I’ll tell you the (few) good news from Minister Franco

1 July 20213 years ago babelfish

The interview given by the Minister of Economy, Daniele Franco, to Corriere della Sera read and commented on by Giuseppe Liturri

There are several interesting ideas detectable today in the interview given by the Minister of Economy Daniele Franco to Federico Fubini for the Corriere della Sera .

It starts with the discussion that will take place in the next G20 of finance ministers in Venice, all centered on the issue of taxation of large companies that operate on a multinational basis by exploiting globalization and digitization.

Franco's hope is that an agreement will be reached but his words suggest that everything is still on the high seas, even if "the climate has changed". It is not yet clear what the tax base will be, how it will be divided between the different states and what the rate will be. Speaking of which the US proposal for an effective minimum rate of 15% will be at the center of the table. In short, they start from zero or almost.

But it is on the issue of budgetary policy in Italy and in the EU that Franco draws lights and shadows, between obviousness and small leaps forward that let us glimpse some hope for the future. After wearily repeating the mantra of “prudent budgetary policy in the medium term”, with the attention that must now be devoted to measures to facilitate the exit from this recession, Franco confirms that the safeguard clause will also be active in 2022. Nothing new, except that it hides a relevant message that is struggling to make its way: the budget law that will be passed in the autumn will be able to allow a very large budget deficit, not subject to the Stability Pact, and will probably be the last. opportunity to do so. We must not let it slip away, after 25 years of primary surplus which have been the main cause of the country's low growth.

Regarding the rules that will return, Franco limits himself to hoping that "a debate on the reform of the EU budget rules will reopen in the second half of this year" and that "a premature tightening of budgetary policy in Europe" will be avoided. And God forbid, we would like to comment. As you can see, we are still hoping for the obvious. An indication of the different sensitivities on this issue in European capitals. Recently, the Fiscal Board (the EU's advisory body on budgetary policy) clearly said that these rules must be reformed "urgently", well before they go back to being applied. Other than the timid wishes of Franco.

The minister is much more convincing when he affirms a basic principle and that is that "before embarking on a gradual consolidation process, we must return to pre-crisis trends in terms of real GDP growth trajectory, not just return to the GDP level of before the crisis ".

It is at the point where GDP would have been without the COVID 19 crisis that we must look at before starting to talk about fiscal consolidation, not the simple pre-pandemic level of GDP, as has been repeatedly stated by representatives of the Commission. This would mean significantly delaying any tightening of the budget.

Also appreciable is the passage in which Franco states that the new rules must “avoid pro-cyclical effects” and be “reasonably simple to manage and enforce”. A way like any other to point out the disaster caused by those rules in the previous crisis of 2011-2014: pro cyclical, cumbersome and complex to manage and enforce.

In saying that “when we overcome the crisis they will be restored. And we will discuss if the rules will be the same as before or if they will be changed ”, Franco returns disappointing. There can be no "if" about the old rules, which must be crossed out without ifs and buts. The debate will have to focus exclusively on the definition of new rules, not on a choice between the old and the new.

As you can see, there is some good news, but you have to look for it with the lantern in a sea of old tools that are now useless.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/vi-racconto-le-poche-buone-notizie-arrivate-dal-ministro-franco/ on Thu, 01 Jul 2021 11:39:38 +0000.