How the Pnrr is doing: facts, numbers, lies and scenarios
The point on the Pnrr. Giuseppe Liturri's in-depth analysis
Two days full of news and updates to understand the progress of the Pnrr. On the one hand, on Thursday the minister Raffaele Fitto presented the half-yearly report on the implementation of the Pnrr, taking stock of the situation on spending and the achievement of the objectives; on the other, the Commission has grasped at straws to tell European citizens about the "wonderful and progressive fortunes" that await us thanks to the Next Generation EU.
Fitto is involved in the titanic effort of bringing to port a vessel that has leaked from all sides since day one and has good reason to be proud of the results achieved so far, which, honestly, few would have bet on. He obtained a significant revision of the Pnrr, has collected four installments (including those collected by the Draghi government) and is about to collect the fifth. Struggling in a sea of bureaucracy, an essential feature of NextGenEU.
The Apulian minister defended with teeth the 45 billion of expenditure out of the 194 of the entire Pnrr, from the accusation of being a small sum compared to the final objective. Criticism focused on the alleged small amount of spending compared to the final objective, but missed the point.
In fact, the mistake is to think that there is a linear progression in spending and that therefore we will never reach 194 billion in 2026. But with thousands of tenders and tenders assigned it is normal that the initial phase sees a lot of paper and little money circulating and , subsequently, as the construction sites progress, more money and less paper will circulate. The progression will be much faster, without however guaranteeing any certainty that the final objective will be achieved.
But the point here is to answer the question: are we spending efficiently and effectively? Or is the rush, in addition to the objectives set by Brussels, giving birth to blind kittens? And on this Fitto can do little or nothing. It will perhaps bring to port a boat full of projects that in a few years we will call "waste" and which will enrich supply chains that very often end in China and its surroundings.
Furthermore, the Mef will have to manage a problem of mismatch in the financial inflows and outflows linked to the Pnrr, which we will illustrate later.
Instead, the reassuring staging of “A Success Story” took place in Brussels on Wednesday. This is the triumphant description of the Next Generation EU by EU commissioners Paolo Gentiloni and Valdis Dombrovskis, who presented the report on its progress at the halfway point.
The Recovery and Resilience Facility (RRF, which constitutes the largest part of the NextGenUE) is currently celebrating 3 years since its (tormented) launch and is moving towards the next 3 years, which will be decisive in determining its success or failure. failure.
Words that literally clash with the merciless description of the actual implementation of the RRF that the Financial Times had provided the day before, in a long and detailed report. Not to mention the doubts we have raised since July 2020, when it was rumored that Giuseppe Conte had returned from Brussels with a check for 209 billion under his arm.
Today the Commission claims – without fear of going beyond the ridiculous – that the payment of 225 billion in the three-year period 2021-2023, out of an initial commitment of 723 billion between grants and loans, has started the rapid "transformation of society". Just 31.1% and, even more sensational, only 1.41% of the 2022 EU GDP at current prices. Just an average of 0.47% of GDP per year. What macroeconomic impact could these telephone prefix numbers have, we have asked ourselves for years and are being asked today on the Ft ? In the order of a few modest decimals. This is what was admitted yesterday by the Commission, which noted that it had released out-of-scale estimates and, in order not to miss anything, had the audacity to argue that those pennies reduced the spread.
One fact above all: Gentiloni admitted that the impact on the EU GDP in 2022 was 0.4 points more than the scenario without RRF. Against an initial estimate of 1.9 additional points. Almost five times compared to reality. But it will get better. In fact, it estimates that the additional growth in 2026 in the entire EU will still be equal to 1.4 points. Numbers written on ice.
Lastly, last November, it was the Parliamentary Budget Office itself that downsized the figures. Which remain, in comparison with Goldman Sachs' projections reported by the FT, still exaggerated.
The PBO has certified that the cumulative +3.6% – forecast by the Draghi government and corrected to 3.1% by the Meloni government – at the end of 2026 is a chimera. In the best case scenario we could read a cumulative increase varying between 2.3 and 2.6 points, of which 1.8/2.0 spread between 2024 and 2026. So everything is still in flux.
This is in the best case scenario, because it could even drop to 1.3%. Accumulating that additional growth at the end of the period means recording annual increases of "zero point". In particular, in 2024 the PBO attributes to the Pnrr an impact of 0.8/0.9 points of GDP. Since this is the entire growth expected for our country, can anyone maintain, while remaining serious, that all of Italy's 2024 growth will be generated by Pnrr investments?
Aware of this situation, Gentiloni put his hand forward by stating that "I don't believe too much in this modeling. We must be aware that these reforms and investments are needed for the future of our country as well as for the future of the whole of Europe." We have given up on impact forecasts and believe in the "sol of the future", like, in their time, Stalin's USSR or Mao's China.
Forecasts that leave the time they find, also in light of what Italy has collected so far and actually spent. It is again the PBO that lets us know that as of 11/28/2023 the recorded expenditure amounted to 28.1 billion (which rose to 45 with the final balance provided on Wednesday by Fitto), against 101.9 billion collected at the end of the year and another 10 .6 required for the fifth instalment. We thus reach a self-evident conclusion.
So far, the billions lent (let us never forget, even subsidies must be repaid via contributions to the EU) by Brussels have mainly served to reduce the financial needs of the public sector and avoid having to resort to the market by issuing securities. When, in the next 3 years, the construction sites reach full capacity and, hopefully, close, the Mef knows that they will have to issue bonds (at hopefully lower rates than today) because the revenues from Brussels will certainly not cover the expenses to conclude the investments.
Let's be clear, here we are not discussing the undeniable and welcome increase in public investments, which collapsed in the last decade under the ax of austerity imposed by the EU. The point is the verification of the spending destinations and the related conditions. It is the latter that determine the incremental impact on GDP. It's not enough to spend. If goods such as those for the energy and digital transition are predominantly of foreign origin, it is good to remember that imports have a negative impact on GDP. This is the reason for the modest growth.
But Gentiloni and his tutelary deity Dombrovskis were not afraid of verging on the ridiculous when they blamed Russia for the modest impact on growth. Unbelievable. It was not the fault of an already initially modest expenditure, split up and slowed down by a hastily set up bureaucratic superstructure, towards low multiplier spending destinations. On the FT they put their finger in the wound by highlighting that significant portions of investments included in the RRF would have been carried out by the member states in any case and the RRF only served to change the financing methods. These were works already financed with national funds (for Italy 55 billion out of 194), which therefore cannot generate additional growth.
However, there is one result that the Commission can certainly boast and on which we can agree. As a voice from the sen escaped, the two EU Commissioners, among the results achieved, boasted of having finally "been able to have an impact" on obtaining the implementation of the country recommendations and the EU investment priorities which, otherwise, no one would have ever respected.
It took ten years, but they finally did it. The country recommendations have come out of dusty drawers and, under penalty of non-disbursement of the funds, must be strictly respected.
A blackmail weapon, in short.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/come-va-il-pnrr-fatti-numeri-frottole-e-scenari/ on Sat, 24 Feb 2024 08:49:46 +0000.