A lucid analysis by the senior deputy governor of the Bank of Italy provides the key elements we need in order to gain a better understanding
Understand the situation, take the most effective measures and implement these efficiently: these are the three steps that we must take when facing any crisis. There are also subsequent stages that apply in a complex situation like the one brought about by Covid-19, but which, on closer inspection, should always be followed by every organisation, pandemic or no pandemic. Reliable analysis, therefore, must be at the foundations of any decision. To get a precise idea is fundamental. In this instance, reading the speech by Daniele Franco, senior deputy governor of the Bank of Italy, on the occasion of the 52nd Day of Credit, can help us with this.
‘The Italian economy and the pandemic’ is a clear summary of what has happened already, what is happening now and what could happen in the future. Franco begins by taking the following fact into consideration: ‘This year’s recession has causes – the Covid-19 pandemic – that are entirely different to the tensions of 2011, which was marked by the sovereign debt crisis that followed the great recession of 2008 to 2009. However, now as then, Italy finds itself having to manage a shock brought about by exogenous factors with an economy that is structurally struggling to grow, and with massive public debt.’ These lines mark the beginning of a detailed analysis by Franco, which first considers the global recession and the actions taken by the various governments, and then goes on to examine what precisely has been done by the central banks. Subsequently, the senior deputy governor of the Bank of Italy takes a look at the consequences of the above issues on the world of work and the latest economic developments. Franco examines savings, credit and investments individually, alongside the structural problems that characterise the Italian economy, before focusing his attention on the various points that must be addressed in a decisive manner. Among these, Franco identifies the need to turn our attention to young people. In the final lines of his speech, he states that: ‘The pandemic and recession are tending … to accentuate the imbalances between generations – which were already significant – as a result, for example, of the increase in youth unemployment, public debt and the rate of pension expenditure. Having underlined these issues, Daniele Franco goes on to insist: ‘The crisis also widens the gulf in opportunities that exists between those who can work remotely and those who cannot, from those engaged in essential activities to those in sectors where the pandemic has served to hinder production and consumption. It is crucial that the response we provide to the emergency – particularly the temporary increase in subsidies – leads back to a comprehensive, coherent plan, which seeks to limit distortions in the future whilst making growth more inclusive. The design of the welfare tools that we implement and of the tax system as a whole must therefore be viewed as essential components of a wider project to relaunch the Italian economy, combining greater growth with greater equity.’
Speech by Daniele Franco (senior deputy governor of the Bank of Italy)
52nd Day of Credit, Rome, 5 November 2020