2023-09-08 13:09:11
By the government’s own admission, budgetary room for maneuver is extremely tight, due to a lack of tax revenue in a context of economic slowdown. As a result, public deficit forecasts risk being revised upwards.
“Waste must be reduced, the few resources we have must be spent in the best possible way”: this is Giorgia Meloni’s mantra, far from the populist speeches preceding her taking office in October 2022.
To fill the state coffers, the right-wing and far-right coalition cut the “citizenship income” intended for the poorest, introduced a tax on bank superprofits and launched the idea of new privatizations.
The surprise drop in GDP of 0.4% in the second quarter, the bad patch experienced by Germany, its main trading partner, and the delay in its recovery plan financed by European funds are weighing heavily on the accounts of the Italy.
The promise to extend to employees the 15% flat-rate tax granted to self-entrepreneurs and craftsmen with annual income of up to 85,000 euros has been postponed indefinitely, as has the definitive burial of the Fornero law of 2011 establishing retirement age at 67.
A temporary system currently allows Italians to retire at 62 with 41 years of contributions.
Risk of deficits slipping
The government, which must send its copy to Brussels by mid-October, should however renew the reduction in the tax burden weighing on modest incomes, at a cost of around 10 billion euros, and introduce measures to support for large families.
The horizon that the government has set for realizing its electoral promises is the duration of the five-year legislature, i.e. until 2027. Deputy Prime Minister Matteo Salvini even hopes that the coalition “will last at least ten years, in order to do all that needs to be done.”
“To date, the Meloni government seems very stable. In the absence of a united and solid opposition, the government could go until the end of the legislature”, commented to AFP Valerio De Molli, CEO from the think tank The European House – Ambrosetti.
Italy will find it difficult to avoid raising its public deficit objective for 2023, currently set at 4.5% of GDP after 8% in 2022. For 2024, with the cursor stopped at 3.7% of GDP, the objective should also prove illusory.
A very generous tax incentive system, called “superbonus” and supposed to make housing less energy-intensive, risks weighing down the accounts again, as it has already over the last three years.
Tensions with Brussels
The cost of this mechanism, inherited from the former government of Giuseppe Conte who created it in 2020 to revive the economy, “will exceed 100 billion euros”, lamented Ms. Meloni on Thursday.
Too large a sum for a country whose public debt reaches more than 144% of GDP, the highest ratio in the euro zone after Greece.
Rome was banking on extending the suspension of the Stability Pact in 2024 if no agreement on its reform was found by the end of the year, but the European Commissioner for the Economy, Paolo Gentiloni, dampened these hopes Saturday, excluding this scenario.
The Stability Pact, which limits the public administration deficit of euro zone member states to 3% of GDP and public debt to 60% of GDP, was suspended in 2020 due to the Covid-19 pandemic.
“A return to the old rules would be dramatic,” warned Giorgia Meloni on Thursday. And to hope that Mr. Gentiloni, an Italian, would defend national interests more.
An opinion shared by Matteo Salvini: “recently I had the impression of having a European commissioner who was playing with the jersey of another national team”, commented the head of the League (far right) on Wednesday.
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