You don't get out of debt with more bonuses. You get out by growing again

In the last few days, during the G20 of finance ministers in the United States, two statements came out that in my view show very clearly two different ways of looking at the same problem.

The US Treasury Secretary Scott Bessent said:

“The world is drowning in debt, after the global financial crisis and after Covid, and the only way out is to grow.”

Shortly afterwards, the Italian economy minister Giancarlo Giorgetti stressed that Italian debt is no longer the problem it was in the past and that our country is fairly relaxed about refinancing it.

I'll start with Bessent.

In my view he is completely right.

The world is drowning in debt

After the global financial crisis and, above all, after the Covid lockdowns, governments and central banks pumped an enormous amount of money into the economy.

Intervening in an exceptional situation was probably unavoidable.

But nothing is free.

That enormous amount of liquidity, together with the growth in public spending, contributed to the rise in debt and then in inflation too.

In the United States public debt has now passed 100% of GDP, reaching levels we historically associate with truly exceptional periods.

And yet, personally, I am much less worried about the future of the American economy.

The United States has a capacity for growth that Europe, and Italy above all, does not have today.

Technology, capital, energy, a domestic market, global companies, the ability to attract investment and talent.

I have few doubts that the United States will try to sustain its debt through the growth of its economy.

And this is where we come to the Italian problem.

Italy's problem is not just debt

I have more doubts about Giorgetti's words.

Granted, it is true that some indicators of our public finances have improved.

The deficit is back at around 3% of GDP and today Italy manages to refinance its debt without the tensions we have known at other times.

But in my view the real problem is that Italy doesn't grow.

Or, when it does, it grows by zero point something.

And this has been going on for decades and got worse above all after the 2007-2009 financial crisis.

We can argue as much as we like about the spread, the deficit, European parameters and refinancing the debt.

But if the denominator, that is GDP, doesn't grow seriously, sooner or later the problem comes back.

First taxes, then bonuses

Since the financial crisis we have tried several recipes.

Under the Monti government we tackled the emergency mainly through a very sharp increase in the tax burden.

IMU property tax.

The super-tax on large cars.

Taxes on boats.

Higher excise duties.

More pressure on property and productive businesses.

Measures adopted at a certainly very difficult moment for the public finances, but which had a real impact on the pockets of families and business owners.

In the years that followed we went almost to the opposite extreme.

The politics of bonuses.

The 110% superbonus.

The facades bonus.

The furniture bonus.

The taps bonus.

The mosquito nets bonus.

And we could go on.

Every government added its own measure.

Every party tried to protect or reward a particular group.

Every small interest group tried to bring home its own tax break.

But in the end somebody always has to pay the bill.

We see the result today

The tax burden on those who work and those who run businesses remains extremely high.

Inflation in recent years has eaten a large part of purchasing power.

Real salaries struggle to grow.

Energy and fuel remain heavy costs for families and companies alike.

And while we keep arguing about how to distribute resources, we find it much harder to discuss how to create new wealth.

In my view this is the point we should pay attention to.

Because in the long run this model risks breaking.

I would do exactly the opposite

I think Italy needs a completely different economic policy.

We should have the courage to cut bonuses, tax breaks, small privileges and unproductive spending drastically.

That money should be used for a structural cut in taxes.

On people.

On labour.

And above all on companies.

The principle, as I see it, is very simple.

If you leave more money in families' pockets, part of that money goes back into the economy through consumption.

If you leave more resources in companies, those companies can invest, hire people, improve their products, raise salaries and grow.

And when the economy grows, it also becomes easier to sustain a very high public debt.

That is why I agree with Bessent's statement.

You get out of debt by increasing the country's capacity to produce wealth.

Raising taxes or continuing to hand out bonuses to this or that group is not enough, in my view.

Before sharing out the cake, you have to make it bigger

For years in Italy we have mainly argued about how to share out the cake.

Who should get a bonus.

Who should have an incentive.

Which group should be protected.

Which spending should be funded.

But if the cake always stays the same size, carrying on cutting it into different slices doesn't solve the problem.

Sooner or later you have to make it grow again.

And I believe this should be the real goal of Italian economic policy in the coming years.

That means cutting bonuses and small privileges and lowering taxes on those who work and produce, to get investment, productivity and growth in return.

Because in the end Bessent hit the nail on the head:

the only sustainable way out of a mountain of debt is to grow again.

What do you think?

Should the way forward be to carry on with bonuses and incentives, or to use those resources to structurally reduce the tax burden on people and companies?