“Inflation has risen sharply in many economies and the increase has been greater and more lasting than we expected. Food and energy costs have grown considerably, with the greatest impact on low-income families ». Mathias Cormann, secretary general of the OECD, is worried. Covid is a danger, as are logistics bottlenecks that are clogging ports. And Italy must not miss the train of the Recovery Fund and reforms, in particular by acting on the pension system. What worries the Australian diplomat born in Belgium, however, are above all inequalities, which could explode also due to the flare-up in prices. In his first interview with an Italian newspaper after his appointment at the top of the Paris organization, Cormann delivers a message to the Draghi government: “We need to redouble our efforts to promote equal opportunities and promote social mobility, increasing opportunities for women and Young people. Italy has the fifth tax wedge on labor in the OECD, which hinders employment ».
Can the rise in inflation still be called temporary and transitory?
“We believe that much of the inflationary pressures have arisen from persistent supply bottlenecks, triggered by labor shortages, intermittent plant closures and shipping delays, as well as disruptions in energy markets. As the health situation improves, demand stabilizes and people return to the workforce, we expect these bottlenecks to fade and inflationary pressures to ease over the course of 2022-23. Meanwhile, political support should remain flexible, adapted to changing health and economic conditions. However, the pandemic has brought to the fore some weaknesses in global value chains: too much concentration of input sources and not enough diversification. It will be important to review them to ensure greater resilience in global value chains and to ensure a level playing field globally ”.
We come to Italy. According to The Economist it is the country of the year, the recovery is robust. What has changed?
«From the point of view of the OECD, the Italian authorities reacted quickly to contain the pandemic and its impacts, as well as pursuing important structural reforms with the necessary fiscal support. Global support measures of over 180 billion euros in 2020 and 2021, equal to over 10% of Italy’s GDP in 2020, have helped to mitigate the impact of the crisis on households and businesses. Growth this year is expected to be around 6% and its National Plan for Recovery and Resilience foresees € 235 billion to stimulate investment, particularly in greener and digitized infrastructure, leading to stronger growth and more jobs. It also includes a number of structural reforms aimed at increasing growth in the medium and long term: competition reform, reform to ensure the efficiency of dispute resolution and civil justice processes in general and measures to improve the effectiveness and responsiveness of the public administration”.
What do you need now?
“As growth consolidates, fiscal policy support should be gradually reduced and increasingly directed towards future-oriented productive investment. Continued support for households in the face of energy price shocks and the planned reform of taxes and social safety nets are important to support the recovery. However, aid to businesses should increasingly be aimed at the most profitable sectors, to mitigate the potential risks for the banking sector and productivity in the long term ”.
How?
“The revenues from the decision to reduce taxes that produce negative externalities for the environment should be used to support the people most affected by the green transition. A more digitalised and well-staffed public sector would facilitate these reforms. And a more comprehensive approach to climate change, including a long-term plan to harmonize and gradually increase carbon prices across sectors, with supportive policies and time to alleviate transition costs, would increase certainty and support investment. “
The government has just passed its budget law. What do you need on the tax front?
“Labor taxes should be reduced for all workers. And the tax breaks will need to be simplified to make the system simpler and easier to administer and monitor, reducing the potential for tax avoidance. Furthermore, while investments in young people, job seekers and future activities are low, the elderly receive a larger share of public spending in Italy than in most other countries. The phasing out of early retirement schemes such as quota 100 will help to improve this balance ».
There is talk of Mario Draghi as the next president of the Italian Republic. Better in that position, more institutional, or in the current one, more operational?
“Draghi is an exceptional global leader: I had the privilege of meeting him in Rome at the beginning of my new term. I will leave it to Mario and our Italian friends to determine where he can make his best contribution ».