Global Outlook 2012: presentation of the final report
It’s not just the crisis. The European Union has structural problems that go beyond the current situation. An alarm was sounded on March 18, during the presentation of the 2012 Global Outlook report at the Istituto Affari Internazionali (IAI) at Palazzo Rondinini in Rome. From the absence of a clear industrial policy, to the scarce investments in research and the sluggish decision-making process, the reasons for pessimism regarding the future are many. Something has to be done, and soon, replacing the so-called “Six Pack” policy with a new wave of investments.
“You can’t really say that 2012 was a good year for the world economy”. Global Outlook’s analysis started with these words. But the report immediately belied the expected conclusion that the global crisis is to blame for Europe’s difficulties. “Europe’s physiological and structural problem is not linked to the crisis, but to the fact that it is increasingly absent in the ‘global value chains’ and does not seem to be able to keep apace with the other regions of the world.” It is suffering from structural problems that go well beyond the slump in the global economy.
Andrea Renda, head of Global Outlook, illustrated a few: “From an economic point of view, for example, too much importance has been given to internal competition and too little to industrial policy. Our international competitors, on the other hand, have behaved differently.” The reference is to China, which will be allocating more funds to research and development than the EU, but also to the United States which, looking at the indicators for propensity to innovate, are ahead of us in almost every sector: from patents to spending on research. And then there are other problems that make things even worse: a “complex and at times redundant” decision-making process, that is in need of a major overhaul, and the fragmentation of the European market. Renda concluded his talk calling Italy “the sick man of Europe”, plagued by universities in decline, no support for enterprises large and small and the absence of compact governance. In order to cure it, he mentioned possible synergies with countries lying outside of Europe, such as Turkey, Mediterranean countries, Brazil and Russia.
The community locomotive seems to be throttled by some objective shortcomings. As the Minister of European Affairs, Enzo Moavero Milanesi, confirmed, speaking of the recent negotiations for the 2014-20 financial framework: “One thing must be made clear: the Commission requested €1033 billion, but the Council stopped at 960. This is a difference of €73 billion, spanning seven years and all member countries. I don’t think that €10 billion more per year would have been able to drive growth.”
As the report emphasizes, however, these are not the most important problems: the real ones are the low level of private investment, the almost total absence of venture capital, the lack of young leading innovators, yollies, who represent the drivers of economic growth elsewhere, universities in decline that do not attract foreign students, and the lack of infrastructure. All shortcomings that are more pronounced in Italy.
Above all, as concerns governance, it is time, the report states, “for Italy to endow itself with a government that is more transparent and ‘accountable’”, that aims to increase medium to long-term competitiveness that can be measured across time and that takes actions to reduce bureaucratic costs and times for new and existing businesses.
The president of the Cassa depositi e prestiti, Franco Bassanini, added two more to this list of Italian shortcomings. “The high cost of electricity and the mountain of public debt” – two factors that overburden our economy and make it difficult to finance an industrial policy with public funding. “Without overlooking the most urgent issue of the moment: that is to reduce the amount of money the public administration owes private companies. This is a matter that will demand a huge glasnost operation” Indeed, it was during the conference that the European Commission announced that it had given the green light to the payment of arrears, a sum estimated between €60 and 100 billion. But there was also a positive note: the competitiveness of the Italian manufacturing export sector, despite the high cost of money and energy, the suffocating red-tape and the serious infrastructural deficiencies. Just how strategic the matter of payment of arrears is was confirmed by Giovanni Castellaneta, president of SACE: “We recently opened an office that deals with factoring and within a month we were submerged with requests. The management of credit to both the private sector and the public administration is a touchy subject at the moment.
Three interventions were more specific. Riccardo Cristadoro, senior economist at the Bank of Italy, seemed to side with those who believe that Italy can still achieve growth if it aims at more meritocracy, and Pierfrancesco Gaggi, head of international relations at the Italian Banking Association (ABI), called for a more severe common banking supervisory body. Minister Inigo Lambertini, from the General Directorate for the Promotion of Italian Trade at the Foreign Ministry insisted that diplomacy can make an important contribution to supporting Italian enterprise in dealing with the challenge of globalisation.
In order to break out of this vicious circle, the report offered a few recommendations, which Renda summarized with: “The Six Pack is not enough, we have to be smart.” Thus, the austerity imposed on Europe by the EU’s consecutive interventions are not enough. What is needed are equally determined actions regarding infrastructure, lower and higher education, biotechnologies and research, and development policies.
The reasons for these priorities were explained by Alessandro Pansa, chief executive officer of Finmeccanica: “Europe and the West in general has lost the battle with regard to labour and capital. All that’s left is technology: at the moment we have a ten-year advantage on the rest of the world. This advantage has to be consolidated with investment in innovation, so that it is not eroded over time.”
The meeting closed on an encouraging note: Antonio Tajani, vice president of the European Commission, Commissioner for Industry and Enterprise, and spokesman for Brussels’ anxious expectations of the birth of an Italian government “ready to do what is needed”, underlined the need to aim for a third industrial revolution – after that of the steam engine and then the internal combustion engine, now, the clean energy revolution.