Professor Alessandro Antonelli: Italy and the European Union’s Stability and Growth Pact
On Tuesday, November 13, the Department of Economics and Social Sciences kicked off its 2018-2019 “Prof Talks” Series with JCU Professor Alessandro Antonelli discussing “Italy and the European Union’s Stability and Growth Pact.”
Professor Antonelli began by providing a background of the European integration process and its timeline. In terms of an important aim of the process – avoiding wars between European nations – the project appears to have been successful.
The integration process has been complex; it includes the Stability and Growth Pact while still missing a fiscal and a political union. The EU’s Stability and Growth Pact put constraints on members’ deficit and debt. In the case of Italy, the problem is primarily related to the country’s high and persistent debt.
Professor Antonelli mentioned two recent proposals that critics say will worsen the debt problem: the reversal of the 2011 pension reform and universal basic income. According to the critics of these measures, the much-needed alternative is fiscal discipline that can pave the way to sound, sustainable growth. Italy needs reforms to fight tax evasion and shadow economy, to further modernize labor markets, product markets, the judicial system, central/local government bureaucracies, and promote highly productive investments and innovation.
On the other hand, proponents of “wise deficit spending” believe the EU’s Convergence Criteria and the Stability and Growth Pact’s constraints kill economic growth, forcing weaker countries into stagnation or recession. In the meantime, rating agencies, IMF, EU Institutions, most of the other Eurozone countries, and capital markets have been signaling the increasing concerns surrounding the Italian budget, and the possibilities of negative effects not only on the Italian economy but also on the European integration process.
Brexit and Italy’s budget plan seem to currently pose a challenge to the convergence process envisioned by the founders of the European Union. Professor Antonelli concluded that in regards to Italy’s government budget plan, a reasonable compromise can be good for the country, for the other EU members, for the Euro, and for future generations. If such a compromise is not reached relatively soon, capital and financial markets might force contenders to find unpopular solutions.