Keep your money: Italy's aid puzzle

Italy fails to take up EU largesse, a study from think tank Vision explains. 
Article for the Economist.

 

AS ITALY’S budget for 2018 wends its way through parliament, the European Union and the Italian government have been trading barbs in what has become an annual ritual. 

The Commission’s vice-president, Jyrki Katainen, recently in effect accused Prime Minister Paolo Gentiloni’s coalition of lying about the true state of the economy; its finance minister, Pier Carlo Padoan, called that “intolerable”. True, Italy’s new budget is mildly expansionary: it aims for a deficit of 1.6% of GDP whereas the government had estimated that, if nothing were changed, it would shrink to 1.0%.

But Italian ministers stress that the revised figure is still well below the EU’s ceiling of 3%. The Commission, though, worries that Italy is not doing enough to cut its huge public debt (133% of GDP at the end of last year). Curiously, while protesting at Brussels’ refusal to let them spend more of their taxpayers’ money, the Italian authorities persistently fail to claim billions of euros from the Commission. Excluding the cash Brussels had paid up front, by November 15th, more than halfway through the period of the EU’s current budget (2014-20), Italy had received barely 1.2% of what was due to it from the Commission’s regional development funds. Apart from Austria and the Netherlands, rich members that get very little aid, Italy had the worst take-up rate of any country bar Croatia, which is new to the EU’s mechanisms. Italy’s rate was below the EU average of 5.3%, but even further below that of poorer southern European states including Greece (6.0%) and Portugal (10.6%). If Italian bureaucrats had been as efficient as the Portuguese in devising suitable projects, they could have pumped an extra €2.2bn ($2.6bn) into the economy over the past four years. The bulk of that money would have gone to the south, where investment is most needed.

According to Svimez, a government body, income per head in the Mezzogiorno, comprising the southern mainland, Sicily and Sardinia, is 11.3% lower than in 2007. There are several reasons for the low figures; for a start, the commission’s schemes tend to be highly back-loaded, with payments spread over a long period. But much of the blame for the low take-up of funds should also be laid at the door of inefficient southern Italian regional administrations. Also, most of the programmes require additional funds from a country’s central government. Combining all the funding on offer from Brussels with the top-up money Rome has to provide, the Mezzogiorno is due around €50bn from the EU’s current seven-year budget.

A study published last month by Vision, an Italian think-tank, calculated that if the money were just handed over to the inhabitants of the south, their incomes would currently be growing by 1.7 percentage points more than those of their fellow Italians.

 

Snapshot from Newspaper the Economist

Economist ItalyFails Edited 2Dic171

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