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Only 8% of Italian Firms Use AI as Digital Skills Lag Behind EU Peers, Says ISTAT

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Italy remains significantly behind its European peers in the adoption of artificial intelligence (AI) and digital skills, according to the annual report released Wednesday by ISTAT, the country’s national statistics bureau.

Only 8% of Italian enterprises were using AI in 2023 — a far lower share than in other major EU economies. By comparison, nearly 20% of German businesses use AI tools, with higher adoption rates also recorded in France and Spain.

ISTAT’s findings point to a broader challenge for Italy: insufficient digital literacy among its population. In 2023, only 45.8% of Italians aged 16 to 74 possessed at least basic digital skills — well below the EU average of 55.5% and far from the bloc’s 2030 target of 80%. The figure drops even further to 36.1% in the Mezzogiorno, Italy’s economically disadvantaged southern regions, including Sicily and Sardinia.

Brain Drain and Economic Concerns

ISTAT also highlighted the ongoing “brain drain” affecting Italy’s younger population. In 2023 alone, 21,000 graduates aged 25–34 left the country, marking a 21.2% increase compared to the previous year. Over the past decade, Italy has experienced a net loss of 97,000 qualified young workers, exacerbating demographic and labor challenges.

This trend poses long-term risks to Italy’s innovation capacity and productivity, particularly as the country struggles with low growth and aging demographics.

Economic Forecast

Amid mounting external pressures, including U.S. trade tariffs, the government of Prime Minister Giorgia Meloni last month slashed its 2025 growth forecast from 1.2% to 0.6%. Preliminary data showed the Italian economy grew by 0.3% in the first quarter of 2025 compared to the previous quarter.

Outlook

Italy’s sluggish digital transformation threatens its competitiveness in a rapidly evolving EU market that is increasingly driven by AI integration, digital skills, and tech innovation. The report underscores an urgent need for targeted policies to:

  • Boost digital education,

  • Incentivize AI adoption among small and medium-sized enterprises,

  • Retain young talent by fostering innovation-friendly environments.

Without such reforms, Italy risks falling further behind in the digital economy of the future.

Eutelsat Competes for Secure Satellite Telecoms Contract in Italy

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Eutelsat, a Franco-British satellite operator, is reportedly in discussions with the Italian government to provide secure satellite communication systems, a move that places it in direct competition with Elon Musk’s Starlink. The Italian government is seeking to ensure encrypted communications between officials, diplomats, and defense personnel working in high-risk areas. Sources close to the matter confirmed that Eutelsat, alongside Starlink, is being considered for the contract, which is critical to Italy’s national security.

The involvement of Eutelsat has not been previously disclosed, highlighting Europe’s desire to establish alternatives to Starlink, which currently dominates the satellite communication sector. This interest in European alternatives comes amid rising geopolitical tensions, particularly regarding the war in Ukraine, where Starlink’s role has become more contentious.

Eutelsat, which merged with OneWeb in 2023, operates a constellation of around 650 low Earth orbit (LEO) satellites. While its satellite network is smaller than Starlink’s 6,700 active satellites, Eutelsat’s shares have surged recently due to ongoing discussions with the European Union regarding internet access for Ukraine.

The company has confirmed its regular engagement with European governments to provide secure satellite communication services. However, Eutelsat declined to comment specifically on its talks with Italy, citing confidentiality.

The Italian government has expressed concerns about relying on foreign companies for sensitive national security contracts. Prime Minister Giorgia Meloni’s right-wing government has faced criticism for considering Starlink, especially given its ties to Elon Musk, who is also a close ally of U.S. President Donald Trump. While no contract has been signed with Starlink, Italy is considering alternatives, including developing its own low-orbit satellites. However, progress on this front has been slow, with delays in the EU’s IRIS² satellite project.

Reports suggest that Italy may consider a deal with Starlink worth 1.5 billion euros ($1.61 billion) over five years, although no agreement has been finalized.

Italy’s Growth Bubble Bursts, Revealing Fragile Economic Outlook

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Italy’s post-pandemic economic recovery is faltering more rapidly than expected, with structural weaknesses re-emerging, raising concerns about the future of the country’s fragile public finances. After a surprising stagnation in GDP growth in the third quarter, Italy’s national statistics bureau, ISTAT, has revised its 2024 growth forecast down to just 0.5%, half of the government’s target of 1%. This projection marks a return to Italy’s position as one of the euro zone’s weakest performers, contradicting the optimistic outlook previously shared by Prime Minister Giorgia Meloni and some economists.

Structural Weaknesses Surface

Recent economic indicators have painted a bleak picture. Business confidence has dropped to its lowest point since 2021, while Italy’s long-standing manufacturing crisis deepens. Even the services sector, which had been a driving force behind the economy for much of the year, is now contracting. According to Francesco Saraceno, economics professor at Science Po and LUISS University, Italy’s reliance on small firms, insufficient public investment, and resistance to the green transition are impeding the country’s growth potential. Saraceno added that the country’s outdated business model is no longer conducive to economic expansion.

Lackluster Recovery Despite EU Funds

Italy continues to receive substantial funding through the European Union’s post-COVID Recovery Fund, yet its economic performance lags significantly behind other fund recipients, such as Spain, which is growing at a rate four times higher than Italy. While Italy’s economic resilience in 2021-2022 was largely driven by state-funded incentives, including the costly “superbonus” for the building sector, this temporary boost has now evaporated as the scheme is phased out.

Despite receiving EU funds, Italy’s economic stagnation threatens its public finances, which are already burdened by the debt accumulated from the superbonus. The government projects that public debt will rise to around 138% of GDP by 2026, up from 135% in 2023. If growth continues to underperform, as most forecasters predict, this debt ratio will likely climb even faster. This could make investors more hesitant to purchase Italian bonds, driving up Italy’s debt-servicing costs.

Comparison to Spain’s Robust Growth

In stark contrast to Italy’s struggles, Spain’s GDP is expected to grow around 3% this year. Over the past year, Spain’s economy has expanded at quarterly rates between 0.7% and 0.9%, while Italy has struggled with growth rates of just 0.3% to 0.0%. Angel Talavera, head of European research at Oxford Economics, attributed Spain’s success to its ability to attract and integrate migrants into the workforce, along with a strong tourism sector and robust consumer spending.

Italy, on the other hand, has struggled with fewer migrants, many of whom are confined to the informal economy, and has seen a significant outflow of young talent seeking better opportunities abroad. This demographic decline is a key factor in the country’s economic fragility.

Talavera noted that while Spain has modernized its infrastructure and public services over the last two decades, Italy’s economy remains hampered by its large but increasingly uncompetitive manufacturing sector, which limits expansion.

The Need for Structural Reform

Economists agree that Italy’s sluggish economy is the result of long-standing issues, including under-investment in education, infrastructure, and public services, as well as a burdensome bureaucracy, risk-averse banking sector, and an inefficient justice system. There is a growing consensus among experts on what should be Italy’s top policy priority to improve the situation: investment in education and research.

Roberto Perotti, Lorenzo Bini Smaghi, and Francesco Saraceno are among those who argue that reforming the education system is vital for Italy’s future growth. Meanwhile, Lorenzo Codogno, former chief economist at the Italian Treasury, has called for labor market liberalization to stimulate economic dynamism.

Conclusion

Italy’s fragile economic outlook calls for urgent reforms to address deep-rooted inefficiencies and structural challenges. While the EU’s financial support provides some cushion, without targeted investment in key sectors such as education and research, the country risks falling further behind its European counterparts. As economic growth remains sluggish and public finances weaken, Italy must take bold steps to avoid a prolonged period of stagnation.