productivity spillovers through innovation and technology adoption
- Back-of-the-envelope estimate: a comprehensive, sustained overhaul of the education and skills system could raise long‑run GDP by about 5–7 percent in a central scenario materializing over about two decades. These estimates are sensitive to underlying assumptions and should be interpreted with caution.

### Early childhood education and VET (policy focus)
- Early childhood education and childcare provision tend to be positively associated with higher female labor force participation.
- Expanded vocational education and training (VET) could act as structural growth drivers; expansion and consolidation of ITS and related pathways are underway but the full impact will take time to materialize.
- Continued efforts are needed to improve coordination across policy instruments and funding streams; NRRP, complementary Cohesion Policy programs, and medium-term commitments under the MTFSP are helpful.

### Lifelong learning: status and challenges
- Italy has persistently low lifelong learning participation despite recent reforms:
  - Adult learning participation was around 10.4 percent in 2024, below the EU average (13.5 percent), and far below Nordic levels (Sweden 37.5 percent, Denmark 31.2 percent, Finland 29.1 percent).
  - The EU’s target of 60 percent adult learning participation remains distant.
- Participation is highly unequal between low-skilled (10.3 percent) and high-skilled (60.2 percent) adults.
- Italy’s learning system is less employer-led and relies more on formal education and non-formal providers; programs such as GOL (Garanzia di Occupabilità dei Lavoratori) and interprofessional training funds provide support but uptake is uneven across regions and worker groups.
- Structural factors explaining gaps include fragmented governance and the predominance of small firms.
- Lifelong learning represents only a small part of Italy’s skills system; spending on active labor market policies (ALMPs) and training remains structurally below peers.
- Existing training funds are financed by a 0.3 percent payroll levy and appear uneven in utilization and not consistently directed toward reskilling purposes.
- The NRRP’s GOL initiative has made progress linking training of the unemployed to ALMPs, but long-term sustainability after NRRP funding is uncertain.

### Distribution of non-formal learning activities by provider, 2022 (percent of all non-formal learning activities of adults aged 25–64)
- 34.7
- 29.0
- 25.7
- 14.6
- 19.9
- 26.9
- 9.9
- 9.7
- 7.0
- 19.2

### Policy recommendations and concluding priorities
- Extend and deepen education reforms under the NRRP beyond 2026, supported by the MTFSP, with a strong emphasis on effective implementation to sustain gains within fiscal constraints.
- Invest strategically in high-impact areas:
  - Early childhood education (with clear links to higher female labor force participation)
  - Stronger pipelines to higher learning
  - Vocational education and training pathways aligned with firms’ demand for skills
- Increase efficiency in education spending through better targeting, improved monitoring of outcomes, and continued reallocation of resources toward priority areas; reinvest realized savings strategically in high‑return initiatives without relying on increasing headline spending.
- Strengthen lifelong learning by moving toward a more universal and portable model supported by repurposed public resources, private sector and employer co‑financing, and stronger coordination across national and regional programs.
- Consider international models to raise participation while narrowing skill access gaps (examples cited: individual learning accounts as used in France and Singapore; Nordic systems combining broad access with active labor market policies).
- Focus on training low‑skilled workers and addressing evolving skill needs to expand labor supply, support longer and more productive working lives, and ensure inclusive and sustained human capital development.

*Italic: Sources: Sources Italia Domani (Spesa per misura del PNRR; Progetti del PNRR; Pagamenti dei progetti del PNRR) and IMF staff calculations.*

### Annex I. Summary of Key Education Reforms under the NRRP

### Annex I. Summary of Key Education Reforms under the NRRP

### Expansion of Early Childhood Education (M4C1)
- Project target: Create 150,000 new childcare places (nursery and preschool) by 2026Q2.
- Progress as of end-2025:
  - Number of new places financed had increased to around 150,000.
  - Almost all Italian regions are on track to exceed the 33% childcare coverage target by 2025, narrowing historical North–South gaps in service provision.
  - Regions such as Puglia and Calabria are expected to reach about 33%, while Campania and Sicily are projected to reach about 20% (an increase of about 10 percentage points from 2021).

### “Scuola 4.0” – Digital Classrooms and Labs (M4C1)
- Project target: Transform 8,000 schools with new digital laboratories and classrooms.
  - Originally scheduled for the ninth installment, this target was brought forward to the eighth installment (achieved in 2025) as part of the plan’s revision.
- Progress by late 2025:
  - 8,254 schools had been equipped with state-of-the-art digital devices and labs, exceeding the target of 8,000 schools.
  - More than 100,000 classrooms have been digitized and over 2,800 next-generation labs created in secondary schools through this investment (103% of the target achieved).
  - Milestone achieved ahead of schedule.

### Combating Learning Gaps and School Dropout (M4C1)
- Project target: Provide tutoring, mentoring, and extracurricular training to at least 820,000 students and young people to reduce territorial learning gaps and high school dropout rates.
- Progress as of end-2025:
  - Nationwide tutoring program being implemented, targeting disadvantaged areas especially in the South.
  - Milestone targets 820,000 participants; target is on track with tutoring activities having reached the expected scale to date.

### Teacher Training and Digital Skills (M4C1)
- Project targets:
  - Activate 8,000 STEM orientation programs in schools (M4C1-16).
  - Deliver 1,000 specialized teacher-training courses on language and innovative teaching methods (M4C1-17).
  - Related milestone (M4C1-13): train 650,000 school staff (principals, teachers, administrative personnel) in digital skills by 2025.
- Progress by 2025:
  - 8,171 schools had launched new STEM programs (102.1% of target).
  - 1,123 teacher training courses were completed (112.3% of target).
  - Training of 650,000 school staff in digital skills achieved on time with participation exceeding the target.

### Recruitment of New Teachers (M4C1 – Reform)
- Project target: Recruit 70,000 new permanent teachers through a reformed, merit-based hiring system.
- Progress:
  - By the end-2024, 20,000 teachers had been hired under the new system.
  - To reach 70,000, the government extended the special recruitment procedure to a third nationwide competition (as planned in the NRRP revisions).
  - Reform enacted via multiple legislative decrees in 2022–2024, modernizing teacher hiring and qualification processes.

### University Student Scholarships (M4C1)
- Project targets:
  - Fund 55,000 need-based and merit-based scholarships for tertiary students by 2024.
  - Revised target: 83,000 scholarships by 2026Q2, after an additional €1   million was allocated to meet higher-than-anticipated demand.
- Progress:
  - By the 2023/24 academic year, 61,213 scholarships were awarded, exceeding the initial goal of 55,000.
  - The funding increase will support awards in the 2024/25 and 2025/26 academic years to reach the expanded target of 83,000 scholarships.

### Student Housing (M4C1)
- Project target: Create 30,000 new affordable student bed places by 2026.
  - Plan revised in 2023–2025 to accelerate progress: instead of direct grants, a dedicated Student Housing Fund (€    million) was established with Cassa Depositi e Prestiti to finance dormitory construction via public-private partnerships.
- Progress:
  - New fund established; projects for student housing are being selected.
  - Final batch of investments to be formalized by the last NRRP tranche.
  - Specific conditions for the fund: supported housing projects must offer rents at least 15% below market rates, and 30% of new places are reserved for students eligible for need-based aid (Right to Education).
  - Delivery mechanism changed to ensure the 30,000-bed target can be met on time despite initial delays in the grant-based approach.

### National Research Projects – PRIN (M4C2)
- Project targets: Fund ,    “PRIN” research projects of national interest and hire 900 associated early-career researchers.
- Progress by mid-2025:
  - 5,533 PRIN projects had been selected for funding (103% of target).
  - 916 fixed-term researchers “Type B” (junior professors) had been hired by universities to work on these projects (102% of target).

### Young Researchers “Seal of Excellence” Grants (M4C2)
- Project target: Fund ≥    research grants for early-career researchers.
- Progress:
  - 588 young scientists have received grants (107% of the target).
  - All recipients had their projects endorsed and obtained positions in Italian research institutions, satisfying NRRP conditions.

### Extended Partnerships (Public-Private R&D Networks – M4C2)
- Project targets: Establish 14 “extended partnership” research programs uniting universities, research centers, and companies, and hire 1,400 researchers across these partnerships.
- Progress:
  - All 14 national research partnerships have been launched with formal agreements.
  - 1,698 researchers have been recruited into their projects (121% of plan).
  - About 45% of the new researchers are women.

### Innovative Doctorates (Industry-Oriented PhDs – M4C2)
- Project target: Fund 6,000 new PhD scholarships focused on innovative and interdisciplinary topics, in collaboration with enterprises.
- Progress by mid-2025:
  - ,    “innovative doctorate” scholarships had been awarded (96.3% of the target).
  - Slight shortfall in the specific sub-target for “innovative” doctorates due to removal of the planned company incentive to hire PhD researchers in the 2025 revision because of RRF timing constraints.
  - The €1   million from this sub-measure was reallocated to expand the university scholarships program.

### Innovation Agreements (Large R&D Projects – M4C2)
- Project target: Conclude 32 innovation agreements between the Ministry of Enterprise and Made in Italy and private firms, co-financing major R&D and industrial innovation projects.
- Progress:
  - As of end-2025, all 32 innovation agreements were in the final stages of completion.

### IPCEI – Important Projects of Common European Interest (M4C2)
- Project target: Support 20 projects under European IPCEI initiatives through a dedicated fund of €1.  billion.
- Progress:
  - 20 IPCEI projects have been approved and co-funded by Italy, for a total of €1.  billion in NRRP resources, fully achieved by the 2025 deadline.

*Source: Italian Government, 2025. Seventh Report to Parliament on the State of Implementation of the National Recovery and Resilience Plan (NRRP), Section I., Rome, December 22.*

### 9.      Moreover, fear of failure contributes to

### 9.      Moreover, fear of failure contributes to

### Fear of failure, entrepreneurship, and business dynamism
- 49.5 percent of Italian respondents report fear of failure being a deterrent from entrepreneurship (Global Entrepreneurship Monitor, 2024).
- Comparative country figures: 44.4 percent in the United States, 42.7 percent in France, and 45.3 percent in Germany.
- Drivers:
  - Cultural and institutional factors.
  - Education systems that place limited emphasis on experimentation and entrepreneurial learning can discourage risk-taking.
  - Slow and inefficient insolvency and judicial processes increase the cost of failure and weigh on business dynamism (OECD, Economic Survey of Italy, 2026).
- Consequences:
  - Self-reinforcing cycle of low risk-taking, weak skill accumulation, and limited innovation.
  - Firms underinvest in intangible capital and worker upskilling, reducing demand for high-skill labor.
  - Lower expected returns to skills discourage workers from investing in human capital or induce high-skill workers to emigrate, reinforcing a negative feedback loop that depresses productivity growth.
- Policy implication: Addressing skill gaps and expanding access to risk capital are critical to enable firms—especially SMEs—to undertake the human-capital upgrading and intangible investment needed for effective technology adoption.

*Italy’s education system shows relatively weaker outcomes in creative thinking and problem-solving, key drivers of experimentation and innovation, pointing to a more limited emphasis on non-routine, exploratory learning (OECD, PISA 2022). European Commission (Eurydice, 2025) highlights the absence of a comprehensive strategy for entrepreneurship education, including core competencies such as financial literacy, initiative-taking, and planning.*

### Skill gaps limiting firms’ capacity to adopt new technologies
- Digital literacy and firm-level training constraints:
  - Only 45.8 percent of the population possesses at least basic digital skills (Digital Skills and Jobs Platform).
  - Comparison: about 60 percent in France and other advanced EU economies.
  - Eurostat notes: between 2021 and 2025, the share of individuals with at least basic digital skills rose from 45.6 to 54.3 percent in Italy—an increase similar to Germany (49.0 to 59.5 percent) and stronger than in France (62.0 to 65.7 percent).
- Firm-level investment:
  - Innovation expenditure per employee (including training, software, machinery, and digitalization) remains below the EU median.
  - Lower investment in digital skills is associated with slower adoption and less effective use of advanced digital tools, particularly among SMEs.
- Emerging skills (definition and status):
  - Emerging skills are defined as a skill if less than 1 percent of job postings that list this skill from 2010 to 2024 in the United States are posted in 2010–11 (Jaumotte and others, 2026).
  - Most emerging skills are IT-related; job postings also indicate growing demand for business and data analytics, social and administrative skills, social media marketing and management, and new healthcare competencies associated with remote care.
  - Italy ranks near the bottom among advanced economies in both demand for emerging skills (prevalence of occupations requiring new technical skills) and supply of new skills (graduates with the set of emerging skills required currently in the labor market).
  - Contributing factors: traditional sectoral structure, a relatively low share of STEM graduates (particularly in ICT), and an education system placing limited emphasis on experimentation and entrepreneurial learning.
- Potential positive dynamics:
  - Firms’ digital adoption could boost demand in emerging skill occupations and industries.
  - Workers’ digital adoption could improve productivity and facilitate reallocation towards new skill‑intensive jobs.
  - Joint adoption by firms and workers could help shift the economy toward an industry structure that relies relatively more on emerging skills, especially if complemented by reforms and policies facilitating resource reallocation.

### Education–firm linkages, recent reforms, and skill-formation mechanisms
- Strong supply of new skills is linked to:
  - Tertiary education complemented by applied training and adult learning systems.
  - On‑the‑job learning and workplace exposure for non‑IT skills.
  - Close university–industry collaboration, apprenticeships, and firm‑education partnerships (OECD STI Outlook, 2025).
- Recent Italian measures:
  - Expansion and 2022 reform of the Instituti Tecnici Superiori (ITS) Academy system to scale up tertiary vocational education connected to local firms and strategic sectors, including digital technologies.
  - NRRP resources allocated to expand ITS enrollment, modernize laboratories, and strengthen firm partnerships.
  - Measures to support university–industry collaboration: technology transfer, industrial PhDs, innovation ecosystems, National Centers and Extended Partnerships.
  - Programs promoting digital skills and lifelong learning, including the Futura initiative (digital education infrastructure, teacher training, STEM capacity, training incentives).
- Expected impact:
  - Continuing these efforts can further strengthen skills outcomes and boost the supply of emerging skills, providing talent for innovative firms as risk capital availability increases.

### Thin risk capital markets, intangible investment, and innovation
- Importance of intangible investment:
  - Intangible investment (digital technologies, software, data, R&D, organizational capital) is increasingly important for productivity growth.
  - National account data (intellectual property products): increase of 21 percent in Italy between 2019 and 2024, compared with 29 percent in France and 17 percent in Germany.
  - Over a longer horizon, Italy’s accumulation of investment in intellectual property products and intangible capital more broadly has been weaker than that of the United States and European peers.
- Venture capital (VC) ecosystem characteristics and constraints:
  - The share of firms receiving VC financing in Italy is about half of the EU level and roughly one-eighth of the U.S. level.
  - Even conditional on receiving VC financing, Italian firms receive only about half the amount obtained by their U.S. counterparts.
  - Geographic concentration: two main clusters centered around Milan (Lombardy) and Rome (Lazio) attract the bulk of investments; the South receives only a marginal share.
  - Home bias: VC investors are predominantly domestic (70 percent), compared to 40–50 percent in EU peers and 30 percent in the U.S.
  - Exits of VC-backed firms are greatly driven by domestic acquirers rather than cross-border M&A.
  - These features (small scale, few clusters, home bias) limit local lead investors, follow-on financing capacity, and integration into international VC networks, constraining start-up formation, scaling, and exposure to international expertise.
- Evidence on VC effects:
  - Establishment of Cassa Depositi e Prestiti (CDP) Venture Capital SGR in 2019 coincided with increases in private risk capital participation.
  - Event-study findings (Albrizio and others, forthcoming): a 17 percent increase in the probability of patenting among firms operating in sectors targeted by CDP VC funds, relative to firms in non-targeted sectors.
  - The patenting increase materializes about three years after the announcement.
  - Interpretation: signaling mechanism and expectation effects—anticipated larger supply of venture capital increases firms’ incentives to invest in innovation up front.
  - Back‑of‑the‑envelope quantification: an economy-wide VC funding equivalent to 0.06 percent of GDP is associated with a one percent rise in sectoral TFP.
- Cluster dynamics:
  - VC is most effective where dense innovation ecosystems link research, entrepreneurship, and finance.
  - Firms’ probability of receiving VC funding is significantly higher when located in established clusters; firms in clusters also patent more.
  - Italy hosts only two clusters among the global top-100 (Milan ranked 56th and Rome around 82nd) per the World Intellectual Property Organization’s Innovation Cluster Ranking, compared with 22 clusters in the United States, 24 in China, and 7 in Germany.
  - The relatively small number of clusters limits firms’ exposure to global innovation and financing networks.

### Structural reforms, EU integration, and mobilizing institutional savings
- Limitations of increasing VC supply alone:
  - Deeper structural reforms and EU integration are critical to generate investable projects and unleash risk capital’s full productivity potential.
  - The shallow VC market reflects both supply constraints and a limited pipeline of investable projects shaped by structural weaknesses in business dynamism, skills, innovation, and firms’ scaling ability.
  - Expanding VC supply without parallel reforms may lead to limited absorption and muted impact.
- Role of institutional investors and regulatory reforms:
  - Lowering financial frictions for pension funds and insurers could expand funding for high-potential startups and support productivity gains (Arnold and others, 2024; Brandao-Marques and others, 2026).
  - Regulatory reforms encouraging equity investment, life-cycle investment strategies, and tax incentives to institutional investors—including pension funds—have helped increase available financing.
- EU-level initiatives:
  - Savings and Investment Union (SIU) initiatives can mobilize long-term savings, reduce regulatory fragmentation, foster competition among financial intermediaries, and encourage institutional investor participation in equity markets.
- Quantitative partial equilibrium estimates (Brandao-Marques and others, 2026):
  - VC inflows in Italy could increase by about 5 percent through legal harmonization (proxying elements of a 28th corporate regime).
  - VC inflows in Italy could increase by about 40 percent through withholding tax reforms.
  - The potential gains from harmonizing the dividend withholding tax are sizable for Italy compared to the EU average.
  - EU financial market integration would further amplify the gains from structural reforms on GDP.

*Source: IMF Selected Issues chapter text (content unit: 1itaea2026002 - 9.      Moreover, fear of failure contributes to).*

### 19.      Broad policy support and reform have been targeted to improve the business

### 19.      Broad policy support and reform have been targeted to improve the business environment.

### Policy measures and innovation financing under the NRRP
- Italy introduced a broad set of measures to support productivity, digitalization, AI adoption, and innovation financing, primarily through the NRRP, including the Transition 4.0 and 5.0 programs.
- These initiatives have relied heavily on tax credits and fiscal incentives to stimulate investment in tangible and intangible capital, while also promoting the green transition.
- NRRP-related reforms aimed at promoting innovation and technology transfer, especially for SMEs, and supporting the digital transition in the public administration.
- Investments and initiatives described:
  - Investments in research infrastructures and deep‑tech sectors (including AI, semiconductors, and quantum technologies).
  - Initiatives to expand STEM education, scholarships, and innovative PhDs co-designed with firms.
  - Plans to boost technology transfer centers through European Digital Innovation Hubs and the Strategic Technologies for Europe Platform (STEP).
  - New funding instruments: Italian Science Fund (FIS), PRIN Hybrid, and Synergy Grants to strengthen basic and applied research and foster public–private collaboration and technology transfer.
- Financing and market-development measures:
  - Strengthened support for innovative firms through CDP Venture Capital.
  - Enhanced tax incentives for startup investment.
  - Reforms to mobilize private pension savings toward venture capital and private equity, including tax exemption applicability to pension funds and 'Casse di Previdenza' (mandatory First‑Pillar schemes for self-employed individuals and professionals).
  - Reduced administrative and legal burdens embedded in the traditional Italian fund structure (reform of Italy’s Testo nico della Finanza).
  - 2026 Budget Law measures aimed at stimulating private demand for equity investment through private pension funds, including implementation of an auto-enrollment mechanism for first-time entrants and a life-cycle investment strategy.
- Implementation note:
  - To date, mobilization of pension savings remains limited, potentially indicating the need for increased awareness (Edufin Report, 2025).

### Policy predictability, instrument design, and evaluation
- Many recent measures helped stimulate investment and enhance digital adoption, but frequent policy changes have added to policy uncertainty.
- Examples of policy volatility:
  - Transition 4.0 incentives were progressively scaled back, especially for intangible assets, and then partially expanded again under the 2026 Budget Law.
  - Transition 5.0 initially saw limited uptake and underwent several revisions and simplifications before gaining traction.
- Institutional responses:
  - Introduction of a Three‑ ear Research Plan aims to provide stable, multi‑year funding and strengthen the coordination of research and innovation policies.
  - Recommendation for systematically assessing the effectiveness of NRRP policy instruments to inform future policy design.
- Ex-post evaluation priorities:
  - Comprehensive and comparative evaluation of widely used tax credits across multiple schemes is warranted.
  - Sustained implementation and closer monitoring of outcomes, while limiting changes to performance indicators and evaluation methodologies over time, would help consolidate gains and ensure reforms deliver durable improvements.
- Judicial and insolvency reforms:
  - Deep overhaul of judicial, insolvency and restructuring frameworks supported by legislative changes, increased use of out-of-court procedures, and significant investments in digitalization and court capacity.
  - Outcomes remain uneven: legacy cases are still lengthy, and performance varies widely across districts, indicating efficiency targets have yet to be fully met.

### Human capital, digital adoption, and firm-scale constraints
- Key point: Italy’s ability to harness digitalization and AI for productivity growth depends critically on strengthening human capital.
- Rationale:
  - Advanced digital tools can raise efficiency even in small firms and traditional sectors.
  - Given the predominance of micro and small firms in Italy, closing human capital gaps and lowering barriers for firms to scale up are essential to avoid a widening divide between frontier firms and the rest of the economy.
- Policy levers:
  - Foster entrepreneurship education.
  - Reinforce applied tertiary education.
  - Expand vocational and adult-learning systems.
  - Cultivate stronger links between firms and education providers, such as the ITS, to accelerate skill formation and enhance firms’ absorptive capacity in technological change.

### Venture capital, risk capital mobilization, and structural reform
- Challenge: Italy’s underdeveloped and home-biased venture capital market limits firms’ ability to start up and scale up and to access external expertise, networks, and markets.
- Required actions:
  - Mobilize private financing and deepen structural reforms that strengthen innovation ecosystems and expand the pipeline of investable projects.
  - Progress on EU Single Market and Savings and Investment Union initiatives can amplify national reforms’ effects.
- Empirical/analytical notes (from source figures and analysis):
  - CDP Venture Capital SGR established (Dec 2019) and later fully operational (timeline context provided in source charts).
  - Partial equilibrium exercises and model-based estimates (Brandao-Marques and others (2026)) assess effects of reforms that boost VC supply and demand, and the partial equilibrium effect of bilateral harmonization of dividend withholding tax on VC inflows.
- Specific reform areas with potential effects:
  - Market access, share of tertiary-educated workers, R&D, business environment distortions, top personal income tax rate (factors in partial-equilibrium effects on VC demand).
  - Dividend withholding tax harmonization (legal and tax dimensions affect VC inflows).

### Concluding messages and policy recommendations
- Unlocking risk capital and broader structural reforms are crucial for innovation and translating risk capital into scalable productivity gains.
- A comprehensive package of reforms in skills and risk capital, alongside EU integration, would help Italy leverage technological change and escape its low-productivity trajectory to support stronger, more inclusive medium-term growth.
- Translating reforms into durable gains requires:
  - Strong evaluation (systematically assessing effectiveness of NRRP instruments).
  - Clear prioritization and streamlined policy design.
  - Policy predictability and sustained reform efforts beyond the NRRP phase to consolidate recent progress and support durable productivity growth.

*Source: Excerpt from Italy country chapter — “19. Broad policy support and reform have been targeted to improve the business environment.”*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1itaea2026002.pdf_