Wednesday

6th Jul 2022

Wobbly Italy gets first EU billions of pandemic aid

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The European Union will, over the next six years, pay Italy a total of €191.5bn - €68.9bn in grants and €122.6bn in loans - under its Recovery and Resilience Facility (RRF), set-up to tackle Covid-19's economic impact.

The significant aid makes Italy the greatest beneficiary among its peers out of a total of more than €750bn EU-wide.

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Sources in Italy's ruling coalition confirmed that the EU, earlier this month, disbursed a first €25bn tranche, which will be used to finance ongoing projects and investments in key infrastructures this year.

Over the next few years, the EU aid could trigger an overall 4 percent rise in GDP growth, provided the funds are timely and efficiently deployed and structural reforms implemented at the same time, sources warned.

"I'll be honest, it's an extremely tough task, but our action plan has targets and there will be a centralised committee to supervise the allocation of the funds. Italy is being offered a historical opportunity to change its future. We have a huge responsibility and can't afford to fail in bettering our country", said an official from the centre-left Democratic party.

Rome's plan outlining how and in which sectors Italy will spend Europe's dime spans interventions from 2021 to 2026.

And the challenge to spend it well, is even bigger than at first glance.

"The European funds will be supported by additional resources included in a new €30bn complementary fund financed by the state ... which makes the total available amount rise to roughly €222bn", another source, from the far-right League party, said.

Priorities

Rome's recovery plan is divided into six key missions.

The core of the plan, noted sources, is the so-called Green Revolution and Ecological Transition, for which a new ministry has been specifically created this year and which will benefit from €69bn, mainly aimed at boosting waste recycling, energy efficiency of public buildings such as hospitals and schools, and research in the use of hydrogen as an alternative energy source.

Another €49bn or so will also go into a digital revolution of enterprises, the public administration, and tourism.

"It is unacceptable that still today there are large areas of the country, even in large cities such as Rome, that lack high-speed internet. Our goal is to have all residents connected by 2026 and to bring ultra-fast broadband networks to 8 million families and businesses", the League official added.

Roughly €31bn will be invested in strategic infrastructures for sustainable mobility, including the extension of high-speed railways, road maintenance, and environmentally-friendly ports.

Meanwhile, another €32bn will go into education and research, €22bn into social inclusion and cohesion (modernisation of the labour market and support to enterprises led by women and people with disabilities), ane roughly €18bn into healthcare investments, including telemedicine.

Of the total funds, €144bn will finance new projects while €65bn are earmarked for existing ones, which are either ongoing or already approved, said sources.

Accountability

Contacts said that the European Commission will be constantly monitoring the work-in-progress of key investments of the plan, making "accountability" a critical issue, given that Brussels will disburse further tranches step by step, as targets are met and structural reforms implemented, including a more efficient public administration and judicial system, as well as a tax-system overhaul.

An MP from the anti-establishment 5-Star Movement party, who was critical of the plan, warned that some money will inevitably go down the drain.

"No matter how centralised the system can be, there could be leaks", the MP, who asked not to be named, told EUobserver.

"The committee set-up to direct and invest incoming funds under the direct supervision of the presidency council and the economy ministry will be passing the money down to single ministries, regions, and local bodies, who will then organise public tenders to select firms for future projects. In so many passages, how can you be totally sure that not a single euro is lost?", the MP said.

The risk of organised crime infiltrating the public tenders remains high despite new rules to boost transparency, they added.

"Above all, will we be really able to speedily use all this money? In past years, Italy has always been forced to hand back a great part of the EU's cohesion funds because it did not meet deadlines. It failed to actually use the money. And pandemic aid is a lot of money", the MP said.

Another issue is that the current cabinet's lifespan does not coincide with that of the recovery plan, which runs until 2026.

The south

"At the next general elections in 2023 a new government will be appointed who could slightly change some targets and investments, perhaps by trying to negotiate with Brussels. How can we ensure continuity in the action plan?", the 5-Star Movement source noted.

The source said that only 40 percent of the entire EU aid would go into helping Italy's poorer south and in bridging the regional growth gap between southern and northern regions, which has plagued Italy for centuries.

"Very little of the plan is dedicated to the south, which is unacceptable. I'm astonished that the European Commission hasn't raised its eyebrows given Italy's regional disparity has always been among Brussels' country-specific recommendations for Italy", the MP said.

Author bio

Silvia Marchetti is a Rome-based freelance reporter. She covers finance, economics, travel and culture for a wide range of international media.

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