Southern Italy's progress and ongoing challenges

The European Union's ambitious recovery fund, designed to boost economic recovery in the wake of the pandemic, is making significant strides in Italy, particularly in the southern regions historically plagued by economic disparity.

Aldo Altomonte had a nagging sense that something was amiss, Caliber.Az reports, citing foreign media.

A man posing as a postman claimed to be delivering Mr. Altomonte’s renewed driving license, but Mr. Altomonte had only applied for it three days earlier. In Italy—especially in Reggio Calabria, a city in the country’s poorest region, Calabria—such swift bureaucratic processes are nearly unheard of. It took the reassurance of a neighbor familiar with the postman to convince the elderly Altomonte of the situation’s legitimacy.

This incident highlights one of the many effects of the EU’s post-pandemic recovery initiative, known as the NGEU, on Italy’s underdeveloped south. Italy is the largest recipient of the 194 billion euro ($216 billion) NGEU fund, which presents a historic chance to reduce the economic disparity between the Mezzogiorno (the southern mainland, Sardinia, and Sicily) and the rest of the country. In 2022, the GDP per capita in the Mezzogiorno was less than two-thirds of the national average.

The European Commission’s strategy with the NGEU fund was to "level up" Europe, but it was intended to address disparities at the national level rather than the sub-national level. However, in 2021, Mario Draghi’s government allocated a significant 40 per cent of this funding to the Mezzogiorno, despite it comprising less than 34 per cent of Italy’s population.

EU funds from the new recovery program are being invested in major projects like a new railway line from Naples to Bari and a wind farm off the coast of Sicily. Efforts are also underway to improve female employment rates in the south by establishing crèches, and digitization is streamlining administrative processes, including the renewal of Mr. Altomonte’s driving license.

Initially, there were concerns that organized crime in the Mezzogiorno might siphon off a significant portion of the funds. However, this has not materialized. According to Carlo Altomonte, a European economics professor at Bocconi University in Milan, the recovery plan is safeguarded by rigorous checks. Each project undergoes four separate evaluations, and Brussels officials are legally accountable for approving any fraudulent proposals, a level of scrutiny not applied to typical regional aid projects.

Another worry was the Mezzogiorno’s lack of local capacity to design and manage projects. This issue persists and may have worsened. Under Mario Draghi's administration, efforts to address this involved hiring around a thousand technical assistants for local authorities, but many of these hires left due to the short-term contracts and modest pay. Giorgia Meloni’s government has opted for a different approach by centralizing decision-making and focusing on subsidies that align with the fund’s broader goals, such as enhancing sustainability and digitalization. This strategy is intended to expedite spending and require less local administrative capacity.

Brussels typically disburses funds only when the recipient country meets the required reforms and investments by set deadlines. Italy has performed well in this regard, but the major challenge remains adhering to the Commission’s mandate that allocations be spent by the end of 2026. With Italy having only spent 43 billion euros of its 102 billion euro allocation by the end of 2023, there is a risk of not fully utilizing the funds and potentially losing the remaining 94 billion euros.