Why Italy’s coalition government needs to go all-in on infrastructure

Infrastructure from the good old days: the Claudio aqueduct, Rome. Image: Getty.

Italy’s draft budget as it stands is a collection of budget-busting campaign giveaways that will do little to support growth or fix Italy’s crumbling roads, bridges and schools. No wonder the EU is threatening financial penalties.

“As a political budget, most of the points were part of the manifesto that the new coalition government was elected on, so it was not a surprise,” says Nicola Beretta Covacivich, global head of infrastructure investments at Santander Asset Management in London.

The budget doesn’t exactly ignore infrastructure, which was thrust onto the national agenda after the collapse of the Morandi Bridge in Genoa last August. But it also includes €10bn for a program to provide temporary incomes for people looking for work and €7bn to fund early retirement programs. Beretta Covacivich believes that these populist policies won’t renew growth and instead will cause the budget’s additional spending on infrastructure to fall far short of what’s needed.

After suffering a triple-dip recession since 2008, Italy desperately needs to invest in growth if it is to have any hope of paying down its colossal public debt, which totals 131 per cent of GDP.

There are very strong macro-economic reasons for Italy to focus narrowly on infrastructure. Historically, the fiscal multiplier that results from these investments creates enormous value for the economy. In the short-term, new jobs provide incomes, get money circulating and boost tax revenue. Longer-term, the assets that are delivered – modern roads, railroads or better schools – boost productivity and attract new investment at home and from abroad.

There’s also an enormous amount of European multilateral and private sector funding available that could leverage government investments, allowing infrastructure to have a meaningful impact on Italy’s economy.

One useful model for tapping the private sector to finance public infrastructure projects is through competitively tendered Public Private Partnerships (PPPs), particularly where they qualify for European Investment Bank (EIB) financing. In addition to providing expertise and risk management, the EIB can provide funding for up to 50 per cent of a project, which takes much of the upfront cost burden off the government.


In 2017 alone, the EIB provided €18bn to support infrastructure projects, including PPPs. Yet Italy has barely used this facility. According to the EIB’s European PPP Expertise Centre (EPEC), between 2008 and 2017, Italy used EIB funding for only eight transportation projects for a total value of €8bn. France, which sits near the top of Europe’s transportation infrastructure quality index, has used EIB funding for transport infrastructure 32 times during that period for a total of €14.9bn.

Beretta Covacivich says that EIB support is essential to attracting private funding for infrastructure. But it isn’t automatic. “Those European funds come with stringent conditions, backed by legislation,” he notes. PPPs undertakings also require a lot of time to tender, evaluate, and finalise. Even countries with well-established PPP programs, such as Canada, require a process that averages between 16 and 18 months.

That is time that Italy’s government may not have. So nearer term solutions are likely to rely on ‘shovel-ready’ projects such as emergency repairs on existing infrastructure.

One idea that is under consideration is for the government to offer a 50-year-plus interest-free second lien mortgage bond to the owners of second properties. This is designed to cover future flat taxes that are due annually on those homes, and would give households greater flexibility around their future tax obligations, including the option to simply roll the tax liability into the price of the property when they sell.

The government for its part would be able to transfer a substantial piece of the public debt, perhaps as much as 20-30 per cent, off its books.

Beretta Covacivich acknowledges there are risks in forfeiting future tax receipts in favour of near-term investment, but he warns: “Italy needs some extraordinary measures to unlock cash flows that are currently being used to pay interest on the debt.”

 
 
 
 

“Every twitch, breath or thought necessitates a contactless tap”: on the rise of the chain conffeeshop as public space

Mmmm caffeine. Image: Getty.

If you visit Granary Square in Kings Cross or the more recent neighbouring development, Coal Drops Yard, you will find all the makings of a public space: office-workers munching on their lunch-break sandwiches, exuberant toddlers dancing in fountains and the expected spread of tourists.

But the reality is positively Truman Show-esque. These are just a couple examples of privately owned public spaces, or “POPS”,  which – in spite of their deceptively endearing name – are insidiously changing our city’s landscape right beneath us.

The fear is that it is often difficult to know when you are in one, and what that means for your rights. But as well as those places the private sector pretends to be public space, the inverse is equally common, and somewhat less discussed. Often citizens, use clearly private amenities like they are public. And this is never more prevalent than in the case of big-chain coffeeshops.

It goes without saying that London is expensive: often it feels like every twitch, breath or thought necessitates a contactless tap. This is where Starbucks, Pret and Costa come in. Many of us find an alternative in freeloading off their services: a place to sit, free wifi when your data is low, or an easily accessible toilet when you are about in the city. It feels like a passive-aggressive middle-finger to the hole in my pocket, only made possible by the sheer size of these companies, which allows us to go about unnoticed. Like a feature on a trail map, it’s not just that they function as public spaces, but are almost universally recognised as such, peppering our cityscapes like churches or parks.

Shouldn’t these services really be provided by the council, you may cry? Well ideally, yes – but also no, as they are not under legal obligation to do so and in an era of austerity politics, what do you really expect? UK-wide, there has been a 13 per cent drop in the number of public toilets between 2010 and 2018; the London boroughs of Wandsworth and Bromley no longer offer any public conveniences.  


For the vast majority of us, though, this will be at most a nuisance, as it is not so much a matter of if but rather when we will have access to the amenities we need. Architectural historian Ian Borden has made the point that we are free citizens in so far as we shop or work. Call it urban hell or retail heaven, but the fact is that most of us do regularly both of these things, and will cope without public spaces on a day to day. But what about those people who don’t?

It is worth asking exactly what public spaces are meant to be. Supposedly they are inclusive areas that are free and accessible to all. They should be a place you want to be, when you have nowhere else to be. A space for relaxation, to build a community or even to be alone.

So, there's an issue: it's that big-chain cafes rarely meet this criterion. Their recent implementation of codes on bathroom doors is a gentle reminder that not all are welcome, only those that can pay or at least, look as if they could. Employees are then given the power to decide who can freeload and who to turn away. 

This is all too familiar, akin to the hostile architecture implemented in many of our London boroughs. From armrests on benches to spikes on windowsills, a message is sent that you are welcome, just so long as you don’t need to be there. This amounts to nothing less than social exclusion and segregation, and it is homeless people that end up caught in this crossfire.

Between the ‘POPS’ and the coffee shops, we are squeezed further by an ever-growing private sector and a public sector in decline. Gentrification is not just about flat-whites, elaborate facial hair and fixed-gear bikes: it’s also about privatisation and monopolies. Just because something swims like a duck and quacks like a duck that doesn’t mean it is a duck. The same can be said of our public spaces.