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the illusion of simple recipes – Corriere.it

The path seems simple: go quickly to a budget gap. More or less, the answer that almost all parties have in mind to give to the suffering produced by the hunt for energy prices that deeply affects the lives of Italians.

The government resists change. Europe repeats, again yesterday with the President of the Commission Ursula von der Leyen, that the rules of the electricity market do not work. Too bad that it is now a question of acting and not of analyzing. Since, moreover, Italy has been saying so to the Union’s partners since last November.

Diversion would allow immediate, short-term action. But it wouldn’t be without consequences. Changing the rules of the electricity market, and doing so quickly, given the anomalies that have contributed to the price spike, would have structural but not immediate effects. Although just saying so would already seem to cool the costs to a minimum.

But why is the government so reluctant to make a fiscal shift? A few tens of billions are allocated to public accounts and measures are taken. Easy to say less to do. This time economists, experts and professors will excuse us if, at the risk of trivializing, we begin by asking ourselves what we are talking about. And what is the budget gap?

Like any family or business, the State must also meet its income and expenses. Let’s say he announced to spend 100 in 2022, in the face of rising energy costs he will have to spend 130. Where to find this additional 30? A citizen or business would go to their bank and apply for a loan.

The state does the same, borrowing money but using a more complicated mechanism. It issues government bonds which it resells on the market. To investors to whom he says: I thought I was spending less, I’m going to find myself spending more, I have to make a budget deviation and I need you to lend me more money; buy my government bonds and I promise to pay you interest and return the money to you in a certain number of years.

The market, the investors, know that energy prices are the cause. But he doesn’t care much. They will be ready to lend us more money as long as the interest is paid to them and the principal is repaid. Except Italy already has a lot of debt. More than 2,700 billion. And we have made 180 billion diversions in recent years because of the pandemic, as Enrico Marro documented yesterday in the Corriere della Sera.

But for that very reason, we could continue to do so. Who’s stopping us? Indeed, those who manage the public debt know that if more and more money is borrowed, investors will in turn demand higher interest. Some states can afford to push the market less. Compared to them, we will have a higher cost of borrowing, that is, we will have to pay more interest to obtain our loans. The difference between the two levels is the spread. Which could develop if investors understand this is the direction.

Beyond the costs on the public budget, all this also means putting your future in hands that have nothing to do with Italy. In areas where speculation, as seen in other periods, there is no problem going against a country as long as it manages to make money. The gap would widen and the cost of our already high debt would increase.

It is no coincidence that the most lukewarm about the possible maneuver is also the most sovereign of parties, Brothers of Italy. A highly indebted country is a country that has far fewer possibilities to act according to its objectives. who has less sovereignty. The other less inclined party is the Democratic Party voiced by European Commissioner Paolo Gentiloni who knows very well that Italy will have to take part in the debate on the reform of the Stability Pact in the months to come. Pact which provides for strict limits on the debt and the deficit of the countries. And technically, the budget deficit is a request for Europe to increase the deficit.

Making the pact more flexible was one of the goals of all political forces and the Draghi government. But to start a discussion with an Italy still ready to put the rules under tension would be to arrive there under conditions of less force (technically a budgetary shift means increasing the expected deficit and must be asked of Europe).

Are we doomed to never make budget changes again? Being constantly hampered by high debt? Not far from here. it is a mistake to consider our debt as the main problem. As we have seen in recent years, we can handle high debt as long as our country continues to grow.

La real question that must be answered because debt is created. Relieving suffering from high energy costs is certainly more than enough reason. But how are you going to do it? With other contributions to the rain? Help every citizen and every business equally, both those who are suffering a lot and those who can withstand a hopefully short period of pressure? Still a bonus policy, which, as we have seen in recent years, is not even absorbed by all those believed to be beneficiaries?

Any fiscal deviation must be placed within a defined public finance framework. Which also means indicating coverage. And since we are talking about energy, also about rebalancing and saving on consumption. It would be useful, as we have already requested in recent weeks, for the political forces to indicate the type of budget law for 2023 that they intend to draft if they address the government rather than indicating individual measures.

Asking the current executive, like any other should be in office after September 25, such and such a measure without worrying about the other elements that make up the economic maneuver, not an index of good governance. Soaring energy prices tell us in painful and obvious ways that there are no shortcuts to dealing with it. We need short-term measures aimed at relieving citizens and businesses and long-term measures such as structural measures to be taken in Italy and in Europe. Foresight and appropriate economic policies. Perhaps the rarest commodity in an election campaign.

August 30, 2022, 10:06 PM – edit August 30, 2022 | 22:07

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