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August 18, 2017

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Growth woes shaping Italy referendum

ROME -- The way Italian Prime Minister Matteo Renzi tells it, there is no economic case for him to quit, as he has vowed to do if he loses Sunday's referendum on constitutional reform.

The center-left former mayor of Florence celebrated 1,000 days in office earlier this month by boasting that his time in charge had delivered respectable growth (1.6 percent), a recovery in household spending (up three percent), lower unemployment (down by 1 percent, employment up) and healthier public finances (budget deficit lowered by 0.4 percentage points).

Renzi's figures add up, economists say. But Antonio Medugno measures the country's economic performance by different data.

"I'm 36. I work full time and employ two other people. But still I have no choice but to live with my parents," the Naples-based electrician tells AFP.

"My father is 63. He works as a janitor in a school and earns 950 euros (US$1,000) a month — after a lifetime of work. How can people get by on such miserable salaries?"

And therein may lie the explanation as to why many fed-up Italians will vote No on Sunday in a referendum that is ostensibly on proposals to reform the country's parliamentary system, but could also usher the hitherto popular young premier towards the exit.

After seizing power in an internal party coup, Renzi has overseen a slow but steady recovery following years of stagnation and recession.

Industry leaders have welcomed what they see as his significant shake-up of the labor market and support Renzi's broader reform agenda, particularly his plans to overhaul a snail-paced judicial system seen as a major obstacle to investment.

Squeezed Middle

The 41-year-old's problem is that the modest improvement seen to date and the promise of more to come has not been enough to make a real difference to Italy's "squeezed middle."

Millions of ordinary families have endured years of declining real incomes and, as in other parts of the Western world, a realization is dawning on many young people that life will be tougher, in some ways, than it was for their parents.

Two thirds of Italians aged 18-34 are still living at home, owning or even renting their own place a distant dream as the low interest environment underpins property prices, to the benefit of the older generation.

The fundamental problem is not that growth is anemic now, but that it has been for a decade and more, says Pietro Reichlin, an economics professor at Rome's Luiss university.

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