Italy is enjoying a summer of over-achievement. First came triumph in the Eurovision Song Contest. Then the Azzurri snatched victory in the European football championship. And this month its sprinters took Olympic gold in Tokyo. In each case, Italians beat low expectations.
The biggest success, though, is that the country now has a government that works. In this instance, high expectations were met. When Mario Draghi was invited to form a government by Italy’s president in February, there was a collective swoon. Italy’s brawling political parties fell over themselves to pledge support. Business leaders, foreign investors and Rome’s EU partners were delighted.
The former president of the European Central Bank has not quite performed the miracle of saving Italy, just as he saved the euro. But in six months he has laid the foundations for his country’s recovery and revival. For the first time in decades, Italy is no longer seen as a byword for political dysfunction.
Given its debt burden and deep-seated economic problems, it could still pose a systemic threat to the long-term viability of the single currency. But for now, Italy exudes optimism and confidence. And its progress is changing wider perceptions of the EU’s prospects as the pandemic recedes. Draghi’s most important achievement was rebooting a faltering Covid-19 vaccination drive. In early March, Italy had administered only 8.6 jabs per 100 people, below the EU average. Worse, it was failing to prioritise more vulnerable older Italians. While death rates fell elsewhere in Europe, Italy’s was going up.
Now, inoculations in Italy are ahead of Germany, France, the EU average and soon the UK. Before the country set off for the August holidays, Italy was jabbing more than 500,000 arms a day. The government’s aim of vaccinating 80 per cent of all Italians aged 12 or over by the end of September looks do-able. The requirement to show a vaccination “green pass” to access restaurants and entertainment venues should spur take-up. Unlike in France, the pass has not provoked a public backlash. With infection rates under control, Italy was able to open up its economy from April, avoiding renewed restrictions.
Draghi’s second big feat was to act forcefully with Italy’s recovery plan. In total, Rome is mobilising €235bn to revive its economy over the next five years with €191.5bn in grants and loans from the EU’s recovery fund topped up by other EU aid and national resources. Italy is spending by the far the most in the EU to rebuild its economy. Draghi is making a definitive break with EU fiscal conservatism. It is, as the economist Jean Pisani-Ferry has noted, a second “whatever it takes” gambit after Draghi’s pledge to do everything to save the euro.
Of course, the money must be spent promptly and spent well. Italy has a poor record of doing so. But putting Italy’s Treasury — a respected and professional institution — in charge of the recovery fund will help as will targeting the money at fewer projects.
Lastly, Draghi has hard-wired economic and administrative reforms into the recovery fund plans. It is what the EU demanded but the previous coalition struggled to provide. Last week, Draghi’s administration secured approval in the lower house of parliament for reforms to streamline a labyrinthine criminal justice system. It was an important breakthrough because it meant reversing some of the reforms implemented by the anti-establishment Five Star movement which now supports the Draghi government. It showed that Italy’s parties are willing to make political sacrifices to deliver change.
Next up is reform of competition laws. A bigger test will be tax reform. Draghi could limit changes to administrative simplification or go for a more ambitious overhaul to cut taxes on labour. He has the fiscal space to be bold. Economic growth could nudge 5 per cent this year. For once, Italy is rebounding from a recession.
The big question remains how long Draghi will stay as premier. The next election is due by June 2023. Even if his coalition were to hang together until then, Draghi may be tempted to switch to the presidency when Sergio Mattarella’s term ends in February. In an ideal world, Mattarella would be persuaded to stay on for another year. Draghi needs more time to change Italy and to weigh in on resetting the EU’s fiscal rules, a vital question that should come to a head in the first half of next year.
With Germany and France heading into uncertain elections, Italy looks like a pole of stability in the EU. This is remarkable given its history of political upheaval. And it is another reason for Italians to cheer.
In six months, Draghi has laid the foundations for his country’s recovery and revival
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Fonte: Financial Time del 11/08/2021