MILANO – Economic activity is accelerating thanks – first of all – to the efforts of the healthcare world and the diffusion of vaccines that opens up the possibility of seeing to grow GDP by more than 4 percent on average for the year. The need to still have coordinated measures between monetary policy (therefore at the ECB level) and fiscal policy (therefore the government and Europe) to support businesses and households more selectively and to counter the danger of interest rate growth, in front of which it will be good to use all the securities purchase plan of the European Central Bank (Pepp) to maintain favorable market conditions. A step forward requested in Brussels, where the Next generation eu has been fundamental for the confidence of economic operators in the recovery but now we need “a common budgetary capacity, accompanied by the revision of the rules for national public finances”; founded “on the possibility of a stable debt issue, guaranteed by independent sources of income”. In practice, a Recovery permanente.
Visco, Manzoni and that warning to politics: restart yes, but we need to work towards a future without subsidies
by Roberto Petrini
These are some of the central elements of Governor Ignazio Visco’s vast Final Considerations, which come at a time when we are beginning to see – according to a plurality of economic operators and observers – the glimmer of recovery. A recovery after the pandemic shock described by Visco in a few numbers: for the first time in 20 years the number of people in extreme poverty, one hundred million more to about 10 percent of the population. Women, young people and precarious workers are the most affected by the loss of work, to stem which governments have implemented something like 16 trillion interventions. And a recovery that will have to run on its own feet, because “it is certain that the stimulus, partly artificial, that today comes from extraordinary and exceptional macroeconomic policies will fail”. In Italy it means that “the freezing of layoffs, State guarantees on loans, debt moratoriums will cease. And the burden of public debt on the economy will be (…) reduced. We must be prepared for the changes we are aware of. and ready to respond to unexpected events and developments “.
Full use of Pepp and common debt
After this real war, the governor sees a “recovery of vigor” by the GDP of the Eurozone in the second half of the year with an estimate of more than + 4% in the two-year period 2021-2022, after the fall of 6, 6% in 2020. The interventions of the ECB and on this point Visco clarifies what Frankfurt’s attitude must be in the coming months: “The uncertainty over the timing and intensity of the recovery requires that financing conditions remain accommodative for a long time: large and persistent increases in interest rates are not justified by the current economic prospects and will have to be contrasted, even with the full use of securities purchase programs already defined. “To avoid importing inflation expectations from the US, therefore, Lagarde is asked to fund the resources available. Also on the strategic review of the ECB, the indication that comes from the Bank of Italy on the inflation target is clear “A numerical target of 2 per cent, with a symmetrical assessment of upward and downward deviations, would be clearer and would strengthen the anchoring of medium and long-term expectations.”
If this is the plan of monetary policy, for the full Union, says Visco, “today the need to have a common fiscal capacity has become even more evident” even more now that there is “the awareness of the fact that common shocks require the use of a European instrument capable of supporting the single monetary policy “. What is it about, in detail? “A common budgetary capacity, accompanied by the revision of the rules for national public finances, should be based on the possibility of a stable debt issue, guaranteed by independent sources of income“. That said, the governor clarifies,” the debt aimed at implementing a European budget policy would be quite distinct from the previous debt of the individual countries, which would remain national responsibility “.
OECD, in 2021 GDP up by 4.5% but hiring of young people and women not before 2022
by Rosaria Amato
Businesses and households after the pandemic. Alert on banks
The Considerations recall the severity of the Covid crisis and how much “the Government’s interventions have made it possible to contain the repercussions of the pandemic on families and the production system”. The measures adopted succeeded “in reducing the increase in inequality” and “prevented healthy companies, severely affected by the effects of the pandemic, from being forced to go out of business“. Now we need a “more selective public intervention, focusing on sectors that will still face difficulties linked to the health crisis and trying to avoid subsidizing companies that are clearly without prospects, while guaranteeing support to those who work in them”.
For Visco “over the next few months, with the continuation of the vaccination campaign, there may be an acceleration of the recovery. According to our most recent surveys, companies are already planning a marked increase in investments; families appear more cautious, but with normalization of the health situation and the reduction of uncertainty the high accumulated savings could gradually translate into higher consumption. On average for the year, the expansion of GDP could exceed 4 per cent “.
The companies themselves, on the other hand, have a lot liquidity available: “In 2020, the financial balance of the sector as a whole (ie the difference between the change in assets and that of financial liabilities), also fueled by the support interventions, was positive for 38 billion, three times that of the previous year. A substantial part of the loans obtained is held by companies in deposits and other liquid assets, which can be used to finance the acceleration of production and investments in the coming months “. Families, on the other hand, are cautious. Public transfers “reached impressive levels in 2020, with an increase of over 30 billion net of pensions”. Consumption fell by 10.7 per cent, four times more than the reduction in disposable income and the squeeze – due to restrictions – unlike the other crises there was also among those who do not have financial difficulties.
The governor reminds the banks that they must “promptly and prudently reveal” credit losses without waiting for the end of the moratorium, extended at the end of the year, to prevent it from making “balance sheets less transparent”. Instead, the alert aimed at the situation of smaller banks which have “structural weaknesses” and which now “urgently” must “review their business models”.
“Cohesion and awareness” for the reforms of the NRP
For the restart, Visco insists on “adequate training“of the workers on whom” depends the possibility for companies to leverage qualified workers and managers. The possibility of accelerating entry into the labor market and fostering the improvement of knowledge throughout the working life depends on the overall quality of the education and training systems. In Italy, over 3 million young people between the ages of 15 and 34 are not employed, nor engaged in education or training activities; this is almost a quarter of the total, the highest share among the countries of the European Union “.
Recalling the challenges in the implementation of the NRP and the complex reforms that accompany it, Visco recalls that “we will need cohesion and awareness on the part of everyone – politics, institutions, social partners, citizens – of the absolute need to meet the commitments undertaken over time”. Among the priorities, “the reduction of territorial gaps in economic and social development, today even deeper after a decade of stagnation”. If the interventions are efficient, the impact of the NRP “could lead to an increase in the level of GDP between 3 and 4 percentage points by 2026. Significant additional effects, up to 6 points in a decade, could derive from reforms and incentive plans for research and innovation “. In short, a well-made plan would make it possible to “return to rates of increase in output that our economy has not achieved for years”.
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