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ECONOMY

EXPLAINED: What’s changing under Italy’s post-pandemic recovery plan?

Italy’s recovery plan is often in the news, but do you know exactly what it involves? With funding for everything from better healthcare to faster wifi, here's what's set to improve about life in the country.

Nero's palace in Rome, Italy
As part of planned urban redevelopment measures, many of Rome's historical sites will undergo renovation works. Photo by Alberto PIZZOLI / AFP

Italy is ready to move on to the next phase of its National Recovery and Resilience Plan (Piano Nazionale di Ripresa e Resilienza, or PNRR), after the government said at the end of June it had met all of its targets for the first half of 2022.

The country is now due to receive its second yearly instalment of funding from the European Commission, amounting to a further 24.1 billion euros. The first payment of 24.9 billion came last August.

But why is Italy receiving this money – and what exactly is the government doing (or planning to do) with it?

Italy is the biggest beneficiary of 750-billion-euro post-pandemic recovery aid package known as the Next Generation EU programme (NGEU), which is being split between member states.

The country is set to receive a total of 191.5 billion euros from the fund by the end of 2026.

In order to access the funding, Italy’s government had to set out in the PNRR exactly how it would spend it – on projects that would not only help the national economy recover, but would leave it more resilient in future.

READ ALSO: What does Italy’s latest political crisis mean for the economy?

Prime Minister Mario Draghi, tasked with putting the plan together, said it would help the country recover after being hit particularly hard by the pandemic but that it also “addresses some weaknesses that have plagued our economy and our society for decades”.

The PNRR include plans to upgrade railways, rebuild crumbling roads and bridges, and speed up wifi connections, with the government saying it aims to use the money to improve infrastructure and make Italy a “country for young people”.

The government outlined the ins and outs of all the investments and reforms in the PNRR (with the official document available here), dividing them into six main areas, or ‘missions’.

Italy's Recovery Plan; 2022, first semester objectives

2022’s first semester PNRR objectives divided by category. Photo courtesy of Italia Domani, Piano Nazionale di Ripresa e Resilienza.

The gradual completion of the plan is expected to bring about a yearly 0.5-percent GDP increase.

Here’s a closer look at some the most relevant investments and reforms included in the plan.

Digitalisation, innovation, competitiveness, culture and tourism

Over 40 billion euros will be poured into the ‘digitalisation and innovation’ measures. 

Simplifying and streamlining public administration procedures will be one of the government’s top priorities as the planned measures will try to reduce the time of civil and criminal trials by 40 and 25 percent respectively.  

Other interventions will revolve around the installation of 5G nationwide and the construction of high-speed internet networks covering government agencies, schools, health facilities and museums all across the country.

Also, ultra-fast broadband is expected to serve an additional 8.5 million families by 2026.

OPINION: Italy has a big chance to improve internet speeds – but will it take it?

A number of measures are aimed at enhancing Italy’s immense cultural heritage by improving access to historical sites located in rural or remote areas (as part of a Piano Nazionale Borghi, or National Plan for Villages), and by digitalising services connected with the tourism industry. 

As part of the tourism redevelopment project, Rome will receive around 500 million euros which will be used to enhance 283 of its historical sites.

Milan's Centrale railway station

Construction of high-speed rail on the Naples-Bari line is expected to reduce the journey time by as much as 90 minutes. Photo by Piero CRUCIATTI / AFP

Green revolution and ecological transition

Funds adding up to a total of 59.5 billion euros (equal to 31 percent of the Recovery Plan’s total value) will be injected into the ‘green revolution’ mission. 

Much of the ecological transition plan will revolve around the development of renewable energy solutions, including agrovoltaic plants and hydrogen charging stations for road vehicles. 

There are also plans to modernise current waste management facilities and build new ones to achieve a “circular economy” (a model of consumption based on the ‘use, recycle and reuse’ principle).

Finally, electricity grids will be upgraded all over the country and water leakages are expected to decrease by as much as 15 percent by 2026 due to system improvements.

Infrastructure for sustainable mobility 

Over 13 percent (25.4 billion euros) of the funds will be set aside for the improvement of Italy’s transport network.

The major measures will involve the construction of high-speed rail on the following lines in southern Italy: Salerno-Reggio Calabria, Naples-Bari and Palermo-Catania, with journey times dropping by as much as 90 minutes.  

Regional and local railway lines and stations will also be upgraded to make public transport more accessible to all.

The planned improvements also include the renovation of many bridges, tunnels and viaducts across the country amid longstanding concerns about safety and stability.

Italian classroom, Venice

As many as 40,000 Italian schools will be equipped with high-speed internet connection in a bid to offer pupils the latest learning methods. Photo by Vincenzo PINTO / AFP

Education and research

The Italian education system will undergo major changes as part of a dedicated 31-billion-euro package. 

The available funds will be used to renovate 2.4 million square metres of school buildings and create 228,000 new places in nurseries. 

Also, as many as 40,000 institutes will be equipped with high-speed internet connection to allow for the implementation of innovative learning methods.

In closing, student accommodation will go from the current 40,000 available lodgings to 100,000 by the end of 2026.

Cohesion and inclusion

The ‘cohesion and inclusion’ mission, which has been allocated a total of 19.9 billion euros, seeks to build a brighter future for the next generations by innovating the labour market, erasing social and economic inequalities and supporting female entrepreneurship.

A number of nationwide programmes, including the new Worker Employability Guarantee, will aim to increase the national employment rate and provide key assistance for unemployed individuals. 

Other than that, a Women’s Entrepreneurship Fund will be set up to support female-run businesses and increase gender equality in the labour market.

Finally, the plan states that the government will work to reduce marginalisation by redeveloping public areas, promoting local cultural activities and offering support for people with disabilities.

Healthcare

The Italian healthcare system will receive PNRR funds amounting to a total of 15.6 billion euros.

The government’s priority will be to improve hospital infrastructure by modernising existing structures and building new ones – 400 community hospitals for short-term medical care and 1,350 care homes will be built by 2026.

Additionally, intensive care units will be upgraded and hospitals across the country will receive state-of-the-art appliances for CAT scans, MRIs and other medical tests.

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ENERGY

What does the shut-off of Russian gas supplies mean for Italy?

After Russian energy giant Gazprom suspended gas deliveries to Italy on Saturday, many are wondering what consequences the stoppage will have on the country’s energy supplies.

What does the shut-off of Russian gas supplies mean for Italy?

What’s going on?

Over the past three days, Italy has received none of the gas supplies it expected from Russian energy giant Gazprom. 

The impasse officially started last Saturday, when Gazprom announced it would not be able to deliver gas to Italy due to “the impossibility of gas transport through Austria” – Russian gas supplies are delivered to Italy through the Trans Austria Gas pipeline (TAG), which reaches into Italian territory near Tarvisio, Friuli Venezia-Giulia. 

READ ALSO: Russia suspends gas to Italy after ‘problem’ in Austria

Though Gazprom originally attributed the problem to Austrian gas grid operators refusing to confirm “transport nominations”, Austria’s energy regulator E-Control said that the Russian energy mammoth had failed to comply with new contractual agreements whose introduction had been “known to all market actors for months”. 

Additional information about the incident only emerged on Monday, when Claudio Descalzi, the CEO of Italy’s national energy provider ENI, said that supplies had been suspended after Gazprom failed to pay a 20-million-euro guarantee to Austrian gas carrier Gas Connect. 

Descalzi also added that ENI was ready to step in and deposit the guarantee itself in order to unblock deliveries to Italy.

Logo of Italian energy regulator ENI.

Italian energy regulator ENI said it was ready to pay Austrian gas carriers a 20-million-euro guarantee to unblock deliveries. Photo by Marco BERTORELLO / AFP

READ ALSO: Italy’s ENI ready to pay guarantee to unblock Russian gas

At the time of writing, however, no agreement between ENI, Gas Connect and Gazprom has yet been reached, with the stoppage expected to continue until Wednesday at the very least.

What would an indefinite stoppage mean for Italy’s upcoming winter season?

Though energy giant ENI appears to be confident that a compromise between all the involved parties will be reached shortly, the “indefinite shutdown” of the Nord Stream 1 pipeline in early September is somewhat of a menacing precedent. 

After fears of a long-term supply suspension cropped up over the weekend, outgoing Ecological Transition Minister Roberto Cingolani publicly reassured Italians that “barring any catastrophic events, Italy will have the whole of winter covered”.

It isn’t yet clear what exactly Cingolani meant by “catastrophic”, but the latest available data seem to suggest that Italy wouldn’t have to resort to emergency measures, chiefly gas rationing, should Gazprom halt deliveries indefinitely. 

Italian Minister for Ecological Transition Roberto Cingolani.

Outgoing Minister for Ecological Transition Roberto Cingolani said that, “barring any catastrophic events”, Italy will have enough gas supplies for the winter. Photo by Andreas SOLARO / AFP

In 2021, prior to Russia’s invasion of Ukraine, Italy received around 20 billion cubic metres of Russian gas per year, which accounted for about 40 percent of the country’s annual gas imports. 

But, thanks to the supply diversification strategy carried out by outgoing PM Mario Draghi and his cabinet over the past few months, Russian gas currently accounts for, in the words of ENI’s CEO Claudio Descalzi, only “about nine to 10 percent” of Italian gas imports.

READ ALSO: Italy’s Draghi criticises Germany over latest energy plan

Granted, Italy still receives (or, given the current diplomatic deadlock, expects to receive) a non-negligible total of 20 million cubic metres of Russian gas per day. But, should supply lines between Rome and Moscow be shut off until further notice, Italy could fall back on existing gas stocks to meet winter consumption demands. 

Last Wednesday, Cingolani announced that the country had already filled up 90 percent of its national gas stocks – Italy has nine storage plants for an overall storage capacity of 17 billion cubic metres of gas – and the government was now working to bring that number up by an additional two or three percentage points.

These supplies, Cingolani said, are set to give Italy “greater flexibility” with respect to potential “spikes in winter consumption”.

Gas storage station in Loenhout, Belgium.

Italy has nine storage plants for an overall storage capacity of 17 billion cubic metres of gas. Photo by Kenzo TRIBOUILLARD / AFP

Finally, Italy is expected to receive an additional four billion cubic metres of gas from North Europe over the winter months – deliveries which will be complemented by the first shipments of LNG (Liquefied Natural Gas) from Egypt.

Both of these developments are expected to further reinforce Italy’s position in the energy market for the cold season.

What about the long-term consequences of an indefinite stoppage?

An indefinite shut-off of Russian gas supplies would effectively anticipate Italy’s independence from Moscow by nearly two years – Draghi’s plan has always been to wean the country off Russian gas by autumn 2024.

However, the Italian government’s strategy is (or, perhaps, was, as a new government is about to be formed) centred around a gradual phasing out of Russian supplies. As such, although not immediately problematic, a ‘cold-turkey’ scenario might create supply issues for Italy at some point during 2023.

READ ALSO: EXPLAINED: How much are energy prices rising in Italy this autumn?

Granted, Algeria, whose supplies currently make up 36 percent of Italy’s national demand, is expected to ramp up gas exports and provide Rome with nine billion cubic metres of gas in 2023.

But, even when combined with LNG supplies from several African partners – these should add up to a total of four billion cubic metres of gas in 2023 – there’s a risk that Algerian gas might not be able to replace Russian gas on its own.

An employee works at the Tunisian Sergaz company, that controls the Tunisian segment of the Trans-Mediterranean (Transmed) pipeline, through which natural gas flows from Algeria to Italy.

Algerian gas supplies, which reach Italy through the Trans-Med pipeline (pictured above), might not be enough to replace Russian gas in 2023. Photo by Fethi BELAID / AFP

Therefore, should an indefinite shut-off be the ultimate outcome of the current diplomatic incident between ENI, Austria’s Gas Connect and Russia’s Gazprom, Italy, this time in the person of new PM Giorgia Meloni, might have to close deals with other suppliers or ask existing suppliers to ramp up production. 

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