Because (unfortunately) the EU economic policy will remain asphyxiated
The analysis of the economist Gustavo Piga
The European Commission last week published its analysis on the positioning of European fiscal policy in the context of Covid, an important economic document. The data are undoubtedly "massaged" to make people perceive a positioning in support of the EU economy, which certainly took place in 2021 during the second peak of the pandemic but which instead sensationally lacks appeal for the following years (the report stops to 2022), when it was most needed to restart a stunned, pessimistic, fearful economy. But the data can be massaged up to a certain point and there is no doubt that the truths eventually manage to come out, thanks to what is contained in the report itself.
Truth number one: Europe's fiscal position is less growth-oriented than the US's. The cumulative fiscal support in the two federated areas is, according to the Report, greater than about 3 percentage points of GDP in the USA. But, the text then reads, the data reported for the US "for 2022 could further increase if the" American Jobs Plan "and the" American Families Act "proposed by the Biden Administration were adopted, since they are not included in the calculations ". And as the probability of adopting these further expansive American plans is very high, the gap between European attention to employment and production compared to that of allies across the Atlantic will reach an inexplicably worrying level. If Biden wants with this attention to the suffering of the people to erase the risk of a return of anti-democratic and divisive tendencies, there is no reason why Europe should not do the same to cancel the ever-present specter of anti-Europeanism.
Second truth: the European fiscal position for 2022 will not be expansive. Obviously, the Commission tries to highlight however how the fiscal positioning of the Member States is in support of the economy. But here too, the data and some significant phrases prove otherwise. The graph below, in addition to confirming effective aid to European economies in 2020 and 2021, also states that in 2022 there will be a similar "fiscal expansion". The curious reader will ask the meaning of this comment, in the light of the histogram for that year in the negative area. The mystery is solved when we read that the European Commission intends expansion compared to previous years the one that does not take into account aid during the pandemic: so yes, we are (very little) more expansive in 2022 than the (not very expansive) position before -pandemic of 2019; but compared to 2021, going to include aid to fight Covid, we are actually witnessing a fiscal restriction of significant proportions.
And this is confirmed by the passage in the text which reads as "in 2022 the public deficits are destined to decrease sharply, while the recovery strengthens and the temporary measures implemented during the pandemic are withdrawn". The graph shows with dots the position of the GDP deficits of individual countries in 2021 and with rectangles the deficit on GDP (depending on the type of deficit indicator chosen) in 2022, clearly and significantly lower. That is, it is believed that the European patient of 2021 in 2022 will be completely recovered and able to get by as in 2019: how much myopia in the face of the greatest aggregate shock since the war!
Third truth: Italy's fiscal position for 2022 will be the most restrictive of all in terms of its impact on growth.
We cannot end by not wondering what the Report on our country says. And here things get even more dramatic. This graph mercilessly illustrates the conditions under which Italy will emerge from the pandemic in 2022: last among all EU member states in terms of economic performance, even still in decline.
We must ask ourselves how it is possible that once again Italy is showing itself to be a loser, enveloped in a further economic crisis that not even Recovery is able to cancel. It will be useful to start by dissolving other tendentious hypotheses: it is evident that this sensational delay has little to do with the so-called (missed) structural reforms, which are a medium-term phenomenon, and that the answer must be found in the usual (lack of) support for the economy. given by public demand. And in fact, in another graph the European Commission shows how Italy in 2022 will have – together with Greece – the greatest reduction in public deficit on GDP of the whole area, a reduction that our Economic and Finance Document foresees to be even equal to 6 percentage points: almost 120 billion in higher revenues and lower expenses. Part of this reduction could have been avoided, by passing (and not canceling) part of the expenses for the 2021 emergency in greater public investments in support of the economy or lower general taxation.
The evidence is clear, again from the European Commission report. In fact, the case of Spain stands out, hit in 2021 like us by the pandemic, which will reduce its deficit by half of Italy, consequently obtaining 2 percentage points more in economic growth. Growth that will secure their Debt-GDP ratio and above all the political stability of the country, unlike ours. The synthesis of all this is the usual one: once again Italy loses an incredible opportunity to change Europe and Europe an opportunity to change Italy; for the better of course.
Article published on gustavopiga.eu
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-la-politica-economica-ue-restera-asfittica/ on Sun, 08 Aug 2021 05:51:08 +0000.