There are certainly positive signs of a recovery, albeit timid, of the economy. These must be consolidated with a well-articulated and coherent plan for reforms and efficiency improvements in both the public and private systems. If the Government develops a credible programme, this could lead to an improvement in expectations, even if not everything can be done together and if some reforms need time to unfold their effects.
The Governor of the Bank of Italy Ignazio Visco, in his annual report, confirmed the overcoming of the acute phase of the crisis, but underlined the need to rapidly implement changes in economic policies both in Italy and in Europe to accelerate the pace of recovery and to give urgent responses to the dramatic employment situation.
Visco does not think that we can embark on a safe growth path simply by expanding public spending, as many politicians and trade unionists are asking, because the markets that are currently benefiting from low interest rates could suddenly turn around as signs of uncertainty reappear on public finances. On the other hand, the heart of the Bank of Italy's report lies in the demonstration that it is possible to reconcile more productivity with more jobs and that this passes through an increase in national (public, but also private) and European investments, i.e. financed with common among the various countries.
More than a source of polemical ideas or catchphrases, Visco's Considerations this year appeared quite didactic. In the introduction there was an unusual illustration of the tasks and commitments of the Central Bank, made necessary by the explosion of controversies around the revaluation of the value of the shares of the bank itself, controversies which were almost always based on a total ignorance of the real functions of the bank and the rules governing its operations. Pentastellati and Lega supporters will have some pages to meditate on, so that specious controversies can be avoided in the future.
On fears of deflation (ie a prolonged downward trend in prices) Visco clearly stated that the ECB will do everything possible to avert this danger, which is as negative for the economy as that of excessively high inflation. Next 5 June there will be a meeting of the board of the ECB and probably decisions will be taken at that venue, also activating "unconventional" instruments if necessary.
Also at the European level, there was a strong call to proceed towards a common public budget which would allow common investments for the development of both tangible and intangible infrastructures. And this further step towards community integration, in addition to those taken in recent years (albeit amidst uncertainties and delays), could improve market expectations and therefore stimulate private investment.
As far as domestic economic policy is concerned, Visco complained that in past years the measures have appeared too fragmented and often still awaiting the implementing decrees, so that their effective impact has been smaller than hoped for. Now there is a long list of things to do, among which the implementation of the tax delegation, the reform of the PA, the fight against tax evasion, legal certainty stand out. In fact, it is precisely the complexity and opacity of many administrative procedures that discourage both Italian and foreign investments.
Visco reminded companies that it is crucial to proceed to increase equity and recourse to the capital market because Italian companies are too exposed to bank credit. Furthermore, it is necessary to take advantage of certain regulations which have reduced the tax disadvantage affecting capital compared to debt.
The largest part of the Report was dedicated to banks, to say on the one hand that their soundness has greatly increased in recent years, but on the other to recall that there are still serious governance problems, especially as regards operations with related parties, for the repression of which the relationship with the Judiciary is very close, as well as the need for ever greater efficiency to be achieved also through a better use of technologies.
Ultimately it cannot be said that Visco abandoned himself to a mannered optimism. However, there seems to be a note of relaxation in the Governor's recommendations, in the sense that, although serious dangers still remain, if we know how to put the sacrifices made so far to good use and avoid cradling ourselves in the illusion that the easing of monetary tensions could exempt us from continuing on the road to reform, then we can really begin to recover a large part of the one million jobs lost over the past five years.
