There are three aspects that deserve to be highlighted.
– How does one arrive at this diagnosis
– What are the negative consequences
– What are the possible remedies
As regards the first point, in recent months the main economic indicators have shown a trend reversal. The qualitative indicators, which reflect the expectations of market operators on the future trend of the economy, are more favorable than observed in the first two quarters of 2013. Both consumer and business confidence have improved. However, it must be emphasized that part of the recovery of confidence, in particular that of consumers, is the result of technical changes to the survey which took place in June. The moderately positive signal of the qualitative indicators is not entirely reflected in the quantitative indicators, which show the current trend of the Italian economy. Quantitative indicators show more a halt in the contraction phase than a real recovery. The GDP reduced its fall in this last quarter, reporting only a slight cyclical downturn of -0.1%. Industrial production data also stabilized in the second half of 2013, after the lows of July, thanks to a recovery in foreign orders, while domestic orders continue to decline. Demand is still very fragile: retail sales are declining, despite the halted fall in car registrations. Even the conditions of the labor market are precarious, if the level of employment seems to have stabilized in the Centre-North, the fall in the South is still vertical.
If we take into account both the leading indicators of the OECD (an estimate of future GDP movements), both of the cycle and of the underlying trend, it is evident that thanks to the recovery… we are returning to the trend, which however remains downwards!
The main consequences are those of an Italian economy that is still very weak and struggling to get back on its feet. The uncertain trend of GDP, consumption and investments risks compromising the Italian public budgets, which according to the latest planning by the Letta Government, forecast an average growth of 2% for the next three years to reach the targets of debt and deficits imposed by the European Commission. While on the one hand the Italian governments must provide for corrective maneuvers and restrictive fiscal policies to contain the public deficit, on the other hand expansionary policies are essential to relaunch the economy and support GDP growth. The recovery/growth dilemma is still with us!
According to the forecasts of the major research centres, including REF Ricerche, the growth estimates are lower than those of the Italian government and are around 1%. Less optimistic forecasts require further correction maneuvers to get back within the limits targets Europeans, with the risk of further sinking the fragile Italian economy.
A choice must therefore be made: a few essential priorities aimed at reconciling growth and recovery. You need to implement one spending reviews well done, rather than just continuous linear cuts in spending. Continue to repay the Public Administration's outstanding debts to provide liquidity to Italian companies and focus on the recovery of employment to improve the conditions of families.
