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Published on 2020-07-31 15:50:02 | words: 5944
This post is about the Legge 77/2020 and it is about what was officially called "the Recovery effort, which is significant, focused and limited in time" (page 2, ST_10_2020_INIT_EN.pdf, "Special meeting of the European Council (17, 18, 19, 20 and 21 July 2020) - Conclusions").
What do have the two to share? Everything,... and nothing (yes, a quote from a movie).
But I would like to highlight what I already shared on both Facebook and Linkedin over the last few days, in English and Italian (to ensure that there is no misunderstanding).
Actually, I will let again the same document say it officially: "NGEU and MFF go together. We need the Recovery effort as a quick and effective answer to a temporary challenge, but this will only yield the desired result and be sustainable if it is linked to and in harmony with the traditional MFF that has shaped our budgetary policies since 1988 and offers a long-term perspective."
As I was taught in French, any self-respecting organization large enough is an acronym-factory.
Yes, it is a joke. And, yes, it is an assertion. Your pick.
Well, despite what you will read later in this article, the document had as a target those that supposedly know what those acronyms refer to.
For everybody else:
MFF = Multiannual Financial Framework (i.e. the resources 2021-2027)
NGEU = Next Generation EU, the "umbrella" of which the "Recovery" is part.
To make it even more clear: we are talking about the over 1,000bln EUR decided months ago after some adjustments, and the 750 "Recovery plan".
significant, focused and limited in time
Again, why should I re-invent the wheel?
Always at page 2: "Significant because the effects of the crisis are far-reaching. Focused because it must target the regions and sectors that are most hit by the crisis. Limited in time because the MFF and the rules governing it remain the basic frame for the Union's budgetary planning and implementation. The additional funds generated by the EU's borrowing will be disbursed as grants and loans via the instruments and programmes of the MFF. This ensures consistency and coherence. Both NGEU and MFF will help transform the EU through its major policies, particularly the European Green Deal, the digital revolution and resilience."
Well, large enough to be significant, but aiming to help those who were worst hit (to ensure that the restart of the EU economy doesn't leave any country behind)- doesn't matter why this happened, as the issue is ensuring a generalized restart of the European Union economy before the stasis generates long-term negative structural impacts (e.g. wiping out industries or undermining social structures).
The remaining part, from "Limited" to "resilience" is where many governments (the Italian one included) seem to be happy to pick up buzzwords and jargon (e.g. on green deal, digital revolution, resilience), but then go soft on their audiences by omitting the reference to the same rules that many countries, Italy included, find so annoying to abide to.
Another point worth noting is the linkup between the "Recovery" and the MFF, which should actually increase the potential impact, but requires a seamless structural integration.
If you are now curious- the part about the "Recovery" goes as far as page 7.
Personally, there is one element that probably will be reinforced when they will get down to details, but I found that "focused" doesn't stress enough.
If the aim is a recovery for the whole European Union, while also restructuring as a jumpstart to dovetail with the MFF 2021-2027, i.e. de facto two parallel lines, then the overlapping should be used also to do something else.
Or: something that requires that both Member States and the European Commission stay "focused" on harmonization and convergence.
Why both? Because, just to stay on my country, if Italy drifted away for decades, and for decades its industrial policy was at best "pannicelli caldi" (piecemeal interventions without an organic, sustainable, full "organizational development" aim that would have transcended individual electoral cycles), no amount of money and no external intervention will ever make a difference.
When I was working in Paris, my colleague used to say about some behaviors "c'est franco-fran¸ais"- in this case, our issues with long-term planning are italo-italian, and tossing helicopter money would not alter culture.
Au contraire, would be perceived as a "free-for-all": as we say in Italian- "passata la festa, gabbato lo santo", i.e. we celebrate the formal rites crossing all the ts and dotting all the is, but, then, only at the end you will see that we went our own way.
So, both in Italy and in our dealing with European Union partners in this case I think we Italians should be as I was when working abroad to be taken seriously and not discounted as the "usual italians" (all creativity and speeches, and then all last-minute fixing): so, I (and other Italians I met while working abroad) were more English than the English, more American than the Americans, more German than the Germans, more Swiss than the Swiss...
...before we could access to our individual and cultural background abilities to move forward and generate a blend of cultures.
Staying focused on harmonization and convergence means just that: we Italians need, as a nation, to be perceived as "more normal", e.g. by preparing plans that are structured, associated to a timeline, with clearly identified performance measures, and clear identification of the context and constraints our plans are based on, so that, as any plan, could be adapted if and when needed.
As the uncertainties are staggering (not just business-wise, but also the social ripple effects and uncertainties linkes to the COVID-19 both as a flu-like pandemic disease and as a disease with potential chronical effects).
And, whenever there are uncertainties, as I saw both in business and the public sector, as well as a "foreign italian observer" since 2012 when I resumed living and working almost exclusively in Italy, generate in any crisis management an impromptu over-rationalization that tries to graft on top of our relationship tribal economy rules that are only apparently rational.
As any set of rational rules to be used in crisis management should be routinely assessed, tested, confirmed- not made up or (even worse) resurrected from a desk assuming that everybody would instantaneously move from our informal organizational structures to a clockwork.
Otherwise you get a clockwork factory approach- but far away from the one praised by Marx in Das Kapital about La Chaux-de-Fonds (birthplace of Le Corbusier) for its village-wide organization of watch making, and closer to Kubrick's "A Clockwork Orange".
Incidentally: as sometimes somebody questioned the validity of the reference to Marx... read Book 1, Chapter 14, Section 3 (about the forms of manufacture), and then note 7: "La Chaux-de-Fond [sic] alone, which we may look upon as a huge watch manufactory" available here
This example is not just to give a written and a visual reference (which is, incidentally, my habit in most articles as it was when I was delivering training or presentations- as I am both a bookworm and a movie buff).
Its purpose is to make you think: what you see is the results that were already visible in the XIX century, i.e. the number of watches produced- but those results required a culture and associated "rituals" that were already in place, not made up, as during the first phase of the pandemic (before the lockdown started) you just needed to go around to see how even the laxer measures adopted back then weren't followed, as there was no "risk culture" in place.
A "risk culture" requires a more proactive stance on an individual basis against risks, assessing rationally risks based on information (if available- but with a new disease...) and prior experience/case history (Ebola, SARS, etc).
The same stance that some retirees homes in Italy adopted, whose personnel had lived elsewhere experiences of pandemics.
They basically went into lockdown already from mid-to-late February, without waiting the first decade of March, and... many reported having had neither infections nor deaths.
Harmonization implies therefore using the "focused" part of the funding also to foster the development of a different culture, to enable shareable approaches across the whole European Union.
Convergence often is something that is routinely associated with grants- but, frankly, it created a dependency akin to that that was recently reported on monkeys.
I shared a link to a newspaper article in Italian, and was asked about the meaning, so I will share here both the link and my summary: "That it all started with a tradition- a banquet to honour the monkeys, once a year.
Then, tourists discovered it, but arrived year-round.
Then, the monkeys got used to the sugary stuff given by tourists- and that became their diet: why should they hunt&gather, if they needed just to show off?
Sugar made them hyperactive and aggressive, while increasing population.
But the pandemic removed tourists, so they kept coming while becoming increasingly hungrier and more aggressive
Until they simply invaded the town.
The police doesn't know what to do, as killing monkeys is a no go
Who would have said that COVID-19 would have ushered in a "planet of the apes" scenario?
Incidentally (my comment): this is compounded by animals coming in town when, due to climate change, their usual sources of food are dwindling
E.g. it has been years that, due to heat, I increasingly saw four-legged drop nearby my place in the mountains looking for food, as their traditional pastures are too dry" (the article in Italian is here).
If convergence as a purpose is replaced by accessing to the convergence funds as a purpose...
I already shared in the past statistics reporting how Italy e.g. started drifting away from the jumping forward toward Internet 20 years ago, was in a crisis already in 2019, and therefore needed to use this crisis that stopped everything and everybody, not just in Italy and not just within the European Union, as what others too identified as an opportunity to jump forward.
Only: this "jumping forward" required something more than spreading cash- required structural changes not just on the public sector, but also acceptance from the private sector that a business should stand if the business can stand.
Many economists and politicians say that it is not the State's business to create jobs, it is up to the private sector. It might well be, but, frankly, in Italy this is way too often coupled by these same people asking then the State to protect the incumbent whenever there is a crisis.
Obviously, you can be for free enterprise when it is time to create it, and subsidies from the State once you have created it- but, personally, those who met me in Brussels remember what I said when Italy had just 1400 or 1600bln in debt (mid-2000s, now we have 2500bln), and I was an optimist: wait until it gets another 400 to 600.
If you were to read newspapers, it would seem that the troble is the X billions given to this, that, or that other- but, frankly, I look at the aggregate.
Before reforming subsidies to both businesses and individuals, what would be needed is a shared design on what should be the "harmonization and convergence" path that Italy wants (or even has) to adopt, as this would be a cross-generational activity.
Instead, we even had those who now would like to push to drop remote working as this removed business from cafés, restaurants, hotels that were used to live on that...
Walk in the centre of Turin and Milan, and you will see a café after the other, and most at lunchtime offer lunch as well: fine- but those demands are akin to say in 1920 that cars should have horseshoes as otherwise horseshoe makers would go out of business.
I do not want to sound Schumpeterian, but the reality is that you can either create or jump on an opportunity and build a business around it, but, once done that, just sitting on that opportunity and hoping that would last forever, or even forcing to change rules to ensure that lasts forever isn't entrepreneurship, is something else.
A first step would be certainly to drop the habit of having legislation composed just by what my American friends would call "earmarks", and in colloquial business Italian are called "mancette", and even worse (no, I will not translate this).
We had in the past decades year-end laws that contained over a thousand of such "earmarks".
Often, that is coupled with the habit that developed notably during the Second Republic (roughly since the 1990s), to issue decrees and laws that... delegate to others not just the details, but also the whole "how", or even set up budgets for a limited time, but create long-term commitments while delegating to others how to implement that (sometimes even by stating explicitly "without additional costs").
In Italian we have a saying: "far le nozze con i fichi secchi", i.e. to organize the marriage banquet having no budget (as in Italy often the marriage banquet is a kind of show-off, not a functional addition to an event- the marriage in and by itself turns almost into an ancillary excuse to organize the banquet and send out invitations).
My perspective in this article is the one I would have adopted if I had been asked (as it happened in the past) to "decrypt" the constraints and timeline for yet another bit of compliance.
If you lived in another planet: since at least the late 1990s (when the OECD started "pushing" for e-government and other digital transformation elements), usually there is a dual carrot-and-stick embedded in transformation via compliance.
Or: incentives, resources, tax credits, etc to help businesses transition.
In Italy, we had few rounds e.g. on "industry 4.0", sometimes quixotic (giving incentives to buy "smart" machinery, and then not considering the cultural change side- from training to processes to organizational structures), sometimes simply due to lack of pre-emptive communication with the targeted beneficiary.
Italy has an additional issue, that I wrote about quite often: having predominantly small and even tiny businesses, rules that are designed thinking about the State oversight processes required, on the recipients' side, to have an equally "structured" approach.
So, as once a small business that used to do some basic printed items told me, he ended up having a small army of "external experts" that covered in their own way all those additional requirements- but without doing what larger companies could do: redesign internal processes to embed the new requirements without disrupting activities.
Why? There wasn't the critical mass (and budget) to do so, but still had compliance.
The same complaint was expressed and reported over a decade ago by local authorities around Italy, when I checked for a potential activity to support them: rules created as if a "mirror image" of the controlling organization existed on the receiving end.
While, instead, often also local authorities, in smaller towns and villages, had a handful of employees (or even part-time employees shared with other small towns).
This apparent digression brings back the "significant, focused, limited in time"- three items where Italy routinely had issues in presenting "business cases" to access funds from the European Union.
Our national issue seems often to be the ability to create plans that are feasible and measurable, and to understand that our timing has to be synchronized: usually we are late, this time often we talk as if the plan funds were for 2020.
Looking at page 5: "70% of the grants provided by the RRF shall be committed in the years 2021 and 2022. The remaining 30% shall be fully committed by the end of 2023. As a rule, the maximum volume of the loans for each Member State will not exceed 6.8% of its GNI ... Member States shall prepare national recovery and resilience plans setting out the reform and investment agenda of the Member State concerned for the years 2021-23. The plans will be reviewed and adapted as necessary in 2022 to take account of the final allocation of funds for 2023."
As I said above, it isn't just this government or the previous one with the habit to issue laws and decrees that delegate to others the "how".
Anyway, the above mentioned paragraph from the document will be tough to match with a culture that resulted in what today was reported by the Italian business newspaper "Il Sole 24 Ore" (that belongs to the Italian industrialists' association):
As I wrote in Italian few days ago: "stanziato non vuol dire impegnato", i.e. you can define a budget line, but then, as written above in that quote "shall be committed in the years 2021 and 2022" would probably require something more than a mere listing of amounts, no timeline, and transferring to others the responsibility of defining details in due course.
a structural perspective
As I wrote above, my approach to any regulation or bit of compliance is to "decrypt", i.e. look at the boundaries, constraints, and degrees of freedom.
Reason? To assess potential organizational impacts, and their timeframe- as this was usually the way I learned, well before starting working, to read documents that arrived from Brussels and Strasbourg.
Of course, it was working first in the Army (compulsory service, but working on bureaucracy along with other more routine stuff), then on business uses of IT for management reporting, and finally decision support for managers and senior managers that contextualized what could be relevant in terms of organizational impacts across many industries.
Having had as first business experiences within a company automotive on the procurement side of reporting, and banking on the general ledger side was an additional bonus, as in both cases had to see what I liked more- systemically, but learn how systems are made of parts and, despite what many legislators seem to think, "systemic impacts" means that you cannot simply replace one part and avoid assessing potential impacts on other, supposedly unaffected, parts.
The wider the scope of your compliance, regulation, legislation, the more unexpected might the impacts be.
Nonetheless, "unexpected" does not imply "impossible to identify": it is just a matter of resources, efforts, skills, and, of course, the right mix of all of them, and your purposes.
If you want a "quick win" for electoral purposes, you can adopt the approach outlined in this old advertisement that routinely quote: https://www.youtube.com/watch?v=LIw-iSsGXLs
If you look on my CV, since the late 1980s I was working on two lines that are usually parallel: number crunching for decision-making, and cultural/organizational change and improvement (sometimes mixing), while at the start was on software development on large systems.
And across the decades, I tried to keep alive both lines (and I was lucky to receive missions on those lines).
Why? Because usually companies that demand both have a structure that is beyond that affordable by smaller companies, and therefore the joining point between the two elements happens well above the operational level, where you can have a systemic view on the business and its context, and therefore also impacts of any changes within the context.
Since the late 1980s, when first had to work on related activities, I always found interesting how the "mental timeframe" adopted by many organizations, whenever confronted with a compliance issue, was a "stopgap", not a strategic impact, as each new requirement was passed over to operational or staff resources that looked at their own perspective, not systemically.
Even technology, when required by compliance, might actually have a systemic impact, if you approach it systemically (if you want to read a storytelling across few hundred pages of a fictional compliance initiative, across seven "episodes", have a look at #QuPlan, it can be read online for free).
As an example of how things can be done in a different way also from Italian public sector entities, in the early 2000s (2004-2006) was introduced a reporting requirement, so that not just banks, but also investment or funding entities (between others) had to provide monthly information within a separate area of the National Risk databank ("Centrale dei Rischi") that was associated with banking activities.
Now, I will skip details I wrote about in the past, but the concept could have been: well, let's produce a report (a stop-gap measure).
But then, the requirement was to have, banking-style, a single unique identifier for each "customer", no matter which division worked with the customer.
And, at the same time, there were data privacy needs (the Italian law 196/2003 contained already many of the elements that are now familiar elsewhere via GDPR, albeit back then, as well as now, few were really compliant).
Again, to minimize impacts, many would have simply created a "buffer" used only to produce such a report, a kind of gatekeeper that, when receiving data, would have "matched" each customer with a unique code.
A convergence of motivation and budget enabled to do something more proactive (I was PM/BA on a prior CRM requirements project, and formally Senior BA on this specific project, albeit covered all the "boring"/administrative sides of PM, that was instead assigned to a technical PM).
Results? A design that actually restructured the way "customer" data were managed, to comply both with the reporting requirement and data privacy, but enabling then, at a later stage, to potentially create a real CRM having already harmonized not just customer data, but also the lifecycle associated with those data (e.g. when and how data were created and associated with existing data with a "need to know" approach, and when and how data could be amended, removed, or a request to track down all the data associated with a specific customer could be identified and retrieved), with minimal impact on each of the systems.
The same, more recently, applied for other laws, e.g. one of the various versions of the Industry 4.0 laws provided funding, but the way you structured the technological content had impacts on how much you could depreciate vs. how much you spent (in Italy we had incentives to technological updates that extended up to 150% of the amount spent that could be depreciated here (in Italian)).
Now, it is almost ordinary for any CFO (or, for smaller companies, for any CEO) to consider such impacts when there is a compliance issue (e.g. when was introduced SOX, to talk about a non-Italian example, also Italian companies had a look at it, and not only those working with companies subjected to SOX: sometimes, companies "import" legislative impacts in Italy well before the Parliament considers that an issue).
Or when there are potential tax credits, incentives, etc.
It is less common, but should not be so, when, instead, a major legislative effort delivers changes that could actually change the context.
The law 77/2020 in and by itself, if you consider its integration with the decree 34/2020, stretches across hundreds of pages.
Therefore, in this article, I will discuss only "structural" elements, not the content of each article.
Online I shared anyway both the text via a tag cloud (with links to the full text of each individual article) and a "timeline" approach, similar to the one presented along with the "Recovery", i.e. until when the impacts of each article, as expressed within the article itself (or the prior laws that it references).
Actually, in both cases posted online also a CSV file containing the word frequencies, that are part of the information used to build and present the "search by tag cloud" that you can see at the previous link.
As for each article (or group of articles): I plan to write something more in the future, whenever relevant, but I will use as a source the same material that you can see online at those links- so, if you have to deal with Italian issues and have more urgent needs to access, search for patterns, etc- you are welcome to use both the webapp and the associated CSV dataset and GitHub repository containing the full text of the law as of 2020-07-18.
And now, I would like to share my "structural" commentary.
Which will be quite short, to focus on clear and direct messages, to avoid any ambiguity.
What you could have expected
I know that the defense of many is what I could call "McLuhan Defense", i.e. "the medium is the message".
Or: instead of writing for the intended audience, many assemble a "communication omnibus", so that anybody can find anything and, of course, you can find something that enables you, the author, to say "here see this, it is what you we thought for you".
Well, I would prefer something that is consistent with the stated aim.
If the aim is to "restart" the country, to overcome the impacts of COVID-19, let's say that the Government Decree 34/2020 was such as "Jack-of-all-trades" released in a hurry in May (make you think to an old movie Seven Days in May), with hundred of hurriedly written articles spread across few hundred pages.
But then, there were a couple of months to monitor and fix, and produce something more "focused".
Instead, while turning into a potentially permanent fixture (a law), the degree of "Jack-of-all-trade"-ness was expanded.
To summarize: the expectation was for something to fix 2020, the result was something that looks like a notebook for fixing the country without a clearly outlined plan.
A fly in the ointment
If worked in business, you certainly heard of "scope creeping".
Some could consider the example that I gave above of a compliance request for a monthly report turned into building a customer referential as "scope creeping", but it was instead, in my view, strategic systemic thinking.
If you were introducing a permanent change, then it made sense to make it matter, to avoid tinkering around.
So, step a little back, look at the requirement and say: what does it mean? what does it imply? how could this be too narrow-minded or too broad-thinking? what would be the appropriate balance?
But, still, remembering the purpose: deliver in few months something that will be permanent without wrecking the overall system, and, actually, enhancing it.
Back to the law, you could have expected something similar, e.g. when, having discovered that, in the end, a medical school student that already completed studies and already did an internship and is studying for specialization, would just be delayed from entering the market if the purpose then was to add yet another multiple-choice test (I am oversimplifying, here).
So, while "fixing" for 2020, you could, within the same article, make the change permanent.
And you can find that within the law: some of the articles whose impacts I listed as structural follow this line of thinking: do it once, do not just tinker.
But in many cases articles focused on the immediate need (the COVID-19 pandemic) then extend well beyond you would expect from a set of measures due to a temporary issue.
As an example: everybody knows that in a data-centric economy where soon we will all be 24/7 surrounded by sensor "poking" at us and collecting and maybe processing and broadcasting data the we (and the sensors that we will be carrying around with us) will provide, data privacy will be a key concern, as a founding element of what in the XXI century will be "freedom".
Now, it is understandable that somebody said "well, it could make sense to use health data and predictive systems to tune the allocation of resources for national health".
Albeit frankly changes such as this one, or those on the national health dossier of each citizen, would deserve a fully-fledged discussion in the Parliament to balance needs and impacts, not just a "placeholder" article that defer to others within the bureaucracy to decide how to make it work- transferring political choices (that should be adopted by the Parliament) to a bureaucracy that answers just to the Government.
The same applies to measures for innovative start-ups, with funding defined up to 2021, and from 2022, but with no limitation.
But, at least, these have focused articles that the Parliament could actually easily put into the debate of the forthcoming "streamlining" government decree- and strike-out if not politically acceptable.
More cumbersome instead is when a comma within an article focused on the emergency introduces something that is out of scope within the article, or creates a new organizational entity, or adds other structural changes (sometimes even with the statement "with no additional costs" for something that, in any organization, would imply additional costs, and sometimes providing budget only for kick-starting).
To summarize: if you read at the preamble of the document from Brussels I discussed at the beginning of this article, the law 77/2020 is neither significant (in terms of resources- the scope creeping expands too much- "nozze con i fichi secchi"), nor focused (ditto), nor limited in time.
A collection of risks
Well, the law 77/2020 is now here to stay- but can be amended later.
The point of this article, and the introduction built around the "Recovery" document is just to highlight some "habits" that frankly would make difficult not only to assess the impacts, but also to implement or adapt in any organization.
Moreover, from what are the routine critical remarks on what Italy presented in the past that I heard in Brussels while living there, this law is just a prime example of why we had in the past issues with accessing to EU funding.
Even more absurd- as, until now, we were a net contributor- so, not accessing our potential quota of funds was, for a country that has been sliding for two decades, even more quixotic: we were putting back in the pool resources after adding more resources than we received, not out of a lack of need or generosity, but simply...
...structural inability to present something that would make sense and could be monitored.
And, despite that, we had more than our fair share of frauds- look at the OLAF report 2018
The 68 pages of the document from Brussels frankly contain all that would be needed to define a "framework" of what should be in and out of each proposal, and probably also to structure the typical elements that you would expect.
Nothing of what I wrote above since the beginning of this article is impossible to improve.
Actually, outlining priorities, and then collecting contributions, instead of creating yet another task force or committee that answers only to itself, could be a worthwhile effort.
As the "Recovery" part of the funding is certainly important, albeit, personally, I think that there are three elements worth considering.
The first element is defining anyway a framework that makes sense across all the funding opportunities, considering that it is a string: the ESM/MES provides funding for the immediate health-system needs, "Recovery"/NGEU covers in parallel to MFF a "bridge" between the emergency and the structural reforms.
The second element is a timeline for intervention that is credible, considering how the Italian State really works- we cannot afford to get a "funding bandwagon" without controls- if you read the OLAF report I referred to above, there is one element that puzzles me: out of 23 cases notified to OLAF (page 57), none were reported by public authorities; yet, on another dimension (page 41), we had 21 cases outstanding at the national judicial authorities, while of the 23 decision taken, a 48% resulted in indictment; so, controls should be reinforced within the State on expenditure
The third element is trying to leverage on public and private resources: this is another element that is discussed here and there within the 68 pages, while in Italy the discussion you read is how to spend 209bln, not what those 209bln could enable.
I am just a citizen with some experience in number crunching on the business side (and a bit also on the public side) and introducing changes and improvements, so my impact is next to zero.
What I would like to see within the proposals is something that is:
_built thinking about the audience: use the contacts in Brussels to define the framework
_contains something that iscontextualized, with defined scope, aggregating competences from public and private sector, organically integrated with the real capabilities of Italy, with as clear a timeline as possible, measurable, and focused on convergence and moving forward.
As I posted on Linkedin: something to foster a restructuring, not just to consume resources and keep afloat.
Have a nice week-end