We are heading for the winter of our discontent, afraid that the pandemic will spread like wild fire once more; worried about the struggling economy, falling incomes and ever-increasing job instability; tired of the poorly kept promises of crisis intervention; alarmed by the mounting social tension and protests taking place in various cities across the country, which are being stirred up and exploited by the radical right and the Camorra, and feeling beaten and discouraged as a result of all of the above. These are darks times in which we are living, increasingly aware of our both personal and social fragility, and we have no real idea how long it will take, this journey to brighter days, waiting for the coronavirus vaccine to arrive at some point in the future. The European Union’s Recovery Plan investments are dwindling, and we can only hope that the government will finally make the right choices to tackle the emergency and support the recovery in the medium term. Today we feel “like the autumn leaves on the trees” — weak, deciduous. When is tomorrow going to come? Meanwhile, in a crisis of confidence, we are not consuming and we are not investing, choosing instead to save the money we have.
There is one figure that represents, with extraordinary clarity, this sense of unease and widespread distrust: 1,682. 1,682 billion, to be exact. That’s how much money the Italians are holding in their current accounts, just sitting there, doing nothing, giving next to nothing in the way of returns (according to data from the ABI, the Associazione delle Banche and Bankitalia). In August, this figure stood at 1,671. At the end of 2018 it was 1,476 — a good 200 billion less. “With confidence at its lowest ebb, saving levels hit record high”, read the front page of Il Sole24Ore on 22 October.
The phenomenon of increased levels of saving is not, of course, unique to Italy but is one that has been observed to some extent across all of the Western countries affected by Covid-19. The average rate in the Eurozone is 24.6% — a figure that has doubled over the past six months. The rate in Germany currently stands at 21.1%, in Spain 31.3% and in Great Britain 28.1% — a three-fold increase on the 9.1% of the previous three months.
In Italy, meanwhile, the average rate of saving stands at 19.6% — below the EU average. This does not, however, mean that we are less sceptical here in Italy, but rather, according to Bankitalia data, that we had already depleted our resources more over the last twenty years than the other large European countries had, the consequences of this including a decrease in purchasing power and the propensity to save — a notion that becomes all the more concerning when you consider the strong and deep-rooted attitude of Italian families to saving.
In a nutshell, then, what we now face is a culmination of a number of negative phenomena — the fall in income and purchasing power (on average, we in Italy did not recover the GDP lost during the great financial crisis of 2008), now aggravated by the pandemic, a decline in consumption, and the stagnation of investment (most companies had slowed or frozen their investments under the previous 5Stelle-Lega government owing to the uncertainty of the political and economic context and the ill-considered political decision to cease tax breaks for Industria 4.0 innovation). We’re not making money, we’re not spending and we’re not investing, meaning that we are at risk of getting stuck in a vicious circle that only aggravates the recession we are currently experiencing. Indeed, as Donato Masciandaro, one of Italy’s most authoritative financial economists, confirms (Il Sole24Ore, 24 October), “[t]he system has fallen – or is falling – into a liquidity trap. It is a perverse mechanism. A stagnant macroeconomic scenario causes the liquidity transmission mechanism to break down because rather than creating a temporary excess of prudence, what uncertainty does is create a structural surplus of fear, as a result of which households do not spend, businesses do not invest, banks do not lend, and the macroeconomic situation gets even worse”.
How, then, should we respond? With all those measures designed to rebuild a climate of confidence, which is vital in such a large and widespread context of crisis. We need the government to keep up with the times and finally demonstrate awareness, a sense of responsibility and competence with consistent, timely and effective decisions. Emergency measures that will help reassure families and businesses, guaranteeing incomes and opportunities for those who, especially in certain service sectors (tourism, culture, catering, leisure, etc.) have lost their jobs, and far-sighted choices that will promote long-term economic recovery. The ESM, for example, could also finally be used to show public opinion that this 35 billion’s worth of debt at extremely low interest rates will all be used to improve healthcare (borrowing from the market on any other grounds would fuel the idea that it were to be used to support the prevalent welfare culture, which would be met with fleeting consensus but quickly eat through resources). Then, of course, clear plans for the over 200 billion of the Recovery Fund would need to be outlined, for the green economy and the digital economy, sustainability and innovation, and thinking about the new generations.
We still have more difficult, painful months of loneliness, even with only partial closures, fear, social tension and growing uncertainty ahead, and the danger is that this sense of distrust will intensify and the ‘demoralisation’ about which President of the Republic Sergio Mattarella warned us will create new political and social divides. We are, in short, at a truly critical point, on the crest that separates the worsening of the disease, on one side, from the recovery, on the other, and never before has our salvation been so firmly in the hands of a community that must now regain a sense of civic spirit and be able to rely on responsible democratic leadership. We simply cannot afford to allow any acts that do not reflect good governance or behaviour that is not civil.