Illimity Bank S p A : What will 2021 be like?

2021 could be a year of upheaval, but we still have a chance to avoid this. We can turn it into a year of opportunity, but it will require trust and an ability to marginalise the uncertainty that is growing worryingly.

Uncertainty is the ailment of our age. And not only for Italy. The global climate is under threat. International peace hangs in the balance. Ageing could undermine our social system. New technologies are turning unemployment on its head. Globalisation is endangering identity. The list goes on and on. In Italy, we can add an endemic lack of economic growth that exacerbates social hardship and potentially makes our public debt unsustainable.

The response - and once again this is by no means unique to Italy - has been a veritable array of populisms, extreme polarisation and, more generally, increased social instability.

COVID-19 has only added more healthcare and economic uncertainty into the fray, while also accelerating many changes already taking place. Perhaps the best example is how pervasive digitalisation has become in every industry, not just banking.

The combination of such uncertainty is that more and more people fear the future.

A few months down the road, a series of factors could cause increased social and economic hardship: the end of the moratoriums on loans, the termination of the ban on dismissals, the gradual depletion of corporate reserves and family savings (and let's hope we don't have to add our sovereign debt crisis, an uncontrollable spike in infections or some international crisis).

The risks are extremely serious unless we can rapidly rebuild trust. History holds telling warnings for what happens when social fear 'gets out of hand'. Extreme reactions are by no means out of the question.

To rebuild trust and unleash the incredible energy of Italians we must act decisively both in the short and medium term. And by 'we' I mean both Italy and Europe. Swift, tangible actions and projects that are at least worth committing to in the medium term are needed. Responsibly getting citizens and companies involved will be fundamental in achieving grand ambitions, although I truly believe these remain within our reach:

1. We need to speed up vaccinations, using all the public, private and military facilities the country has to offer. Let's be the first to vaccinate the entire population, in record time, and let's put in place the structures we need to manage future epidemics, because Covid-19 won't be the last. We need to use the resources available through the ESM to build facilities and technological structures across the country, to put in place an epidemiological data collection and management system that far exceeds the current one, and to boost the test & trace capacity for current and future epidemics, ensuring the system is robust and efficient. This road will greatly reduce the risk of future lockdowns that are both devastating and inadequate.
2. We must achieve sustained and sustainable economic growth using, where possible, effective laws that can be applied immediately (without the need for countless implementing decrees) and extraordinary decision-making powers, but keeping the public administration accountable at the same time. To return to sustained and sustainable growth in the short term, we cannot get lost in a thousand meanders. We need to focus on key priorities: a) Unleash the energy of companies that can drive the recovery, using both tax and structural solutions to reward those companies that invest in innovation and human capital, that improve their asset position and that increase in size. Some laws - Industria 4.0, Apprendistato, ACE - have already proven their effectiveness. b) Rapidly create - potentially using extraordinary or executive authorisation procedures - new physical, digital, energy and defence infrastructure, while maintaining the existing infrastructure. c) Ensure those industries hardest hit by the crisis - first and foremost, tourism, culture, sport and transport - are given a chance to survive and exploit this unique moment in time to undertake the necessary restructuring (e.g. modernisation and aggregation of the tourist offer).
3. Turn four current structural weaknesses into accelerators for sustainable development, through four key reforms: Education, Justice, Bureaucracy and Welfare. In each of these fields, efforts should begin immediately on the necessary, urgent measures (could anyone really deny additional professional and technological resources are needed in the justice system?), while at the same time efforts need to be made to build consensus on the most 'ideological', divisive issues.

The funds needed for these 4 + 4 strategic priorities to get Italy growing and redesign our country are available in quantities that will never be repeated. In the coming five years, between 400 and 500 billion could be used, if one combines national and EU funds. It would be a huge error not to use them all. 'Good' debt should never be a source of fear!

The role of Europe will always be fundamental in this framework. We must use a European booster for the national recovery and resilience plans. We need major 'federal investment' (€4-5 trillion) in shared physical and digital infrastructure, grand research projects, innovation and energy transitioning, and the completion of the key single markets, unless we want the EU to be a little fish in the big pond of the global tech powers. When I use the term 'federal investments', I don't mean new national programmes financed using EU funds, but investments that are selected, managed and funded at European level. The arrival of Eurobonds could provide a major boost, as early as 2021, to Europe. Moreover Italy, provided it acts seriously at home, could become a major leader in Europe.

The next G20, where Italy could also be a driving force, offers an opportunity we really mustn't waste to overcome the current effective GZero that has dominated recent years.

In essence, 2021 could be the year when things take a positive turn, but we mustn't underestimate the accumulating risks.

Editorial published by Formiche.net on January 17, 2021.