The WFD (Dir 2000/60) introduces fundamental innovations in the management of water resources and water policies in Europe. It calls in particular for a substantial integration of the economic analysisin the policymaking process, creating the scope for the expansion of economic research to this field. The article discusses the reasons guiding this innovative approach, outlines the scope and the meaning of economic analysis of water policies and discusses the relevance of economic and financial issues for the concept of water sustainability. In particular it emphasizes the need to conceive economic analysis as a circular process that accompanies water policies from the earliest possible stage, and not to confine to the issues of pricing and cost-benefit analysis. We outline a possible stucture for performing the economic analysis and the evaluation of economic implications of water policies in Italy and discusses the way it can be coordinated with the existing insitutional framework. Finally some insights on the gaps to be filled by economic research are provided.
