The new approach to European Union policy by the Commission led by Ursula Von der Leyen – long-term priorities and willingness to respond to the unforeseen crisis with support measures inconceivable until a few months ago – has also changed the economic discourse in Italy. Finally, the themes for the restart of our economy find space among the most cynical realists, appearing on the lips of politicians and in newspaper articles together with the immediate responses to the economic effects of the epidemic or, in the worst cases, the usual electoral slogans. The change is due tounrepeatable opportunity of the European recovery plan, as Gentiloni says, recalling that there was only one Marshall Plan after the war. This is our chance to lift the bottlenecks to the country's growth and converge on European goals for the future.
It fits into this framework the Plan presented by Colao's team, which has collected all or almost all of the best proposals advanced over the past couple of decades on how to restart growth in Italy. The three "strengthening axes for the transformation of the country" are certainly acceptable: digitization and innovation, gender equality and inclusion and green transition. Most of the 102 proposed measures are certainly appreciable. Precisely because of its breadth it offers the side to those who reproach a lack of priorities and tools.
President Mattarella has extrapolated the most important from the crowd of measures: increase business growth. This is the measure necessary for the country's innovation and potential growth. Small businesses not only can't do R&D, they also don't adopt the technologies that are already available. The result is the very low productivity of a large mass of firms which brings the aggregate down and contributes to Italy's divergence from the other large countries.
THE 4 BALLASTS OF THE ITALIAN ECONOMY
The lack of diffusion of innovation, of digital, is one of the four bottlenecks to the growth of productivity in Italy for a quarter of a century and therefore to the tout court growth of the economy and living standards.
Adhering to the flagship measure announced by the President means do not contradict her with raining subsidies: supporting work and people is different from supporting zombie companies, tax evaders, or simply those who absorb resources that could move to new companies with the possibility of growth, the creation of quality and well-paid jobs. The mass of vital small businesses must instead be protected from the effects of Covid on condition, however, of mergers, the adoption of digital technologies, the accumulation of data, software, or rather the intangible capital necessary for the digital economy. Or on conditions that make them grow even against their wishes: In fact, incentives to increase size have existed for some time and have not worked. Aside from a very few frontier firms that are virtually monopolists in their niche, small businesses are and will continue to be wiped out of the market in this transition to the digital economy. The debatable advantages that prevented this evolution, not so much family control which has not prevented the formation of large companies all over the world, but family management, the rigidities of the labor market and distorting tax incentives can now be more than compensated by state subsidies and guarantees. Furthermore, high-speed fiber will have to be available to everyone. This is an infrastructure without which our present (eg telemedicine, teleworking) and our future are put at risk.
The other bottleneck to productivity and growth is the training, not just school or just university and research, but also worker update, whether young or adult, to allow the use of new technologies. The other two bottlenecks that have caused Italy to lose positions among the big countries are the Public Administration e Justice with their inefficiency. These are the structural reforms needed to negotiate the financing of our projects in Europe. The PA, we experienced it in the lockdown, is the tool for every subsidy, incentive, parachute... Does anyone really believe that replacing the INPS president is enough for this to work? There are starting to be detailed proposals for overcoming these last two bottlenecks and we will talk about them again.
FUNDS AND THE PROBLEM OF TIMES
Fortunately for us, the funds available in 2020 do not require the more difficult ex-ante structural reforms. Of the immediately available, we only have the 35,8 billion euros of the Mes for health care costs. The funds for the Sure unemployment insurance mechanism (around 8 billion calculated for Italy) will begin to be collected by the EC not before September and the EIB funds for loans and guarantees (9 billion euros according to LC- Macro Advisors) request, directly or indirectly, investment projects that are not ready.
Of the most important funds, the Recovery and Resilience Facility, (RRF or Next Generation EU) if confirmed, will be available for around 12 billion for Italy in 2021, a figure almost equivalent to Italy's largest contribution to the EU budget. Most of the funds will be available between 2022 and 2025. Luckily for us, it is investment funds and we will have to have serious projects ready as soon as possible to prevent them from going the usual way of cohesion funds and from Italy continuing to stagnate, as shown in the graph above, instead of restarting. Even the Next generation Italy will decide with this plan: we must immediately begin to articulate it with the appropriate tools of governance, implementation, monitoring, correction.
THE COLLAPSE OF CONSUMPTION
Will we arrive alive at the presentation of the Plan for the future? We have to ask ourselves this given the fall in production and the low demand from consumers even after the reopening of the activities. The collapse of consumption in services is a feature of this crisis, not financial, not manufacturing. The limitation of social contacts contributes to the low demand: why buy the dress/fashion accessory if going to the shop is a risk and we can't show it to our friends? But the uncertainty in the epidemiological and economic future that causes savings to accumulate rather than consume weighs even more. Especially when inflation is far off, as the inverted yield curve shows.
We will have to verify the data in late June, but we should be ready to take direct support measures for consumption: no vouchers for scooters or travel agencies to satisfy small groups of interests and who need the distribution efficiency of the PA which does not exist. Let's take an example from who is at the head of the European countries (always better to copy from the first in the class) Germany. We also reduce VAT to 16% until 31 December 2020.
The Finance department will scream for the lost revenues calculated compared to the same period of 2019. But the post-Covid period will not be like the previous year, the revenue losses will be much more limited and in any case, tax revenues are not the goal of economic policy now. Also, one size fits all makes collection easier, as opposed to the myriad of targeted exemptions that exist today. In any case, the Ministry of Economy must also deal with the macroeconomic context and remedy the lack of consumer demand with the appropriate stimulus measures.
Clarity and determination on the beginning and above all the end of this measure to stimulate consumption is essential. The guarantee of the closure of this temporary measure at the end of 2020 is the definition of the projects to use the MES, Sure, EIB funds and from January 2021 of the investment projects requested by Next Generation EU and the reinforced European budget which will take over the growth of production and employment.
