Analysis
Conte predicts GDP rebound next year, but Recovery Fund projects are still a mystery
For Next Generation EU, Prime Minister Conte announced the creation of an ad hoc structure to ensure transparency and meet deadlines.
There is more time. The Minister of Health, Roberto Speranza, delivered the happy news almost in passing, while reporting in committee on the guidelines of the Health Plan: “The date of presentation of the organic plan of the Recovery Fund to the European Commission has been moved to January 1, 2021.” This means, in practice, the first ten days of January, because it is not the case that the Commission intends to meet on New Year’s Day. There are three more months to transform the objectives sketched so far under the high-sounding categories of the “guidelines” into credible projects.
For Italy, this postponement is a godsend, probably due as much to the need to give a hand to countries who find themselves in difficulty with the planning process as to the obstacles that make the approval of Next Generation EU by all parliaments of member states by 2021 an uncertain matter. For Italy, the projects that would otherwise have needed to be submitted by October 15 as the first useful date (while the final deadline was, and should remain, April 2021) do not exist at the moment. There is still nothing beyond good intentions.
This is why PD secretary Zingaretti summoned the PD delegation to the government on Monday afternoon: to urge them to hurry up, to urge the use of the ESM, which would allow for an immediate start, and to force the involvement of the Prime Minister, who is instead playing alone, as usual, without involving the political forces.
The response from the Prime Minister came shortly thereafter: “These are unsubstantiated concerns. We are not late, and the government is already working on the examination of the projects.” He had something more to say on Tuesday, in reply to the president of Confindustria, Bonomi, who had put out a stern admonition: “If the Recovery fails, it’s not just the government that falls: we all fall.”
Conte struck a reassuring tone: ”For the Plan, we will equip ourselves with an ad hoc regulatory instrument. A structure with specific regulations and dedicated implementing actors to guarantee transparency and certain deadlines.” Even here, however, the commitment pledged does not go beyond promises for now.
The real first step was the NADEF, which the Council of Ministers approved on Wednesday. On Tuesday, there was a long two-stage summit between Conte, the heads of trade union delegations and the economic ministers and undersecretaries. At the mid-point break, necessary due to institutional commitments and which lasted many hours before the summit resumed in the late afternoon, Conte spread quite a bit of optimism, while admitting that the situation was very pressing.
But according to Conte, Italy “is also showing economic resilience. The drop in GDP will be below double digits, and then there will be the rebound effect next year.” The fall in GDP is expected at between 9 and 10%, just below the double-digit threshold (and if the accountants have to work overtime to make sure that happens, so be it), arriving at a rebound of 6% the next year. The deficit/GDP ratio, this year slightly above 10%, should fall to 6%, and then fall back to the 3% parameter in 2023. The debt is projected to fall from a peak of 158% to 150%. These are optimistic forecasts. They are betting on a scenario in which not only would the government act effectively and quickly, but everything would go well and the pandemic would not cause deep wounds once again. The budget law would have a scope of around 25 billion, without recourse to the deficit.
Regarding the budget law, little has been committed in concrete terms, and that little will concern fiscal reform, which is a priority for Gualtieri. The Economy Minister is thinking of cutting the tax wedge, with a delegated law already this year and implementing decrees by 2021, but the M5S are also aiming for a reform of the IRPEF tax.
This is where the ESM issue, long debated at the meeting of the PD delegation on Monday, might emerge. Gualtieri is a “possibilist” on the issue, but seeks to avoid a jolt that would traumatize the majority. After all, the Recovery plan now also allows health care expenses, which had not been expected. The Minister of European Affairs, Enzo Amendola, is of the opposite opinion: he believes that the loan should be taken out immediately, and Zingaretti also agrees, although cautiously. He aims to invoke the health plans of the Regions to demonstrate the urgent need for the 37 billion in ESM funding. And around 100 mayors have already signed the appeal in favor of invoking the ESM promoted by the PD’s Matteo Ricci.
As for Conte, he is betting on the usual process of kicking the can down the road. Will the Health Plan be presented in January? Then, in his view, the ESM will be discussed again next year. The M5S remain firmly opposed to using the ESM, but insist on IRPEF tax reform. If the ESM were not such a banner issue for everyone involved, some horse trading would be in the order of things.
Originally published at https://ilmanifesto.it/una-task-force-per-i-fondi-europei-e-rinvio-sul-mes/ on 2020-09-30