Next Generation Europe and the Italian Plan - PNRR: an opportunity not to be missed for a new European and Italian Renaissance?
Antonio Lanotte
CTA | MBA | EU Top Experts @EUBOF - EC | Tax Technology Committee - CFE Bruxelles | Advisory Council B4EU Bruxelles | BoA Vernewell Group Dubai (UAE)| GBBC Ambassador for Italy | Italia Fintech Comitato Scientifico
The present article has been written with the collaboration of Julia?Lagahuzère, Co-Founder and General Director Opera for Peace, <[email protected] >; <www.operaforpeace.org > - Twitter: @JLagahuzere
Preface
This article is hihly inspired by the dedication, the passion and the commitment of Julia?Lagahuzère and her event "Circular Culture" which will be held in Lerici, on the 2-3 July 2021. Circular Culture, founded by Julia Lagahuzère, is an innovative project linking the performing arts and circular economy values, promoting climate protection and a better future for humanity through creative communication and shared goals. It is inspired by the Renaissance, the European intellectual and cultural movement between 1400-1600, where art, philosophy and science came together to advance civilization and a new way of seeing the world. This inspiration is pushed further here, for today’s world, with a strong societal engagement structured around the UN Sustainable Development Goals for a better future. Meaningful innovative technology is also an essential part of the mission in alignment with Next Generation EU and the digital transformation.
1.?Introduction.?
The "extraordinary" European Council on the fate of the Next Generation EU, otherwise known as the Recovery Fund delivered in the early hours of the morning, 05:32 am, on July 21, 2020, was a historic agreement of approximately 2 trillion Euro to make Europe more resilient, strong and cohesive. Urgent action is needed to revive the economy and create the conditions for a recovery driven by private investment in key sectors and technology. This investment is particularly crucial to the success of Europe's green transition, European Green New Deal and Digital Transformation.?A key plan to boost the European economy that seizes the opportunity to turn the crisis into an opportunity for the transition to a green and digital future of the Union. This digital transformation paves the way for a new Italian Renaissance, Circular Culture, an innovative way of thinking and living based on traditional European values linking culture, art, music, science, philosophy, societal and technological advancement.
2.?The European Plan.
The Recovery Fund of the European Union to counter the heavy impact of the Covid-19 pandemic is defined in detail with the new proposal of the European Commission of May 27, 2020. The ambition is for a plan that looks beyond the crisis, investing heavily in the financial strength of the 27-member Europe. A project that can be summarized in three concepts: energy transition, digital transition and soundness of public finances. The new project is called "Next Generation EU", evoking the ambition to lay the foundations for the Europe of the next generation.
The plan?is worth € 750 bn. Of this figure, which will be based on a new size and design of the European budget, € 390 billion will be grants and € 360 billion will be very long-term loans.
The President of the European Commission Ursula von der Leyen has specified that the 750 billion euros foreseen by the plan, approximately 5.25% of the annual European GDP, are added to the 1,074 billion euros of the budget, bringing it to 1.824 trillion euros in total. Italy will receive 28% of the sums allocated by the so-called "Recovery and Resilient Facility”?209 billion, broken down as follows: some € 82 billion in grants and € 127 billion in loans. The Next Generation Europe Fund represents a historic agreement for the European project to be strengthened, effectively making Europe itself more ambitious, forward-thinking,?and ready for future global challenges in an ever-changing world. In order to issue the bonds that will finance the fund, guarantees will be needed from the new EU budget, active from January 1, and the green light from all 27 European countries.
2.1 Flagship projects
The European Commission encourages member states to include in their investment plans a series of projects, the implementation of which must be evaluated on the basis of the relevance they can assume in the domestic economy, the total sums of the fund allocated to the individual state and the potential impact on job growth.
Specifically, the projects indicated by the Commission are as follows:
3.?The Italian Plan - PNRR?
“Italy must combine imagination, design capacity and concreteness, in order to deliver to the next generations a more modern country within a stronger and more inclusive European Union”. This is what Mario Draghi, Italian Prime Minister, declared to present the Italian PNRR to the Lower and Upper Chamber of the Parliament. He also added that: “The PNRR is part of a broader and more ambitious strategy for modernising the country. The Government intends to update national strategies on development and sustainable mobility; environment and climate; hydrogen; the automotive; the health sector”.
The difficulties of the Italian economy in keeping pace with other advanced European countries and bridging social and environmental gaps is mainly due to its productivity trends, much slower than in other Member States of the EU. From 1999 to 2019, GDP per hour worked in Italy grew by 4.2%, while in France and Germany it increased by 21.2% and 21.3% respectively. Total factor productivity, an indicator that measures the overall efficiency of the economy, decreased by 6.2% between 2001 and 2019, against a general increase at the European level.
Among the causes of such a poor productivity performance is that Italy was not able to seize the many opportunities offered by the digital revolution. This weakness is both due to the lack of adequate infrastructure and to the structure of the productive fabric itself, characterized by the prevalence of small and medium-sized enterprises, which have often been slow in adopting new technologies and moving towards higher value-added productions.
Italy is the first beneficiary, in absolute value, of the two main NGEU instruments, the Recovery and Resilience Facility (RRF) and the Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU). The RRF allocates resources amounting to EUR 191.5 billion, to be used over the period 2021-2026, of which 68.9 billion are non-refundable grants. Italy also intends to make full use of its own financing capacity through the RRF loans, estimated at 122.6 billion.
The RRF requires each Member States to submit a package of investment and reforms. The Italian National Recovery and Resilience Plan (PNRR) sets out a package encompassing 6 policy areas (missions) and 16 actions, the result of a close interaction that took place in recent months with the European Parliament and the European Commission, on basis of the RRF Regulation. The six policy areas are: digitization; innovation; competitiveness; culture; green revolution and ecological transition; infrastructure for sustainable mobility; education and research; inclusion and cohesion; healthcare.?
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The Plan is fully consistent with the six NGEU pillars and broadly meets the parameters set out in the European regulations on shares of green and digital projects.
4.?The “Digital Disruption”.
One of the most relevant aspects of this "extraordinary" emergency period is the importance of digital transformation. There's no going back. The digital world is constantly evolving, and it's up to us to change our mindset and to change with it. We need to get used to physical distancing without losing social connection. It is time to facilitate the so-called digital "disruption", in terms of Blockchain and Artificial Intelligence - AI. The future implementation of new technologies will lead us towards a simpler, closer, circular?and sustainable world. It will also enable people to live their lives in a different, paradoxically more inclusive way, and minimize the anguish of bureaucratic and regulatory practices in a revolutionary way. The opportunity is there to make, for example, our Public Administration leaner, faster, more effective and efficient not only through digital infrastructure but also through new communication paths that can make the administrative machine less physical but more present for the citizen. In the same way, our public health system, put to the test by the pandemic, can become more resilient and stronger?through a serious program of interventions aimed at modernizing the physical and digital structures?highlighting the need to invest more and more in our research and its great human capital.?
5.?The energy transition: green growth and circular economy
According to the European Environment Agency, the circular economy is a relevant part of the green economy that deals more broadly with human well-being, lifestyles, and consumption patterns in the pursuit of broad and inclusive well-being and with natural capital, ecosystem resilience, and the preservation of ecosystem services. A circular economy refers to an industrial model that is regenerative in its intentions, in that products are designed to facilitate their reuse, disassembly, restoration, and recycling, rather than being obtained through primary extraction. A circular economy refers to a model in which businesses retain used resources for as long as possible, in order to extract the maximum value from them during use, recovering and regenerating products and materials at the end of their useful life.
On the Green New Deal front, there are numerous actions to promote:
In this regard, the U.S. Blackrock?fund has decided to take a very precise and concrete position on climate change by identifying as many as 244 companies, major global players including Exxon to Chevron, and Lufthansa to Daimler, that are making insufficient progress in integrating climate risk into their business models and disclosures. The new policies demonstrate a change in culture, increasingly oriented towards greater inclusion but above all towards a new found awareness that, alongside the profit motive, it is necessary to develop a more "responsible" business model. Only by working together in the same direction will we reach global objectives and new methods of creative communication need to be employed to mobilise as many people as possible.?
6.?Concluding remarks.?
The "Next Generation EU" sets ambitious goals in its founding premises, inspired by the principle of solidarity which is aimed at ensuring the well-being of the European Union (EU) through the fulfillment of economic, political and social obligations by all member states.?
"The recovery plan, Next Generation EU, turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environments. This is Europe's moment. Our readiness to act must match the challenges we all face. With Next Generation EU we are providing an ambitious response" Ursula von der Leyen, President of the European Commission, has repeatedly stated.
One of the greatest founding fathers of Europe, Alcide De Gasperi, looked ahead in terms of time, but also in geopolitical terms. Going beyond gradualism in certain respects, he had also persuaded, with the contribution of Spinelli, the European partners to include the original project of the EDC (European Defence Community) in a wider project of a European political community, Cep. For these objectives, however, the need for adequate European supranational democratic institutions was highlighted, with corresponding surrenders of sovereignty by member states.
In more recent years, the world's governments have been confronted with challenges that cannot be met by individualistic logic but that require united and cohesive approaches and concrete actions by supranational bodies capable of assuming a coordinating role.
A concrete example is given by the pandemic/health crises with the inevitable economic repercussions, the increasingly worrying climate change, distressing social crises and the increasingly marked centralization of wealth on a few subjects.
Challenges of this magnitude must be faced with unity and cohesion, as Europe has shown it can do in this historic agreement, highlighting the ability of the structure of the States to overcome clashes to build a common space for the benefit of all.
For this reason the common and unitary response provided by this historic agreement takes on an even more impressive significance.?
The negotiation that led to this historic result must lead to a way of thinking about a stratified phase of change. This must not only pervade European institutions of every order and degree as well as national ones, but must relate to all of its main actors. The European people, with their actions today and tomorrow, will influence more and more not only the common destiny also unitary, but especially a new European way of thinking characterised by a policy of comparison and growth. It is time for a unitary and circular culture aimed at creating once and for all a true common home.