To return to growth, it is not necessary to increase public spending. Italy is the clear example that with public spending in deficit you don't grow, you just need to go around the regions of the South. Towards Europe we have a lament attitude when we childishly invoke "flexibility". Above all, we continue to face the reforms in a partial way and consequently in the face of herculean efforts and therefore a strong stress in the institutions and in society, we do not obtain tangible results. Prof Nicola Rossi, a former senator of the Democratic Party who later moved to the Mixed Group, looks with great concern at the evolution of the Italian economic situation. He does not see reasons for optimism in the conceptual setting of the Italian debate and in the concrete action of the Government.
“The Government – he says – is giving a weak reading of the economic situation, of the root causes of the persistent stagnation and of the actions necessary to get out of it. Many intellectuals and politicians launch initiatives, including referendums against the fiscal compact, as if public spending were the solution and not part of the problem."
According to many economists, the problem of our economy is the lack of demand. So we need to spend more public money, exceeding the strict parameters imposed by Brussels.
“This statement – says Prof. Rossi – may make sense if referred to the whole of Europe where there are countries, or community institutions, which would have room to accelerate investments, but at the level of a single country it is completely unreasonable. If Italy, for example, were to announce such a policy, the markets would not follow us and it would be more difficult to place treasury bonds. Ultimately there would be no benefit to the growth rate of the economy.”
However, everyone says that the austerity policy alone causes recession and therefore makes it more difficult to control the deficit and debt of individual states.
“But the solution is not to ask for flexibility to buy time without doing anything to address the underlying economic issues. The Germans don't trust countries like France and Italy, which too many times have invoked support and then postponed any change capable of making their systems regain competitiveness. The way to get support is to surrender sovereignty. But are we willing to do it?”
Renzi has pledged to rapidly implement a vast program of reforms both of the institutions and of the economy market. And in fact he has put a lot of irons in the fire.
“Yes, in this phase – says Prof. Rossi – we do not run the risk of doing nothing as has often happened in the past, but of doing wrong or inadequate things. For example, I think it is essential to address the issue of the labor market and Article 18, but I fear that by dint of mediation we will eventually arrive at a solution which, as happened with Fornero, modifies the law without changing anything in substance. So it seems to me that for reforms such as those of the Public Administration and of Justice, we stop at some facade elements, such as the reduction of union permits for public employees, or the cutting of holidays for Judges, without really going into the treatment of these two institutions that play a decisive role in forcing our economy to crawl to the bottom. Do we realize in what state our public administration is and what total revolution would be needed to make it efficient? If it is said that changes must be made with the consent of public sector workers, then we are cool!”
But can certain fundamental reforms be implemented even in times of crisis? Don't you risk aggravating people's fears? Wouldn't it be better to wait for better times?
“This is the usual excuse not to do. Reforms can be done even when there is a crisis. If they are done well, that is, in an incisive way, the return of public confidence could trigger a positive spiral.”
We have been in crisis for seven years. Politicians and economists often give the impression that they have lost the crux of the matter. That is, they don't know where to start.
“This is why we cannot stop at the surface of the problems but must give a deeper reading of the economic phase we are experiencing. The Government does not seem to notice that today any initiative aimed at giving money to market players, families and businesses, is frustrated by two dewatering pumps which suck up all liquidity: the banks and the tax authorities. As we have seen for the more than 30 billion in loans from companies to the State, or in part for the 80 euro, these funds have been drained by the banks which have taken advantage of reducing their assets, while the uncertainties about the tax authorities have led households to caution. If these two big leaks are not repaired, the tub will never fill up.”
So where to start from?
“First of all, we must start a serious policy to reduce bank intermediation of credit to businesses. Today in Italy 80% of companies' requirements are supplied by banks. And you have to go down many points. Mini-bonds have been made but then neglect has been made to encourage the creation of debt funds outside the banking channels and therefore this new instrument is struggling to take off. Then, of course, real reforms need to be made, not only to reduce state and local government spending, but also to make public scrub efficient and effective. And we need to do it quickly, because the rest of the world has moved, in some cases creating a situation of excess liquidity and the spasmodic search for higher returns (often neglecting the degree of risk), similar to that of 2007. Certainly today we are more prepared to deal with possible bubbles, but in any case if some turbulence were to occur on the financial markets, the weakest countries, such as Italy, would suffer the most. And after all, this condition is the one we already experienced in 2009, with a much higher fall in our GDP than the European average.”
Prof Nicola Rossi does not hide his deep concern for a situation that we are not yet able to fully understand: either an easy and illusory refuge is sought towards public spending, or measures are launched which raise the banner of reforms, but which then concrete risk of modifying marginal aspects of the system without therefore providing the innovative energy that would be necessary. Then there are some problems that you just don't want to deal with, such as the banking issue, even if no recovery will be possible without credit. But if the economic situation is allowed to degenerate further, the political consequences not only in Italy but also in Europe can be catastrophic. Think of the advance of nationalisms not only in France, but in all the countries of the Old Continent, including England.
