In the management of 208 billion coming with the Recovery Fund “we are all called to be better than in the past: it is a challenge, it is not up to us to decide how to manage these funds, they are European and each country will present proposals to implement the interventions; if they are approved, we will proceed accordingly. Fortunately, there is time until 2021 to understand how to use them, because it is not a trivial exercise". This was stated by Fabrizio Balassone, head of the Bank of Italy's economic structure service, during a parliamentary hearing on the national reform program (Pnr), the document that Italy will have to send to Brussels to obtain the go-ahead for transfers and loans extraordinary.
The path ahead of our country “is far from easy – he added – Far-sighted, concrete and detailed investment and reform projects will need to be outlined quickly; above all, these projects must be implemented without delays and inefficiencies” in order to be able to access EU funds.
All this, in an emergency economic context: "At present - underlined Balassone - a 9,5% drop in GDP is envisaged on average for 2020, due to the contraction in the spring, and a partial recovery in the following two years: +4,8 2021% in 2,4 and +2022% in 13”. In a more unfavorable scenario, i.e. if there are negative developments on the epidemiological front, "GDP could contract by more than 2020% in 2021 and recover to a lesser extent in XNUMX".
At this point, according to Bankitalia, “The details provided in the PNR do not yet allow for the formulation of a complete judgment. The challenge facing the Government and Parliament is to give implementation content to the indications contained in the Pnr, guaranteeing effectiveness, efficiency and speed of interventions. If resources are not used in a way that produces important results in terms of economic growth and employment, the country's problems will be increased, not alleviated".
WE NEED AN ORGANIC TAX REFORM
Balassone notes that "the Government intends to implement an overall reform of the tax system to make it more favorable to growth and environmental and digital transitions, but also to make it more "fair, based on the principle of progressiveness, simple and transparent for citizens, which favors the middle classes and families with children”. The Governor of the Bank of Italy has repeatedly recalled the need for a comprehensive tax reform, which recomposes the tax burden to the benefit of production factors, also taking into account the changes that have affected the social transfer system. A recent analysis conducted by the Bank of Italy shows that personal income tax has very high effective marginal rates, even at relatively low levels of income", as well as "non-homogeneous rates among taxpayers with the same income due to of the different tax treatment reserved for the various sources of income”.
EVASION RECOVERY AND PRIVATIZATION: BEWARE OF ESTIMATIONS
The head of the Bank of Italy's economic structure service then warned that "given the uncertainty about the results of the measures to combat tax evasion, it remains advisable to estimate the related revenues with extreme prudence" and therefore not consider them the basis on which support the public finance recovery strategy after the emergency. Caution also on real estate disposals, given that in the past they have given results far below those planned (only 1,1 billion a year between 2010 and 2019).
WORK: WOMEN RELIEF CAN BE DISTORTIVE. YES TO THE MINIMUM WAGE
Also in the Pnr, "to combat gender gaps, the strengthening of employment subsidies is envisaged through a three-year extension of tax relief and a further strengthening in areas with low female employment - continued the Bank of Italy manager - The tax relief to female employment can represent an immediate tool to stimulate women's demand for work, but categorical interventions can have distorting effects, prompting companies to prefer the hiring of workers belonging to the encouraged socio-demographic groups to the detriment of others", while "the effects on the expansion of employment levels are uncertain”.
Balassone therefore reiterated "the need to strengthen collective bargaining and to introduce a minimum wage".
OK SUPPORT TO LOCAL AUTHORITIES, BUT IT DOESN'T HELP THE GROWTH
Finally, as regards the investments of local authorities, "they support demand in the short term - concluded Balassone - but those are not the investments that change the growth potential of the economy, they are others, so it is good to support them if the idea it is supporting demand, but paying attention to the economy's growth potential: we need other tools”.
