Will the mega-European economic stimulus plan be used well? Spain is skeptical, but Italy is showing its confidence. The two countries will receive nearly half of the 750 billion euros planned by Brussels to revive the European economy shaken by the Covid-19, via an unprecedented joint borrowing mechanism. Italy will receive 191.5 billion euros in the form of grants and loans, and Spain up to 140 billion. “We are aware that the EU is playing its future with the correct implementation of these funds,” Spanish Prime Minister Pedro Sanchez said on Friday, stressing that Italy and Spain were “key countries”. “We all have a responsibility towards European citizens who pay taxes to finance our national plan,” added Mario Draghi on Tuesday.
The European Commission has just given the green light to the plans of the two countries, which intend to invest money in ecological and digital transition as well as infrastructure. But in Spain, there are many criticisms. “These funds are oversold (…) and will not have that much impact on the economy,” said Fernando Fernandez, economist at IE Business School. The first payments are due in July but most of the funds planned for 2021 will probably not arrive before the end of the year, when the economic recovery will probably already be underway, he regrets.
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In addition, “the plan sometimes fails by a certain simplistic optimism, taking for granted that it is enough to have the firm intention to be greener and more digital for all our problems to be solved by magic”, estimated Angel de la Fuente, director of the Fedea think tank, in the daily El Pais. Because the deep problems of the Spanish economy are quite different: precariousness of the labor market, youth unemployment, education lagging behind and the retirement system in peril. Pedro Sanchez may repeat that his project includes “100 structural reforms”, these reforms are “at the margin, sufficient to obtain the agreement of the European Commission, but not to stimulate a real change in competitiveness in Spain”, judges Toni Roldan , director of the EsadeEcPol economic policy research center.
For Fernando Fernandez, “the investments come down to the energy renovation of housing, the electric car and 5G. This is very good, but it does not create jobs in the long term”. Many economists fear that these funds mainly benefit large companies while SMEs are the ultra-majority in Spain. Critics also point to the lack of political consultation around the plan, designed by Pedro Sanchez and his Minister of the Economy virtually without consultation with other political forces.
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In Italy, the perception is very different: “Super Mario” Draghi, considered the savior of the euro zone during the debt crisis, was called to the rescue to put in place the recovery plan, which had crystallized political tensions, even causing the fall of the previous government in January. “Draghi’s strong political commitment and leadership, together with generous grants and loans from the EU, may give Italy a better chance to implement its plan than before”, believes the former chief economist of the Italian Treasury Lorenzo Codogno.
If Rome has shown in the past inefficient in the management of European funds, the arrival of Mr. Draghi could be a game-changer, experts believe. The head of government appointed around thirty commissioners with special powers to resuscitate 57 infrastructure projects, bogged down in the twists and turns of the legendary Italian bureaucracy, and issued a series of decrees to simplify and speed up procedures.
A step “in the right direction, to unblock the start of projects and start investments”, believes Carlo Altomonte, from Bocconi University in Milan. “The problem of bureaucracy remains, but it seems that some obstacles can be overcome and some procedures streamlined”, hopes Lucia Tajoli, of the Polytechnic of Milan. The pressure on Rome is enormous: “If the Italian plan were to fail, it would call into question the entire European common debt policy,” says Carlo Altomonte.
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