Apart from the pandemic’s quantifiable and, to some extent, already recognized impact, how it has influenced the economic policies of governments across the globe is another assessment to be made. It is along this dual track that the trajectory of recovery and medium-term development can be examined. The European context has shifted in response to post-pandemic needs that are, nevertheless, even more broadly changing the relationship between the roles of government and how global markets function. In addition to a series of tariffs and related trade risks, a greater recourse to State Aid has emerged, even to the point of direct government capital going to corporations.
Addressing the exceptional demands associated with the post-pandemic recovery and the consequent need for government support introduces the risk of excessive zeal. Rigorous ex post evaluation of the effectiveness of an intricate network of incentives that often favor neither small and medium-sized enterprises nor foreign investors would therefore be indispensable. In the broader sense, the concept of “golden power”, i.e. the State’s authoritative intervention in private-to-private transactions, has expanded considerably and its limitations should be better defined.
A specifically Italian concern currently gaining attention is certainly nothing new: the acquisition of national enterprises (in strategic sectors in some cases) by foreign, European and extra-European interests. It is well known that Italy’s main problem is the size of its businesses; indeed, the largest of these should be encouraged to grow in order to increase competitiveness. Another ago-old problem is access to credit for financing investments and the resulting general undercapitalization of Italian enterprise.
The Italian manufacturing system proved capable of reacting rapidly to the pandemic emergency, with the digital transformation going forward at a faster pace and the majority of companies maintaining their ranking on the global value chain. Yet, Italy pays the price of structural problems inherent to an inadequate public administration (including the judicial sector), a secondary school and training system not always up to par, the limited presence of high tech businesses compared with major European partners (sectors poised to account for a good portion of growth in the coming years) and a lack of service productivity. For the most part, these problems are more marked in Italy’s southern regions than elsewhere.
The ecological transition inevitably poses a significant challenge, with its industrial, energy and regulatory implications. What’s more, in a context complicated by market pressure regarding some raw materials (not only “rare earth” metals but even much more common ones such as copper) that drive up overhead costs for a range of sectors. In a highly competitive global system, it is clear that only systemic responses will have lasting benefits for Italian manufacturing, which also risks serious damage from some legislative measures associated with the transition. Thus, Italy’s ability to negotiate with its counterparts in Brussels is also going to be pivotal.
There are other risks linked with the possible distortions caused by the many incentives currently being launched. If the immediate intention is to stimulate demand, especially in terms of some major projects, problems could arise on the supply side, due in part to raw materials bottlenecks and in part to the work force. It is also going to be crucial to streamline administrative and approval timeframes so as not to block the flow of incoming investments. In other words, regulatory processes are going to be key to the more efficient spending of available funds: copious resources may not offer a complete solution.