Strengthen growth to mitigate global uncertainties. Giancarlo Giorgetti’s recommendation comes at a delicate stage for the continental economy, with Germany seeing the possibility of a technical recession and the conflicts – Ukraine and the Middle East – casting doubts on the stability of the European trade balance.
«Our economy also grew in 2023, although at a slower pace and shows a fair amount of vitality», explains Giorgetti. But he warns that more needs to be done. He talks about resources to be unlocked, the owner of the Treasury. And he does so by taking inspiration from the latest reform carried out by his ministry. «It is important to have a fairer, more efficient and less burdensome tax system for businesses and citizens, encouraging employment and investments», he underlines. A reference, that to investments, which is in line with the requests of Brussels, which calls for a proactive attitude from the Member States.
The objective, in such a complicated historical phase, is to foster trust. There are numerous positive signs from the job market in Italy, Giorgetti points out during the swearing-in ceremony for the students of the Guardia di Finanza Academy in Bergamo. But these ideas must be supported by a one-way race, although the obstacles are varied. Giorgetti is aware that the Superbonus and Facade Bonus issues may have significant implications on public finances in the coming years, and therefore on the budget laws that will accompany the country out of uncertainty.
Both measures – around 180 billion euros as a burden on the state balance – need to be defused. Precisely for this reason it is necessary to ensure that the “discreet vitality” of Italian economic growth, as defined by Giorgetti in Bergamo, is supported by more structural factors. He does not deny that the challenges facing Europe, and therefore Italy, are important. «Support the transition towards a more sustainable economy with prudent and realist choices while respecting public finances and debt sustainability», he reminds us.
From this long-term perspective, the head of the Treasury highlights some aspects that have limited Italy’s potential in recent decades. The obligatory reference, for the occasion and for current events, is to tax issues. «The role of the Financial Police is fundamental to legally accompany the process of relaunching the economy of our country in the complicated geopolitical scenarios we live in», he noted, defining the action of the Gdf as «indispensable» in combating illicit acts, which represent a “serious obstacle to the growth and development of the country”. Also for this reason, he warns, we need to speed up with the reforms.
The context in which Giorgetti moves, between geopolitical tensions and deglobalization processes, does not help. But from the point of view of interest rates, with the European Central Bank (ECB) starting the process of discussing the first cut in the cost of money, there is much more serenity than in the recent past. The yield differential between BTPs and Bunds is at its lowest level for two years, the yield on the Italian ten-year bond – while remaining higher than its European counterparts – marks a marked decline.
The appeal of bonds dedicated to small savers, such as the Btp Valore, is not in question. The time gained on Italian public debt issues, including through instruments dedicated to domestic retail, cannot be wasted. A concept that the Treasury knows well, with the National Recovery and Resilience Plan still having to unleash its full potential for economic expansion.
The words of the head of the Treasury come at a time when Confindustria is also highlighting the danger of the scenario. Domestic demand is expected to be “weak”. For consumption, warns the research center of Viale dell’Astronomia, «more lights: in January, retail sales drop slightly (-0.3%); there is a marginal decline in employment (-0.1%), but the medium-term trend remains very positive and supports incomes; in February, household confidence rose again; rates and loans don’t help.” On the other hand, «for investments, more shadows: credit is decreasing (-4.0% per year in January); in February orders from capital goods companies thin out; the sentiment of companies (Iesi) has dropped”.
The most difficult issue is that linked to the trade balance. «The prospects for the export of goods are uncertain. In the 4th quarter of 2023, world trade increased (+0.5%), for the first time after four quarters of contraction (-1.9% in the year)”, explains the latest report. But “the difficulties of maritime transport (90% of global trade), and its costs, continue to fuel uncertainty. The Suez Canal, through which 15% of global goods pass, has reduced the movement of ships by approximately -40% (in January-March 2024, in annual terms) and, in parallel, that for the Cape of Good Hope (+86%)”. An issue that is being carefully monitored at the Treasury.
Giorgetti is the spokesperson for a widespread opinion also on the financial markets, given the apparent period of calm. “We must continue to implement the structural policies already launched by the government to support the economy.” The solution passes through a streamlining of bureaucratic processes and an adaptive pragmatism which, according to Giorgetti, can be the key to guaranteeing medium, but above all long, term sustainability. In the background, the geopolitical unknowns will increase, since in a few months there will be the European elections first and then the US ones. Preparing to mitigate the repercussions, this is the dominant reasoning at the Treasury, is not only advisable. It is necessary.