Money for roads, trains, energy and even the Fontana di Trevi: with the EU fund for the coronavirus crisis, Italy invested in many areas. Was the Reconstruction Program a success?
The fact that the Trevi Fountain in Rome is once again shining in all its glory is also due to funding from Brussels: around 330.000 euros have been allocated for the restoration of this spectacular Baroque fountain. The money came from the EU’s Reconstruction Programme. The restoration of historical heritage was one of many areas for which Italy mobilised a total of almost 200 billion euros. However, the focus was on investments in new roads and railways, in digitalisation and energy, in childcare and healthcare.
‘A LOT OF MONEY HAS BEEN SPENT’
At first glance, this sounds good, says economist Tito Boeri of Bocconi University in Milan. However, his assessment is somewhat negative: ‘In my opinion, a lot of money was used. It was not necessary to use it all. Because investing such a large amount of money wisely is very difficult.’ Luca Del Poggetto, who monitors how the Reconstruction Plan funds are spent, also thinks so.
“From the beginning, studies showed that this represents a major challenge for public administration in Italy,” says Del Poggetto. “As early as 2021, the Parliamentary Budget Office published an estimate suggesting that the additional costs for the administration reach a third more than those of its usual activities.”
MELONI IS HAPPY
The Italian Prime Minister, Giorgia Meloni, has a very different view of the 200 billion euro program. A few weeks ago, she took stock which, although not yet completely final, was almost so – officially, the program ended at the end of August. Meloni noted that no less than 660.000 individual projects had been financed and expressed satisfaction: “Of course, it has not been an easy journey, but we respected the timetable. And today we can say with some pride that we were up to the task. Thanks to the joint efforts of everyone involved, we managed to keep up the pace over these years.”
DID IT STIMULATE GROWTH?
However, economist Boeri is not convinced by the government’s assessment. One thing particularly worries him: a large part of the approximately 200 billion euros from Brussels is offered in the form of loans.
Even though they are low-interest, they have to be repaid. The hope in Italy was that the money invested would boost growth and, with it, tax revenues, which in turn would help repay loans to the European Union. But, according to Boeri, this had been a kind of gamble: “I fear, unfortunately, that we will not win this gamble. Because, if we look at the economic performance of our country, growth rates are below one percent and remain very low.”
CONSEQUENTIAL COSTS MAY BECOME A RISK
Another issue also worries the economics professor: every billion spent now on new construction generates follow-on costs for which money will be needed later.
“There is a risk that a project will be completed, but there will be no more money for its maintenance. And then a construction project will degrade very quickly and lose value – if we think about bridges or railways where the investment is no longer carried out according to plan,” says Boeri. Unfortunately, according to him, the funds from the Reconstruction Fund were channeled into new projects and not into the maintenance of existing infrastructure. The experience that bridges and railway lines require costs not only at the beginning, but for many decades, is currently being experienced in Germany.
However, in some of the 660.000 projects of the EU Reconstruction Fund for Italy, the money was actually used to maintain existing structures: for example, the Trevi Fountain, which, moreover, has enriched the city of Rome and the whole world for about 300 years. (DW)