According to Francesco Giavazzi’s  editorial on today’s Corriere della Sera , the Prime Minister Renzi is getting the “reform sequence right”, first institutions, second economics, as Renzi is convinced that,

following one of the most promising research line of recent economic theory, see  Daron Acemoglu and James Robinson “Why Nations Fail”, a country’s success depends on its institutional and legal rules..”

Now that is a flattering view of Renzi’s motivations! Honestly, I think that nobody in government has ever heard of Acemoglu & Robinson. Here is a different view.

After the success of the European elections, Renzi has thought much easier to push through the institutional, rather than economic, agenda, since, at least on paper, he would face a weakend opposition  (Berlusconi, Grillo and left of  his party). Much, much weaker than the opposition he would face (unions, public employees, opposition within its party) should he attempt to reform the labor market, cut pubilc spending, privatise public assets etc, all things that he has well refrained from attempting.

Had Renzi been following Acemoglu’s advice, he would have 1) started from the electoral reform, 2) called early  elections and 3) proceeded to other economic reforms with a possibly large majority. The problem is that reforming the electoral system would prove much more difficult than the present half-baked senate reform!

PS: Just a quick note on supply side reforms. The Renzi “Jobs Act” with the proposal of replacing with one single contract the present multiplicity of contracts, is worthy by itself,  but, cotrary to Giavazzi’s claims, it  will do very little to  improve the labor supply and growth (actually, structural reform have negative pay-offs on impact, and take more than one year to show positive effects). Labor market problems, in my view, lie  here . But  solving them will require a tough confrontation with the unions