The Covid-19 crisis will have cost Italy dearly, but it could also prove to be a historic opportunity. This country has long been seen as the euro zone’s poor student. It is today the first beneficiary of the vast stimulus program financed by the European Union, with 191.5 billion euros, including 69 billion euros in subsidies. Indeed, the amount allocated to each Member State was calculated according to the consequences of the pandemic on its economy. However, Italy has suffered a lot, with a drop in GDP of 9% in 2020.
It was also a lagging country, which particularly needed this breath of fresh air. Founder country of the EU, third economy in the euro zone, Italy had a GDP very close to that of France in the 1990s. Then it stalled, to the point of having a GDP lower by 15% today.
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“Italy has suffered for thirty years from a very weak, even negative growth dynamic. It is linked to an aging population and insufficient productivity gains ”, recalls Philippe Gudin, economist at Barclays. Its political instability did not allow it to initiate reforms. The markets therefore demand higher interest rates when it resorts to borrowing. These financial constraints have led it to reduce its investments. “In the short term, it’s the least painful. But that only accentuated the country’s ills ”, judge Philippe Gudin.
The Mezzogiorno cumulates the ills of Italy
The loss of competitiveness was very noticeable in the Mezzogiorno, these eight southern regions where 20 million inhabitants live. “The Mezzogiorno was particularly hit by the effects of the great recession between 2008 and 2014. It broke down due to the absence of a real industrial policy, the inefficiency of the public administration, the lack of human capital to manage projects and an insufficient fight against organized crime ”, details economist Giuseppe Di Taranto.
This results in a multitude of unfinished projects: motorway slip roads that lead to the void or the skeletons of concrete villas on the edge of seaside resorts. From Naples to the end of the peninsula there are still many single-track railway lines.
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Another great weakness is the failure of health services. “To meet the needs of patients, there is a shortage of 48,000 doctors and nurses, most of them in the southern regions”, emphasizes Carlo Palermo, leader of the union of chief doctors. The divide between the North and the South has deleterious consequences on daily life, confirms Giuseppe Di Taranto. “In the health and education sectors, in 2019, the regions of the North spent € 17,621 per capita, those of the South € 13,613. “
This explains why in the Mezzogiorno, only 44% of female university graduates, aged 20 to 34, have a job, compared to 73% in the Center-North. The rate of 15-29 year olds who are neither in employment, nor in studies, nor in training, reaches 40% in the South, against 17% in the Center-North.
“Reform, simplify, stimulate”
Under the leadership of Mario Draghi, head of a national unity government since February 2021, a recovery and resilience plan (PNRR) has been designed to meet these challenges. It is “Radically reform the economy, boost productivity, simplify bureaucracy and encourage innovation”, summed up the former president of the European Central Bank. Italy will benefit from an investment effort concentrated over three years like it has not seen since the post-war period: trains, ports, roads, green energies, broadband, hospitals, universities… Forty percent investments will go to the southern regions.
The challenge is to succeed in spending the money quickly enough, whereas in the past, Rome has never known how to consume the European funds made available to it. Mario Draghi appointed commissioners with wide powers to supervise the work.
In addition, the payments of European money are conditional on structural reforms. Mario Draghi leads them at full speed: simplification of the rules for public tenders, fight against monopolies, reform of the justice system to unclog the courts, modernization of the cadastre which had to regularizea million illegal constructions escaping property tax.
The plan should make it possible to gain 16 points of GDP and create 240,000 jobs by 2026. The gap between the North and the South should narrow, since the southern regions should gain 24 points of GDP.
“Super Mario”, the essential
The plan is well received by investors who salute the rediscovered ambition of a country that has long had no project. Their concern is mainly due to the future of Mario Draghi. The former head of the ECB, nicknamed “Super Mario” for having saved the euro in 2012, indeed enjoys great credibility. It appears to be the guarantor of the proper implementation of the plan.
For the moment, he swallows all the obstacles with the ease of a runner of 110 meters hurdles. He indicated on December 22 that he had “Achieved the 51 objectives agreed with the European Commission”, which ensures that it will receive the next tranche of funding. The first, worth 25 billion euros, arrived in August 2021.
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Italy now seems to be on the right track. Growth for 2021 has exceeded 6%. It remains to extend this rebound over time. However, the mandate of Mario Draghi ends in March 2023. Will he be renewed? Or will he prefer to run for the Presidency of the Republic before that, with the election taking place by the end of January? The person has not yet said anything about his intentions.
Italy will receive a quarter of the European recovery plan
The Italian economy represents 15.5% of the euro zone, behind Germany (27.8%) and France (19.6%) and ahead of Spain (11.3%).
Italy will benefit from 25.5% of the funds of the European recovery plan, the total amount of which is 750 billion euros (including 390 billion euros in subsidies). Spain follows, with 20.5% of the plan (154 billion euros).
the “Piano Nazionale di Ripresa e Resilienza “ Italian breaks down into six missions, 106 projects, mentions 63 reforms and 506 objectives to be achieved by 2026. Forty percent of resources will go to ecological transition and 27% to digital.