Italian Recovery Plan: a short sighted plan guiding the future
- www.imago-images.de
Italy received the largest allocation of funds ever for a member state at European level as part of the Recovery program. The €235 billion Italian Recovery Plan (NRP) are to grow the aims to revive the economy after the shock caused by Covid-19. This unprecedented European investment program is also supposed to drive the energy transition and help achieve Italy’s climate objectives. One of the first consequences of the recovery program was political instability that has already consumed to two governments and put in place an extreme right government. Elsewhere in Europe this raised concerns whether the Meloni will honour her predecessors’ commitments to implement the recovery plan. However, a lack of a common vision and targeted plan on the European and national level taking into account the structural causes of the multiple social, ecological and economic crises jeopardise meeting the ecological and economic objectives of the recovery plan as much as any potential rogue moves by Meloni’s government.
‘Italia Domani meets the demanding criteria we have defined together. It is ambitious, forward-looking and it will lead to a better future for Italians and for our European Union’.[i] With these words, from President Ursula von der Leyen, the European Commission gave the green light to the Italian Recovery Plan (NRP).
A year has passed since and a new extreme right-wing government, led by President Giorgia Meloni, is now in charge of the NRP. The quick succession of Italian governments itself is closely related to the recovery program. Former Prime Minister Giuseppe Conte's government collapsed in 2020 over tensions on how to spend this money, and was replaced by a large coalition led by former ECB President Mario Draghi. Previously lauded for saving the Euro, he was seen as a guarantor of stability who would manage the recovery program in an orderly way. However, the reforms which had to be implemented earlier this year as a condition for receiving the recovery funds sparked public hostility and conflicts among the governing parties. By quitting, Draghi showed how it is easier to be a technocrat at the helm of the ECB than to lead a national government where you cannot hide from the social tensions caused by unjust monetary and other economic policies, which favour investors and reinforce inequalities.
Since October 2022 it’s Meloni government’s turn to manage what is seen as an ambitious and crucial plan for Italy. This must be done alongside guaranteeing the country's energy security and responding to growing poverty amidst the expected return of economic recession and a potential threat of financial instability.
Mixed economic results and still growing gap between North and South Italy
On the economic level, the results of the recovery program so far have been mixed. The Italian economy was able to start growing again, but has failed to reach the level seen before the pandemic hit. Public debt has also continued to rise since the recovery program started.[ii] Italy is already seen as the most important point of economic instability in the Eurozone as it combines a stagnating economy with an increasing level of public debt. As the third largest economy, it has a massive impact on the rest of the Eurozone. On the other hand, Italy’s economic stagnation serves as a stark example of the low-growth, which the European Union has faced for a long time, even though stimulating growth is a primary objective of European economic policy.
The NRP is also supposed to help bridge the gap between northern and southern Italy. Yet there is evidence that it is precisely the municipalities in the south currently experiencing the most difficulties, which risk being excluded from the recovery plan - both from carrying out projects and from submitting proposals eligible for funding. This situation can be ascribed to the funding allocation method that, instead of being based on a joint programming principle, is based on territorial competition: This provides an advantage to the more efficient administrations in the centre and north. Additionally, many calls for proposals contain the request for co-financing by local authorities, yet 259 out of 411 municipalities in Calabria, 237 out of 552 in Campania and 144 out of 390 in Sicily experiencing financial difficulties in 2020.[iii] This divergence is a clear and present risk due to the convergence of various conditions, the first proof of which was given by the rejection of all 31 projects related to the irrigation of agricultural areas in Sicily by the Ministry of Agriculture. A large part of Sicily is at serious risk of desertification. [iv]
In theory, everybody can apply for recovery funding. Yet a lack of transparency currently blocks us from seeing who the main beneficiaries are. However, given the general strategy of supporting the economy and the quick distribution of vast amounts of grants and loans, it is likely that large companies will receive a big piece of the recovery pie. This may not be the most helpful way to achieve economic growth or high-quality job creation, because big companies are generally not reinvesting their profits in new productive economic activities.[v] The behaviour of big European oil and gas companies during the current energy crisis, including Eni, illustrates this. Almost half of the record extra profits they have made from the high energy prices pushing many Italians and other Europeans into poverty have gone to shareholders. Meanwhile, investments in future activities have been decreasing in recent years. And unfortunately, most of the money these companies do invest goes into fossil fuel activities - with only a small portion invested in what they describe as ‘green solutions’.[vi] How giving public money to such companies will help Europe achieve economic recovery - let alone transform into an economy and society that can cap global warming at 1.5 C and protect the environment in a socially just way - is a mystery.
Between weaknesses of the ecological dimension and fossil fuels corporate capture
When we look at the ecological dimension of Italy’s national recovery plan, the first warning sign is that the EU’s third economy allocates less investments to the ecological transition than any other member state bar Greece. What’s more, this 'green' recovery appears not to distribute resources towards transformative and innovative zero-emission projects needed for a true ecological transition.
This strategy to favour large infrastructure projects and monopolies over citizen-first investments is also represented by the New Breakwater construction at the port of Genoa - the largest infrastructure project financed by the Italian government under the recovery plan. The first part of the project alone has an estimated cost of €950 million. It will receive €500 million through the NRP Complementary Fund set up by the Italian government, €100 million though the Port Infrastructure Fund and €264 million via a loan from the European Investment Bank to the Western Ligurian Sea Port Authority. A new breakwater structure is the basis for the restructuring and reorganising of the entire Port of Genoa. The restructuring aims to allow mega tourist and cargo ships to dock at the port, and to adapt it to the needs of the major shipping companies such as MSC - which has its 'real' Italian headquarters in the port of Genoa. The project will bring the artificial breakwater barriers closer to two marine canyons near the mouths of the Polcevera and Bisagno rivers, which risks changing key water currents in the Mediterranean, with obvious repercussions for marine fauna and the entire marine ecosystem.[vii] The port expansion will also drive up both traffic congestion and air pollution within Genoa itself, which will exacerbate existing social and health problems.
The fossil fuel industry, led by the Italian companies Eni and Snam, has succeeded in claiming a huge slice of Recovery Plan funding – helped immensely by an intense two-year lobbying campaign.[viii] From this, more than €3 billion has been allocated for the production, distribution and use of hydrogen. Fossil fuel corporations will also receive a part of the €11.4 billion budget for education and research, which also provides funds for studies on both green and ‘clean’ hydrogen. To devote so much resource to green hydrogen appears entirely misplaced as non-green hydrogen prolongs dependence on fossil fuels. Too much focus on green hydrogen would consume a huge amount of renewable energy capacity as large amounts of energy are lost in the conversion process, and renewables need to satisfy other energy needs. The scale of hydrogen investments seems to fulfil the oil and gas sector’s desire to keep their polluting business model as unchanged as possible.[ix] Meanwhile, there is not enough focus on Italy realising its full renewable energy potential.
Resources needed for a true green transition are dispersed within various components and minor elements of the NRP, such as support measures for 'green islands' or agri-voltaic projects. Little funding is provided for industrial decarbonisation, greener electricity supplies and electrification expansion – all essential to achieving a just green and social transition. Italian electricity transmission grid operator Terna has tripled the number of requests to connect renewable energy-based plants to the electricity grid since 2018, but three years later almost 1,500 applications still await approval.[x] Additionally, the increases in renewables actually realised by Italy in recent years are far below the targets for 2030, which at the current rate would only be reached in 2071.[xi] It is obvious that the NRP renewable targets are too low overall, as they are only a small fraction of what Italy is capable of producing.[xii]
The aim to support energy communities for municipalities under 5,000 inhabitants could be a small step forward. Together with energy efficiency measures, these could be among the useful ways to combat high-energy prices and the ease the wider social crisis. However, they cannot be developed until the necessary decrees to transpose a related European directive are implemented by the Italian government. The NRP also supports energy efficiency and safety of buildings, but the programs, which will benefit are those with greater spending capacity, rather than those, which fairly redistribute resources and tackling energy poverty.[xiii] Creating public finance mechanisms to support the renovation of all housing, especially the housing of people who are less well off, is necessary to support access to decent housing as well as achieving climate objectives.
Energy crisis and modifications of the plan
The amendment to the NRP and its implementation in line with Brussels standards was one of the most controversial points of the right-wing election campaign, with Meloni demanding more room for manoeuvre. It seems that the Government’s intention is to discuss the plan with Brussels and thus free up resources for investment projects in the energy sector, which Meloni considers the real priority. This strategy relays on two points. The first is a more conventional confrontation with the European Commission to revise the status of individual interventions and to agree with the Commission, which projects should be confirmed and which ones should be shelved or replaced. The second is the European discussion around the REPowerEU energy plan that will allow member states to add an energy chapter to the NRP. The two aspects go together, as REPowerEU should be financed primarily with the residual quotas of EU loans not used for the NRP, yet Italy has already committed to using them all. The country therefore has to free up resources from current projects to reinvest in new energy projects. The possibility for Italy to use unspent resources of the EU Cohesion Fund, originally meant to be spent between 2014 and 2020, is also open. We will find out shortly what the actual energy strategy of the Meloni government will be.
The inclusion of the REPowerEU chapter in the NRP is seen as opportunity to respond to the energy crisis by pushing transformative investments. Firstly, the energy crisis proves that big energy companies are not reliable partners, as they are making huge profits from rising energy costs and giving them to shareholders or investing them in continued fossil fuel production when they should be considering the population’s living standards and going all out on the energy transition. However, companies like Eni are engaged in the same profiteering as purely private companies, even though the company is partially state-owned. To resolve the energy crisis, we need to invest in democratically controlled energy companies, which have a clear mandate to prioritise a socially just transition. More specifically, such transformative investments could include the provision of massive support to create energy communities even in the largest municipalities, accompanied by the speeding up of the activation process, improving renewable energy infrastructure and decarbonising public and private buildings. However, this opportunity is being jeopardised by the emerging European legislative framework. On 10 November, the European Parliament voted in favour of the Commission's legislative proposal on the inclusion of REPowerEU chapters in national recovery and resilience plans. The proposal will prolong the EU's dependence on imported fossil gas and cause further lock-in of high-emission and high-cost fossil fuel sources. By exempting some fossil fuel projects, the European Parliament failed to ensure that the ‘do no significant harm’ principle - an environmental safeguarding tool - applies to all EU investments. Although the Parliament tightened the rules compared to the original European Commission proposal, Member States will still be allowed to exempt some fossil fuel investments such as gas pipelines and LNG terminals from complying with the principle. This creates a risk that Meloni will U-turn and use REPowerEU funds to develop oil and gas reserves off the Italian coast.
In 2016, when a referendum on banning the renewal of gas and oil concessions in existing reservoirs within a certain distance from the Italian coast was held, Meloni was strongly against it. She complained that the renewal of concessions until existing reservoirs were exhausted 'badly affects our environment and helps a few large lobbies that are linked to this government'. By November 2022, during her first speech to the Senate, she had changed her tune. Meloni claimed that 'out of the drama of the energy crisis, paradoxically, an opportunity for Italy may also emerge. Our seas possess gas deposits that we have a duty to fully exploit. Moreover, our country, particularly the south of Italy, is a paradise for renewables, with its sun, wind, the heat of the earth, tides and rivers'. The Council of Ministries also agreed on the “Decreto Aiuti Quater" decree, proposing the continuation and revitalisation of offshore oil and gas platforms, even while Meloni declared her commitment to combating the climate crisis during COP27. So, does Italy have a comprehensive strategy to address the actual energy and climate crisis? It does not seem that way by looking at the National Climate and Energy Plan, which is thoroughly unambitious and fails to meet the Green Deal’s objective. Much will depend on the choices of a government which for now is little different from Draghi's on this (with former Minister for Ecological Transition Cingolani as energy advisor to Meloni's new executive).
Citizens and workers should own the plan
Rather than this set of contradictions, the NRP’s revision process should be based on the results of open, public and participatory consultations with civil society organisations, think tanks, professional associations, unions, local authorities and the Italian Parliament, who were very little consulted during the initial drafting of the Plan. This would be far more in line with the European Parliament’s proposal introducing guidance on mandatory consultation during the preparation and the implementation of the REPowerEU chapters. In response to the limited consultation and opaque plan drafting process, Italian civil society has mobilised to gather reliable information and monitor the Plan's implementation. [xiv]
Decision makers all over the world talk about the extraordinary combination of social, ecological and economic crises, but keep implementing the same policies and defending the same corporate and financial interests that created them. If a new government would want to mark a real alternative to its predecessors and ensure that 'from the drama of the energy crisis, paradoxically, an opportunity for Italy may also emerge' as Meloni claims, then it should start by guaranteeing citizen and worker participation and ownership in all sectors receiving public funding .
Real investments in renewable energies, electrification and energy saving would limit the risks related to the country's energy security. Properly planned and managed, this transition has the potential to create new, better, more qualified and well-paid jobs, and a more enticing social offer for younger people
So from people’s standpoint, the priority should be to critically assess and aim for far more than the recovery of economic growth. We should instead aim to create a public investment program that actually focus on real green solutions, good jobs creation, public owned services and sustainable development.
About the authors
Eva Pastorelli
Eva has joined Bankwatch in 2022 as responsible for monitoring European public funds and their use in Italy. Her professional career has focused on policy and advocacy activities on sustainable development goals and on the issues of inequalities, sustainable agriculture and changing consumption and production patterns. She has also been involved in project design and management within major European development and awareness-raising programmes.
The author would like to thank Frank Vanaerschot, Director of Counter Balance, Network of which their organisation is a member, for his essential support for the article.
Anelia Stefanova
Anelia joined Bankwatch in 2000 and she is currently Energy Transformation Area Leader.
Between 2004 and 2007, Anelia coordinated Bankwatch’s transport campaigns, which included assistance to local campaigns, advocacy work on EU level and analyses of EU, EIB and EBRD Transport policy. In 2007 she took over the coordination of Bankwatch policy work on EIB, EU funds, transport and climate. Since 2014, Anelia is Bankwatch’s programme director. She is also representing Bankwatch in the Green 10, the coalition of leading environmental non-governmental organisations working in Brussels.
References
[i] Irene Dominioni, Italia Domani Il Recovery Plan italiano è ambizioso e lungimirante, ha detto Ursula von der Leyen (23/06/2021), Linkiesta https://www.linkiesta.it/2021/06/von-der-leyen-draghi-cinecitta-recovery/
[ii] Rosa Canelli, Giuseppe Fontana, Riccardo Realfonzo, Marco Veronese Passarella (2022) Is the Italian government debt sustainable? Scenarios after the Covid-19 shock. Cambridge Journal of Economics, Volume 46, Issue 3, 11 May 2022, Pages 581–587, https://doi.org/10.1093/cje/beac014
[iii] Rapporto Ca' Foscari sui comuni 2020. Il governo locale: modelli ed esperienze in Italia e in Europa (2020), cited in an article from Fausto Carmelo Nigrelli on Micromega https://www.micromega.net/pnrr-divario-nord-sud/
[iv] Ministerial Decree n. 490962 of 30 september 2021 - Decree of approval of the lists of projects eligible and ineligible for financing with funds from the PNRR - Mission 2 Component 4 (M2C4) -
Investment 4.3 - Investments in the resilience of the irrigated agro-system for a better management of water resources https://www.politicheagricole.it/flex/cm/pages/ServeBLOB.php/L/IT/IDPagina/17399
[v] Tori, Daniele and Onaran, Özlem (2017) The effects of financialisation and financial development on investment: Evidence from firm-level data in Europe. Greenwich Political Economy Research Centre (GPERC). https://gala.gre.ac.uk/id/eprint/16089/7/16089 Tori and Onaran_effect of financialization and financial development on investment FEPS REPORT 61216.pdf
[vi] Merian Research for ReCommon (2022) Analisi degli extraprofitti nel settore oil & gas europeo. https://www.recommon.org/analisi-degli-extra-profitti-nel-settore-oilgas-europeo/
[vii] Bankwatch, EuroNatur briefing with case studies from Poland, Estonia, Italy and Slovenia (2022) Applying the ‘do no significant harm’ principle in practice. Examples of reforms and investments under national recovery plans that will cause harm to the environment. Pages 9-12, https://bankwatch.org/wp-content/uploads/2022/03/Annex-2_Applying-the-do-no-significant-harm-principle-in-practice.pdf
[viii] Fossil Free Politics (2021) Hijacking the recovery through hydrogen https://www.fossilfreepolitics.org/news-resources/hijacking-recovery-hydrogen and ReCommon (2021) Ripresa e Connivenza https://www.recommon.org/le-mani-del-settore-dei-combustibili-fossili-sul-recovery-plan/
[ix] Elena Gerebizza and Filippo Taglieri (2022) The illusion of green hydrogen https://www.recommon.org/en/the-illusion-of-green-hydrogen/
[x] Legambiente (2021) Scacco matto alle fonti rinnovabili https://www.legambiente.it/wp-content/uploads/2021/11/Scacco-matto-alle-rinnovabili_report-2022.pdf
[xi] ECCO Climate (2022) Q&A Renewables. È vero che l’Italia è indietro nello sviluppo delle rinnovabili rispetto agli obiettivi? https://eccoclimate.org/it/qa-rinnovabili/
[xii] Greenpeace Italia (2022) Next Generation in dieci passi https://www.greenpeace.org/static/planet4-italy-stateless/2021/04/434d60d0-next-generation-in-dieci-passi.docx.pdf
[xiii] INTERNATIONAL MONETARY FUND (2022) Italy’s Superbonus Tax Credits. IMF Country Report No. 22/255, Annex VII. https://www.imf.org/en/Publications/CR/Issues/2022/07/28/Italy-2022-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-521484
[xiv] Osservatorio Civico PNRR (PNRR Civic Observatory) was set up, which brings together some of the main organisations with ample experience in the field of transparency and accountability. Fondazione Openpolis set up OpenPNRR, a web platform to monitor certain key aspects of the Plan. The LIBenter project aims at monitoring every project envisaged in the NRP, acting as a watchdog on the use of European and national resources aimed at recovery