Nadef, the Meloni government plays defense. Here because
Hope is not a strategy. All the numbers and prospects of Nadef. Giuseppe Liturri's analysis
“ Prudent, realistic, sustainable and responsible” with these words the Minister of Economy, Giancarlo Giorgett I, in unison with the Prime Minister, Giorgia Meloni, defined the approach of the budget law for 2023.
A number was expected on Friday that would define the entire perimeter of the government's economic policy for the next 14 months. And that number arrived and constituted the acknowledgment that the only short-term strategy possible for our government – for some time in the crosshairs of EU institutions and markets and expected at the start of the first economic maneuver – is to move within the path traced by the Commission. Any derailment would have been severely punished with methods we know well, having tried them on our skin between 2011 and 2012 and in the autumn of 2018 and Meloni was satisfied with the dish that passed the convent.
Mario Draghi's government had left a well-defined legacy in the Def Update Note released in late September. It was incomplete because it contained only the tendential part, that is, with the legislation in force, before the new government did anything. For 2022 and 2023 the deficit / GDP was 5.1% and 3.4% respectively. And from there the Meloni had to leave again. With the update communicated on Friday by the government we also have the programmatic part which foresees that the deficit / GDP for 2022 will rise to 5.6% and for 2023 to 4.5%. In both cases, these are variations largely in the wake of the deficit / GDP reduction path already promised by Draghi with the April Def. The programmatic indications of the new government must therefore be contained within half a point of GDP (about 9/10 billion) that can be spent in this last part of the year, and 1.1 points of GDP (about 21 billion) that can be spent in 2023.
If we consider that the "Aid-ter" decree at the end of September, to mitigate the impact of the energy crisis, provided for interventions for 13.1 billion, it takes little to understand that an additional 21 billion by 2023 will barely cover the needs of the first three / four months. And then? You cannot rely on "I hope I get along". Because hope cannot be a strategy.
It is true that the government's room for maneuver does not run out of the announced additional deficit, but it can widen to include new expenses or lower revenues all strictly financed by reducing other expenses or increasing other revenues. This other branch of the budget maneuver is still to be built and could bring some slight expansionary effect, because the expenditure and the income do not all have an identical effect on the development of the economy.
But the bulk of the expansion effect derives from the additional deficit and, as mentioned, in the given conditions Meloni was forced to marry with dried figs and so she did. We will never tire of repeating that, despite the safeguard clause of the Stability Pact being active, the Draghi government has been loyal in reducing the 2022 deficit / GDP in order to respect the path towards the medium-term objective required by the rules. EU. A budget surplus (yes, surplus!) Of 0.3% must be achieved through reductions of at least 0.6 points per year.
The 5.1% forecast by Draghi in 2022 and the 4.5% that Meloni intends to achieve in 2023 perfectly meet this objective. The difference is that Draghi in 2022 was helped by a GDP that grew beyond forecasts (+ 3.7% real), to which is added the effect of inflation. In fact, remember that the deficit / GDP and debt / GDP are calculated using nominal GDP. In 2023, Meloni risks finding itself chasing a decreasing GDP (+ 0.6% programmatic appears subject to numerous uncertainties).
In the coming days, the draft budget plan (Dpb) will resume the perimeter drawn up on Friday and will fill it with all the measures – albeit only sketchy – that contribute to determining it. That document will go first to Brussels and then to Parliament for a path (probably entrusted to one or more decree laws) that starts about a month later than the usual budget session times.
Could we have done more and better? We do not intend to join the party – however very crowded – of those who suffer from the performance anxiety of cutting judgments on a government, just 40 days before the elections and 10 days from parliamentary confidence.
We only point out that we must take into account the given conditions and, objectively, it is not a good time to go and tickle the markets which, for several months, have seen government debt as smoke in the eyes. Instead of offering herself to enemy fire by coming out of the trench in flip flops and a bucket on her head, facing certain defeat, Meloni preferred to survive, albeit suffering and won a few months of respite.
Hoping that mythological tools to contain energy prices, which exist only in the dreams of post-European Council announcements – such as roofs, corridors, attics and various basements – will become operational in April does not appear to be a promising strategy. Just as it does not promise anything good to wait for a new common European debt , which could reasonably only take the form of loans from the Mes, which would decree the political end of the government called to ask for them.
With this budget maneuver, Meloni has probably won a few months of honeymoon with EU institutions, markets, families and Italian companies. At the end, it must have convinced the former that it is possible to trust it and let Italy do a moderately expansionary fiscal policy, after a decade of failed austerity.
Or the choice will only be between failing with honor – challenging everyone to defend the country – or failing with dishonor.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/nadef-il-governo-meloni-gioca-in-difesa-ecco-perche/ on Sat, 05 Nov 2022 17:55:01 +0000.