TURIN. In addition to that of government and the pandemic emergency, also that of private income. Italy is in the grip of a triple crisis. And to certify it is the Bank of Italy, which recorded that in the first half of the year of Covid-19, private non-financial income showed the greatest contraction in the last 20 years. This decline was only partially countered by the support measures adopted by the executive Conte. A tile that could have significant impacts in the most delicate phase of the restart. With long-term consequences that could increase the gap with European partners.
The destruction of income begins to be felt on Italian family budgets. And it could also have considerable long-term consequences on the erosion of private wealth, the country’s most significant social safety net. The report by Palazzo Koch “The economic and financial accounts during the Covid-19 health crisis” highlights all the difficulties that the Italian system is facing. And that, in large part, will still have to face. The data is worse than the US housing crisis of 2006/2007, which then led to the pyrotechnic collapse of the fourth Wall Street bank in September 2008, Lehman Brothers.
“In the first half of 2020, households’ primary per capita incomes at current values fell by 8.8% compared to the first half of 2019, a much larger contraction than those recorded in the most acute phases of the financial crisis (-5 , 2%) and that of sovereign debts (-3.4%) ”, points out the analysis of Via Nazionale. Not surprisingly, the most affected were the compensation of employees, which fell by 8.7% due to the decline in unit income, while the earnings and profits of producing households (i.e. net operating income and net mixed income , ed) decreased by 7.4 percent. War scenario numbers.
Savings are growing very much. Direct consequence of the decline in wages, but also of uncertainty about the future and the scissoring on consumption. Again the Bank of Italy: “Despite the strong public support for household spending power, the drop in consumption in the first half of the year was exceptionally large (-9.8%). This resulted in net savings of € 51.6 billion; the savings rate has more than tripled compared to the end of 2019 (from 2.8 to 9.2%) “. This had never happened in the last two crises, subprime and eurozone debt.
But where did the Italians’ money go? Partly eroded, partly spared, partly transferred. The Bank of Italy’s analysis highlights, not surprisingly, a transfer in public securities. “In a context of sharp contraction in consumption and investment spending, households and businesses have on the whole indirectly transferred resources to public administrations, especially through the use of liquidity set aside in the banking system”, explains the report. Which in fact specifies the investment dynamics.
“After more than a year of disinvestments in public securities (-23.6 billion in 2019), in the first half of 2020 households returned to buying them for 5.1 billion, while sales of other securities for 11.6 billion were recorded », Remarks the Bank of Italy. Going into detail, purchases of government bonds were concentrated in the second quarter, when Italian households absorbed securities for 9.9 billion euros, approximately 9% of net issues, offsetting sales for 4.8 billion recorded in the first three months of the year. Also thanks to the launch of the hype organized by the Conte government for the BTP Italia and BTP Futura in Phase 2 of the Sars-Cov-2 pandemic.
Then there is the question of the debt. According to the economists of the Bank of Italy, “between the end of 2019 and the end of June 2020, the six-monthly change in public debt as a percentage of GDP reached the highest values in the last twenty years considered”. Predictable, of course. But the numbers are impressive: in the first half of 2021 alone, public debt increased by 121 billion euros, of which 97.4 in the second quarter alone. The deficit was lower, set at around 78 billion euros. Data that worries the European Central Bank (ECB), which has repeatedly invited the eurozone chancelleries to carefully monitor the dynamics of the domestic public debt, to avoid imbalances and asymmetries in the long term. In this context, the Italian accounts are worrying. And they should worry even more in light of the government crisis that opened yesterday, the outcome of which is still unclear.