Here are the real tensions between the Government and the EU Commission on the Recovery Plan
What is really happening between Rome and Brussels on the Recovery Plan? All the reasons why the European Commission is mumbling about the moves of the Conte government. The in-depth study by Giuseppe Liturri
In these hours, the big media tell us about heated discussions in Rome on the Recovery Plan, which could constitute the casus belli for a government crisis.
This is what transpires from the tissue papers expertly conveyed by Palazzo Chigi. What they don't tell us is that the real conflict is not in Rome, but between Rome and Brussels. But to have evidence of this, it would be necessary to have studied the hundreds of pages of documents published by the Commission from May 28 to today . Those who have done so cannot fail to have evidence that the projects included by the Government in the drafts circulated up to now, could arouse many perplexities, as indeed is happening, if compared with the guidelines defined by the Commission.
Hence the concern of the Government which, if it did not already present a plan consistent with those parameters, would find itself undergoing a clear and resounding rejection during the two months following the deadline of 30 April (scheduled for the presentation of the plans) in which the Commission will have to formally evaluate them.
A few eye-catching bureaucrats from Palazzo Berlaymont are pointing out to the technicians in via XX Settembre that, for example, the generous 50% tax credit for "industry 4.0" investments that the Government intends to finance with the Recovery Fund, is poorly compatible with bombastic “digital transition” goals written by the Commission.
Perhaps it is not enough to connect a machine to the company network and allow remote assistance to benefit from Union loans (because this is always the case, not "aid"). With the aggravating circumstance that this benefit has existed in Italy since 2018 (so-called hyper amortization). Where is the revolution, they ask in Brussels?
To hide the embarrassment of the contents, the attention is focused on the numbers. And here we are at the level of Mussolini's tanks; always the same, but move from town to town for each parade.
During the week, after the publication of the guidelines for the draft of the National Plan for Recovery and Resilience (PNRR) to be submitted to the Council of Ministers which could be held on Tuesday 12, there was a thunderous explosion of "additional funds".
To the famous check for 209 billion, with which the legend tells that Conte returned from Brussels on 21 July, in the latest draft of the PNRR, about 20 billion from the Development and Cohesion Fund (FSC) were added, which is not not a new tool at all.
Almost in the same way, the share of loans from the Recovery and Resilience Facility (RRF) destined for additional investments (therefore not already included in the public finance balances) should rise to around 60 billion from the previous 40 and, specularly, should fall from 87 to 67 billion in loans to finance planned investments. In fact, the total will always have to stop at 127 billion. There is not an extra penny. We only recall that Matteo Renzi would have liked the entire amount to be dedicated to additional investments but, as pointed out in the guidelines, “ The division between existing projects and new projects takes into account the sustainability of the public finance framework. In fact, the burden of excessive debt must not be borne by the new generations ”.
Our debt will increase by “only” 60 billion instead of 127, since the remaining 67 will be debts that we would have contracted with private investors by issuing BTPs. What they do not tell us is the still pending risk that Eurostat requires that the contribution that Italy has already provided to the EU budget to allow the reimbursement of the bonds issued to pay the subsidies – about 51 billion, i.e. 13% of 390 billion – is calculated immediately as debt . We would like to announce that this theme, still hidden, will be the next “discovery” of the big media.
We understand the reader's disorientation in this whirlwind of numbers, but the devil is hiding in the details and therefore must be laid bare with painstaking patience. There is not a cent more on the contrary, the risk of losing something on the way is high.
When you have to face a long journey – and such is the attempt to bring Italy's GDP back to pre- Covid levels or, better still, pre-2009 – what matters is not the fuel that we would have been able to buy anyway, but the additional availability that we can get. The greater the latter, the closer we will be to the goal, all else being stopped. That is the real and only stimulus provided to the economy. This is why the 196 billion of the RRF, to which are added another 14 billion of instruments linked to the multi-year budget 2021-2027, for the purposes of stimulating growth are only 143 billion (69 of RRF subsidies, 14 of other instruments and 60 of loans). Even the 20 billion of the FSC (to which the European structural funds are added), destined since 2003 to finance strategic projects , both of an infrastructural and intangible nature (80% in the south), are a simple advance of funds already foreseen , since the previous 2014-2020 programming already provided for about 55 billion.
All this deployment of forces should produce 3% additional GDP in the final year of the plan (2026) compared to the trend scenario of public finance. About 50 billion. Too bad that in 2020 about 170 billion of GDP literally evaporated and we hope that it is only that, given the modest growth prospect of 2021. Not bad for a Plan for Recovery.
But these prospects still face the trap of the recessive effects of the Stability and Growth Pact. Few remember that Italy is still at risk of "significant deviation" and violation of the debt rule and that the procedures of the Stability Pact are not suspended : in fact, the communication of the Commission of last March 20 with which the clause was activated safeguard ( general escape clause ) keeps the Stability Pact active, so much so that on May 20 the Commission drafted a Report according to article 126 (3) of the Tfeu, concluding that the rule of the medium-term objective of the deficit is not satisfied and that there is insufficient evidence to declare us in default of the debt rule.
What will be the recessive effects of a debt / GDP that will have to return from 158% to 133% by 2031 due to primary surpluses?
Finally, we remind you that the Government has seen fit to inflate the PNRR with investments of 209 billion, compared to 196 financed by the RRF, since "the comparison with the European Commission regarding their full eligibility could lead to a reduction in the amount of authorized resources" . The guidelines published by the Commission on 17 September are in fact an authentic obstacle course littered with elements of discretionary evaluation that give enormous power to those who will evaluate the projects. The Brussels bureaucrats have even indicated the number of pages that the documents must have.
The negotiation will be very tough and the numbers of these days are still at risk. Of cuts or blackmail.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tensioni-governo-commissione-ue-recovery-plan/ on Sun, 10 Jan 2021 11:55:16 +0000.