“For the first time after years of crisis, the economic situation in recent months is sending us signs of recovery in Europe and also in Italy, especially in terms of industrial production, and there is no doubt that a step in the right direction is taking place, but woe to get too many illusions and to think that the crisis is over. It is true that Italy too is emerging from the recession but for the crisis to end and for the production and growth levels of the beginning of 2007 to return, we will have to wait for the end of the current decade”. In a break from the Ambrosetti workshop at Villa d'Este in Cernobbio, Angelo Tantazzi, an economist from the Bolognese school and one of the finest analysts of the economic situation, president of Prometeia and former president of Borsa Italiana, tells FIRSTonline how he sees the horizon of Italian and European economy. With some signs of hope more than last year. But also without dangerous illusions.
FIRSTonline – Professor Tantazzi, what are the signs that lead us to see the first lights at the end of the tunnel of the Italian economy?
TANTAZZI – In the first place, the trend of production activity which over the months sends timid signs of awakening, albeit with lights and shadows because the comparison between the first and second quarters of 2013 is not entirely adequate because it is true that the last months went better but it is also true that the beginning of the year was characterized by seasonal difficulties that could not be repeated. However, there is no doubt that a step in the right direction is taking place. Industrial production is improving, exports are always positive, PA payments to businesses are arriving and bringing a little more liquidity and, lastly, the inventory cycle is being rebuilt which is always the driving force behind the economy.
FIRSTonline – Will the signs of recovery continue or are they ephemeral?
TANTAZZI – There is the possibility of consolidating them but a lot depends on us. On a more general level, there are signs of weakness – such as the slowdown in emerging countries – but the moves of the giants (starting with America) are also outstanding, which can compensate for the lower growth of the new players in the world economy. As for Italy, the area of virtuous companies that have capitalized on the crisis, which have innovated and which push internationalisation, is expanding and if up until some time ago it amounted to about 25% of the total, today it can reach 35% . Of course there are and there will be winners and losers among businesses as well.
FIRSTonline – But can't the slowdown in emerging countries penalize a country like Italy which largely bases its hope of recovery on exports?
TANTAZZI – The risk exists but the slowdown in emerging countries is not homogeneous and does not produce the same effects. Let's take China as an example: it is true that growth will drop from 9 to 7% per year but it is also true that it will concern more investments than consumption which, on the other hand, should rise with beneficial effects for companies such as those of Made in Italy. Furthermore, the lower growth of Emerging Countries can be compensated for by the higher growth of the USA and Germany towards which a large part of Italian exports is directed. Finally, let us consider that the direction of Italian exports is changing and expanding and that extra-EU exports are almost close to Italian exports to Europe.
FIRSTonline – However, four big unknowns hang over the recovery such as tapering, the German elections in September, the crisis in Syria and the Berlusconi puzzle: what effects could they have for the Italian economy?
TANTAZZI – American tapering may also have a positive reading: it is true that the Fed will inject less liquidity into the system but it is also true that tapering is triggered because the economy is growing again, albeit modestly. As for Germany, it will be necessary to see who really wins the elections, whether or not the Grand coalition will be formed and what effects all this will have on German European economic policy. The other unknowns are inscrutable. But what worries me most is the attitude that exists in the ruling class and in the country with respect to the first signs of recovery?
FIRSTonline – I understand that, after years of crisis, if a positive signal arrives, we can breathe a sigh of relief, but be careful not to get under any illusions or make any missteps. This is not the time to celebrate, indeed it is worrying that the country continues to demonstrate that it is not aware that we are a debtor country that has one of the largest public debts in the world and that we must get used to living with fewer resources than in the past. We've made sacrifices and the drop in the spread attests to it but, in Italy's conditions, you can't be virtuous just for an hour and then assault the diligence. The recent agreement between Confindustria and the trade unions is a sign to reflect on.
FIRSTonline – In what sense?
TANTAZZI – In the sense that, if all the requests of the social partners were to be accepted, 15 billion would have to be put on the table. Proposing a reduction in taxes on labor and businesses is sacrosanct and one of the keys to recovery, but it is also necessary to indicate how to finance such an operation. And above all it is necessary to have a general vision of the future of the country of its economy that I cannot see. Sorry to say it, but Italy's future will probably be worse than the past and we will have to deal with this, without giving up doing everything in our power - starting with structural reforms - to improve our economic and social condition.
FIRSTonline – Are cutting taxes on labor and companies and normalizing credit still the priorities for the autumn?
TANTAZZI – Yes, certainly. But to cut taxes significantly and in compliance with European constraints, it is necessary not only to cut unproductive public spending in a corresponding way, to reorganize and change the quality of spending and the functioning of the entire public administration and this is not an operation that can be do in a few days. The reduction of the Btp-Bund spread is the sign of our new-found credibility even if Spain has moved closer to us and another positive novelty is also the fact that, for the first time in a long time, foreign capital has returned to Italy, but be careful not to get too big and not to smash everything. The 3% deficit threshold on GDP is not optional and it will not be easy to respect it.
FIRSTonline – There are those who say that the other knot on the carpet of credit normalization and the possibility that banks return to give more abundant credit to households and businesses that deserve it can be tackled by finally overcoming the anomaly of the ownership structure of the Bank of Italy and revaluing and liquidating the shares of the shareholder banks: what do you think?
TANTAZZI – I think this is the case and that it is right to address the problem of the ownership structure of the Bank of Italy and that the presence in the Treasury of a wise and balanced person who comes from the Bank of Italy like Minister Saccomanni can facilitate the operation .
FIRSTonline – Professor, perhaps the recession is ending, but for the end of the crisis Prometeia has repeatedly warned us not to delude ourselves about the short term: when will it end?
TANTAZZI – Beyond the purely statistical effects, which can confuse reality, I believe that only at the end of the current decade will we be able to return to the levels of production and growth that existed before the start of the crisis in the summer of 2007
