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A series of initiatives to turn around Italy’s shrinking economy appears to lack the broad scale needed to pull the country out of the doldrums, a draft of the plan shows.
The 74-page “Growth Decree” seen by Bloomberg points to a wide range of actions of relatively limited scope. With no fiscal room left this year and an economy struggling to emerge from a new recession, the populist government may be hoping a package of micro measures will be enough to do the job.
The draft outlines some 60 items, from energy incentives to a 100 million-euro ($112 million) fund to encourage first-time home buyers, to moves to protect the “Made in Italy” brand and tax breaks for companies that invest in new equipment. The plan is set to be discussed by the cabinet on Thursday.
“Italy needs a growth bazooka,” said Vincenzo Longo, an analyst at IG Markets in Milan, adding that the upcoming package looks more akin to trying to “kill a monster with a water pistol.” The country will need “about 30 billion euros to avoid a VAT tax increase next year,” he said.
One key measure aims at speeding up real estate sales from local municipalities to help the Treasury reach a target of about 18 billion euros in privatizations and other asset sales set in the 2018 budget law. Critics have called that target unrealistic.
Another section is dedicated to help for banks to get soured debt categorized as unlikely-to-pay loans off their books.
Business Concerns
Critics are already warning that Italy needs something on a far more ambitious scale to have the necessary effect.
"The growth decree, alongside the new decree to unblock construction projects, could make an impact only if it’s massive," Vincenzo Boccia, the head of business lobby Confindustria, said Wednesday.
The plan comes at a particularly dire moment for the euro-zone’s third-biggest economy, where a recession may have extended through the first three months of this year. The Treasury is due to update its outlook later this month and may have to cut its 2019 growth prediction from 1 percent.
The growth decree is “a mixed bag of micro measures which proved popular in the past and that the government is using again to tell businesses and international counterparts that it’s trying to counter the economic slump,” said Francesco Galietti, head of Rome-based political consultancy Policy Sonar.
Earlier this week, the Organisation for Economic Cooperation and Development urged action from Italy to take control of its fiscal situation and reduce public debt. Finance Minister Giovanni Tria responded by saying approval of the decree is needed “to contain the economic slowdown.”
The Paris-based OECD also said the government should reverse changes in early retirement rules, an initiative pushed by coalition member the League and backed by its partner in government, the Five Star Movement.
League leader and Deputy Prime Minister Matteo Salvini said he has no plans to rethink the reform, a key pledge from the 2018 national election campaign.
"If they ask me to go back on it, they didn’t understand anything," Salvini said Monday.