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The implications of the midterms in the US. International economic challenges and the role of Italy

Hybrid format - Rome, 25/10/2022, Roundtable

The current and highly complex scenario of energy crises, rising inflation and serious geopolitical tensions is placing economic and social actors at loggerheads. Thus, predictions for the future necessarily emerge from imminent, globally-resonant events such as the midterm elections in the United States.

Despite a long tradition that puts the sitting president’s party on the losing end of this contest, there is considerable room for doubt this time around. The Republicans hold a substantial advantage in predictions for control of the House and a slimmer one for majority in the Senate. Nevertheless, some ongoing debates, triggered not least by the Supreme Court’s recent ruling on abortion, have given the Democratic Party various possibilities to regain ground.

A change in the American congressional majority will pose new questions at international level as well, starting with the growing importance of a portion of the Republican Party’s promise of greater caution and “no blank check” for Ukraine. There could also be various consequences of a Biden administration energy plan that has chosen to play the strategic reserves card in an effort to stabilize oil prices.

Europe, however, is facing the main challenge. With the energy situation in rapid flux, the European Union must go the route of unity and cohesiveness. With the cost of energy rising across the globe, policies aimed at backing national industrial consumption could provoke new instability.  It would therefore be more sensible to promote increased savings, an essential factor in increasing energy security in the face of dwindling and inflexible gas supplies. What’s more, weathering the energy crisis means being better equipped for the major global economic transition ahead. After nearly 30 years of expansive monetary policies and favorable finance, businesses, families and governments seeing a shift to a new paradigm whose contours are still vague. 

The issue is one that Italy cannot afford to underestimate. After a robust post-Covid recovery, the country is now forced to deal with the prospect of recession, and margins for fiscal maneuvering are slim. Over the medium term then the Italian economy will have to address the obstacles that have led over recent decades to substantial stagnation. The economic recovery cannot take place without reforms, both fiscal and judicial, and in the context of European funding. Reducing the burden of bureaucracy would not only make it possible to free up the country’s potential in many areas, including the production of renewable energy, but also ensure the successful application of the Next Generation EU funds, the key to the future for major beneficiaries such as Italy. Indeed, new Community debt-sharing and investment undertakings are the most effective solution to tackling the economic, social and environmental challenges Europe will be facing in the coming years.