Italy is to receive EU aid soon, but its recovery plan could do more harm than good, Reuters reported on Thursday.
Italy, the EU’s third largest economy, has been more or less inert, which should make it the biggest beneficiary of the EU’s 750-billion euro recovery scheme. The Italian Government hopes the financial injection will help fix the country’s chronic economic problems and enable it to catch up with the rest of the EU in terms of growth. While the exact sum for each EU member state has yet to be decided, the Italian Government estimates it should receive some 209 billion euros from the EU coronavirus recovery fund.
Italy’s Prime Minister Giuseppe Conte said earlier this week that the EU coronavirus relief plan offers both an historic opportunity and an immense responsibility. The Government pointed out mid-week that the cash could help it double Italy’s economic growth rate, which would close the gap between the country’s north and the south and be of benefit to the nation’s birth rate.
Since some 60% of the money is to come in the form of affordable loans, Rome needs to invest the funds effectively. Otherwise, it will achieve little more than increase the country’s already excessive public debt. Should the Government invest the money efficiently, it could revitalize the nation’s economy. However, Italy has a less-than-stellar record when it comes to its use of EU funds and productive investment, according to Reuters. Between 2014 and 2020, Italy absorbed about 40% of EU funds allocated for EU projects.
Many of the obstacles to increased productivity and economic growth in Italy have little to do with lack of funds. Contributing factors widely cited include the country’s cumbersome bureaucracy and its sluggish justice system. Earlier this month, the head of the Bank of Italy’s Structural Economic Analysis Directorate, Fabrizio Balassone, warned that low productivity rates cannot be fixed just by higher spending.
Italian ministers have a list of plans worth some 680 million euros ready and waiting. These range from developing hydrogen-powered vehicles and better oil presses to new rail lines and digital laboratories.
Roberto Perotti, Professor of Economics at the Bocconi University in Milan, has warned that there is a significant risk that Italy will not be able to spend the money or that it might spend it on useless projects, pushing the country into a debt crisis in a matter of years.