PA reform and how to kick out the worst ones

In a recent article, (30 December, Project Syndicate) Nouriel Roubini states 'The real threat Europe faces lies in its economic and technological backwardness. Between 2008 and 2023, GDP increased by 87% in the US, compared to just 13.5% in the EU. Over the same period, the EU's GDP per capita fell from 76.5% of the US level to 50%. Even the poorest US state-Mississippi-has a higher per capita income than several major European economies, including France, Italy, and the EU average." What is striking in the quotation is not the well-known figures of anaemic European growth compared to the US, but the reflections it prompts. The first is that, perhaps, we should not always reason only in relative terms and, above all, we should look beyond the aggregate GDP and productivity statistics, which seem to tell us less and less truth. Personally, I have many doubts as to whether the standard of living prevalent among the inhabitants of Mississippi is higher than that of Italy or France, and I am not just referring to 'quality of life', but also to material well-being measurable not only in terms of GDP. Europe remains predominantly an area of economic well-being, albeit with unresolved distribution problems that we should not consider merely physiological. We have not become poor. The second reflection concerns, as Roubini reminds us along with all European economists, Europe's technological and innovation gap compared to both the United States and China, even though the latter still has a lower GDP per capita than Europe. In a recent article, Philippe Aghion, fresh winner of the Nobel Prize in economics, reminds us that in Europe there is a problem with the functioning of the 'creative destruction' mechanism that is the spring of innovation and economic dynamics. The spring jammed by protectionism.

But all this happened before Trump. How has reality changed today? In a nutshell, the US government in 2025 communicated to the world that the global economic order, with its more or less codified economic and financial relations, no longer responds to American interests. The result is the shock of tariffs being raised and the role of the dollar being questioned, accompanied by a vision of an international monetary system in which public and private currencies can compete. We do not yet know what the quantitative impact of these shocks will be through uncertainty on global growth on the supply side, i.e. on investment decisions, inflation and global production chains. The expected disastrous effects on the US economy have not yet occurred, in terms of higher inflation and less growth, but neither can we see the new era of gold foreshadowed by the Trump administration. For most economists, greater negative effects on the US economy will unfold in the year ahead, because that is what economic theory tells us. We shall see. But we are interested in the possible effects on the rest of the world, on Europe and Italy in particular. But much will also depend on their response.

Against this backdrop of uncertainty, it pays to focus on the fundamentals and how to gear up. The hope is that the EU does not continue its suicidal protectionist drift. The technology and innovation gap is not cured by closing it, but by importing technology and innovation from where it is generated today and creating the conditions for future convergence towards those who are ahead today.

But let us come to Italy. I believe that a correct path has been taken. Italy today enjoys political, financial and social stability. A few years ago this was not a foregone conclusion. The budget law that has just been approved confirms proper management of public finances, which has restored market confidence in Italy. Because of the high degree of uncertainty that dominates the world, this result has national security value and is a prerequisite for the relaunch of investment and growth. And this policy has not prevented an increase in employment and a decrease in the unemployment rate, which are the basis for substantial social stability.

Continuing along the path taken means, however, continuing to dig into a public budget of over a trillion to find resources lost in many rivulets to channel them where it is fairest and where it is most productive, without recourse to new taxes or new debt. There is room to do so, while the domestic and international conditions for a policy of fiscal expansion are not yet in place. Moreover, the idea that growth depends primarily on government action through budgetary policy is wrong. Let us remember that the Ministry of Economy and Finance governs, with the consent of parliament, the procurement of financial resources (taxes) and their allocation to expenditure chapters, but does not control the efficient use of resources by the spending ministries, from which the financial flows to the private sector also flow. This remains the great obstacle. We are still, therefore, talking about PA reform as the reform of all reforms. However, having spent a lifetime in the public sector, in various positions, I have become convinced that it is not enough to change the rules and that the problem is not even to attract the best people into the PA, because there is no shortage of them. The problem is how to get rid of the worst ones. We are still on the subject of 'creative destruction': you do not create without destroying and you do not innovate without changing methods and people.