Growing debt and deficit above the old threshold of 3% of GDP (formally not abolished). The European Commission’s spring forecasts confirm, as regards the public finance framework, that the Italian government will probably find itself facing an excessive deficit procedure, in the new version laboriously approved by the European institutions. While on the growth front they portray a country that will have to find the strength to leave behind the hangover of the superbonus: which – it is worth remembering – has not only sunk the accounts (and will continue to do so over time) but has made up for, after the vigorous emerging from the pandemic, to the need to fuel the performance of the economy with investments and well-designed reforms.
THE COMPARISON
The details of the future confrontation with Brussels are still to be defined, but looking at the autumn deadline of the maneuver it is reasonable to hypothesize that at least on paper the executive could find itself having to add to the bill necessary to finance the more or less announced measures (almost 20 billion as indicated in the same Economic and Financial Document) other resources, necessary to guarantee the adjustment consistent with a “plausible” reduction in the debt. Privatizations will also contribute to a decline, which in turn cannot be taken for granted even if yesterday the Mef announced the placement of 2.8% of Eni.
The new system of European rules was conceived with the utmost care to replace a baroque mechanism that was incomprehensible to most but then – in the name of compromise with the rigorist countries – ended up inheriting some of its defects. It is enough to remember that the complicated parameters suspended in 2020 and the related exceptions should have given way to a more reasonable single indicator, that of “net spending” which does not take into account interests, discretionary measures and other expenditures linked to the economic cycle, such as those of unemployment benefits. The dialectic between national governments and the Brussels authorities would essentially be based on this unit of measurement, over a multi-year period of time: four years which, based on the commitments made by the interested parties, can be extended to seven. Precisely the temporal extension of the comparison period and of the related adjustment plan potentially represents another significant new element: each country would define with greater autonomy the various intermediate steps to achieve the required objective (the famous “trajectory”) instead to depend on the bogeyman of periodic recommendations and the related forced budget corrections.
So far, so good. As is known, however, other quantitative indicators have returned from the window which in the Italian case, given the burden of a public debt well above 90 percent of gross domestic product, would materialize above all in the request for a reduction in public debt equal to one percentage point . Which is less than a twentieth of the distance from the 60 percent level, contemplated at least abstractly by the old rules; but it still represents a significant commitment.
THE INDICATIONS
What does all this mean if we move from sophisticated macroeconomic constructions to the more prosaic language of the budget law to be prepared every year? The path of the Meloni government, as mentioned, is in some way already marked by the albeit scant indications of the Def. There are approximately ten billion needed to confirm the reduction of 6-7 points in the contribution burden borne by the worker, which translates into an increase in the net paycheck of up to over 100 euros per month. Another five billion for the needs of the tax reform, which, like the cut in the tax wedge, is currently valid only for 2024. Naturally, the decision to proceed with a new annual extension or to make the two structural measures will not be indifferent: the latter is the most logical and credible path, which however requires structural coverings. The total bill is close to twenty billion if we add the other needs that must be financed every year.
How will the executive move? The constraint is not to create a new deficit, given that on the contrary there is the risk of having to proceed with restrictive interventions of the opposite nature. On a political level, it is also quite difficult to imagine new tax levies, beyond what is foreseen in the delegation. Which has a fund already fueled for 2025 by the repeal of the old incentive for the capitalization of companies (the ACE, Aid for economic growth) and could be replenished by greater revenues deriving both from the new taxation of multinationals and from the biennial agreement that it will be offered to self-employed workers and small businesses.
The possible paths then refer to titles already read many times in the past, the cutting of tax breaks and the review of public spending. Are there elements to believe that this time we are serious? As for tax expenditures, Deputy Finance Minister Maurizio Leo seems intent on obtaining real resources, proceeding along the path of automatic cuts based on the income threshold. While the owner of Via Venti Settembre has already had the opportunity in the past to affirm his intentions of a gentle assault on the ministries’ endowments.
Then there is the great unknown of growth. Which, at least in the original spirit of the new Stability Pact, was supposed to be the real key to debt relief. Two indications contained in the Commission’s forecasts are important here. Next year the investments from the superbonus will have to be replaced by those from the Pnrr. While consumption would be supported by the increase in real wages favored, after the defeat of the 2022-2023 two-year period, by contract renewals in both the public and private sectors.
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