Pnrr, is it true that we are late? Can Italy do without projects? Questions and answers – Corriere.it

A few days before the deadline of the December 2022 milestone, Italy must reach 55 goals to obtain the new tranche of funding for the Pnrr. Analysts and government officials have repeatedly expressed their concern about the progress of the entire plan, Prime Minister Meloni herself recalled that the Pnrr is no longer sufficient, by itself, to overcome the new challenges that Italy is preparing to face. With Professor Carlo Altomonte, director of the Pnrr Lab at Bocconi University, we try to understand what the current situation is and what might be the paths to take to update the Pnrr.

Why is the Pnrr different from a normal investment plan?

The tool through which we make reforms and investments is a recovery and resilience device, not a fund, this semantic difference is important. The goal of the plan is to achieve operational results, not spend money.

We talk about infrastructures, services, digitization: what is the basic concept of the plan?
Quite simply, if I want to build a public kindergarten, I set aside a fund. When the kindergarten is built, I see if the procedure has been carried out well and if the kindergarten exists. With the Pnrr, however, I want to increase the number of children who go to public kindergartens, this is the goal. The point is not the construction of the kindergarten itself, but the fact that there are more children going to public kindergartens or more kids going to digitized schools or more kilometers of high-speed rail. To do this, a plan was created which is divided into goals and objectives, which we call milestones and targets. Goals are more related to reforms and investment goals; every six months the European Commission evaluates that Italy satisfies these objectives, on the basis of these objectives it is certified that the country is doing well and the money is given for the next tranche.

How is Italy behaving and what is Europe’s judgment so far?

The Commission’s initial assessments were positive, they gave us 25 billion in July 2021, in advance to start reaching our goals. Then on the basis of the performances we achieved there was a second tranche of 21 billion in December 2021, a third tranche of 21 billion was assigned in June 2022 and now we are waiting to close the 55 objectives to have the slightly smaller tranche , below 20 billion, in December 2022.

What has been so far? Is it true that it is one thing to complete reforms and another thing to start building sites?

In the timing of these objectives, almost all the reforms, all the regulatory provisions, have been placed at the beginning, because the idea is to start with reforms on simplification, competition, public administration, justice. If you have already started breaking some bottle cones and peeling off some delays from the public machine, at that point when the investments arrive you are on flatter, less bumpy ground. The first goals that we fully achieved were largely goals of reforms and administrative spending allocations. 100 billion have been allocated in the sense that individual administrations have had the availability to spend, now begins the part, if we like, a little more complicated, that of the start of construction sites because this money must be transformed into walls, railways and investments in general .

true that we are late with the projects to be completed within the year?

With the previous government, at the handover which operationally took place a month after the elections, about 20 of these objectives had already been fully achieved. As Prime Minister Meloni rightly said, there were about thirty left to close. But the vast majority of these were very advanced. According to studies by the Bocconi lab, the final steps went as for the other projects. There are 4 or 5 points that still deserve some work, but we don’t lack time. I have no doubt that things will be completed and therefore the December milestone will be closed to obtain a further tranche of financing.

When we talk about delays, we often refer to spending capacity. Don’t know how to spend?

In my opinion, there is time to recover because the Pnrr has foreseen reforms and implementing procedures in the first part and loaded the investments in the second part. So from 2023 onwards we should almost only make investments, and if we have 10 billion left over this year we will have time in the next few years to spread the share that we have not been able to spend.

Italy receives the funds but is unable to spend the money to start the works?

it is clear that we can only be concerned about the fact that we have an objective difficulty in spending. This depends on a series of known problems that we have inherited from the past, I am thinking of the technical capacity of local administrations which have been subjected to 10 years of austerity and which have been somewhat impoverished in terms of resources and number of people. There was the terror of signing for the patrimonial risk for those signing the projects, and there are physiological times for service conferences and environmental authorizations. In short, there is a whole set of procedures that we had and that in Pnrr with the first measures has begun to unblock. It just takes time for all of these processes to take effect. We are in that transition phase where we have finished unlocking, the spending part begins and therefore we should see an acceleration in the second part of the plan, up to 2026.

Among the aspects that are often mentioned among the possible problems of the Pnrr, there is also the issue of inflation.


Could the price increase, at all levels, be a risk to the success of the plan?


The short answer is no, it’s not a problem because the government has already allocated six billion euros in 2022 and 10 billion in 2023 to increase the costs of the specifications, so these issues can be tackled easily and in this sense who says that since there is ‘inflation doesn’t start the races, in my opinion, does not say the right thing. A series of procedural simplifications have been launched, substitute powers have been introduced, the financial liability of officials has been limited so that we can proceed more quickly, the capacities of local administrations have been strengthened, so the system must not stop at the inflation problem.

The allocations are based on the response capacity of the individual administrations, isn’t there the risk that the funds will end up only with the most virtuous and not where they are really needed?
At the moment we have two pieces of evidence, on the one hand we see that a good share of resources is arriving in the regions of the South, in line with the fact that 40% must go to the South because there is a territorial constraint. On the other hand, however, we note that within the South itself it is actually the more virtuous local administrations that hoard the tenders. So, if you like, at the macro-regional level, the resources are going more to the South as right and as desired by the political decision-maker, but in fact within these allocations we see that it is precisely the most virtuous administrations that receive the money. This unfortunately can ensure that the last of the lagging regions continue to be the last. We need to start thinking about this in order to intervene in detail.

Coming to the future of the Pnrr, there are already those who are talking about renegotiating or updating projects. still possible to intervene?

Three keywords must be distinguished. The first renegotiation of the plan, i.e. total revision, and we must be clear on this: it is not possible, because the plan has constraints, it is coordinated by European countries and therefore from this point of view there is no political space to proceed. The other issue is that of moving deadlines, we could start thinking about this but only after we begin to implement the Pnrr. Finally, there is the key word which in my opinion is the right one, what a remodulation; we can imagine that some investments in the plan are either no longer needed or are less urgent than others and therefore we could shift resources from some investments to others. It is necessary to distinguish the remodulation from the renegotiation.

Why is the Pnrr a challenge to be won at all costs?

We can rightly speak of delays, we can speak of difficulties and difficulties of remodulation, but this absolutely must not be an excuse to let go of the tension to make and implement the plan. There are delays, let’s see where they are and with the data we have available, let’s see what are the possible solutions to intervene, but we don’t plan to close the spaces for the plan. The Pnrr is the only way that the country has in the short term to overcome 2023, because next year will be a particular year, we will have the consequences of high inflation and the rise in interest rates and therefore in fact the only certainty of investment public that we will have in the country is precisely the money of the Pnrr. I say more, there are those who say thank goodness that we didn’t spend all the money in 2022, so we can put it in 2023 as a growth bonus.

What would happen if Italy fails the challenge in implementing the plan?

I say it very simply, the Pnrr will lead to a 0.5% growth in GDP forever; the only way we have to pay the public debt for the next generation. Without this certainty, Italy’s future would be called into question, international markets would take very little time to do the math and see that the country’s system is not on the path to stability. certainly a challenge that we must win at all costs, all rowing in the same direction.

What will the Italy of the future look like when the Pnrr is completed?

The Pnrr guarantees us a protection shield from the European Central Bank, and an opportunity to transform the country because it obliges us every day to invest in the two major transitions that we have before us, the energy transition and the digital transition. These two objectives combine more than 50% of the investments we are making. We also have the two major horizontal reforms we are implementing, public administration and justice. At the end of the Pnrr we will have a greener, more digital, simpler and more efficient country, paid for by Europe. Why should we deprive ourselves of this thing? If there are difficulties, we face them, but we really cannot do without them.