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Italy Vows to Use EU Money to Finally Alter Its Economic Destiny

Bloomberg logo Bloomberg 10/2/2020 Chiara Albanese, Alessandra Migliaccio and John Follain

(Bloomberg) -- European aid money will help lift Italy’s economy out of a chronic underperformance if it’s targeted properly, according to the country’s minister in charge of industrial policy.

“I am convinced that Recovery Fund money will allow Italy to finally make the leap,” Economic Development Minister Stefano Patuanelli said in an interview in Rome Thursday. Italy will be the biggest beneficiary of the aid, and could receive up to 209 billion euros ($246 billion) in grants and loans.

But Patuanelli acknowledged the challenge of directing the money properly. Prime Minister Giuseppe Conte’s government will have to make tough political decisions, even at the expense of angering some supporters, so that it helps the post-coronavirus reconstruction and gives a much needed boost to long-term growth prospects.

“We need to have the strength to avoid distributing it in bits and pieces and instead concentrate it where it’s most effective to boost growth,” Pataunelli said. “We need credible projects and rapid execution to repair fractures in our productive system.”

chart, histogram: Italy's economic growth has long lagged behind the euro region © Bloomberg Italy's economic growth has long lagged behind the euro region

The country has approved 100 billion euros in stimulus so far, which is set to boost its debt load to almost 160% of output. The economy will contract 9% this year and bounce back 6% next year, according to government forecasts.

Patuanelli said the only way out of the crisis is growth, and his ministry is working on identifying projects and sectors to submit to the EU. Among its targets are infrastructure, digitalization and green transition.

“The money shouldn’t be spent, it should be invested,” he said.

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