Thread by @NaomiOhReally

I had a fascinating chat with @PaoloGentiloni who is heading to Dublin today for talks with Paschal Donohoe and others on issues including the push for a global deal to set a minimum 15% corporation tax rate irishtimes.com/business/econo…

Gentiloni is a former Italian prime minister who is now the European Commission's economy chief. The experience of the Italian economy, which pretty much hasn't grown since joining the euro, is particularly interesting when it comes to discussions about the EU's fiscal rules.

A popular Brussels catchphrase at the moment is that the EU 'learned the lessons of the past' in its economic response to the Covid-19 crisis, compared to the policy reaction to the last great recession and Eurozone debt crisis that followed it.

The phrase was in EU Commission chief Ursula von der Leyen's State of the Union address last week.
19 EU economies will reach pre-pandemic levels this year and the rest in 2022, compared to the 8 years it took last time, she said.
Growth also beat the US and China last quarter.

The EU response to this downturn has been expansionary: the EU's fiscal rules limiting annual budget deficits & debt were suspended to allow governments to spend; state aid rules were relaxed so companies could be aided; the ECB mass bought bonds.
And the bloc went after vaccines

I asked Paolo Gentiloni outright if austerity last time had been a mistake. He said:
“Well, I think it was a mistake the - you can call it austerity, of course. What is clear is that we missed the opportunity of a fast and coordinated reaction. We acted very slowly...."

"... We declared mission accomplished too soon. And then, the result was that we were dealing with this crisis for seven, eight years.”

Debt levels will need to be reduced going forward, he said. But while pubilc spending will need to taper and become more targeted, there is a need to avoid the situation of the end of the last decade, when public investment reached "net zero" in the EU.

Spending will needed in the period ahead.
“If we are serious about our programmes, the climate transition for example... we need a serious amount of public investment” he said. “This will be I think needed both on the health care systems and for the green and digital transition.”

Public investment needs to be funded somehow, and this is the context to the mounting push for an international deal on a minimum corporation tax rate of 15%
irishtimes.com/news/ireland/i…

I asked Gentiloni if Ireland is a tax haven - which is not an unusual view on the continent.
"I don't think that we can describe European member states as tax havens, including Ireland," he said.

Ireland is however among the 5-6 member states that the Commission annually recommends "to tackle the issue of what in our language, we call aggressive tax planning. But this is quite different.”

A significant part of the reason for Paolo Gentiloni's visit to Ireland this week is clearly to try to talk Paschal Donohoe into dropping Ireland's increasingly lonely opposition to the tax deal.
The pitch: Ireland can still compete without the 12.5% rate.

"We are not working for harmonising taxation and eliminating tax competition," Gentiloni said. "We will keep huge differences among European member states, and in the global arena."
Ireland's competitiveness is also down to education, skills, business environment etc, he added.

A few interesting points from the conversation.
On the climate transition: "Our generation after the war, never experienced the level of transformation that we will experience in this decade..."

“The real challenge for politicians is to consider the dimension of part of the population that fear to remain behind" he said
"If we are not aware of the fact that we have part of our population that are scared by this perspective, I think we will risk to undermine the ambition”

Could joint EU borrowing be repeated?
“If we look to the experience of the European Union. Then we learn that new tools, new projects, new programs. If they work that can be repeated."
"The precondition is to make it work."
"But I am not suggesting to open this discussion now.”

Are the safeguards like Rule of Law conditions sufficient to avoid corruption & waste?
“Enough? I don’t know,” Gentiloni said - but they are more than anything before.
“As you see the discussion is not a formality because it’s going on for several weeks and we are not yet there.”