The Covid-19 pandemic has been an economic disaster as well as a public health disaster, and massive public spending will be needed to promote recovery. In Europe, the EU is projected to spend up to €1.8 trillion on pandemic recovery. One of the biggest recipients of these EU funds will be Italy, the EU’s hardest-hit member state. Currently, Italy is poised to receive €123 billion in loans and €69 billion in grants between now and 2026. Provision of these funds has already started; the first tranche of €25 billion arrived this past June. This funding will support Italy’s Covid recovery plan, known as the Piano Nazionale di Ripresa e Resilienza (PNRR), which—in the name of territorial cohesion—will allocate 40% of the funds to the Italian south.
If history is any guide, a massive amount of that money will be misallocated, misspent, or outright stolen by corrupt public officials colluding with organized crime groups. The mafias have a long history of bribing Italian officials for lucrative public contracts. Between 2014 and 2020, Italy received €77 billion from the EU for use in structural and investment funds; 60% of those funds were “fraudulently requested or obtained,” often by organized crime, with the 85% of that fraud occurring in the South. Much of the fraud occurs when illegitimate companies request funds in the form of loans and grants; the companies either don’t exist or are liquidated upon receipt of the funds.
But we needn’t look only to history: Italy’s three most powerful crime syndicates—Cosa Nostra in Sicily, the Camorra in Campania, and the ‘Ndrangheta in Calabria—are already bribing Covid response officials, winning fraudulent contracts, and plundering businesses in receipt of PNRR funds. As the EU money pours in, we can expect that these mafia groups will use their corrupt networks to siphon off a staggering percentage of the EU Covid relief funding.
What should European policymakers do in response? It’s tempting to insist—as anticorruption activists have in this and other contexts—that the EU and Prime Minister Mario Draghi’s government adopt enhanced oversight and transparency measures, to better ensure that funds are spent appropriately. But that would be a mistake. Right now, the priority must be on promoting a swift economic recovery. Attaching burdensome anticorruption requirements to the public spending needed to support that recovery will slow the process down too much. This is, I realize, a bitter pill to swallow. Many readers will instinctively resist the idea that the EU and the Italian government might bankroll Italy’s most powerful mafias (to the tune of up to €200 billion). But if Italy is to recover from the economic effects of the Covid-19 pandemic, the priority must be the swift delivery of recovery funds, even if this means that much of the money will be intercepted by the mafia.
The case for getting the money out quickly—eschewing anticorruption controls or other safeguards that could slow the process down—is based principally on Italy’s dire economic outlook. Thanks to the pandemic, Italy’s GDP has dropped to 1998 levels, a figure made all the more worrisome by the nation’s whopping €2.5 trillion debt load. Economists have warned that, without the rapid infusion of public funds, Italy may plunge into another financial crisis. Indeed, the EU’s record-breaking shot-in-the-arm is viewed as Italy’s best (and last) chance to overcome its long-term economic crisis. And as Italy goes, so goes Europe—Italy is, after all the Eurozone’s third-largest economy.
Attaching more conditions and regulations to the distribution of funds—no matter how well-intentioned these conditions may be—is likely to slow down the process by adding friction and delay. Indeed, the Italian bureaucracy is notoriously inefficient, with past EU money left undistributed due to excessive red tape. In the South, things are even worse: In 2019, some 2% of GDP was lost because of labyrinthine processes that stalled the distribution of already-granted funds from the EU. The focus of the Italian government and the EU should therefore be on facilitating rather than complicating the distribution of Covid recovery funds—ensuring that they are released quickly rather than slowing the process down for the sake of minimizing fraud and corruption. Tying too many strings to the PNRR might miscarry the recovery project altogether.
This is, I realize, likely an unpopular opinion, at least with those who are committed to fighting corruption. I agree that anticorruption is a worthy and important cause, perhaps especially in a country like Italy. But while Italy must tackle systemic corruption in the longer term, it must move swiftly to keep Italy’s already moribund economy afloat. The fact is that PNRR corruption is inevitable, and many of the measures favored by activists—which might (modestly) reduce that corruption—come at too high a cost. Right now, the challenge is figuring out how to distribute funds quickly and, without retarding the distribution process, reign in corruption on the margins.
That’s not to say that there’s nothing that the Italian government could do to address corruption, even while ensuring the swift distribution of PNRR funds. For example, it might make sense to strip local authorities of autonomy over any contracts awarding PNRR funds, relocating such decision-making to Rome. This might not only help reduce corruption (which is worse in southern regional governments than in the central government), but it might actually speed up the distribution of funds, given that southern regional governments are also less efficient. In this way, Italy might be able to have its torta and eat it, too.
But while certain reforms along these lines might help, the fact remains that there will still be an uncomfortable trade-off between speed and oversight. And right now, speed is more important. After all, anticorruption is not the only priority of good governance. It’s a tough pill to swallow, but such is life in a pandemic.