Covid 19 and the “Phase 2” of the Italian system. Prospects for the future

Marco Ricceri, Secretary General, EURISPES

“Phase 2”: this is the expression used by the Italian government in the fight against the pandemic to indicate the new regulation system of individual behavior and economic activities which entered into force on 18 May 2020. The action to fight the Covid 19 emergency promoted in Italy since 31 January 2020 has finally begun to give good results in terms of a constant decrease in infections and deaths and an increase in healings. This allowed the Prime Minister to issue the DCPM “Relaunch Italy” decree, which while on the one hand continues to operate on the sanitary protection front, on the other hand addresses the main economic recovery problems.

 

After a first positive testing of partial opening promoted in the previous weeks, the launch of the new “Phase 2” allows the restart of numerous economic activities, which should be complete by June 15, 2020, if the pandemic continues to decline. Obviously the achievement of this result will be possible – this is the appeal of the Italian government – only if, alongside the value of the new regulation system, also people and operators will be able to act with a sense of responsibility and prudence, taking all necessary precautions in inter-personal contacts and work activities.

On the occasion of the DCPM “Phase 2” presentation, the Minister of Economy clearly defined the current conditions of the Italian economy as a “very difficult situation”. This definition expresses a great concern and ultimately corresponds to the assessments on the prospects of the world economy illustrated by the United Nations which in a specific Report published on May 1, 2020, made a precise reference not so much to the previous world financial crisis of 2008 (Great Recession) but rather to the disastrous crisis of the first half of the last century (Great Depression), due to the great unemployment and widespread impoverishment of the populations “as many businesses were forced to shutter because of nationwide lockdowns in most developed economies. Rising unemployment and shrinking revenues are choking the demand for products and services, which will inevitably lead to sharp increases in bankruptcies and even more lay-offs” (UN.ECOSOC, Monthly report on the world economic situation and its prospects, Vol.4, n.5, May 2020). These are the same concerns expressed by the Italian government and shared by the most representative economic associations.

To better understand this orientation, it is necessary to keep in mind that the Italian production system is made up of small and medium-sized enterprises (SMEs) that are very flexible and dynamic but also very vulnerable, which represent 99.9% of the total number of companies (0.1% large enterprises), 80% of employment (20% large enterprises), 57.6% of the produced added value (32% large enterprises). The emergency closure of this complex production system, which lasted for about four months, is destined to have a strong impact on unemployment which in Confindustria’s forecasts (the main Business Association) should rise at a rate of 11.2% in 2020, returning to levels prior to the 2008 financial crisis. The “Relaunch Italy” government decree approved measures to protect workers, families and businesses for 55 billion euro, of which 25 billion in favor of workers and social safety nets. Of particular impact on corporate reorganization decisions are the provisions for blocking lay-offs for economic reasons, now extended to 5 months, the extensions for fixed-term contracts, the support for smart working, the emergence of irregular work. A subsidy called “emergency income” will be distributed to those living in poverty.

It is interesting to note that the assessment of government measures is currently accompanied by a parallel debate on the future prospects of the Italian system, in which the Eurispes Scientific Committee also actively participates, which has been called the “Phase 3” debate. At the basis of this reflection there are some shared fixed points. The pandemic shock has highlighted, for example, that the state must resume an active guiding role in the economy, that widespread digitization is the real tool to overcome the limits of the present, that companies must deeply reorganize their structure and their own strategies, that the world of work must adapt to new working conditions, first of all those connected to smart working and remote work (these new forms of work could involve up to 50 per cent of company workforce). The transition from “closed society”, as it has been in the last period, to “open society” requires everyone not to abuse freedoms at the expense of responsibility for the quality and sustainability of development: this is the main lesson of Coronavirs. For the Italian system, the start of “Phase 3” is seen as the opportunity to open a great season of reforms, of discontinuity with the recent past, of a new vision for the future.