Italy's EU reconstruction program: success or financial burden?

The fact that the Fontana di Trevi in ​​Rome is currently shining in new splendor is also thanks to money from Brussels: around 330,000 euros went into renovating the spectacular baroque fountain.

The money came from the PNRR reconstruction program. Restoring historical heritage was one of many areas for which Italy mobilized a total of almost 200 billion euros. The focus, however, was on investments in new roads and railways, in digitalization and energy, childcare and medical care.

“Too much money withdrawn”

That sounds good at first, says economist Tito Boeri from Bocconi University in Milan. Nevertheless, he draws a rather negative conclusion: "In my opinion, too much money was called up. There was no need to call up everything. Because investing all this money wisely is very difficult."

This assessment is shared by Luca Del Poggetto, who at the OpenPolis Foundation observes how the money from the reconstruction fund is spent. “From the beginning, there have been studies that have shown that this is a very big challenge for public administration in Italy,” says Del Poggetto. “As early as 2021, the Parliamentary Budget Office published an estimate according to which the additional effort for administration amounts to a third compared to usual activities.”

Meloni appears satisfied

Italy's Prime Minister Giorgia Meloni has a completely different view of the 200 billion euro program. A few weeks ago she drew a conclusion that wasn't quite a final conclusion, but almost - the program officially runs until the end of August.

Meloni listed funding for a whopping 660,000 individual projects and expressed his satisfaction: "It wasn't an easy path, of course, but we kept to the schedule. And today we can say with a bit of pride that we were up to the task. Thanks to a joint effort by everyone involved, we have managed to keep up over these years."

Has growth been stimulated?

However, economist Boeri is not convinced by the government's self-assessment. One thing in particular worries him: a large part of the around 200 billion euros from Brussels flows as loans. They are cheap, but have to be paid back.

The hope in Italy was that the money invested would stimulate growth and thus tax revenue, which in turn would help repay the loans to the European Union.

But that was a kind of bet, says Boeri: "Unfortunately, I'm afraid that we won't win this bet. Because if you look at our country's economic performance, the growth rates are less than one percent and are still very low."

Follow-up costs could become a risk

But the economics professor is also worried about something else: every billion that is now spent on new buildings triggers follow-up costs for which money will be needed later.

"There is a risk that a project will be completed but there will be no more money for maintenance. And then a construction project will quickly deteriorate and lose value - if you think of bridges or railways, in which investments are no longer planned," says Boeri.

Unfortunately, the money from the reconstruction fund was spent on new projects and not on maintaining what already exists. The experience that bridges and railway lines not only cost money initially, but for many decades, is currently also happening in Germany.

In some of the 660,000 projects of the EU reconstruction fund for Italy, the money goes towards maintaining existing structures: for example the Fontana di Trevi, which has enriched the city of Rome and the whole world for around 300 years.