Every year Mario Baldassarri, economist and student of the Nobel Modigliani, presents the forecasts on the trend of the Italian economy elaborated by his study center "Real Economy". And as usual it offers some proposals which, on the basis of the results of the econometric model used, would be able to accelerate the growth rate of GDP, reduce unemployment more rapidly and improve both the deficit and the public debt thanks precisely to the higher GDP growth.
This is not a classic Keynesian recipe, i.e. based on a sharp increase in public deficit spending, but a recomposition of spending itself through cuts in current expenditure (and waste) to reduce the tax burden on businesses and individuals and to increase public investment. And the spending cuts are not as disruptive as one might imagine and therefore could be implemented without arousing the reactions of all those who live, and sometimes, even well, on the redundancy of public spending.
Baldassarri proposes to cut expenditure for the purchase of goods and services of the PA by 10 billion for 2018 and the same for 2019. In addition, in his opinion, it would be necessary to reduce the "non-repayable transfers", i.e. the sums that the State and local authorities, give to economic operators in various capacities and which, as has been repeatedly demonstrated, have no function of real development stimulus. A reduction of about 15 billion for each of the next two years. But this money thus recovered would not go towards reducing the public deficit, but should be used to reduce Irpef for citizens and Irap for companies by the same amount.
To a lesser extent they could be used to accelerate public investment which has fallen by more than 30% in the last ten years. The beauty of the proposal, which is not one of austerity, let alone tears and blood, lies in the fact that a different composition of expenditure would cause, according to the indications of Baldassarri's econometric model, a strong rebound in GDP which, instead of rising by 2018 only about 1%, could grow by about 2,2%, leading to a lowering of the ratio with the deficit and with the debt.
Furthermore, there would be a robust reduction in unemployment with an increase in the number of employed persons of over 300 units compared to the current year. Of course, this is an econometric exercise that gives results that cannot be taken literally, also because many other variables that could concretely arise and modify the trend are not taken into account. However, these simulations are useful for giving general indications to economic policy makers. And these tell us in the first place that Italy's problem is not so much that of engaging in a tug of war with Europe to have a 0,2% more or less flexibility on the public budget, but that of varying with more courage the composition of the items of expenditure.
In fact, while the battle over the 0,2% increase in the 2017 deficit that is being fought in Brussels does not seem to bring major advantages on the level of growth expected for this year (still, according to the Report, at 0,6% much of less than estimated by the Government), this robust, but not drastic, remodulation of spending would bring significant benefits both to internal employment and to public budget ratios, which would approach the targets set by EU rules. In this way, the expectations of operators and consumers on the Italian economy would also improve, reinforcing that "confidence" about the future which is indispensable in investment and consumption decisions.
Baldassarri's analyzes are not limited to forecasts on our economic policy, but also examine some crucial aspects of European politics, above all as regards the exchange rate of the Euro and the famous 3% budget constraint. On the Euro, the simulation highlights the mistake made by the ECB, before Draghi took office, when interest rates were increased and the amount of money reduced just as the FED in the United States acted in the diametrically opposite direction. This has led to an unjustified overvaluation of the Euro exchange rate which has caused the whole of Europe to lose several points of GDP and employment.
It should be noted that Germany too would have had significant benefits if the exchange rate had always remained around the current levels, the ones to which Draghi brought it back with the QE. Naturally, Germany should have used its larger budget and foreign trade surpluses to expand its domestic demand, making its citizens even better off. On the budgetary rules, Baldassarri's proposal is interesting. Instead of fixing a rigid rule on the overall deficit, it would be necessary, in his opinion, to set stringent constraints on current expenditures for which the balance should be categorical, and in exchange to allow space for the financing of debt investments. Here too we act on the composition of public spending and not so much on blind and absolute austerity.
In general, what emerges from these studies, and which was confirmed by the majority of the professors who took part in the subsequent debate, is that it is absurd and very expensive to think of an exit from the Euro, as the new "sovereignists" are saying in
around Europe, but that there are a series of changes, all in all not disruptive, which could improve the functioning of the Euro and of European governance, so as to put the old continent in the best position to face the challenges of the global market which they cannot be stopped by the old and harmful protectionism.
