Gustavo Piga – Italy’s Recovery and Resilience Plan and/or Fiscal Compact

Having learnt nothing in the past, the EU continues to impose its neo-liberal policies upon member states

Gustavo Piga is Full Professor of Economics at the University of Rome Tor Vergata

You will find the original version in Italian at Gustavo’s website

Sculpture by Angela Maria Piga

2022 will not be the year of the end of austerity for Italy. This may seem a puzzling statement, especially since it will be the year in which the first Recovery Plan funds will become available from the EU.

But it is precisely the Plan that constitutes the new armoury protecting the austerity initiated in 2011 with the so-called Fiscal Compact, an armoury that has crumbled in the face of the empirical evidence, with its destruction of jobs, businesses, well-being, security, equality and optimism. So much so that when the European Parliament censured its usefulness, no one found the courage, at the end of its trial period, to propose its inclusion in the European Treaties.

But what went out the door came back in through the window. Article 10 of EU Regulation 2021/241 (establishing the Recovery and Resilience Facility) states that the Commission may submit to the European Council a proposal to suspend commitments or payments if a Member State has submitted an insufficient “corrective” action plan in the presence of “excessive imbalances”, a language well known to legal scholars of austerity in European style.

So what one hand gives, the other one takes back. Do we want the Recovery Plan money? We will only get it in a context similar to that of the Fiscal Compact.

This explains why President Draghi (and his predecessor Conte before him) have been so quick to reassure Europe that, in the midst of the worst crisis in 80 years, Italy, instead of helping the weakest to recover through an expansive fiscal policy, will do the opposite, i.e. the usual austerity, for the next few years.

The numbers confirm this. After promising a deficit of 11.8% of GDP in April 2021, the deficit for 2022 will be 5.6% in December 2022: a cut in promises of higher spending and lower taxes of more than 6% of GDP, or 120 billion euro! Deficits that, we have promised in our 3-year plans, will fall towards the desired and  well known (by the devils of austerity) 3% in 2024.

And so if you wonder why Italy will be the country that at the end of 2022 will have further lost ground compared to others indutrialised nations from the pre-Covid 2019 levels (+1.8% compared to +3% in the eurozone and 7% in the United States) just look at Biden’s position, with deficits around 10% of GDP compared to the timid European ones of 3%: in terrible times like these it is with deficit-finance public investments that countries and their democracies are saved. But perhaps it is time to ask ourselves, even before asking how to stop austerity, how to restore democracy.

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