Draghi Says Italy’s Fate on the Line With EU Recovery Plan
(Bloomberg) -- Prime Minister Mario Draghi warned that Italy’s fate and credibility are on the line as it embarks on its most ambitious plan in decades to jump-start the economy and address shortcomings that have long scared off investors.
The former head of the European Central Bank told lawmakers in Rome that the government will invest 248 billion euros ($299 billion) in a plan heavily backed by European Union loans and grants. The program “of historic importance” will lead to a 3.2% increase in employment by 2026, the premier said.
“In the programs that I present today, there rests above all the destiny of the country,” Draghi said. “The measure of what will be its role in the international community, its credibility and reputation as a founder of the European Union and protagonist of the modern world.”
The success of the government is also at stake as Draghi attempts to pull off his country’s most ambitious overhaul since the end of World War II. And with Italy set to be the biggest beneficiary of the EU’s recovery package, the ability of Draghi’s broad coalition to spend the funds and push through reforms will be a barometer for the bloc’s effort itself.
About 40% of funding will be allocated to green and 25% to digital projects, with priorities including infrastructure and high-speed trains. In line with EU requirements, the plan also includes a timetable for long-needed reforms to cut red tape and speed up the country’s notoriously slow legal system.
The premier set his sights on both investments and structural reforms “to tackle some weaknesses which have afflicted our economy and our society for decades,” including the economic gap between regions, gender inequality and weak productivity growth. Some 40% of funds will go to the depressed south.
“The acceleration of growth can be greater than that in the recovery plan if we succeed in carrying out reforms that are efficient and aimed at improving the competitiveness of our economy,” Draghi said.
Planned investments range from about 6 billion euros for ultra-fast telecoms networks, to 750 million euros for high-tech industrial projects including semiconductor production, to targeting coverage of all energy demand from e-cars by building more than 3.4 million charging stations. Reforms also include the creation of a new “simplification” department.
The premier will address the lower house again on Tuesday morning, before presenting the plan to the Senate in the afternoon. A cabinet meeting on Wednesday or Thursday is expected to give final approval before the Italian proposal is sent to Brussels.
The extra spending will push Italian debt to near 160% of output this year, higher even than the 159.5% touched after the devastation of World War I and more than double the EU’s 60% reference level for joining the euro.
EU officials expect about a dozen member states to submit blueprints this week ahead of an end-of-April deadline, kicking off the process of assessing whether proposed reforms and investments meet the criteria to qualify for funds.
At the same time, member-state parliaments are working to ratify a law allowing the bloc to raise the 800 million euros to finance the package. If ratification is completed on time, officials expect the bloc to raise enough debt to finance a first tranche of grants worth 13% of each nation’s allocation by July, with countries receiving their first disbursement by the end of the month.
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