It will be a difficult year, 2019. A flagging international economy, thanks to the continuing trade and strategic conflicts between the USA and China, above all, but also between Trump’s USA and the EU. Widespread insecurity, thanks to the hotbeds of terrorism which continue to affect our cities. Serious social unrest, of which the migratory flows are at the same time both a consequence and a cause of new tensions. And growing concerns about the issues of the environment and the climate: “In 2019, let us prevent the Apocalypse”, is the summary of the cover of the “L’Espresso” magazine, in its last issue of 2018, in which it talks of “global warming, exceptional events, pollution”, all of which are matters of major economic and social impact about which “world leaders are showing complete indifference”, despite these being “a decisive challenge for the future”. “The year of reckoning” claims Maurizio Molinari, head of “La Stampa” (The Press) daily newspaper, in an editorial (30th December) in which he lists the key international political and economic challenges for democracy in a Great Britain, North America and continental Europe “weakened by inequalities, transformed into battlegrounds of a revolt of the middle classes and frightened by the risk of financial stagnation”.
Brexit, the crisis for Trump following the revelations of “Russiagate” and his ever more heavily criticised incapability of running a stable and forward-looking government, the difficulties of the traditional parties in Germany and the gradual demise of Merkel, the sclerosis of the EU institutions and the uprisings of nationalistic and sovereignist parties, from central and Eastern Europe to Italy – these are all key modern-day challenges, which one way or another will unfurl in 2019. How, nobody knows. There are fears of backward steps for liberal democracy, such as we have hitherto known and appreciated it. But also positive possibilities of reform. Overall, “The Western World remains the most active laboratory of new ideas on the Planet but can expect a pitiless reckoning thanks to its profound political crises”. The economy is thoroughly conditioned for this to happen. In a negative way.
“The next recession. How bad will it be?”, was the heading on the cover of “The Economist” as far back as October 2018. “The global economy is slowing down. And it will not be a locomotive to save us”, claims Klaus Schwab, the German economist and founder, fifty years ago, of the World Economic Forum in Davos which every year, at the end of January, brings together in the Swiss mountains the main world players of the economy and of business. So? “The reforms have failed. The duel is between those who accept this and those who refuse it out of fear. And we must combine all possible efforts to give a better alternative to the people who seek refuge in populism”.
We have reached crisis point: we are moving forward between turbulence and crisis and people can make out a new recession on the horizon, while the whole economy is involved in a giant, radical process of transformation which provokes discussion about social stability, economic cultures, productive choices, and consumption. An economic crisis is occurring alongside a structural metamorphosis. And there is growing general unease.
In Italy too, naturally. With an aggravating further two-fold factor: a more fragile and slow-paced economy than in the rest of the major EU countries (negative growth already in the final months of 2018, signalled even in the most dynamic areas of the country, starting with Milan and the Lombardy region in the leading sectors, such as cars, where sales are falling) and a government which, faced with the crisis, creates fear and generates expectations of “easy solutions” but is incapable of constructing long-term policies. “What is needed for a heated social body, is a cool government head”, is what was taught by the Censis Foundation of Giuseppe De Rita, as a rule of good government. Entirely the opposite of what is happening.
The President of the Republic, Sergio Mattarella, gave a sound interpretation of Italian unease, in his traditional end-of-year speech, on the evening of 31st January 2018. “There is security if everyone feels they are respected”, said President Mattarella. And he used a word rich in values, “community”: “Feeling part of a community means being aware of the things which unite us”, and we must refuse “the resentment, insults and intolerance which create hostility and fear”. “Security is created by guaranteeing the positive values of living together”. And security is also “employment and a more equitable distribution of opportunities”. A speech which was short (twelve minutes) and to the point. In which were also mentioned the values of Europe, of the central role of Parliament overshadowed by the squeeze on timeframes needed to approve the laws for the budget, and for solidarity, with an explicit criticism of the “tax on good deeds” – that is to say of the choice in the Budget law to cut into tax relief on IRES corporation tax for organisations in the “third sector” and no-profit companies (a highly disputed provision, on the part of all the caritative organisations, charitable foundations and the Church, so much so that they forced the government to promise to backtrack rapidly). An Italy which, in the words of President Mattarella, brings to the fore something altogether different from the intolerant or vulgar.
The President’s address was also a success in the media. On social media (more than three million viewings). And on TV (more than ten million Italians in front of their TV screens). These are figures which speak volumes about the widespread need for responsible authority and for institutions which can give reassurance and point to real prospects for a good life in the community, rather than fear and social alarm. Because Italians are truly worried. About the future. And especially about jobs and thus the futures of their children and grandchildren. One more sign of the need for sound prospects and a positive spirit of community.
This is also clearly indicated by the figures from a survey by IPSOS led by Nando Pagnoncelli on the “priorities of Italians” (Corriere della Sera newspaper, 4th January). For 75% of them, i.e. three Italians out of every four, “the economy is going badly” and “jobs” are the priority (the percentage for jobs reaches 82% in the South of the country). Welfare and care are the priority for a minority, albeit a strong one, 38% (these are the ideas upon which the government concentrated for its Budget law: citizen’s income and pensions). And immigration comes in at 37%, which means that it is considered an essential question only by just over one Italian in three. Security is at the top of the list for one Italian in four, and the environment barely 8%, less than one Italian in ten.
There is a second underlying feature, noted by IPSOS: the opinions about the crisis and about the emergencies are a lot more positive when they relate to the areas in which the interviewees live: at home we are reasonably content overall, but we are worried about Italy in general (the positive score goes from 70 in the North East to 47 in the Mid-South). There is a question of communication and perception, therefore.
In general, 39% of the interviewees consider that Italy is going in the wrong direction, 35% believe on the contrary that it has chosen the right path. Looking at last year’s data, the pessimists (“the wrong direction”) represented 66%, compared with 20% of optimists. Pagnoncelli comments as follows: “The analysis of the social climate offers us the portrait of a country undecided between hope and disenchantment and confirms the profound divergence between the local dimension and the national one: the link between one’s local area and the direct relationship with everyday reality show a picture which is on the whole a positive one, albeit not a uniform one. The national reality, on the other hand, is characterised by an attitude which amplifies the influence of several problems and which devalues the conditions of a country in which various critical elements certainly persist, but which still represents the second largest manufacturing capability in Europe, even if only a minority has gained an awareness of the fact”.
If employment is at the forefront of the thoughts of Italians, it is indeed the businesses which create it that should be top of the agenda for a good responsible government. Quite the opposite is what has happened with the Budget law, which may be more or less in line with the rules and constraints of the EU in terms of accounting balances (after months of useless and costly arguments with the Brussels authorities) but which is strongly out of line in respect of two electoral measures: the citizen’s income dear to the hearts of the state support interventionism of the 5-Star Movement and the “100 quota” for pensions as chosen by the League in opposition to the “Fornero reform” (to the detriment, however, of moderate and moderately high pensions: those of millions of elderly citizens, in fact). As for jobs and business, nothing. Actually, worse: more taxes.
This has been documented by the UPB, the Public Accounts Control Authority, in the hearing of its chairman Giuseppe Pisauro before Parliament on 27th December: the taxation charge will increase, for the first time in five years, and will rise in 2019 to 42.4% compared with 42% for 2018 and then again to 42.8% in 2020, removing resources from the production circuit and from consumption, with consequent “recessionary” effects on the economy.
A similar story comes from the national Consultancy for the Confederation of chartered accountants, which has estimated a net balance of 12.9 billion euros of increased taxes in the three-year period 2019-2021: set against cuts of 6.8 billion for self-employed VAT-registered individuals earning up to 100 thousand euros and of 1.8 billion for the property sector, there will be 12.4 billion of increased taxes: 5.6 billion on banks and insurance companies (with negative effects on businesses and families, for loans and mortgages), 2.4 billion on businesses in general, 1.3 billion on digital companies and 2.1 billion on gambling groups, with a further 1 billion for sundry provisions for consumer damages and no-profit organisations. Additionally, a further 7.3 billion are planned for increased revenues from taxpayers seeking to put themselves in conformity with the tax regulations, thanks to the numerous anticipated forms of tax amnesty being introduced.
Leaving aside the distorting effects of yet another tax amnesty on the businesses which habitually respect the tax regulations, the sums are easy to do: the weight of the governmental economic policy “manoeuvre” will fall squarely on the shoulders of productive businesses and consumers. The recessionary effect is clear, from this perspective also. This will be aggravated by the removal, yet again under the Budget law, of the freeze on local taxes: Town Councils and Regional Councils will be able to raise IRAP, IMU, TASI and additional IRPEF contributions. “We are anticipating increased local taxes. This is the most obvious warning sign of the extent to which a reduced taxation charge, growth and jobs have become obscured as priorities for the government. And this is a mistake, which Italians are beginning to see clearly”, argues Francesco Giavazzi, the authoritative economist, in an editorial in the “Corriere della Sera” newspaper of 4th January. “The year of price rises”, warns Sandro Neri, manager of the “Il Giorno” online daily: “A burden” for businesses “which have dragged uncertainty with them into 2019 as a legacy of the year gone by”, which puts a brake on investment and growth, with negative consequences for the whole of Italy.