Giorgia Meloni at the White House in Washington, July 27, 2023 (AFP/Brendan SMIALOWSKI)
A sober, serious and without excess 2024 budget: the head of the Italian government Giorgia Meloni intends to tighten the screw in order to give guarantees on the rigor of the accounts in Brussels, even if it means renouncing, at least temporarily, electoral promises.
By the government’s own admission, budgetary leeway 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 his taking office in October 2022.
To fill state coffers, the right-wing and far-right coalition cut the “citizenship income” intended for the poorest, introduced a tax on banks’ 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 weigh heavily on the accounts of the Italy.
The promise to extend to employees the flat tax of 15% granted to self-employed entrepreneurs and craftsmen with annual incomes of up to 85,000 euros has been postponed indefinitely, as has the final burial of the Fornero law of 2011 fixing retirement age at 67.
A temporary system currently allows Italians to retire at age 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 on low incomes, at a cost of around 10 billion euros, and introduce measures to support for large families.
Giorgia Meloni and her Deputy Prime Minister Matteo Salvini during a press conference in Cutro, March 9, 2023 (AFP/Tiziana FABI)
The horizon that the government has set itself to carry out its electoral promises is the duration of the legislature of five years, 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 target 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 target should also prove illusory.
A system of very generous tax incentives, called “superbonus” and supposed to make housing less energy-consuming, risks weighing down the accounts again, as already in 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 Thursday Ms. Meloni.
Paolo Gentiloni during a meeting of G20 finance ministers in Gandhinagar, India, July 17, 2023 (AFP/Punit PARANJPE)
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 betting on extending the suspension of the Stability Pact in 2024 if no agreement on its reform was reached by the end of the year, but the European Commissioner for the Economy, Paolo Gentiloni, showered these hopes Saturday, excluding this scenario.
The Stability Pact, which limits the general government deficit of eurozone 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: “lately I have had the impression of having a European commissioner who was playing with the shirt of another national team”, commented on Wednesday the head of the League (extreme right).
© 2023 AFP
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