The Italian economy can finally attempt a post-pandemic rebound. And it will take an unprecedented effort to avoid wasting the opportunities that are presenting themselves, such as the National Recovery and Resilience Plan (Pnrr). This is said by the governor of the Bank of Italy, Ignazio Visco, during the usual annual Final Considerations. The scenario is still uncertain but, with the vaccination campaigns at full capacity, it will be possible to accelerate the restart. And it will be a “formidable challenge” in which all Italian economic agents, from families to businesses, must participate.
Cohesion and hope. Without forgetting, however, that the scenario is still chiaroscuro. Of course, Visco said, we must commend the “enormous efforts” of the scientific community on the creation of anti-Covid vaccines. And precisely with the progress of vaccinations, a point on which the number one of Via Nazionale has clearly insisted, it will be possible to return to a new normal. Without forgetting a crucial aspect in the medium to long term. That is, the one linked “to the uneven rhythm of vaccinations between the different areas of the world: this could result in marked divergences in the performance of the economies and sudden movements of capital”, stated Visco.
Meanwhile, however, the response of the economic policies adopted by governments must be coordinated and coherent, one of the leitmotifs of Visco’s speech. Therefore, Visco stressed that it will be crucial to maintain monetary and fiscal stimulus as long as needed. And this also means that all the firepower of the Pandemic emergency purchase program (Pepp) will have to be used, the eurozone public and private bond purchase plan launched in March 2020 and which now has a value of 1,850 billion euros. . The goal is to continue to support the recovery that will be, for as long as it takes, without hesitation or slowdowns.
The future of the EU post Covid-19
The eurozone’s response was strong and immediate, but more is possible. This, to paraphrase, is the extreme synthesis of Visco, who stressed a very precise point with a long-term eye. That is, the importance of the agreement on the Next Generation EU, of which the Recovery and resilience facility (Rrf), the so-called Recovery fund, constitutes the central nucleus for investments between 2021 and 2026. NextGenEU which, this is the hope of governor of the Bank of Italy, it can be the basis for the completion of the EU. “As has happened in the past, the severity of the crisis has overcome doubts and inertia. Even if they do not solve the problem of the incompleteness of the Economic and Monetary Union, the more effectively they are used, the more the programs launched in the last year will be able to constitute a reference point for the design of mechanisms of a permanent nature and with a more agile operation. Visco said. Who has not forgotten the obstacles. “It is a path full of difficulties; the countries that will benefit most from the resources made available, including Italy in particular, have a double responsibility: to seize a decisive opportunity to solve their own structural problems and demonstrate with concrete results the importance of a more strong and cohesive, ”he said. The aim remains to have a common budgetary capacity, combined with a stable issuance of EU debt. An ambitious project, but one that can become reality if the divisions between the North and South of the euro area are overcome.
Public finance
It is one of the most difficult issues. This is because, as mentioned by Visco, the high Italian public debt is a problem, considering that the ratio between debt and Gross Domestic Product (GDP) is around 160 percent. And it can also be so in the years to come, if we do not intervene with budget consolidation. “A future built on the basis of public subsidies and incentives is unthinkable”, remarked Visco. Who underlined that “it is certain, however, that the stimulus, partly artificial, which today comes from extraordinary and exceptional macroeconomic policies, will fail. Therefore, the freezing of layoffs, the State guarantees on loans, the moratoriums on debts will cease. And the burden of public debt on the economy will gradually but continuously be reduced ”. Words in line with those spoken by the vice president of the European Central Bank (ECB), Luis de Guindos, a few days ago. Once the recovery is hooked in the most homogeneous way possible, “credible plans for fiscal consolidation” will have to be prepared, explained de Guindos. Precisely to prevent the next crisis from becoming even less sustainable for countries worse off in terms of public finance, such as France and Italy.
Banking system
The evidence is that the banking system has held up better than during the global financial crisis of 2007/2008, both in terms of assets and in terms of finance. We must not forget, however, a fundamental element, the support provided. About 170 billion euros in guaranteed loans and about 250 billion in moratoriums. Two initiatives that affected the growth of impaired loans, the increase of which was slowed down by the measures adopted by Italian banks. Therefore, the attention threshold of the Bank of Italy is maximum. And the governor urges lenders to use tight monitoring of bad debts to avoid future shocks. But not only. This action must be matched by new provisions, with the ultimate aim of not nullifying the opportunity given by the NRP. Also for this reason, Visco asks Italian banks to favor the change of business models, in light of the technological transformation accelerated by the pandemic, and to promote mergers and acquisitions as soon as possible, with the aim of strengthening them at a systemic level. An attitude in full coordination with the recommendations of the ECB in recent years.
Italy, Pnrr and new generations
A further point emerges from Visco’s speech. Italy was hit by the Sars-Cov-2 pandemic in full and the cost was very high, both economically and socially. And the opportunity facing the country is unprecedented. The approximately 250 billion euros (the result of the mix between EU funds and own resources) that will be invested between now and 2026 will have to be the basis for building the future of the new generations. That’s why you can’t miss this train, according to the governor of the Bank of Italy. “NextGenEU and Pnrr are not two acronyms with a vague meaning. Their contents, programmatic and substantial, are decisive. This is why it is essential to spend well the extraordinary resources that the program offers us and all the others that will be available to give the economy a stable prospect of development ”, he concluded. In other words, the future of Italy passes from here. And any slowdown would only slow down the greatest opportunity for economic revival since the Second World War.