(Finance) – “Today the Government approved some important measures. We have launched the Nadef, i.e. the framework that defines the next budget law. We are working to write an economic maneuver in the name of seriousness and common sense. And which maintains the commitments we have made to the Italians: enough with the waste of the past, all available resources destined to support the lowest incomes, cut taxes and help families. The second measure approved by the Government is a decree on immigration and security. Let’s make the expulsions of dangerous illegal immigrants quicker, let’s introduce full protection for all women and maintain that for minors but with the new rules it will no longer be possible to lie about their real age. Furthermore, on safety, we continue our maximum commitment : 400 more soldiers will be employed in the ‘Safe Roads’ operation, to be allocated to the main Italian railway stations.
Finally, we have extended the state guarantee up to 80% for the purchase of the first home for young couples”. Prime Minister Giorgia Meloni he summarized this on Facebook Today’s CDM.
The framework outlined in the Def update note approved this evening by the Council of Ministers – which outlines the scenario under current legislation without defining the programmatic public finance objectives for the three-year period 2024-2026 – revises the forecast scenario set in April. The 2024 maneuver of the Meloni government starts from a treasure of around 14 billion: one dowry of 13-14 billion from the deficit to which 2 billion will be added from the spending review, as well as other revenues yet to be defined. Nadef certifies weaker than expected economic growth, but sends reassurances to markets and investors, confirming a trend of debt reduction. Account management, Palazzo Chigi assures, “in the name of seriousness and common sense”. In the Note a Planned GDP of 1.2% in 2024 and a deficit of 4.3% compared to a trend deficit of 3.6% which opens up room for maneuver of 0.7 points of GDP. The public finance data for 2023 have also been revised compared to the April Def. GDP is now estimated to grow by 0.8%, less than the 1% forecast in the Def, while the deficit/GDP ratio rises to 5.3 % compared to 4.5%.
“We believe we have done the right things with great responsibility – underlined the Minister of Economy, Giancarlo Giorgetti at the end of the CDM –. Someone may observe that we do not respect the famous 3% on the deficit but the overall situation does not lead to pro-cyclical policies and therefore the bar has been set at an absolutely reasonable level. The space opened up by the 2024 deficit should allow us to confirm the indispensable interventions for medium-low incomes and in particular the cutting of the tax and contribution wedge, measures for the birth rate as well as significant allocations for the renewal of the public employment contract, starting with healthcare”.
To compromise the availability framework for the maneuver and the reduction of the debt – he underlined Giorgetti – is the effect of the building bonuses on public finances which “lead to a substantial increase in public needs over the course of the entire legislature, reducing the room for maneuver to finance interventions in favor of the real economy and families. The reason why the debt does not decrease as hoped and it is because the bill to pay for the building bonuses, and in particular the superbonus, will be 80 billion, unfortunately increasing, to be paid in four convenient installments every year. In the absence of this effect the debt would have decreased by point every year.”
In Nadef il debt/GDP ratio in fact, it is expected to reduce from just two points in four years, from 141.7 in 2022 to 139.6% in 2026. The desire to proceed with privatization operations equal to 1% of GDP per year is confirmed. “If and when I decide” underlined Giorgetti specifying that in any case on MPS “we do not need to raise cash immediately. Therefore the assessments that the ministry and the minister will make will be made in the interests of the Bank and its shareholders” and in a to “avoid speculations that I see these days”.
Giorgetti assured that the tax burden will decrease and he was very decisive regarding the objective of reaching 2 billion in savings with the spending review.
Update note to the 2023 economics and finance document – The NADEF prepared by the Government – Palazzo Chigi said in a note – takes into consideration the complex international economic situation, the impact of the restrictive monetary policy, with the increase in interest rates, and the consequences of the war in Ukraine. The public finance framework reflects a prudent approach, with a revision of growth estimates for 2023-2024 due to the ongoing economic slowdown. This slowdown and the trend in inflation, however, require a policy of support for the real incomes of families, in particular those with lower incomes. Also thanks to the confirmation of the cut in the tax wedge on labour, the tax burden for 2024 is expected to reduce. In any case, the objective of reducing the tax burden more decisively during the legislature remains confirmed. The interventions envisaged by the budget bill that the Government intends to present reflect this approach: confirmation of the cut to the tax wedge on labor also in 2024; first phase of tax reform; support for families and parenting; continuation of contract renewals in the public sector, also with particular reference to healthcare; confirmation of public investments, with priority to those of the PNRR; refinancing of unchanged policies. Although net debt to GDP will be revised upwards in particular in 2024, the envisaged structural adjustment and the trend of the reference expenditure aggregate are in line with the European Council Recommendation and with what is believed to be the future structure of the European Union’s budget rules. Furthermore, the measures adopted to contain public spending will be incisive. As regards the debt profile, it is noted that the construction bonuses in particular lead to a substantial increase in public needs during the legislature. Nonetheless, the planning of budget balances and the efforts to valorise and subsequently partially privatize some public assets will make it possible to achieve a moderately declining profile of the debt/GDP ratio over the time frame of the NADEF. Subsequently, the public finance balance achieved at the end of the period and the elimination of the negative effects on the cash balance due to the Superbonus will make it possible to obtain a much more rapid decline in the debt/GDP ratio, with the aim of returning to pre-crisis levels by the end of the decade. The budget balance reflects the increase in the stock of public debt resulting from the deviation measures adopted in the pandemic period.
There GDP growth is estimated at 0.8 percent in 2023, 1.2 percent in 2024 and, respectively, 1.4 percent and 1 percent in 2025 and 2026. Regarding the net debt objectives in in relation to GDP, the document indicates a trend deficit under current legislation of 5.2 percent in 2023, 3.6 percent in 2024, 3.4 percent in 2025 and 3.1 percent in 2026. In the programmatic scenario the deficit is 5.3 percent in 2023 and 4.3 percent in 2024. Regarding the projections for 2025 and 2026, the document forecasts 3.6 percent and 2.9 percent respectively. The public debt-to-GDP ratio for 2024 is forecast at 140.1 percent. The unemployment rate is expected to fall to 7.3 percent in 2024 (from 7.6 percent forecast for 2023).