Italian government releases economic document without key targets for future

In an unprecedented move, the Italian government released its Economic and Financial Document (DEF) without any programmatic targets on deficit and debt and excluding the impact of the measures the government plans for the budget law.

On Tuesday, the government presented the DEF, which was, for the first time, limited to providing trend budget figures without revealing the programmatic figures representing the direction the government intends to move.

This choice is typically favoured by outgoing governments, which want to avoid overly constraining their successors.

Prime Minister Giorgia Meloni’s government officials lowered Italy’s growth forecasts for 2023 and 2024 but broadly maintained their targets for reducing the inflated budget deficit.

According to the document, the projected gross domestic product (GDP) for 2024 stands at 1%, which looks optimistic compared to estimates from institutions such as the Bank of Italy, the IMF, and the European Commission, which range from 0.6% to 0.7%.

The debt trajectory reverses course compared to the last forecasts, settling upward but remaining below 140%. It is expected to reach 137.8% in 2024, following last year’s significant decline to 137.3%.

During the press conference at which the DEF was presented, Economy Minister Giancarlo Giorgetti attributed the projected increase in public debt mainly to the financial ramifications of the “super bonus” in the coming years, noting it would “start to decline” after 2026.

The “super bonus”, a much-discussed green tax credit, allowed homeowners to deduct 110% of their home renovation costs from their taxes, provided these aimed to improve the sustainability of buildings.

According to the latest data from the National Agency for New Technologies and Energy (ENEA), deductions accrued through the Superbonus totalled €122.24 billion by the end of March, a figure that is expected to grow to more than €210 billion, exceeding the funds that Italy will receive from the National Recovery and Resilience Plan.

Giorgetti defended the “dry” DEF, explaining that this was the only viable option given the changing rules of the EU Stability Pact, which introduced a new timeline and format for documents to be submitted to the EU.

According to the minister, the DEF considers the new European rules, although the “implementing provisions” are still pending. He announced that the programmatic framework would be included in the new medium-term structural fiscal plan, due on 20 September, but he committed to presenting it earlier.

Opposition parties criticised the decision only to publish trend data and postpone the programmatic framework, calling it a “bluff” that heralds a budget law of “cuts and sacrifices” in the autumn.

“A DEF without a programmatic framework will prevent Italians from understanding the dimensions of the next budget law,” remarked Nicola Fratoianni of the Green-Left Alliance.

“The right-wing government does not want to disclose to Italians, before the European elections, that it has thus far engaged in nothing but bluff.”

Giorgetti also commented on the extension of the recovery fund deadline beyond 2026. “Behind the no to the 2026 extension is the desire of many countries to avoid replicating the Next Generation EU experience: There is a broad front of European countries that do not want debt to fund projects,” he said.

“May I express my wish (that we can extend the term beyond 2026)?” he added.

(Alessia Peretti | Euractiv.it)

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