EU Recovery Fund, because for Italy it is an opportunity not to be wasted

An exchange between the two German women in the tele-summit of the other day says everything there is to know, if a real recovery plan in Europe is not reached. Ursula von der Leyen observed at one point: Since we suspended the rules limiting state aid to businesses, half of the authorized interventions concern only one country. Angela Merkel interrupted her, for once with a touch of irony: Are you talking about us ?. Yes, the President of the Commission spoke of Germany. In a Europe where the rules of the game are suspended and everyone plays only for himself – nobody for everyone – it would become a Darwinian rather than a meritocratic system. Only the strong would prevail and the fractures would only widen. Up to the drift of economies, the social fabric and political systems, which in the long run would cause the defeat of all. The recovery plan (or recovery plan) of at least one trillion euros that Europe is trying to put together must therefore be judged on this one parameter, the real one: is it enough to avoid this clear and concrete danger?

responsibility

For now, the whole system remains on the wire. It can take the road to disintegration or that which makes it irrevocable. Not everyone is convinced that the latter is already on its way. Vtor Constncio, vice president of the European Central Bank in the years of Mario Draghi, fears that much less could be hidden behind the large numbers of Von der Leyen. Maybe only the idea of ​​raising the budget by just over 300 billion euros – nothing compared to the fall in income in Europe – deluding themselves into using them as guarantees for private investments. That maybe they would arrive or not arrive anyway. The strength of things and the indications from the heart of the European institutions suggest that the path of responsibility is feasible. Within ten days the von der Leyen Commission, also with Paolo Gentiloni, will have to propose the details to the governments. For now, nine lessons can be learned.

Europe’s change of pace

1. Europe is there. It sounds trivial, but in mid-March it wasn’t there. He hadn’t struck a single blow except with the gaffe of Christine Lagarde, the president of the ECB, when he blew up the cost of debt. Just five weeks have passed, and it seems like a year. At this time, the ECB has launched another 750 billion (not the last) securities purchase plan, limited but concrete projects of the Mes bailout fund and of the Commission have been launched, which lend at very low rates to cover healthcare expenditure and one month of layoffs. Now the proof of the truth: a Recovery Plan that yesterday the Vice President of the Commission saw around 1,500 billion, partly loans and partly non-repayable transfers. We will see how credible this figure is, but it would be devastating for Brussels by now if it were not. It is no coincidence that Merkel’s words at the summit on the need for coherence between countries on taxes and expenditure, reported yesterday by the Corriere, already outline the role of a true European Finance Minister.

Transfers or loans

2. The clash between governments whether to offer important transfers or loans (the latter would raise debts), but less than it seems. Loans granted at a very long term and at very low rates, below inflation and expected growth, in substantial terms weigh very little. The ECB system – including the Bank of Italy – would almost certainly buy many of the related bonds, returning interest paid to governments in the form of dividends.

Because we need the euro and not the lira

3. Italy with its national currency could not do it. Colossal central bank money-making operations are sustainable without exchange rate collapses, capital flight and rate hikes only with a global reserve currency. On behalf of the ECB, the Bank of Italy has already bought back about 22% of the national public debt by paying interest dividends to the government itself. It can do this because it acts on behalf of an area that is worth 14% of the world economy. The lira would represent 2.4%.

The leverage effect

4. Whether the Recovery Plan deploys to the maximum current potential (1,500 billion real, of which at least 200 for Italy) or even much less, the country will soon begin to receive new sums that will double or even multiply by five public investments . It will happen from the second half of this year or at the latest of the next two and it already has a number of implications.

Merkel is right

5. The first that Merkel is right: Italy cannot demand colossal help from Europe and in perspective tolerate tax evasion of at least 110 billion a year, pensions at 100, slow and uncertain justice and many others aspects that suddenly seem anachronistic. After the recession, the issue arises but must be recognized immediately.

Growth, income, work

6. The investment plan coming from Europe – if it does not disappoint – could become an unrepeatable opportunity. In a 2017 study, Bruno Pellegrino and Luigi Zingales show that the delay of productivity of Italian companies – therefore of growth, incomes, work – largely depends on the technological delay. The resources of the Recovery Plan will be spent at best and with courageous choices.

Money to spend well

7. The quality of their investment in Italy will count more than the fact that they are loans or transfers. If they strengthen the country’s production capacity with technologies and infrastructures, future growth will reabsorb any public debt; if they end up wasted in flower beds built last but not to lose European funds, any debt of Italy already too high today.

No brakes on bureaucracy

8. The Recovery Plan in Italy cannot work if the administration remains blocked. Professor Sabino Cassese has shown many times (most recently in the “Corriere” on April 9) that investments in Italy will never restart without dissolving the intertwining of administrative procedures. For example, in times of checks or in the rules that push officials to never sign anything, because they risk having their house requisitioned without even a judge’s judgment – as mafia – in the event of disputes.

Don’t waste an opportunity

9. Not everything perfect in Europe, far from it, and we will still fight with Merkel or Holland. But if an opportunity opens up and we waste it, don’t take it out on them. Let’s take it out on ourselves.