Five northern Italian regions are stepping up cooperation to protect their industrial base and strengthen their position in the European economy, while new data show that southern Italy has been growing faster than the North but has suffered a much sharper decline in workers’ real incomes.
The contrasting trends highlight the widening complexity of Italy’s traditional North-South divide. While the industrial heartland is seeking to coordinate its response to growing international competition, particularly from China, the South is recording stronger economic growth without translating that performance into higher purchasing power for workers.
The five northern regions involved in the new initiative are Lombardy, Piedmont, Veneto, Liguria and Emilia-Romagna. Together, they account for roughly half of Italy’s gross domestic product and are home to much of the country’s manufacturing capacity.
Their regional economic development ministers come from across Italy’s political spectrum. The group includes Lombardy’s Lega minister Guido Guidesi, Piedmont’s Forza Italia representative Andrea Tronzano, Veneto’s Lega minister Massimo Bitonci, Liguria’s Lega minister Alessio Piana and Emilia-Romagna’s centre-left Democratic Party minister Vincenzo Colla.
Five regions form a northern “coordination table”
The initiative is aimed at coordinating policies in response to the challenges facing Italy’s industrial supply chains, including technological change, restructuring and increasing competition from China.
The five regions have established what in Italy is commonly described as a cabina di regia, or coordination body, intended to identify common priorities and accelerate economic measures across regional borders.
The initiative is notable because it brings together regions governed by different political parties while avoiding the more contentious debate over greater regional autonomy.
Instead, its focus is on economic growth and protecting the manufacturing sector, which remains one of the defining strengths of northern Italy.
The proposals under discussion include creating joint budgets rather than separate regional funds and managing them through a single coordinating body. Another proposal would expand Special Economic Zones to include mountainous areas.
Italy’s main employers’ association, Confindustria, has also expressed support for the initiative.
Dario Di Vico, writing in Il Foglio, described the approach as a form of “moderate northernism,” or nordismo dolce. The idea is to strengthen cooperation between northern regions and other economically powerful European regions without seeking to isolate the South.
However, analysts warn that without a broader national and European perspective, regional cooperation could eventually turn into a narrower form of localism.
South grows faster but workers earn less
The economic picture becomes more complicated when Italy’s southern regions are taken into account.
According to recent regional economic data from the Bank of Italy, southern Italy grew faster than the Centre and North between 2019 and 2024.
Real GDP in the South increased by 4.4% over the period, compared with 3% growth in central and northern Italy.
Yet workers in the South experienced a substantially larger decline in real income.
Real wage income per employee fell by 7.8% in southern Italy, more than twice the 3.8% decline recorded in the Centre and North.
In other words, the South has been growing faster, but its workers have experienced a significantly greater loss of purchasing power.
Four economists — Marco Leonardi, Giuseppe Migali, Leonzio Rizzo and Riccardo Secomandi — examined the apparent contradiction in an analysis published by lavoce.info.
Why are wages falling despite stronger growth?
The economists point to two main explanations.
The first is the uneven impact of inflation. Lower-income households devote a larger share of their income to essential expenses such as food, energy, rent and transportation. These were also among the categories that experienced some of the sharpest price increases in recent years.
As a result, the loss of purchasing power has been particularly severe in southern Italy, where average incomes are lower and essential spending accounts for a larger proportion of household budgets.
The second explanation is the structure of the southern economy.
Services account for a much larger share of economic activity in the South, including retail, tourism, personal services and public administration. These sectors tend to have lower average productivity and, in many cases, collective wage agreements have been slower to compensate workers for the inflation shock.
The larger role of the public sector in the South has also contributed to the pressure on wages. Public-sector employees were among those whose collective wage agreements provided relatively limited protection against the loss of purchasing power.
Manufacturing, by contrast, has generally offered greater wage resilience, supported by stronger collective bargaining structures and higher productivity.
Manufacturing helps protect incomes
The relationship between manufacturing and wages is therefore emerging as one of the key factors behind Italy’s regional divide.
The economists found that the regions where real wage incomes declined the least were also those where manufacturing plays a larger role in the economy.
This is particularly evident across much of central and northern Italy, where industrial production and manufacturing supply chains remain deeply embedded in the regional economy.
The findings suggest that the South’s stronger GDP growth does not necessarily mean that households there are benefiting more from economic expansion.
The economists caution that the South’s stronger growth performance should therefore be interpreted carefully.
The key issue, they argue, is not simply how much the economy grows, but who benefits from that growth.
A different challenge for North and South
The contrasting developments are creating two different economic challenges within the same country.
In the North, the focus is increasingly on preserving industrial competitiveness, coordinating investment and responding to international competition. The five-region initiative is an attempt to strengthen the manufacturing heartland by working across traditional political and administrative boundaries.
In the South, meanwhile, the challenge is turning economic growth into higher incomes and stronger purchasing power.
The differing priorities have renewed debate over whether Italy needs stronger coordination not only among its northern industrial regions but at the national level.
One conclusion is increasingly difficult to avoid: while the North is looking for a new way to coordinate its economic strength, the South needs to find a way to ensure that faster growth translates into better living standards.
And ultimately, the most important coordination centre may still need to be Rome.
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