Is Italy doing enough to deal with the economic crisis?

The Italian government has presented a measure worth € 25 billion (1.5% of GDP), far higher than the one initially envisaged (€ 3.6 billion) which tends to ensure business credit for € 350 billion. At present, however, in anticipation of future impacts and given that Italy is the second largest manufacturing country in Europe, these measures deserve to be investigated qualitatively and quantitatively.

These are mainly measures for postponing tax payments and supporting unemployment, while it is advisable to provide liquidity, not on loan but with non-repayable funds, on the current accounts of companies and self-employed workers, to cover the costs of the period of inactivity in order to safeguard employment and investment; also cancel tax payments and not simply suspend them. Liquidity must be provided by the banking system and replenished without limits by the state until the complete reopening of the assets. The consequence of all this will be the conspicuous increase in public debt but if many companies fail, in the absence of state support, there will be the certain and permanent destruction of production capacity and tax revenues with much more damaging effects for the economy. To understand the size of the phenomenon, a study by the National Council of Chartered Accountants published on March 27 hypothesizes a collapse of the GDP in the order of 60-70% in the blocking period considering that also many of the allowed economic activities will discount the reduction in consumption. and demand. These numbers are equivalent to a potential reduction in GDP of between 85 and 100 billion for each month of the lockdown duration in the current structure and a significant reduction in tax revenues.

It is therefore necessary and urgently, given that the activities have been stopped for 20 days, to provide liquidity to businesses and families with the support of the European Union of which Italy is the founding country, increasing until the end of the emergency and the resumption of the public debt of each country; it is precisely at this time of difficulties generated by causes not attributable to the economies or productive activities of individual states that the spirit of the Union must prevail; there must be no Serie A and Serie B countries but together, as in war economies, adequate and unlimited solutions must be found for the end of the emergency and the resumption of production activities in the Community interest.

The amount of the Italian maneuver also appears quantitatively not in line with the measures being prepared in other countries. Germany has announced a € 156 billion maneuver, equal to about 5% of GDP, with subsidies of € 9,000 for companies with less than 5 employees and up to 15 thousand for those with less than 10. In addition, a fund will be set up for the stabilization of the economy of 600 billion euros for reconstruction. France plans a 45 billion euro package of measures, as well as 300 billion euro of guarantees for companies overwhelmed by the coronavirus. The United States will field a $ 2 trillion shock maneuver (10% of GDP) intended for direct payments to American citizens, with checks up to € 1,200 per head, based on income, as well as a contribution to families up to for $ 3,000. Other resources would be dedicated to the liquidity emergency for companies in crisis and for hospitals.

Allow me to conclude with the quotation of a sentence of Mario Draghi in his latest intervention in the Financial Times: “The speed of the collapse of the balance sheets of private companies – caused by an economic closure which is both necessary and inevitable – will have to be countered with equal speed by the deployment of government interventions, the mobilization of banks and, in as European, with mutual support for what is undeniably a common cause. ”