Bidenomics in Italy | Financial Times


Italian economic dynamics

This article is a live version of Martin Sandbu’s free lunch newsletter.register here Send the newsletter directly to your inbox every Thursday

The European economy performs well: the second quarter Growth data Strong performance in almost every EU country, and Real-time indicators Shows that the high Covid-19 vaccination rate makes the recovery sustainable.

This is good news, but in a sense, it is not surprising. At this stage of the pandemic, growth depends on the overall dynamics of macroeconomic shocks and fiscal and monetary policy stimulus. After the sharp decline, a strong rebound is expected. What happens next will depend more on the quality of detailed economic policies. Most importantly, the national “recovery and resilience plans” that have been developed by countries are funded by the following institutions: Unprecedented EU collective borrowing.

However, judging these plans is extremely difficult for a variety of reasons. One is that it is too early: it has not even been approved in its entirety. Another reason is that they are too long, too detailed, and too technical for anyone to read voluntarily, let alone the complete 27 articles. It is a pity that finance officials who had to write these documents, EU officials who had to review them, and financial analysts who paid to read them, so that their customers would not have to read them.

Nevertheless, it is surprising that, so far, these plans have been largely praised by independent observers. One reason-thanks to the European Commission, which demands to stick to its priorities-is that they are investing heavily in the right areas, such as the physical and digital infrastructure needed for an interconnected, decarbonized economy. The other is that they have clear goals that must be reached to achieve “free” currency. Third, the conditions include long-term recommended structural reforms, which the committee can now use big carrots to encourage.

So far, the most important thing is a nationwide recovery and rehabilitation plan, which is the Italian plan. Whether Italy can use the post-pandemic recovery to get rid of its 20-year stagnation forever is a key question for Europe’s future. It will determine whether the single market is applicable to all regions of Europe. If or when doubts about the survival of the single currency are temporarily dissipated, it will shape the attitude towards the euro.

Most importantly, Italy’s perception of European recovery funds is critical to whether they will be judged as successful, and therefore critical to the prospect of permanent enhancement of borrowing and spending within the EU.

So it’s worth paying attention to the OECD’s new Italian Economic Survey. It gives an overall very optimistic assessment of the Italian plan. (For those who are pressed for time, there is a Short blog post.) The promised investment and structural reforms—targeting well-known weaknesses in public management and competition—can increase the economy by nearly 6% by 2030.

The absolute number of potential investments is important. When the plan was first announced, Jack Allen-Reynolds of Capital Economics highlight Italy’s recovery and recovery plan’s share of the Italian economy is actually larger than that of President Joe Biden’s U.S. employment plan (both are aimed at similar numbers and green investments), and will be in a slightly shorter time. Internal spending, providing a greater financial blow.

This is a major change as usual. The OECD pointed out that investment in the Italian economy is less than most other member states. It also shows the possibilities when the investment occurs. Although Italy’s productivity growth has long been the lowest among its peers, in the years before the pandemic, its manufacturing productivity growth actually caught up with the OECD average—manufacturing was stagnant investment A department, especially in intellectual property. However, in the service industry, investment is declining and productivity growth is weak.

As reported by the OECD, Italy’s economic deficiencies are well-known and, in a sense, can be directly improved (not related to the euro): poor bureaucracy, bankruptcy resolution and judicial procedures; lack of investment; low education level Labor; insufficient digitization; poor capital allocation in banks; and high labor tax wedge. All of these can be solved—technical policy challenges are completely surmountable. Repair them, the economic return should be great. What has been hindering is politics. But the current Italian government knows what needs to be done and seems to be determined to do it. It has sufficient financial resources to pave the way for reforms, and under the leadership of Mario Draghi, there is a prime minister with great support.

All this means that Italy’s growth miracle is coming, and Italy has the best chance of achieving it in its history. Of course, opportunities are not guaranteed, and opportunities will not last long. By seizing it, Italy can make up for most of the stagnation of the past two decades. Missing it, the result may be the last chance to escape a permanent recession. For Italy and Europe, the stakes cannot be higher.

Other readability

  • Henrietta Moore of University College London Report on “Local Prosperity Index” Developed in the borough of East London after the Olympics to understand the true meaning of “rebuild better”. “In order to heal their divided country, [Joe Biden and Boris Johnson] They need to replace their unequal economy with a sense of belonging. “

  • Learn from Canada how to save climate politics from the culture war, I think Carbon tax and dividend policy column.

  • New Economics Foundation proposal The UK can use its existing state-owned financial institutions to fund the infrastructure investments needed to achieve net zero carbon emissions.

Digital news

Newsletter recommended for you

Unhedged — Robert Armstrong analyzes the most important market trends and discusses how the best talent on Wall Street responds to these trends.register here

Lex communication — Check letters from Lex centers around the world every Wednesday, and check the best comments of the week every Friday.register here



Source link