Italy Recovery Plan: Bidenomics or Marshall Plan 2.0?

Italy Recovery Plan: Bidenomics or Marshall Plan 2.0?

Italy’s Recovery and Resilience Plan could provide a significant boost to aggregate demand in the coming years. And arguably even more important are the accompanying structural reforms, which could raise GDP in the long run. Having said that, there are a number of reasons to think that the programme will have a smaller impact than the government hopes.
Jack Allen-Reynolds Senior Europe Economist
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European Data Response

Euro-zone Final HICP (Sep.)

Euro-zone inflation looks set to climb further in the coming months as higher input and energy costs feed through. An unusually cold winter would put even more upward pressure on gas prices in the short term, but we still think that headline and core inflation will fall sharply next year to well below 2%.

20 October 2021

European Economic Outlook

Running into troubled waters

Supply chain problems will slow the recovery and keep inflation above target until around the middle of next year. Beyond that, however, the economy should get back on track. After regaining its pre-crisis level later this year, output is likely to converge with its pre-pandemic trend. Meanwhile, we do not expect significant second-round effects from the recent surge in prices and think wage increases will remain quite modest. Headline inflation is likely to drop back below the ECB’s target by the end of next year, as energy inflation turns negative. So while the ECB will end its emergency PEPP purchases next March, it will step up its regular asset purchases and leave the deposit rate at -0.5% until around 2025, which is a lot later than financial markets anticipate.

19 October 2021

European Economics Weekly

Energy, semi-conductors and Italy’s Green Pass

The continued high level of energy prices strengthens our view that euro-zone inflation will keep rising in the coming months. But by lowering consumers’ purchasing power, it could actually reduce inflationary pressure in the medium term. Meanwhile, data released this week added to the evidence that supply problems are weighing on German car manufacturers, and things are unlikely to get better any time soon. Finally, Italy’s new Green Pass requirement for workers came into force today, sparking protests at a number of ports. But so far the disruption seems to have been limited.

15 October 2021

More from Jack Allen-Reynolds

European Data Response

Euro-zone Retail Sales (May)

Euro-zone retail sales rose back above their pre-pandemic level in May. And as Covid restrictions continue to be lifted, spending in the services sector is recovering very rapidly, which will provide a significant boost to household consumption and GDP.

6 July 2021

European Data Response

Euro-zone Flash PMIs (June)

The further strengthening of the euro-zone Composite PMI to a 15-year high in June underlines that the economy is rebounding quickly. Alongside this recovery, price pressures are continuing to build. But we still think that they will fade in 2022.

23 June 2021

European Data Response

Euro-zone Hourly Labour Costs (Q1)

Average hourly labour cost growth slowed in Q1, and we expect wage growth to remain subdued over the coming years. This will keep underlying inflationary pressures down.

16 June 2021
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