Because Brussels will have some nasty surprises in store for us
The recommendations of the EU Commission? It is as if during the Second World War some general still proposed to use the rifles of '15 / '18 and to dig long trenches along the Piave line.
The EU Commission intended to contribute to the celebrations for the Republic Day in its own way: by publishing its usual spring package of the European semester, in which they stand out with the proposals for economic policy recommendations for member states, to be adopted by the Council .
The usual ritual that has been repeated since 2011, when, with the regulations of the two-pack and the six-pack, accompanied by the treaty on the "fiscal compact", the architecture for the coordination and surveillance of the budgetary policy of the countries was completed. EU.
Nothing new, we said, were it not for the epochal revolution that has happened in the meantime:
- It is now recognized that those rules are pro-cyclical and aggravate the problems rather than solve them.
- The economic crisis from Covid 19 is imposing expansive budget policies everywhere.
On the other hand, what happens in Brussels? He re-proposes his reports , as if nothing had happened.
It is as if during the Second World War some general still proposed to use the rifles of '15 / '18 and to dig long trenches along the Piave line.
On the other hand, it could not be otherwise. The procedures of the Stability Pact continue to operate in all their fullness. There is only the safeguard clause, activated in March 2020 to make the difference and allow a temporary deviation from the achievement of the medium-term budgetary objective. Nothing more. And therefore the weary liturgy of the report issued by the Commission must continue.
Moreover, on Wednesday Commissioner Paolo Gentiloni , accompanied by his "tutor" Valdis Dombrovskis, disconsolately admitted that – even if the Stability Pact is harmful and not usable in the future – it will be very difficult to find consensus to change those rules. In fact, in the official documents published on June 2 there is not even a trace of a future debate on their revision.
The Commission's orientation foresees that the safeguard clause will remain active until the pre-Covid level of GDP is recovered. Which, for some countries coincides with the end of 2021 or the beginning of 2022 and, for others such as Italy and Spain, it means waiting at least until the end of 2022. It will therefore be the budget law for 2023, to be passed in autumn 2022, that will have to conform to the old parameters.
In the meantime, the Commission allows the fiscal policy to be still expansionary in 2021 and 2022 but, especially for countries such as Italy, characterized by a relatively high level of debt / GDP, maximum attention must be paid immediately to the containment of current spending and leave to the Next Generation EU the role of (sluggish) driving force of investment spending.
Almost all countries violate the deficit rule (24 out of 27), many others violate the debt rule (13 out of 27) but, given the particular economic situation, for none of them the Commission considers starting with an infringement procedure.
12 Member States were subjected to an in-depth review, obviously including Italy , which is one of the three countries that show excessive macroeconomic imbalances, and whose report focuses particularly on the return path of public debt. And the recipe is still the same (bankruptcy) that bent us at the beginning of the last decade: primary budget surplus. Except realizing that it has heavy recessionary effects and pushes away the goal of debt sustainability.
All growth prospects are entrusted to the NGEU, ie public investments in the order of just under 2 percentage points of GDP per year until 2026. The minimum necessary to bring us back in line with the spending of our European partners, certainly not how much desirable to really relaunch the country.
The EU does not intend to retreat a single millimeter on the path of orthodoxy in terms of public budgets and, just to put the record straight, it affirms the policy of a "prudent" budget must be pursued "as soon as economic conditions permit" .
The last recommendation for our country is the manifesto of austerity that awaits us: “… favor the structural budget reforms that will contribute to the financing of public policy priorities and to the long-term sustainability of public finances…”. The "priorities" will only be met through the capacity of the budget. Article 81 of the Constitution in purity. Already the April Def had offered disheartening signs that we were headed down this road. Now the Commission confirms everything.
Granted and not granted that in the next 18 months we will be able to relaunch our economy, what awaits us after is already marked, does not promise anything good and, above all, there does not seem to be any concrete prospects for improvement.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-bruxelles-ci-riservera-bruttissime-sorprese/ on Fri, 04 Jun 2021 08:13:24 +0000.