Once the spending’s over, is the momentum gone? Svimez highlights the limits to growth in the South

For several years, the South has grown more rapidly than the Centre-North, creating the illusion (or the hope) that the process of convergence, long hoped for since the unification of Italy, was finally coming to fruition. However, the latest Svimez report warns that this momentum is fading: between 2021 and 2025, the southern economy grew by 9.5 percentage points (compared with 6.6 for the rest of Italy), but the gap has gradually narrowed and could disappear or even reverse from next year onwards. According to the organisation headed by Luca Bianchi, the driving force behind this achievement – and its subsequent decline – is the National Recovery and Resilience Plan (PNRR). With the requirement that 40 per cent of resources be allocated to the South and the Islands – which together account for just over a fifth of the national economy – the NRRP is said to have strongly underpinned growth which, now that the cycle has come to an end, is reportedly drawing to a close.

The report is, as ever, packed with data and analysis to support the argument put forward. However, perhaps unintentionally, this edition seems to imply a twofold criticism between the lines: directed at the NRRP and at its actual implementation, particularly in the South. The aim of the NRRP was to boost GDP growth potential through a vast programme of investment and reforms. However, Svimez points out that the impact, at least in the South, has essentially been limited to the implementation phase of the measures and is attributable almost exclusively to the resulting flow of public spending. This suggests that the expenditure multiplier effect is at work: as long as resources are injected into the economy, it grows. But if this is merely a short-term economic spurt, it has nothing to do with the economy’s own capacity for sustainable development in the medium to long term.

It is important to emphasise that this would remain true even if the multiplier had an extraordinarily high value – something for which there is no particular evidence, either in the South or elsewhere. At most, one might conclude that this scheme performed well in temporarily sustaining economic activity. But the ‘Southern Question’ is not about the absence of temporary stimuli: it relates precisely to the lack of robust long-term growth. Our country’s history is full of temporary measures: in their book "Morire di aiuti" (Ibl libri), Antonio Accetturo and Guido De Blasio have compiled an extensive catalogue of them, demonstrating that in the majority of cases the effect ended when the transfers ceased, just as in this instance. If this is the case, then it follows that, whatever the merits of the NRRP may be, they do not represent a solution to the deep-rooted problem of the southern economy.

This observation is uncomfortable, because Svimez itself shows that the NRRP has had some merit. For example, the average duration of the procedural stages of public works has fallen much more in the South than in the Centre-North and is now shorter in the South, where 12.5 months are sufficient compared with 30.7 in the pre-NRRP period. Therefore, we cannot simply blame the inefficiencies of the public administration: if the impact of these projects on GDP was limited to their construction phase, it is not the fault of the bureaucracy but of the projects themselves. It is no coincidence – as Svimez also points out – that during this so-called 2015–2021 boom, the exodus of young people has intensified: those planning for the long term certainly do not look at changes in GDP over a single year, but much further ahead.

Finally, the growth observed over the past five years did not come for free. The National Recovery and Resilience Plan (PNRR) has mobilised substantial resources – around 200 billion euros – which have been added to the national debt, partly directly (the loans that Italy will have to repay to Europe) and partly indirectly (the non-repayable grants, which Europe will have to repay with money from member states, including Italy). The empirical question, then, is whether the benefits outweighed the costs. The Svimez analysis offers a persuasive argument for concluding that, at least as far as spending in the South is concerned, the answer is no, and that the outcome of the NRRP has been little more than a rehash of failed policies that have already been tried. There is no ‘legacy to consolidate’, but merely yet another mistake to be avoided in policies on territorial convergence.