Why southern Italy’s economic “miracle” risks disappearing

Even the German press, traditionally far from generous towards Italy, had been forced to acknowledge it. In September, the newspaper Die Welt described the “surprising rise of a former problem case”: southern Italy, long regarded as backward, poor and riddled with mafia infiltration, had managed to turn its fortunes around. And in October, Giorgia Meloni described the South as the country’s “new economic engine”, prompting her party to announce a forthcoming tour of Italy to showcase the new Italian “miracle”.
The figures for recent years are certainly impressive: between 2021 and 2025, GDP in the South grew by 9.5%, compared with 6.6% in the Centre-North. Four consecutive years of outperformance – an unprecedented run in the comparable statistical records available since 1980.

A boom fuelled by public investment
The trouble is that this miracle was powered by a very specific fuel, and the tank is now almost empty. That is the warning from Svimez, the research institute that has studied the southern Italian economy since 1946, in its 2026 report.
Growth, it explains, was driven by investment, which rose by 24.4% in the South, compared with 17.1% in the rest of Italy. First came the Superbonus, a tax credit of up to 110% for building renovations. Then came the PNRR, Italy’s National Recovery and Resilience Plan, through which the country spent the €194 billion it received from the EU’s post-Covid recovery fund, 40% of which was earmarked for the South.
The Superbonus has run its course, and the PNRR expired on 30 June. By 2025, the South’s advantage had already narrowed to almost nothing: growth of 0.7%, compared with 0.5% in central and northern Italy.
“The South has shown that it can respond to public investment with a strong multiplier effect,” says Emanuele Felice, an economic historian and former head of economic policy for the Democratic Party, who has just edited La via del Sud (The Southern Way), published by Il Mulino. “But now the investment is coming to an end, and what remains is a structural fragility that the South cannot overcome on its own.”
Not all the gains will vanish. According to Svimez simulations, the recovery plan will leave southern GDP around 2.6% higher this year than it would have been without the PNRR. Even in 2030, GDP would still be 2.3% higher.
But a higher level of GDP is not the same as a faster rate of growth. Once that initial boost has been absorbed, the stimulus from public spending fades, while private investment has yet to take its place. And the results of the projects financed under the plan have been mixed.
“The PNRR funding was spread across too many small initiatives,” says Felice. “Some things worked, including several infrastructure projects. Other resources were wasted.”
Falling wages and a generation leaving the South
The problem is also what the miracle will leave behind.
Not stronger consumer spending: between 2021 and 2025, household expenditure in the South rose by 7.6%, compared with 9.9% in central and northern Italy.
Not higher wages: between 2021 and 2026, real hourly pay in the South fell by 9.9%, compared with a national decline of 7.2%.
Nor has it created many jobs for young people. Of the 568,000 additional people in employment, more than 400,000 are aged 50 or over. Just 70,000 are between 25 and 34.
Those who leave are increasingly well educated. In 2005, graduates accounted for less than a quarter of young people moving from the South to central and northern Italy. By 2025, that proportion had reached 54%.
And almost one in five employed people in the South lives in a household at risk of poverty.
“The difference between today's South and the South of 50 years ago is depopulation,” says Felice. “If you look at population figures, we are back to the levels of the first half of the 20th century. But it is not a question of numbers. It is a question of composition: we have an ageing population and a shrinking number of young people.”
From a peak of around 20 million inhabitants, the South's population could fall to 15 million by 2050.
“If we think only in terms of incentives for businesses, useful though they are, we will not solve the problem, because life in the South remains more difficult.”

Workers at the ILVA steel plant protest outside the factory offices in Taranto. 

A new energy shock and shrinking EU funds
It is against this fragile backdrop that a new energy shock is now hitting.
In October, inflation reached 5.4%, driven by a 31.4% surge in energy prices. Svimez estimates that inflation in the South reached 6.3%.
Nor does Europe appear likely to fill the gap. Under the proposed EU budget for 2028–2034, cohesion funding would fall from 33% to 23% of total resources, while Italy's less developed regions would lose 21% in real terms – €6.4 billion.
Funding is being redirected towards competitiveness programmes, allocated through EU-wide competitive calls for proposals. Yet the South currently secures just 9.5% of the Horizon funding awarded to Italy.
For Felice, the central problem is institutional. Southern regional governments struggle to secure European funding and remain trapped in an excessively local outlook.
“There is a problem with political decision-making being vulnerable to vested interests, but also with the weak administrative structures.”
His proposal is to establish a Ministry for Economic Planning that would decide where to invest on the basis of data.
The single Special Economic Zone (ZES), which authorised projects worth €4.2 billion in 2025, “should also become more selective, which it currently is not”.
Renewable energy could offer a way forward
The South accounts for 46% of the new renewable energy installations planned by 2030 and 72% of grid connection requests for energy storage systems. It could turn its abundant sunshine and wind into a cost advantage for industry.
But by July, it had achieved only 30.4% of the increase in renewable capacity planned for the decade, compared with 41.3% in central and northern Italy.
That is the difference between a temporary surge and lasting development.
The original Cassa per il Mezzogiorno, the State development agency established to promote economic growth in southern Italy, worked, Felice recalls, “because it was a technical body, independent of politics”. Later, spending became a vehicle for political patronage, and the process of economic convergence stalled.
This time, the money arrived, and the South demonstrated that it could turn it into growth – but only temporarily.
What remains to be seen is whether anyone can transform that growth into higher wages, better services and opportunities that persuade young people to stay.
Otherwise, the miracle celebrated from Rome to Berlin will have been nothing more than a temporary boost from the PNRR.
This article was reviewed by an external translation partner