The good governance of Draghi. Facts, numbers and comparisons

7 August 20222 years ago babelfish

The Italian economy and the latest provisions of the Draghi government analyzed by Gianfranco Polillo

It certainly cannot be said that Marco Travaglio's constant teasing has produced the desired effect. That of Draghi may not have been the "government of the best", but in any case the distances, in terms of results, with the double experience of Giuseppe Conte remain unbridgeable. Proof of the fact that Italy does not need superheroes. Normal men are enough. Provided that they are guided by that amount of self-interest and are resistant to the flattery of possible barkers, raised in the circus barnum of the "Big Brother".

With the latest decree law , the Government makes resources available to families and businesses for 17 billion euros. They will especially serve to alleviate the pangs of dear life. Of that cost inflation, which arose before the Russian invasion of Ukraine, but which became more severe after the 163 days of war. A few weeks earlier, another decree had allocated another 35 billion euros: more or less for the same purposes. An old promise from Mario Draghi (now is not the time to take away, but to give) has therefore been kept. The total, in the first eight months of the year, is 52 billion euros. Almost 3 points of GDP.

This would be enough. Which, however, is not the main dish. The most important aspect is the financial sustainability of the intervention. Contrary to what Matteo Salvini claimed (an overrun of 50 billion is essential), the accounts appear in order. Or rather they follow the course announced by the last Def. With net debt which should fall from 7.2 to 5.6 per cent. And the debt / GDP ratio from 150.8 to 147 percent.

Several factors have contributed to this success. Starting from a growth rate, in real terms, which has burned the darkest forecasts. The growth achieved so far, according to Istat certification, has been equal to 3.4 per cent. Well above the hypothesis of the end of the year (3.1 per cent) of the Def. And after last year's 6.6. Derubricated, always from those of The daily fact , to "simple rebound". Pure self-harm. For the sake of completeness, it should be remembered that Confindustria's forecasts for the current year did not go beyond 1 percent.

Inflation, in turn, while producing damage, has lent a hand. It has inflated nominal GDP and therefore reduced the ratio of public finance aggregates, whose values are related, in fact, to this greater magnitude. It also gave a boost to consumption, which however did not grow as well as it could. In any case, especially in the sector of durable goods and investments, it has pushed companies and businesses to anticipate their decisions, in order to obtain a price, albeit slightly lower, compared to the trend of the coming months.

In turn, although on the rise, interest rates were generally negative from a real point of view. That is, compare yourself with the inflation rate. Above all, the state budget benefited. Today on the secondary market a government bond (for example BTP Italia), with an average maturity of 6 years, yields 2.43 net, as interest. When the inflation rate is 7.9 percent. It follows that, for those who have purchased the security at par, at the time of issue, the capital loss is close to 11 per cent. A sort of small patrimonial for those who need to realize and make cash.

Despite these drawbacks, there are no free meals in the economy, but inflation has helped. But above all it was the ECB that has, so far, prevented spreads from growing that much. It was able to do so by continuing to buy Italian public debt securities, limiting spreads. Purchases which, in the last month, amounted to approximately 10 billion euros, thanks to the resources obtained from the redemption of the securities which had reached maturity and previously purchased as part of the PEPP (pandemic emergency purchase program).

At its discretion, the central bank changed the mix of previously tightly tied purchases. In this way he was able to help Italy, together (in any case much less), Spain and Greece. But only because the country's overall framework was such as to guarantee the required stability requirements. And perhaps, also because, at the helm of Palazzo Chigi he was the past president of the Institute.

It will be said: but Giuseppe Conte has done something else. Actually from the data it does not appear. Unless it is Eurostat's fault, in the 988 days of its government (from 1 June 2018 to 13 February 2021), the growth rate of the Italian economy was the most modest in the Eurozone. Minus 2.5 per cent on average, with the maximum fall of 9 per cent in 2020. Simple bad luck? Maybe. Except that the following year, Italy leapt to the head. Seventh position in the Eurozone, but second (immediately after France) among the major countries. In the first six months of this year, however, Italy also did better than its cousins from beyond the Alps.

In any case, another consideration, the refreshment of the two Governments (yellow, green and red) was decidedly higher. True: more than 105 billion euros. 80 percent in current spending, the rest in capital account. To which to add another 20 billion in lower revenues. A total of over 125 billion euros. Luckily, interest payments dropped slightly (savings of just over 8 billion), but the drain was massive. Could anything be saved? Maybe yes: just think of the citizenship income and the 110 percent super bonus for construction. The first in favor of the less well-off, the second for the richest. In both cases, legislation that will certainly not go down in history as a shining example of good lawmaking.

But with what consequences? The level of debt which, at the beginning of 2018, was equal to 2.4 per cent, at the end of that experiment, will reach 9.6 per cent. Stuff from the 70s. In turn, the debt / GDP ratio will even grow by 21.1 points, from 134.2 to 155.3 percent. True Guinness Book of Records, considering that such a high leap had never occurred since the end of the Second World War onwards. It is therefore easy to see what the philosophy of those two Governments had been. Spend without any worries, taking advantage of the green light allowed by Europe following the Covid epidemic. As if in the end those debts – which the Draghi government has already begun to do – won't have to be repaid.

And then the conclusion is easy. The Italians will also have been "a people of poets, artists, heroes, saints, thinkers, scientists, navigators, transmigrators", as Benito Mussolini had imagined in his speech to the United Nations. But to guarantee the good governance of the country, much less is enough. We do not even need "the best", as the daily newspaper makes fun of . It is enough to know things a little and behave accordingly, not losing sight of a more general interest.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/il-buon-governo-di-draghi-fatti-numeri-e-confronti/ on Sat, 06 Aug 2022 07:28:53 +0000.