Will Italy be able to grasp the #NextGeneration opportunity?

The European Commission has put forward its proposal for a major recovery plan.

To ensure the recovery is sustainable, even, inclusive and fair for all Member States, the European Commission is proposing to create a new recovery instrument, Next Generation EU, embedded within a powerful, modern and revamped long-term EU budget. The Commission has also unveiled its adjusted Work Programme for 2020, which will prioritise the actions needed to propel Europe’s recovery and resilience.

Building on the considerable progress that has already been made in the European Parliament and the Council, the Commission now proposes to deploy a reinforced EU budget to help repair the immediate economic and social damage brought by the coronavirus pandemic, kickstart the recovery and prepare for a better future for the next generation.

The 2 most relevant and disruptive features of the plan are:

1- the amount of common debt issued that is some 10 times higher than historical precedents

2- the explicit admission of a trasnfer of resources from stronger (like Germany) countries to weaker ones (like Italy)

Italy is amid the countries worst hit by the current pandemic and amid those with the most relevant macroeconomic imbalances prior to the Covid19 crisis. According ANSA news agency Italy is expected to receive some 172.7 billion euros of the proposed 750 billion euro EU Recovery Fund for the coronavirus emergency. (

Some 81.087 billion will be granted as aid and 90.938 as loans, the sources said.
The EC’s proposed quota for Italy is the highest in the Fund, followed by Spain with 140.4 billion, split into 77.3 in aid and 63.1 in loans, the sources told ANSA.

According to Silvia Merler estimates the net benefit calculated for Italy may range between 32 and 38 Bn and would be equivalent to some 10 years of net contribution to EU Budget.

But while media seem to be focused on the quantity of available funds we should point out that what really matters is the quality their allocation. Italy has a negative track record in the ability to use funds granted by european institution and broadly in the efficacy of its government expenditure. This mean that to grasp the opportunity offered by Next Generation EU a substantial change in public policy will be needed.

Global Economy is facing a relevant challenge due to changed habits in working (more remote less commute), spending (more e-commerce), traveling both for business and leisure and finally living.

Some business will simply be not useful anymore while others will be much requested and this mean that so many people will need to change their job, learn new things and acquire new skills. A substantial transformation is coming and EU will provide a remarkable safety net for Italy and others “weaker” countries. But a substantial cooperation effort and a strong attitude to adapt will be needed to change the potential threat into a huge opportunity.

Italy is facing a unique opportunity to reverse the downturn derived by the crisis into an upward path to growth missing in Italy for several decades but the success of the initiative will mostly depend on the ability use properly grants and loans and to realize long-awaited structural reforms.

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About Massimo Famularo

Investment Manager and Blogger Focus on Distressed Assets and Non Performing Loans Interested in Politics, Economics,
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