ITALIAN SCENARIO / The challenge of the NRP and the risk of a new 2011

It is easy to say “current affairs”, from now on to the elections on 25 September Mario Draghi will have to deal with issues that go far beyond normal administration, because the emergency is not only not over, but in many respects it has just begun . This applies to the economic and social situation and to the war in Ukraine, while a new return of Covid-19 is expected in the autumn and the executive must at least prepare the guidelines to organize the new vaccination campaign. All this with a government now non-existent, with parties torn apart and concerned only with the electoral campaign.

Draghi has given himself a priority: completing the 55 objectives still missing for the Pnrr and hope to bring home the 21.8 billion euros planned for the end of the year. It really is a hope and not much more. This is the main concern of the Prime Minister who is still in office. Friday Draghi signed a circular outlining the very broad perimeter of his action, in fact he wants to have his hands free also to adopt bills not normally foreseen during government crises, implementing decrees of delegations and government or ministerial regulations. However, we need the collaboration of Parliament, that is, this Parliament which has now been dissolved.

Closing his (dis) adventure with a PNRR flop is what Draghi wants to avoid more than anything else because from the beginning it was the heart of his mandate, together with the fight against the pandemic. According to rumors bouncing from the Palazzo, the straw that broke the camel’s back is a letter sent by the European Commission with a detailed picture of all the commitments taken and not yet realized. The head of the government would have curried the ministers and would have been convinced that a stroke of the accelerator was needed even at the cost of going off the road. The car didn’t hold up and crashed. The party machine, but also the administrative one.

The jungle of the rules is always the same despite all the “simplification decrees”, the bureaucratic web remains very dense, the vetoes cross and overlap, the authorizations are lacking. All this while Parliament broke up in the face of a key measure also for the implementation of the NRP such as the competition reform. What remains of it is a bad copy, including beach referrals, excerpts for taxi drivers, proxies (there are seven of them) which, under “current affairs”, are at least controversial.

Great unknowns, therefore, but it is certain that there will be no tax reform, the reduction of the tax wedge, while a possible intervention on pensions passes to the next government: Quota 102 expires in December, then we return to Fornero, a circumstance that the League wants to avoid like the plague. The discussion on the minimum wage stops, there will be no revision of the Citizenship Income, and the 110% superbonus will remain unchanged. It is not clear what the new aid decree that Draghi had announced may contain: it had to be full-bodied, but at this point it should be downsized, because there are no conditions for taking demanding decisions. The reform of justice is still hanging on the decrees to be passed on the criminal and civil proceedings. An upcoming Council of Ministers is expected.

In the meantime, the time is approaching to put our hands on the economic policy framework with Nadef. The Update to the Economic and Financial Document will not be a walk in the park, given that forecasts have worsened significantly: with inflation at 8% (June figure) and a declining industrial production, GDP, which in the first half of the year grew by 3.1% compared to an expected annual trend of 4.7%, will be in sharp decline between now and December. A true recession will probably be avoided, but there is no room for all the promises that parties have already begun to make. Will Draghi limit himself to presenting the forecasts or will he leave programmatic indications to his successors?

The lethal combination of inflation and recession will be the dominant concern of the election campaign. The end of abundant and cheap money affects all variables, personal and collective ones, household budgets, savings, mortgages, as well as the burden of public debt. The anti-spread shield of which so much is talked about is still a mysterious object. It is true that it will not have ex ante limits, but it will serve for Italy as well as for Germany even if in the opposite sense, the ECB will have ample discretion and there are four stringent conditions: compliance with the general budget rules of the EU, absence of serious budgetary imbalances, fiscal sustainability and “solid and sustainable macroeconomic policies”, with the commitment to respect the parameters of the EU Recovery Fund (with the NRPs) and the specific recommendations for each country based on the EU semester.

The sun 24 hours yesterday he recorded the perplexities of analysts and financial operators and evoked a danger: that Italy, in full government crisis and with the debt that finds itself, could become the battlefield between the market and the central bank. At that point the spread would rise above 250. How will it affect the elections? The question is whether the fear of inflation or that of default will prevail. In the first case, the right can take advantage of it, but beware, an effective fight against inflation requires a squeeze that nobody wants, much less Meloni, Salvini and Berlusconi. In the second case, the specter of 2011 can take shape. And then there is none for anyone.

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ITALIAN SCENARIO / The challenge of the NRP and the risk of a new 2011