Italy has "atomic bomb" to revive economy, says Renzi aide Italian prime minister Matteo Renzi Yoram Gutgeld pulls out a white sheet of paper and starts scribbling, true to his roots as a management consultant. It is just after dusk on the first floor of Palazzo Chigi, the seat of the Italian government in central Rome, and the Israeli-born economist wants to illustrate the size of the tax cuts in Italy's budget. A worker earning €20,000 a year would see net pay rise from €1,200 to €1,350 per month, while the cost to the employer would drop from €2,200 to about €1,650, Mr Gutgeld jots down. This is a massive reduction in taxes primarily on low to middle range wages. I think you will be hard pressed to find any country in Europe that has done something similar," Mr Gutgeld says. "This is an atomic bomb," he adds. Mr Gutgeld, a former senior partner at consultants McKinsey, is the most high profile economic mind behind Matteo Renzi, Italy's young, reforming prime minister, who is desperately trying to revive the eurozone's third biggest economy after a long recession. Italy's gross domestic product is expected to shrink 0.4 per cent this year, according to the latest European Commission forecasts, a far cry from the 0.8 per cent growth predicted by Rome just after Mr Renzi took office in February. But Mr Gutgeld - who became Italian by marriage after moving to the country in 1989 - seems far from discouraged and still wagers that a lasting recovery is just around the corner. "There is a spending capacity and an investment capacity that is not materialising," he says. The real bet is that we [the Renzi government] will keep doing the right things and at a certain point people will figure out that this is a different game, the country is changing and the future is different. Mr Gutgeld met Mr Renzi about two years ago, and the 39-year old former mayor of Florence quickly reeled him into his closest circle of advisers. Within that group it can be hard to discern who has Mr Renzi's ear at any given moment. But critics have said economic policy aides, such as Mr Gutgeld, have overshadowed, and caused friction with, the finance ministry run by Pier Carlo Padoan. Mr Gutgeld - who was born and raised in Tel Aviv and studied at the Hebrew University of Jerusalem and the University of California at Los Angeles - denies that this is the case. "There will always be some tensions - but it's all working extremely well, I don't see any real problems," Mr Gutgeld says. He also rejects criticism that Mr Renzi has a tendency, more broadly, to shut out views that clash with his own. It's really not doing justice to [Mr Renzi] to say he does not take critical advice. He does listen to many people but he has his own mind," the economist adds. As one of the architects of the Italian budget, which was heavier on tax relief than spending cuts, Mr Gutgeld is adamant it will pass muster with the new European Commission under Jean-Claude Juncker. The previous commission under José Manuel Barroso cleared it of "serious non-compliance" with EU fiscal rules. Mr Gutgeld says: "It would be counterproductive to have another fight over the budget - I am confident the commission is sensible [and is] not going to get into this." Just like many investors, Brussels is worried about Italy's high and rising public debt level, which is projected to hit 132.2 per cent of GDP this year, according to EU forecasts. Unless growth returns, there are concerns that Rome will be forced into considering more drastic measures, such as a huge debt restructuring or a wealth tax. But Mr Gutgeld brushes aside these worries. "After seven years of crisis, I see much more upside than downside," he says. I am not concerned about further spiralling down, because we are already at a low point.  A key measure of success for Mr Renzi's reform drive lies ahead in the coming weeks, with lawmakers expected to pass a sweeping overhaul of Italy's sclerotic labour laws. These have deterred companies from hiring because it is so difficult to lay off workers, leaving many young workers on temporary contracts with no protections. Though the law cleared its first hurdle in the Senate last month, it still needs to get the green light from the lower chamber of parliament. There are fears that it could be delayed by political tinkering, as well as stubborn opposition from the left. "We are trying to make it simpler to hire and have predictable rules for terminations," Mr Gutgeld says. We need it passed by January 1. If we can work it out so it gets done by then, the parliamentary tactics don't matter. But Mr Gutgeld is also pleading for a certain amount of patience, from policy makers in Brussels and international investors, given the depth of the structural woes in Italy's economy. "We are trying to fix a 40-year old problem, not a four-year-old problem," he says.