The Council of Ministers approved the stability law in recent days and Premier Renzi presented it with great emphasis as a maneuver intended to relaunch the Italian economy. We immediately started discussing hedging and equity, but in the excitement no one asked the Prime Minister the simplest and most essential question: what increase in national income does the Government intend to bring about in 2015 with this manoeuvre? In other words, what effect will this massive public finance manoeuvre, made up of cuts, hedging and deficits, have on the trend of the Italian economy starting from the next few months?
The question was not asked and Renzi voluntarily did not mention it. But this is the crucial question that comes even before discussing the individual measures contained in the package in response to the Note to the Economic and Financial Document approved last September 30 by the Government and largely passed over in silence, submerged (deliberately submerged?) by the discussions on the 'art 18 and surroundings. And it is a very unsatisfactory answer. In the Note, which can be consulted on the site http://www.mef.gov.it on page 2, there is a very clear table. ln it a distinction is made between the budget deficit trend for 2015 and the deficit which is the Government's target. From the data – as the Prime Minister said – the deficit is growing by 0.7 percentage points (compared to the trend) while remaining below the 3% of the European rules. As a result - it is understood from the Note - there could be some growth in income in 2015. That's all. The rest concerns individual aspects of the maneuver.
The positive aspect of the decisions of the Council of Ministers is that they reveal that the government deems the size of the deficit effective for the purposes of income trends. After years of crisis that have destroyed a quarter of the production structure, the Table shows that the Government foresees a tendential reduction of the deficit. The negative aspect is that, while aware of this, the Government does not dare to use the deficit to give an economic boost. The judgment on the maneuver stems from the response to this problem, even before the technical aspects of its composition, the judgment is positive if the maneuver gives hope for a restart of the Italian economy. Otherwise, what are we talking about?
The answer that has not been given is contained in the Update Note of the Def where, instead of the 2,2% of the deficit, the Government planned to bring it up to almost 3% using this margin to support a better performance of the economy. by how much? Exactly by 0,8, so as to make the national income pass from -0,3% in 2014 to +0,5% in 2015. The government maneuver is content to float without however clearly telling the citizens that it foresees another year of sacrifices and job losses. If this is the case, that is, if all that the Government expects from the maneuver is another difficult year, what is the point of all that emphasis, as if Italian life had really been turned around?
The next question to ask the prime minister is what is holding him back from doing more. Why didn't he use public finance more courageously to determine the beginning of a new phase of growth? If a 0,7% deficit is judged useful, then a 1,7 or 2% would be even more useful and perhaps decisive in restoring hope and confidence to entrepreneurs and consumers. It must also be added that only in the context of an economy that is recovering does it make sense to reduce the IRAP paid by companies. ln a growing economy, the improvement of business income can become an expansion of production and employment. In a stagnant economy there is no guarantee that an increase in business income will be transformed into investment or consumption. The risk is that it only goes towards savings or worse that it fuels capital movements.
I can imagine the Government's response and that is, if the 2,9% deficit already risks provoking a negative judgment from the European Commission, let alone what would happen if we went beyond 3% and promised ourselves to do so for several years. All reinforced by the signals coming from the financial markets of these days. Personally I don't think so, but if so, it is a political problem of the first magnitude that cannot be hidden from the Italians. If staying in Europe involves a long interminable deflation, citizens must know it and decide whether the economic price paid is justified by the political value of adhering to the European bond.
