While the United States invests to support quality jobs and decarbonize their economy, creating high debt and deficits, Europe is returning to the failed recipes of fiscal tightening considered the premise for guaranteeing investments and therefore growth. This paradox, denied by austerity between 2007-2015, became relevant again yesterday. The European Commission has suggested to the Council to open an excessive deficit infringement procedure for seven countries, including Italy. The Italian deficit is at the highest in Europe at 7.4% of Gross Domestic Product (GDP). According to the Commission, it will fall to 4.4% in 2024. And it will rise again to 4.7% in 2025.
TO GET CLOSER TO THE SACRED parameter of 3% – already defined as “stupid” by Romano Prodi – the Meloni government will have to commit to cutting 0.5% of GDP – equal to around 10 billion euros per year – starting from the next budget law. Not only. Social spending will be blocked. And this is the condition that will probably continue to strangle a country exhausted by an austerity that has never ended. Think of the shortage of staff in essential services such as healthcare. This is the legacy of the “old” austerity that has combined with the structural freeze on wages, in the public and private sectors, which has continued since the 1990s.
LACKING of growth more than double the current one, we will proceed with cuts and privatizations – which the Meloni government has already started. Objective: also reduce the ratio between public debt and GDP to 137.3 percent in 2023. Brussels expects an increase to 138.6 percent and 141.7 percent of GDP at the end of 2024 and 2025 respectively.
PRESENTING the spring package of the European Semester yesterday the EU commissioner for the economy Paolo Gentiloni urged us not to see the rules of the new “stability pact” as a “diktat”. For the next seven-year period, the Meloni executive, and subsequent ones, will be able to “negotiate” a recovery plan. In Gentiloni’s opinion this condition is different. «Austerity exists when an additional burden of fiscal restriction is imposed in a recession. Today, however, we have rules that are more attentive to the economic cycle and therefore avoid imposing severe measures.” To demonstrate that today we find ourselves in a different economic cycle, Gentiloni reiterated that Italy has the investments of the National Recovery and Resilience Plan (Pnrr) available: «Public investments are increasing. This is not austerity.”
HOWEVER, Gentiloni himself recently said that there is no certainty about the positive effects of the Pnrr on GDP. Also because he is not at all certain that Italy will be able to fully spend the 194 billion euros within a year and a half. And it remains to be seen whether, in the restrictive conditions that are being created, these investments will have a beneficial effect on the accounts.
IT IS COMPRENSIBLE that Gentiloni wants to defend the balance of his mandate. But it is difficult not to hide the fact that the stability pact forced down the throat of Meloni & Co. is worsening. It will push for a cut of up to 1.5% of GDP in order to prepare for the next crises (wars, pandemics, collapses of all kinds). The intrepid Melonians have agreed to cut the budget by 25.4 billion per year (if the recovery process lasts 4 years) or by 13.5 billion, if it lasts 7. The calculations are by the Bruegel study center.
THE RESIGNED MINISTER of the economy Giancarlo Giorgetti yesterday took the opportunity to reiterate that the “LSD model” is over, i.e. “laxity, subsidies, debt”. Net of linguistic violence, Giorgetti intends to justify the cut in social spending by placing the responsibility on citizens who do not “produce” according to the criteria established by the government.
NOT ONLY THE CAGE IS BACK, and the intolerable moralism of the libertarians, but the famous “recommendations” of Brussels also reappear. And they are very detailed. On taxes, for example, the policies of the Meloni government are being dismantled from the right. « The cuts to the tax wedge on labor, legislated only until 2024 and financed through temporary provisions, are rather limited in scope».
THE EXTENSION OF REGIMES flat tax policies, even for self-employed workers, worsen the horizontal equity and efficiency of the tax system by reducing redistribution, favoring specific categories of taxpayers and discouraging the growth of businesses”. Tax amnesties worsen equity among citizens. A blow was also given to the seaside resorts, a lobby dear to Meloni & Co. “The delays in the implementation of transparent and competitive procurement procedures are worrying.” Also requested is the reform of the land register which the government does not intend to address at all.
BY SEPTEMBER 20TH the government will have to present the “medium-term structural budget plan”. In November the new Commission will establish the return path. From today the political negotiation announced several times to obtain some discounts will come to life. Even yesterday Giorgetti asked to “go back to discussing the stability pact” which is not going in the desired direction. His change was the illusion sold by the right in the European elections. The costs of the advertisements are collective.
