For the third time in a short time, Italy is therefore back in recession. The Istat verdict leaves no way out. After the surprise of the first quarter (-0,1%) , the second quarter disappoints even more with a drop in GDP of 0,2% (-0,3% on an annual basis) which technically delivers the country to recession. Domestic demand is not moving both on the consumption side and on the investment side, exports are negative (and this is a nasty surprise), all productive sectors (from industry to agriculture and services) remain at a standstill.
Faced with such an economic scenario that will force the Government to revise the Def downwards and jump through hoops to respect the European parameters, it is no surprise that the Stock Exchange, which has already been suffering for days after losing 10% in a few weeks, today it is in deep red and is dominated by the sell-off, and that the Btp-Bund spread returns above 160.
The illusion that an agenda of reforms, such as the certainly laudable and innovative one promised by the Renzi government, was enough to get out of the tunnel has vanished like snow in the sun. It is no coincidence that in the columns of the Sole 24 Ore the Economy Minister Piercarlo Padoan warned this morning that the Italian recession is much deeper than one thinks and that to get out of the quagmire one can only rely on an acceleration of structural reforms . Easy to say, much more difficult to do both for the corporate resistance from which the country is traversed and for the resistance of Parliament to support the reform projects as the tiring navigation of the reform of the Senate has highlighted.
So what to do to get back on top? The silliest thing that will not fail to resurface but which it would be disheartening to indulge is that of those who say that it is useless to think about institutional reforms and that it is time to concentrate on economic strategy. It is quite obvious that the fight against the recession and the battle for growth are becoming more central today than yesterday, but it will be useful to immediately banish two dangerous illusions: the first is that economic reforms can disregard the reform and modernization of institutions and by the urgency to speed up the decision-making process; the second is to think that it is enough to propose or even approve new laws to eradicate the recession. Wish it were that simple, but the reality is unfortunately much more complex.
However, one thing is clear: the revival of domestic demand calls for strong and urgent decisions to boost consumption and investment, just as we can no longer hide our heads in the sand in front of the public debt boulder that has been weighing down the economy for years and which puts lead on the fragile wings of growth. As for exports, we need to meditate on the slowdown in Germany but also on the weight of the anti-Russia sanctions.
It is simply ridiculous that the president of Confcommercio Sangalli makes fun of the 80 euros that the Renzi government has put into the pockets of less well-off workers, but there is no doubt that to give a jolt to consumption, for now only marginally invested by the 80 euros, it is necessary to make a leap in quality despite the scarcity of public resources. As? A suggestion came just yesterday from the tax policy proposal of Assonime (the association of joint-stock companies) which advocated a robust cut in the tax wedge, shifting taxation from work and businesses to consumption (with a reasoned revolution of VAT ) and with a light capital. Of course there are no free lunches and it is evident that, in addition to rebalancing the tax burden, the cut in unproductive public spending is unavoidable and that it will have to be all the stronger the more we want to reduce taxes not for everyone but for the benefit of the productive classes, leading workers and businesses.
However, an aggressive strategy must also be implemented on the other side of domestic demand, that of investments. It is useless to have too many illusions about the possibility, in these public finance conditions, of launching pharaonic public investment plans. Only Camusso can believe in fairy tales. But without relaunching private investment, we won't go anywhere. If private investment is lagging behind, it is because entrepreneurs are also to blame – this is a country of capitalists without capital or capitalists who prefer to enrich themselves rather than grow their companies – but the question cannot be resolved so simplistically. If you don't invest it is because the conditions for profitability are often lacking or because there are no tools necessary to support and facilitate investments.
As the former CEO of Finmeccanica, Alessandro Pansa shrewdly pointed out in the Corriere della Sera on 31 July, Italy lacks the fuel for private investment, i.e. industrial credit, i.e. "loans granted to develop technologies, innovate products, processes, plants, machinery with interest rates, maturities, repayment conditions and guarantees on the debtors' investment plans”. Unfortunately "this credit - Pansa noted bitterly - does not exist for companies". And there isn't because the banks are bad but because medium and long-term credit institutes, the real lungs of industrial investments, have almost completely disappeared. In essence, a new IMI is needed, a medium-long term credit bank with a capital of three or four billion that can mobilize resources of up to 100 billion euros in just a few years for business investment.
Pansa's is an excellent idea: Renzi thinks about it, Cassa Depositi e Prestiti thinks about it and private groups think about it, from banks to insurance companies and social security funds. A new IMI would be a formidable tool to support investment and the recovery. But this does not exclude the possibility that in the short term we will also have to deal with a shock therapy that will finally attack and pick the public debt. It's been talked about too much: it's time to move.
