Bank of Italy rejects the maneuver by the yellow-green government. The CBI, as “increase in current transfers, as well as the tax relief, they tend to have modest economic effects and gradually over time. We estimate that the income multiplier associated with these interventions is contained”. This was stated by the deputy general manager of Bank of Italy, Luigi Federico Signorini, during a parliamentary hearing on the Update note to Def, adding that the citizen's income “must not discourage the job offer. To this end, the level of benefit compared to the potential wage that the worker would be able to earn on the market is crucial".
Also the impact of the stop toVAT increase could be zero: “In our assessments, based on the Bank of Italy's quarterly econometric model, the expansive effect of the deactivation of the VAT clauses in 2019 should be limited, in line with the Government's estimates. The impact could be even smaller or none if it had already been incorporated into household expectations.
As for pensions, “the Note – continues Signorini – rightly underlines that the pension reforms introduced in the last twenty years have significantly improved both the sustainability and the intergenerational equity of the Italian pension system. It is essential not to go back on these two fronts, especially when, as highlighted by the latest long-term forecasts of the European Commission on expenditure related to the aging of the population, the risks for the sustainability of public finances increase also due to the worsening of demographic projections.
Signorini then spoke of the forecasts on the GDP growth over the next few years, emphasizing that next year, according to Bank of Italy technicians, it should settle slightly below 1%, a figure very far from the +1,5% forecast by the government on the basis of the measures envisaged in the manoeuvre: update plans a significant cyclical stimulus to the economy as a result of the increase in the deficit; to achieve it, it is necessary to assume high multipliers, which cannot be taken for granted”.
On the side of the debt, the deputy general manager of the Bank of Italy added that "using today's rates and assuming a recovery of consolidation postponed to 2022, as announced in the Note, one would see that the time needed to reach" a debt/GDP level below 100% "would extend another seven or eight years" compared to the 10 previously assumed. In the current conditions that open up to this perspective, "the trust of savers in the credibility of the repayment process would need to be damaged".
MANEUVER REJECTED ALSO BY THE PARLIAMENTARY BUDGETARY OFFICE (UPB)
Another institutional rejection of the upcoming maneuver also arrived on Tuesday. That of the Parliamentary Budget Office, which "does not consider it possible to validate the macroeconomic forecasts relating to 2019" contained in the update note to the Def, judged too optimistic in the face of the strong downside risks, due in part to the "weak short-term economic trends term", but also to "financial turmoil".
In particular, the government would underestimate the costs linked to the increase in the spread. According to the Upb, the higher interest expense could reach 17 billion by 2021, corresponding to 0,9 percentage points of GDP. Strong doubts also on the impact on GDP of investments which, observes in the hearing the president of the Parliamentary Budget Office, Giuseppe Pisauro, should increase from 1,9 per cent in 2018 to 2,3 per cent in 2021, "an objective certainly shareable but particularly ambitious if compared to the recent trend”.
The Minister of Economy, Giovanni Tria, will respond today in Parliament to the objections formulated by the Parliamentary Budget Office. Then in the evening the minister should leave for Bali where the annual meeting of the Monetary Fund is scheduled, an institution which in turn has already expressed concern for Italy's economic projects.
