The brilliant conference held by the Italian-American economist Dominick Salvatore as part of the lessons in honor of Felice Ippolito organized by the La Malfa Foundation seems to have led to a greater convergence of the theses of economists from different schools on the origins and above all on the policies necessary to get Europe and Italy in particular out of the deep crisis in which they find themselves.
Salvatore, La Malfa and Savona seem to converge on the need to deal simultaneously with both the economic and structural aspects from which Italy's difficulties derive and which are aggravated by their perverse intertwining. In fact, the structural adjustment policies, with particular regard to the fiscal tightening necessary to keep the state budget deficit under control, are having stronger depressive effects on the economic situation than hoped for, so as to put into question the achievement of the same deficit and planned debt, as well as creating a frightening disappearance of businesses and an unbearable increase in unemployment.
To break the perverse spiral of the depression, some economists and a large part of the political forces have placed the emphasis on the possibility of breaking through the deficit parameters and obtaining permission from the European authorities to finance public investments and job support policies off-budget. , especially juveniles. But this is a recipe that according to other economists would not be suitable for overcoming the perverse economic situation because, as Nobel laureate Edmund Phelps underlined just yesterday, also in Italy for a series of conferences, for highly indebted countries any increase in the deficit and debt would increase market fears, with depressive effects on investments and on consumption itself.
To get out of the current situation it is therefore necessary to emphasize the two aspects of the problem: on the one hand recognizing, as Salvatore underlined, that the Italian crisis has ancient roots which have led to a progressive loss of competitiveness, and which therefore must be attacked immediately with policies aimed at a progressive reduction of the tax burden, at a dismantling of bureaucratic excesses, at a greater flexibility of the labor market, at an improvement of the school and of Justice, but at the same time one cannot fail to consider that all structural reforms need some time to unfold their effects, while something needs to be done immediately to attack the economic crisis which is putting social and political cohesion at risk, as well as causing serious "structural" damage to the country's productive system.
How can the two moments be linked in order to communicate a clear and credible recovery path to the markets and citizens? There is a passage in the Report of the Governor of the Bank of Italy dated 31 May which has not been the subject of public reflection and which instead deserved more attention. The Governor says that, according to calculations by his offices, about a third of the responsibility for the recession can be attributed to the fiscal tightening for about a third, but that a full two-thirds stems from the accentuated credit crunch. A similar concept was taken up a few days later by the chief economist of the OECD, Carlo Padoan.
If this indication found the agreement of economists and above all the attention of politicians who instead are fighting over secondary measures and certainly not suitable for outlining an effective path out of the crisis, then it would be quite clear what to do in our house and what forcefully ask (beating the table if necessary) the European authorities and other countries, especially Germany, which are champions of austerity in one direction only.
Our Government should immediately propose a plan of reforms starting with the institutional ones and cutting public spending, to then move on in rapid succession to the labor market, education and justice, in order to make the direction of travel clear and credible along which the country is moving and which, moreover, in a short time could already give the first results in terms, for example, of reducing the tax burden on labor and businesses.
At the same time, the Government should definitively place on the European tables the need to immediately launch the banking union and all the rules necessary to help the banks on the one hand, but on the other support the need to give the ECB the necessary powers to implement an even more expansive monetary policy by purchasing public and private securities at its sole discretion (with preference for countries that have a clear and incisive recovery program) in order to reduce the unbearable overvaluation of the Euro.
Which, moreover, should be facilitated by the gradual change in the Fed's monetary policy. Helping the banks is also essential, not only those in a crisis situation, but also those, such as the Italian ones (but not only) who suffer from inadequate capitalisation, doing as was done in the United States three years ago when the authorities forced the banks to take public funds to raise their capital.
Naturally, as Dominick Salvatore underlined, it would also be necessary to press Germany to relaunch its economy, given that they could expand public investments, partially offsetting the fall in demand from countries that must continue their austerity policies with greater demand from the German market.
Ultimately, for countries like Italy it would be a question of aiming at eliminating the credit crunch and at an even more decisive monetary policy in an expansionary direction, rather than trying to widen the nets of the public budget. And this not only for political expediency, given that it is Germany with its no votes on the banks that is in difficulty with respect to the European authorities, but also for a precise economic calculation since an increase in public spending would not achieve the desired objectives given that it would increase the uncertainty about the fate of the country both among international investors and with respect to the Italian consumers themselves. This is not an easy battle.
The alternative is that of a progressive crisis of the Euro in which there is already a drop in confidence among European citizens, but whose dissolution would lead to even more serious problems than those we face today and a trail of grudges and suspicions which would 'Europe back more than a century.
