Can the EU save Italy?

There’s been a lot of hype around the green light given by the European Commission yesterday to Italy’s recovery plan. But let’s break it down: the final headline numbers are €68.9 billion in EU grants by the year 2026 and €123 billion in loans. If you take the grant component, and divide it over the six-year duration, you arrive at an average of 0.6-0.7 per cent of Italy’s 2019 GDP each year.

It is front-loaded, and it’s by no means a modest sum. What’s harder to accept however, is folding in the loan component to arrive at some giant fake headline number.

The whole point of this exercise is not to produce a classic fiscal boost, but fiscally-assisted structural reforms. Anyone who has ever dealt with structural reforms knows that they are easy to write down on paper, difficult to legislate, and extremely difficult to implement on the ground.