All the costs of the pandemic (and the government’s phony cover-ups)
How much has the pandemic cost so far? How much new debt has been contracted to support the torrent of chaotic legislation that is still in sight today? Here are all the accounts in Gianfranco Polillo's analysis
How much has the pandemic cost so far? How much new debt has been contracted to support the torrent of chaotic legislation that is still in sight today? It took a painstaking patience to recover the basic material and arrive at an initial evaluation: one that cannot fail to surprise. The total cost of the entire operation has so far amounted to 200 billion and 245 million. Much has been spent, this year alone, to cope with the emergency. And without considering the burden of the "restorations quater" decree (DL containing urgent measures related to the epidemiological emergency from Covid-19) still not reached Parliament, to cope with which a further exceeding of the spending ceiling for 8 billions.
The disheartening conclusion, therefore, is that Italy has already gambled the entire financing of the Recovery Fund, of that Next Generation EU, which was worth 208.8 billion and which was to be destined, as its name suggests, to trace a line for the future, to allow the new generations to cope with the weight that that debt would entail. And instead: horned and mazziati. They will have to take care of it. And for well over 127.4 billion nominal. Since even a good half of the 81.4 billion in non-repayable subsidies will still have to be repaid due to higher European taxes or increases in annual contributions to the Community budget.
But it was just that. A significant part of the increased debt, amounting to around 60 billion euros, was hedged in creative ways, which were the envy of the old stables in Greece, before the great crisis. The higher revenues that will derive from the greater growth of the two-year period 2022/23 are discounted for approximately 33.4 billion. While for the remaining 27 billion and broken, to be used on the funds of the Next Generation EU. Neglecting, however, the small detail that no one is able to guarantee that those funds will actually be there. Not so much for the Recovery fund : because in the end it is foreseeable that an agreement will be found. But for that to spend in advance the proceeds of a growth rate that no one is able to predict. Evidently the old proverb “don't say a cat if you don't have it in the bag” is no longer fashionable in the austere rooms of Via XX Settembre.
But is it at least a "good debt"? Has Mario Draghi's lesson been understood and assimilated? Or was that other nothing but a renewed “useless sermon” in the wake of Luigi Einaudi's tradition? A breakdown of the data can provide some indication. Current expenses amounted to approximately 130 billion. 64 percent of the total. Those in capital account, equal to 55.4 billion: 28 per cent. The total tax relief of 15.6 billion: the remaining 8 percent. Therefore it cannot be said that worries about a possible future have dominated. The sums allocated to the higher capital expenditure were, in fact, even lower (55 against 60 billion) than the phony hedges.
To these figures, which are in themselves disheartening, there is little to add. 50% of the commitments relate to the current year, for a total of over 100 billion euros. Next year, the decisions already taken will weigh around 56 billion and another 47.5 in 2022. While for 2023 a slight surplus is expected (revenues should be greater than expenses) of around 3.5 billion. Time will tell. The budget law, as already mentioned, mortgages a part of the higher revenues deriving from the more robust growth expected for 2022 and 2023. If all goes as it should go, but there is doubt about it, that is to say according to the forecasts of the Nadef, in the first case, the mortgage should cover about 40 percent of the expected higher income. While for the following year this percentage should rise to 79 percent.
Talking about a more than conservative maneuver is all too obvious. But if we pass from the pure quantitative aspect to a more qualitative profile, paradoxically the negative judgment is strengthened. Consider only the tax item: a Cinderella in the distribution of possible resources, with a percentage equal to just 8 percent of the total available: 15.6 billion euros. The abolition of the safeguard clauses for VAT and excise duties will produce a lower revenue, in 2022 and 2023, equal to 45.5 billion. An advantage that was almost canceled out by the increase in other taxes and duties, amounting to almost 30 billion. Choices that went against the tide of European requests.
In the various analysis documents on the Italian situation, the European Commission had repeatedly requested a reduction in the burden of personal taxes, especially Irpef and tax wedge, to be offset by an increase in indirect taxes on assets and properties. The government, as can be seen from the data provided, has instead chosen the opposite path. In the end there will still be a small reduction in the tax burden, but it will be minimalist. According to projections by Nadef itself, it should decrease from 42.2 per cent in 2021 to 41.9 per cent in 2023. A trifle: with a zero impact on the possible future growth rate of the economy.
Have we therefore been able to reconstruct that “framework in which long-term objectives are intimately connected with short-term ones” as Mario Draghi exhorted in his speech at the Rimini meeting? The answer can be found in a debt that not only grows at a frenzied pace, but in Europe is now within a span of the Greek one, which increases much less (14 points). With a growth of over 24 points, compared to 2019, second only to Spain, which sees its debt increase, in the same period, by 28 points. But what gives more to think about is its bad quality. Nothing to do with that "good debt", which it would also be desirable to increase.
With the data from the European Commission, a discrepancy has existed for some time. For Nadef in 2022 the debt-to-GDP ratio in Italy will be 153.4 per cent. For Brussels at 159.1. A valuation difference that weighs in at over 100 billion euros. Which is close to the debt amount of the Recovery Fund: those 127.4 billion that represent the Italian endowment. To be added, if necessary, another 37 from the EMS, should it be necessary to request them. What, at this point, to be excluded not for implicit conditioning, which does not exist, but to avoid an unsustainable financial burden. In this case, in fact, the Italian debt would rise by over 9 points on the 2021 GDP. Reaching the peak of 165-170 percent, depending on the basic forecasts considered. Again the edge of a precipice, towards which Italy, without the slightest awareness, seems destined to run.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tutti-i-costi-della-pandemia/ on Tue, 01 Dec 2020 06:00:03 +0000.