The National Recovery and Resilience Plan represents an “extraordinary” challenge for growth for Italy, just as the pandemic, technological progress and ecological transition are important challenges for central banks. The Governor of the Bank of Italy, Ignazio Visco, warns about what awaits the country to make the most of the huge resources provided by Europe. «The challenge, planning and implementation», which the implementation of the NRP entails, «is extraordinary. In addition to recovering the ground lost due to the pandemic, it is a question of laying solid and stable foundations for a return to a more sustained growth path of the economy and employment “, says Visco in his speech at the” Giornate di Economia Marcello De Cecco 2021 »on pandemic, inflation and monetary policy. “Investments and reforms, to which an extraordinary amount of resources are destined between now and 2026, aim to fill the serious and well-known structural deficiencies of our economy” adds the Governor of Bank of Italy. It is a total of 191.5 billion, plus 30.6 billion allocated through the complementary fund and another 26 billion to be used, over the next ten years, for the construction of specific works and for the replenishment of the resources of the Development Fund and Cohesion.
Even “the changes” induced by the pandemic, technological progress and the ecological transition “can have effects not only on economic activity, but also on the configuration of relative prices and, at least temporarily, on inflation rates”, warns Visco, therefore ” the implications of these changes must be carefully evaluated by those who govern monetary policy ”and therefore by the European Central Bank with regard to the Eurozone. And the monetary policy of the ECB “will remain accommodative as long as necessary”, assures Visco, specifying however that “when the time comes, the challenge for monetary policy will be to know how to properly pull the brake, without causing unnecessary tension and remaining in any case ready to press the accelerator again should this become necessary ».
Regarding the challenge of the ecological transition, Visco pointed out that most of the available analyzes “tend to suggest” that the process could involve “an increase in inflation”, which would complicate the work of central banks, but “recent studies , including economists from the Bank of Italy, indicate that, when the more general effects of a carbon tax such as to induce a rapid, albeit necessary, transition to a zero-emission economy are taken into account, its impact in the early stages of adjustment could even be deflationary ». Therefore, “deflation would be the result of the negative effects of the tax on economic activity, which could also fall significantly”, explained Visco. Therefore, “contrary to what is normally claimed, the problem for central banks could be that of too low inflation, which would exacerbate the risks of un-anchoring downward expectations” he pointed out.
Finally, touching on the issue of debt, the Governor of the Bank of Italy explained that “if the exit from the current ultra-expansion phase proceeds correctly, when growth will be stronger and inflation higher, in line with the objective of central bank, its impact on the sustainability of public debt should not be a cause for concern ».