ACHTUNG; Just play JA! The Lunar Recommendations of Brussels to Italy

THE COUNCIL OF THE EUROPEAN UNION,

having regard to the Treaty on the Functioning of the European Union,

having regard to Regulation (EC) no. 1466/97 of the Council, of 7 July 1997, for the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies 1 , in particular Article 5 (2),

having regard to the recommendation of the European Commission,

having regard to the resolutions of the European Parliament,

after consulting the Economic and Financial Committee,

considering the following:

(1) On 20 March 2020, the Commission adopted a communication on the activation of the general safeguard clause 2 of the Stability and Growth Pact 3 . In the communication, the Commission considered that, given the expected severe economic recession due to the COVID-19 pandemic, the conditions for activating the general safeguard clause were met. On 23 March 2020, the finance ministers of the Member States agreed with the Commission's assessment. The general safeguard clause allowed Member States the fiscal flexibility needed to cope with the crisis and facilitated the coordination of fiscal policies in times of severe economic downturn. Its activation allows for a temporary deviation from the alignment path towards the medium-term budgetary objective of each Member State, provided that medium-term fiscal sustainability is not compromised. On 17 September 2020, in the annual strategy for sustainable growth, the Commission announced that the general safeguard clause would remain active in 2021 4 .

(2) On 20 July 2020, the Council recommended Italy 5 to implement, in line with the general safeguard clause, all the necessary measures to effectively tackle the pandemic and support the economy and subsequent recovery. It also recommended that Italy, when economic conditions permit, pursue budgetary policies aimed at achieving prudent medium-term budgetary positions and ensuring debt sustainability, while increasing investments.

(3) In its recommendation on the economic policy of the euro area, the Council recommends that fiscal policies continue to support the recovery in all euro area Member States throughout 2021 and that measures be timely, tailored to the specific circumstances of each. country, temporary and targeted 6 . When epidemiological and economic conditions allow, emergency measures should be gradually phased out, while countering the impact of the crisis on the social level and on the labor market. Fiscal policies should be pursued aimed at achieving prudent medium-term budgetary positions and ensuring debt sustainability while increasing investment. Member States should implement reforms that strengthen the coverage, adequacy and sustainability of health and social protection systems for all.

(4) On 18 November 2020, the Commission adopted opinions on the 2021 draft budgetary plans of the euro area Member States, based on a qualitative assessment of fiscal measures. According to the Commission, Italy's Draft Budgetary Plan was broadly in line with the Fiscal Policy Recommendations adopted by the Council on 20 July 2020 and most of the measures included in the Draft were supporting economic activity in a context of significant uncertainty . However, some measures did not appear to be temporary or accompanied by compensatory measures.

(5) Next Generation EU, in particular the Facility for Recovery and Resilience, will ensure a sustainable, inclusive and equitable recovery. Regulation (EU) 2021/241 establishing the Recovery and Resilience Facility 7 entered into force on 19 February 2021. The Facility will provide financial support for the implementation of reforms and investments, with a fiscal stimulus funded by the 'EU. It will contribute to economic recovery, the implementation of sustainable and growth-friendly investments and reforms, in particular to promote the green and digital transition, and strengthen the resilience of economies and potential growth. It will therefore also help public finances to return to more favorable positions in the short term, consolidating their stability and at the same time strengthening growth and job creation in the medium and long term.

(6) On 3 March 2021, the Commission adopted a communication giving political guidelines to facilitate the coordination of budgetary policies and the preparation of the stability and convergence programs of the Member States 8 . In view of national budgets and the mechanism for recovery and resilience, the general fiscal stance should continue to support the recovery in 2021 and 2022. At the same time, given the prospect of a gradual normalization of economic activity in the second half of 2021, Member States' fiscal policies are expected to further differentiate in 2022. They should take into account the state of recovery, fiscal sustainability and the need to reduce economic, social and territorial divergences. Given the need to foster a sustainable recovery for the EU, Member States with low sustainability risks should orient the budget towards maintaining a fiscal stance supporting the recovery in 2022, taking into account the impact of the mechanism for recovery and resilience. Member States with high debt levels should pursue prudent fiscal policies, while preserving nationally funded investments and using grants from the Recovery and Resilience Facility to finance new high-quality investment projects and structural reforms. For the post-2022 period, fiscal policies should continue to take into account the strength of the recovery, the degree of economic uncertainty and fiscal sustainability considerations. The reorientation of fiscal policies towards prudent medium-term fiscal positions, including through the phasing out of support measures in due course, will help ensure medium-term fiscal sustainability. Prudence is not that of a good family man, but that of a father who prefers to starve his children in order not to spend a cent. If you understand this dialectical passage, then you will have understood everything written.

(7) The Communication of 3 March 2021 also announced that, according to the Commission, the decision on the deactivation or maintenance of the general safeguard clause should be taken as part of a comprehensive assessment of the state of the economy, taking as the main quantitative criterion the level of economic activity in the EU or euro area compared to pre-crisis levels (end of 2019). Based on the Commission spring 2021 forecast, on 2 June the Commission considered that the conditions to maintain the general safeguard clause in 2022 and deactivate it as from 2023 are met. After the deactivation of the general safeguard clause, due account will continue to be taken the specific situation of each country 9 . So end the flexibility and return of both the Masstrcht clauses and the Two Pack and the Six Pack, with their IMPOSSIBLE burden of primary surplus (read more taxes) to reduce debt, with austerity and economic punishment

(8) On 30 April 2021 Italy presented its 2021 stability program, in line with Article 4 of Regulation (EC) No. 1466/97.

(9) In 2020, based on data validated by Eurostat, Italy's general government deficit was 9.5% of GDP and public debt increased to 155.8% of GDP. The annual change in the primary balance was 8.0% of GDP, including discretionary fiscal measures to support the economy and the functioning of automatic stabilizers. Italy has also provided businesses and households with liquidity support estimated at 24.8% of GDP (for example in the form of guarantees and tax deferrals that do not have a direct and immediate impact on the budget).

On 2 June 2021, the Commission published a report pursuant to Article 126 (3) TFEU. The report examines Italy's fiscal position, as in 2020 the general government deficit exceeded the 3% of GDP reference value set by the Treaty and the general government debt exceeded the 60% of GDP reference value set by the Treaty. treated, without reducing at an adequate pace. The report concludes that the deficit criterion was not met in the same way as the debt criterion.

(10 ) The macroeconomic scenario underlying the authorities' fiscal projections is realistic for 2021 and 2022. The 2021 Stability Program projects real GDP growth of 4.5% in 2021 and 4.8% in 2022. By comparison, the Commission's 2021 spring forecast projects moderately lower real GDP growth of 4.2% in 2021 and 4.4% in 2022, mainly due to the lower expected use of EU subsidies. mechanism for recovery and resilience in 2021 and 2022, based on the most recent indications provided in the national plan for recovery and resilience.

(11) In its 2021 stability program, the government plans an increase in the general government deficit, which would rise from 9.5% of GDP in 2020 to 11.8% of GDP in 2021, and an increase in the debt ratio to 159.8% in 2021. According to the program, in 2021 the change in the primary balance compared to pre-crisis levels (2019) will be equal to 10.4% of GDP, due to discretionary budgetary measures to support the economy and the operation of the automatic stabilizers. These projections are in line with the Commission's 2021 spring forecast. In short, Draghi at least tries to do some spending and investment to relaunch Italy. Ill take it from him.

(12) In response to the COVID-19 pandemic and in the context of the resulting economic recession, Italy has adopted budgetary measures to strengthen the capacity of its health system, contain the pandemic and support the people and sectors most affected. This vigorous political response has mitigated the contraction in GDP, thereby reducing the increase in the deficit and public debt. Fiscal measures should maximize support for the recovery without jeopardizing the future fiscal trajectory. They should therefore avoid creating a permanent burden on public finances. When introducing permanent measures, Member States should finance them adequately in order to ensure budget neutrality in the medium term. ( i.e. more taxes to pay for any improvements to the health system, otherwise you may as well die ) The measures adopted by Italy in 2020 and 2021 are in line with the Council recommendation of 20 July 2020. Some discretionary measures adopted by the government in 2020 and 2021 do not appear to be temporary or accompanied by compensatory measures. Beyond the Commission's forecast horizon, the remaining impact of these non-temporary measures, mainly consisting in the reduction of social security contributions in the poorest regions, the extension of the tax credit on earned income and the introduction of a family allowance, is preliminarily estimated at around 1% of GDP in 2023. These non-temporary measures also include investments of around ⅓% of GDP, which presumably will support medium-term potential growth and therefore sustainability.

(13) The 2021 Stability Program assumes subsidized investments and reforms of the Recovery and Resilience Facility of 0.6% of GDP in 2021, 0.9% in 2022, 1.4% in 2023 , 0.5% in 2024 and 0.2% in 2025 Note that the RRF actually intervenes for numbers from the telephone area code and this should save Italy

. . The program also assumes investments and reforms financed by loans from the Recovery and Resilience Facility of 0.3% of GDP in 2020, 0.8% of GDP in 2021, 0.9% of GDP in 2022, 0.7% of GDP in 2023, 1.3% of GDP in 2024, 1.2% of GDP in 2025 and 1.0% of GDP in 2026. The Commission's spring forecast does not include the aforementioned subsidies in the budgetary projections in full, in line with the most recent indications provided in the National Plan for Recovery and Resilience, which was completed after the Stability Program. On the other hand, the Commission forecast assumes that the subsidized investments and reforms of the Recovery and Resilience Facility will amount to 0.3% of GDP in 2021 and 0.7% of GDP in 2022.

(14) The fiscal adjustment indicators set out in Regulation (EC) No. 1466/97 must be considered in the context of the current circumstances. First, considerable uncertainty surrounds estimates of the gap between actual and potential output . Even if it is a senseless, a-scientific and a-economic measure, they cannot get rid of the potential GDP and the whole band of NAIRU etc. They can't, it's stronger than them. Secondly, fiscal policy needs to be ready to adapt rapidly to the evolution of the pandemic, moving from emergency aid to more targeted measures once health risks have diminished. Thirdly, the current context is characterized by a significant policy response in support of economic activity. In the presence of large transfers from the EU budget (such as those from the recovery and resilience facility), the established indicators do not give a complete picture of the stimulus that fiscal policies give to the economy. In light of the above, the structural balance therefore does not appear to be an adequate indicator in the current circumstances. For its part, the expenditure benchmark needs to be adapted 10 and supplemented by additional information in order to fully assess the fiscal stance.

Firstly, similar to the approach adopted for the assessment of the 2021 draft budgetary plans, temporary emergency measures, i.e. those related to the crisis that support health systems and compensate workers and companies for loss of income due to closures and interruptions in the supply chain and which will be lifted by public authorities once the economic and public health situation is back to normal.

Secondly, in order to assess the general stance of fiscal policy in the current juncture, large transfers from the EU budget (such as those from the Recovery and Resilience Facility) should be included in the relevant aggregate expenditure.

In this way the measure of the fiscal stance is given by the change in primary expenditure (net of discretionary measures on the revenue side and excluding temporary emergency measures related to the crisis), including the expenditure financed by subsidies of the device for recovery and resilience and other EU funds.

In addition to the general stance of fiscal policy, the analysis also aims to assess whether national fiscal policy is prudent and its composition conducive to a sustainable recovery in line with the green and digital transition. For this reason, particular attention is paid to the evolution of current primary expenditure and investments financed at national level.

(15) In the 2021 stability program, Italy plans to reduce the general government deficit to 5.9% of GDP in 2022, mainly due to the termination of the temporary support measures adopted in 2020 and 2021 and the lower support from it from automatic stabilizers. The public debt ratio is projected to decrease to 156.3% in 2022. These projections are in line with the Commission spring 2021 forecast. therefore, given that the temporary measures cease, the covid is also expected to cease, without a third wave etc …

Based on the Commission forecasts, the general fiscal stance as defined above, which also includes the impact on aggregate demand in 2022 of investments financed by both the national budget and the EU budget, in particular the mechanism for recovery and resilience, is estimated at -2.2% of GDP 11 . The positive contribution of subsidized expenditure from the Recovery and Resilience Facility and other EU funds is projected to grow by 0.4 percentage points of GDP, compared with an expansionary contribution of 0.3 percentage points of GDP resulting from from investments financed at national level 12 . Nationally funded primary current expenditure (net of discretionary revenue measures) is expected to make an expansionary contribution of 1.3 percentage points of GDP . So as we wanted to prove, if current expenditure pushes GDP by 1.3%, in 2022, the RRF only by 0.4 and national investments by 0.3%. In the end minutiae, pinzillacchere would say Totò.

(16) The quality of the budgetary measures of the Member States is of particular importance . Structural fiscal reforms to improve their composition can support potential growth, create useful fiscal space and help ensure long-term fiscal sustainability, including in the perspective of climate change and health challenges. On the revenue side, the COVID-19 crisis has increased the importance of reforms aimed at achieving more efficient and fairer public revenue systems. On the expenditure side, it has become even more crucial to raise the level and quality of sustainable and growth-friendly investments, at the service of the objectives of strengthening growth potential, economic and social resilience and the dual green and digital transition. Plans for recovery and resilience will make it possible to improve the composition of national budgets . REFORMS WILL SAVE US REFORMS

(17) According to the medium-term budgetary plans of the program, the general government deficit will decrease from 4.3% in 2023 to 3.4% of GDP in 2024. The general government deficit will therefore not return below the 3% of GDP in the program period . Achtung, end of games

Based on the program, the overall fiscal stance, which also includes the impact on aggregate demand of investments financed from both the national budget and the EU budget, in particular the Recovery and Resilience Facility, is estimated. averaging 0.4% of GDP in 2023 and 2024 13 . The positive contribution of subsidized expenditure from the Recovery and Resilience Facility and other EU funds is projected to decrease by 0.4 percentage points of GDP, compared with an expansionary contribution of 0.2 percentage points of GDP resulting from from investments financed at national level 14 . Nationally funded primary current expenditure (net of discretionary revenue measures) is expected to make a neutral contribution.

The current estimate of 10-year average nominal potential growth is 2% 15 . However, this estimate does not include the impact of the reforms included in the plan for recovery and resilience, which can boost Italy's potential growth . The Commission and the Council have never got a prediction right, even by mistake. It would be better not to own it.

(18) The public debt / GDP ratio will decrease according to forecasts from 155% of GDP in 2023 to 152.7% in 2024. Due to the high debt / GDP ratio, which will only gradually decline over time, it is believed, in light of of the latest debt sustainability analysis, that Italy will face high risks to fiscal sustainability in the medium term 16 . There is really a lot to discuss about this very dangerous sentence. Debt is a danger because expressed in Euro, otherwise, as everyone has now admitted, it would not be. Yet you manage to put this imprudent sentence here, as if you want to unleash the markets.

(19) Given the current still exceptionally high degree of uncertainty, the fiscal policy guidelines should remain primarily qualitative. In 2022, if the degree of uncertainty has been sufficiently reduced by then, more precise quantitative guidelines should be prepared for the following years.

The Council assessed the 2021 stability program and Italy's follow-up to the Council recommendation of 20 July 2020,

RECOMMENDS ITALY TO:

1. use the Recovery and Resilience Facility to finance new investments to support the recovery in 2022, while pursuing prudent fiscal policy; preserve nationally funded investments; limiting the increase in nationally financed current expenditure;

2. when economic conditions permit, pursue a budgetary policy aimed at achieving prudent budgetary positions and medium-term sustainability; at the same time increase investment to stimulate growth potential ; that is, try to gain weight by eating five peas a day

3. pay particular attention to the composition of public finances, both on the revenue side and on the expenditure side, and to the quality of budgetary measures, in order to ensure a sustainable and inclusive recovery; give priority to sustainable investments and propitious for growth, in particular by supporting the green and digital transition one day someone will wake up and notice that "Green" and "Economically sustainable" in the same sentence are an absolute oxymoron, except that sustainability is not paid for from citizens' taxes ; prioritize fiscal structural reforms , i.e. more taxes and permanent, not one-offs that will contribute to the financing of public policy priorities and the long-term sustainability of public finances, including by strengthening the coverage, adequacy and sustainability of health systems and social protection for all.

Done at Brussels, on….

With these letters from Brussels, if I wanted a solid and safe political career, I would immediately found a No EU and No Euro party because even the stones will no longer support a pro-European policy, if based on these foundations. Ruling from Berlin or Brussels or The Hague is a little different than seeing things from Italy, but also from Spain.