The analysis of the maneuver: the accounts in order, some good measures (and two critical choices on scrapping and gold of Bank of Italy)

Habemus legem de rationibus publicis! (I hope the Latin translation is fine; a somewhat emphatic start seemed necessary to me given the troubled path of the law during the last two weeks). There budget law for 2026 it was approved by the Senate and the House only has one vote without surprises, which tells us, once again, that we have a de facto unicameral system and it is time to formalize it (but that’s another story). What about this law?

Many have spoken of “austerity”. It doesn’t seem like it to me. Let’s look at the public deficit: it is the difference between expenses and revenues and therefore it is the net money that the state puts into the economy, a good (first) approximation of how much the public sector supports businesses and families. There is no austerity either in terms of the level of the deficit or its change compared to 2026. The deficit is reduced from 3.0% of GDP this year to 2.8%, a modest change. Nothing to do with the squeezes made in the pastwhen restrictive measures of a couple of percentage points of GDP were taken. As for the level, at 2.8% the deficit is still much higher than the average of the pre-Covid five-year period (2.2%). Paradoxically, in that five-year period the lowest deficit (1.6% of GDP) was recorded in 2019, when they were in government together (incredible to say) League and 5 Stars, the two parties that (with the obvious exceptions for the League) most vocally criticized the so-called austerity of the budget law. Among other things, once we emerge from the excessive deficit procedure in the spring, we will ask for the activation of the escape clause for increase military spending by another 0.15% of GDPdeficit financed. Where is the austerity?

However, the law is in line with European constraints, which, after the 2024 reform, are much less stringent than in the past. Giorgetti, and Meloni obviously, given that in the end it is the Prime Minister who decides, they should be congratulated for having been able to resist the pressure of those who would have wanted a higher deficit. There law was well received by the financial marketswhich does us save billions in interest on debt. This is very important because the debt remains high and will only slowly decrease in the coming years also due to the delayed effect of the building super bonuses granted too generously in the past.

Still on the subject of budget balances, it was said that the deficit has been contained, leaving more room for electoral maneuvers in the next budget law. I don’t think it’s possible, unless we violate European rules, which Giorgetti rightly doesn’t seem to intend to do. These rules set spending limits (net of possible tax increases). Being in line with the cap this year does not mean creating space compared to the cap expected next year.

But it’s not just budget balances that count. What it used to be called the finance company it also provides an opportunity for review the composition of income and expenses and to increase or decrease their total. From this point of view the new budget law does not do much. The total of expansionary measures (tax cuts or spending increases) is modest. Even with the addition of the 3.5 billion in support, above all, for businesses, introduced during the discussion in the Senate, the overall 22 billion is, compared to GDP, the smallest maneuver since 2014. Among the measures taken there are several that go in the right direction: cuts to Irpef (for once focus on average incomes), increase in health spending (which goes back to 6.5% of GDP, i.e. a slightly higher level than the one at which the last pre-Covid centre-left government left it), an improvement in the design of investment subsidiessome measures for the birth rate. But these are small amounts, certainly not capable of fundamentally changing the prospects of the Italian economy. To have broader interventions it would have been necessary major spending reviewto obtain an additional 20-30 billion by eliminating non-essential expenses. The government has not been able to do this, but in this it does not differ from previous governments. Public spending remains well above 50% of GDP.

On the side of covering the expansionary measures, the budget law is limited to tax increases of various kinds, dominated by those on the financial sector, plus some linear cuts in spending and postponements of investments. The tax burden remains at almost record levels over the last twenty years. The fact that it is banks and insurance companies that are hit first doesn’t mean much. It is always about taxes and it is not known who these taxes will ultimately fall on. The state can decide the level of taxation, but how the taxes are actually distributed depends on how much the initially affected subjects are able to to pass on tax increases to others.

I would stop here, but I can’t help but mention two last things in the budget law that I don’t like. The first concerns gold to the Italian people. A move that serves no purpose. It was said that it was necessary to avoid the risk that the foreigner, who is present in the capital of the Italian banks which, in turn, participate in the capital of the Bank of Italy, could one day get their hands on our gold reserves. Impossible given that, by statute (approved by decree of the President of the Republic), the effective powers of the participants in the capital of the Bank of Italy are very limited and certainly do not include decisions on reserves. But we see that for some people little or nothing is needed to be able to claim victory. The second measure that I don’t like concerns the fifth scrapping of tax bills. In the last ten years we have had five scrappings, four settlement and write-off operations, and a very generous amnesty. I wonder why in the face of all this, and beyond the employees for whom there is withholding tax, ci are still taxpayers who still pay everything due without delay.

All in all, it is a budget law that keeps public finances in order, it doesn’t cause disasters and contains some good, if small, measures. It does not include reforms capable of changing the growth capacity of the Italian economy: no revolutionbut it would have been difficult to do so at this point in the legislature, without having had a popular mandate (yes, for a reduction in spending and taxation levels) and having invested political capital in other initiatives (premiership, justice reform).

December 25, 2025

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