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A gap has been opened in the majority that supports the government. Therefore, a latent political crisis that could burn until the next confrontational opportunity, with different scenarios and consequences for the economy and public finances.
by Dino Pesole
A gap has been opened in the majority that supports the government. Therefore, a latent political crisis that could burn until the next confrontational opportunity, with different scenarios and consequences for the economy and public finances.
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At the moment, it is not known if and when the tug of war between the leader of Italia Viva, Matteo Renzi and Prime Minister Giuseppe Conte, on the issue of the governance of the Recovery Plan, will degenerate into open disagreement and therefore both in a possible government crisis. The truth is that a fracture has opened in the majority that supports the Government, as suggested by the generalized distinctions about the true or presumed attitude of the prime minister to centralize decisions that are also emerging in the Democratic Party. Therefore, a latent political crisis that could burn until the next confrontational opportunity, with different scenarios and consequences that lie ahead for the management of the pandemic, for the economy and public accounts.
The scene of a short-term crisis
In the hypothesis that, once the Budget Law is approved, a true government crisis can open between the end of the year and the beginning of the next, the most relevant problem (with evident repercussions also in Europe) would focus precisely on the definition of the contents of the Recovery Plan, scheduled in Brussels for January / February, as well as in the actual execution phase of individual projects both in terms of portfolio reforms and investments in tangible and intangible infrastructures. Of course, everything will depend on what solutions the crisis may have, but if the scenario considered most probable (but undesirable by the same political forces of the majority) takes place, that is, if we go directly to early political elections, then all the way The implementation of the Recovery Plan can only be stopped for several months. The phase between the possible early dissolution of Parliament, the elections and the formation of the new government will not be less than three months, in the best of cases (it will depend on the result of the elections). In the event of a majority change, it seems unlikely that the new government will implement sic et simpliciter the economic policy strategy that constitutes the indispensable basis for the completion and full use of the 209 billion allocated to our country by the next generation of the EU. . All this should be re-negotiated at the European level, with considerable uncertainties about the actual time of the disbursement of the first tranche of European resources, indicated in the draft Recovery Plan at 24.9 billion for the whole of 2021.
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The unknowns of the markets
The reaction of the markets to such a rapid outcome of the crisis towards new elections must also be taken into account. It is true that the spread is now firmly in the safe zone (around 117 basis points) thanks mainly to the monetary stimulus already underway for more than 1.3 billion and an additional 500 billion to come. Current interest rate levels will remain extremely low for the duration of the pandemic, but this safety net may not be entirely sufficient to avoid the risk of a possible negative reaction of the markets to the explosion of a government crisis with uncertain exits. , considering that the public debt is about to reach a record figure of 158% of GDP.
The risks of “floating”
The situation is no less problematic if we move towards a floating phase, if not a stagnation of government action. It is quite clear that the unprecedented (and unrepeatable) opportunity offered by the enormous flow of resources coming from the European Union will have to be fully managed and exploited by a government that enjoys broad and shared trust by the forces. policies that support it. It is a precondition that not only concerns our country. Given that Italy is the largest beneficiary of the Recovery Fund resources, they could prove resilient and different especially from the more rigorous countries of Northern Europe. The funds will be found on the market by the European Commission itself, so the precondition is that the maximum political support of all member countries is guaranteed.
Commitment
If a kind of compromise is identified on governance, the control room, the role of individual departments and Parliament, the biggest question will concern the ongoing follow-up of individual projects. Also in this case, cohesion and sharing of the guidelines and the implementation path will be necessary, in order to avoid any objections in the follow-up phase by the EU Commission on the “progress” of the reforms and the investment plan, on the basis of which the annual credit tranches will be calibrated. The final judgment will correspond to the Commission and the Council, who will vote by qualified majority. And the so-called “emergency brake” could also be activated, a warning sent to the defaulting country, which could in fact suspend the process for up to three months for the disbursement of funds. All this taking into account that, if the Conte2 government manages to emerge unscathed from this complex political curve, the “white semester” in the Quirinal will begin next summer (Sergio Mattarella’s mandate will expire in February 2022), and therefore so it will not be possible to proceed with the prompt dissolution of Parliament. At that time (in case the crisis breaks out near the summer), a new government must be created. Once again, the unknowns and risks are just around the corner.
