How are Italy, France and Germany moving for the post Covid relaunch? All the differences
Gianfranco Polillo analyzes the different approaches of Germany, France and Italy in relaunching the economy
On the one hand, the gaffes of the neophytes of politics, on the other the deep and worried thoughts of the old leaders on what could be the immediate future. Giuseppe Conte, as usual, promised and reassured. Then speaking of Mario Draghi he tried to exorcise his figure, excluding any possible, even if distant, confrontation. I would have proposed him for the presidency of the European Commission, in place of Ursula van der Leyen – he revealed – but he did not accept. He was too tired. From the series: how to trivialize the most delicate problem of the European Union.
Romano Prodi, on the contrary, tried to identify the possible lines of march to get out of the swamp in which the whole of Europe has sunk. There are two main models that he sees on the horizon. The French one, on the one hand, and the German one, on the other. Models that discount not only economic differences, but the different political timing. For Emmanuel Macron "the elections are still a long way off", in Germany, however, "the country is mobilized for next year's elections".
Beyond the different political conjuncture, the differences still remain. French politics is entirely focused on supply: increased productivity and efficiency of the company, resources for the training of the new generations, investments in research and infrastructure. In other words, the massive use of all Colbertist paraphernalia to make France make a qualitative leap. There is no mention, however, of possible tax cuts, although in France the tax burden is the highest in the Eurozone. But now is not the time to let your guard down. Grandeur requires some sacrifice.
In Germany, the music is different, also in view (but not only) of the upcoming elections. Here the focus is mainly on supporting domestic demand: “With particular attention to the needs of families, sectors and businesses”. Choice justified by a "competitive capacity" so "high" as not to run any risk. We can therefore think about the next. And, at the same time, waiting without trepidation for the result of the polls.
Shareable analysis? Certainly. They are confirmed in the respective macroeconomic frameworks. The main difference between the two countries lies in the different structure of the current account of the balance of payments. Since 2007, the French one, which in the years preceding the crisis, showed a slight surplus, recorded a continuous deficit, albeit contained within values between minus 0.5 and minus 1 percent of GDP. In Germany, however, the surplus has been constant since the birth of the euro. After the high of 2016 (8.6 per cent of GDP) it fell slightly. But it is still a question of values higher than 6 percent. Moreover, theoretically outlawed, according to European rules.
The divergent trends of the two countries show, for France, a suffering on the ground of its productive strength. Nothing to worry about, but the unknowns of the post-Covid world push the elites of that country to move ahead. On the German side, however, the opposite is true. Its development model is export led. That is, driven by exports and based on the compression of internal demand, compared to the existing production potential. Its economic growth so far has therefore depended on the dynamics of international trade and on the value of the euro in relation to other currencies: especially the dollar and the yen. But the American currency, following the latest decisions of the FED – no fear for the eventual recovery of inflation – tends to devalue. So those spaces shrink. And then it is good to focus on the recovery of domestic demand.
It's Italy? "Our system – argues Prodi – without primary attention to innovation, research, education and the indispensable reforms of our public administration, is no longer able to survive". Again, it's hard not to agree. Following the same pattern, Italy is a cross between the French and the German models. It has an efficient engine, as shown by the strong current account surplus of the balance of payments (up to 3 per cent of GDP in recent years), but too small to drag the entire country. Hence the need for an economic policy that aims above all at growth, also using the flywheel of the internal market. The hard part is finding the right balance and the necessary tools.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/come-si-muovono-italia-francia-e-germania-per-il-rilancio-post-covid-tutte-le-differenze/ on Mon, 07 Sep 2020 12:40:28 +0000.