Green light with reservations: this is the European Commission’s opinion on the Italian manoeuvre. In particular, according to Brussels, the Italian financial system is not “fully in line” with the recent country recommendations because the savings should be used to reduce the debt while, according to Brussels, they will be used by the government for new expenses. This is why Europe asks Rome “to be ready to introduce the necessary measures”. Germany and the Netherlands are in the same situation, while the judgment sent to France is much clearer: the French budget is considered “not in line” with the country recommendations. Ultimately, Italy, as regards the assessment of macro-economic imbalances, continues to be under observation in 2024 together with 11 other states.
In the eight-page analysis dedicated to the opinion on Italy, the European Commission indicates in succession the salient points of the evaluation. According to European estimates, the growth of nationally financed net primary expenditure complies with the European recommendation for 2024 (it should not exceed 1.3% of GDP and stops at 0.9%). However, the current estimates for 2023 are higher by 0.8% of GDP compared to what was expected in July as a result of tax credits for the renovation of residential residences (building bonus). In essence, there would be a carry-over effect on spending on 2024. For this reason, the spending ceiling would not be fully respected. The second aspect concerns the use of funds saved from the reduction of measures against high energy costs which will end within this year: “The savings are not expected to be fully used to reduce the deficit in 2024”, says the Commission. At the same time, Brussels indicates that Italy is expected to preserve nationally financed public investments and should “continue to ensure the effective absorption of donated funds within the framework of the Recovery Fund and other European funds”.
The judgment on the maneuver
This is the conclusion: «Overall, the Commission is of the opinion that the budget plan is not fully in line with the Ecofin recommendation of 14 July 2023» for which «it invites Italy to be ready to take the necessary measures within the framework of the budgetary process to ensure that budgetary policy in 2024 is in line” (precisely) with the same recommendation. Further on, Brussels points out that the community estimate of a deficit of 4.4% in 2024 (4.3% according to the government) exceeds the 3% deficit/GDP ceiling and that the public debt will be at 140.6% of GDP, above the 60% ceiling but still 6.5 percentage points below the ratio at the end of 2021. Brussels notes that the debt/GDP falls only marginally to 140.1% in 2024 according to the government and that according to EU estimates it increases to 140.6% from 139.8% at the end of 2023. The Commission adds that Italy “has made limited progress regarding the structural elements of last July’s recommendations”. Hence the invitation to “accelerate them”. Brussels does not provide direct indications on the decisions it will take after the EU elections on possible procedures for excessive deficit both because there are no definitive accounts for 2023 yet (we need to wait for the end of the year and the various notifications to Eurostat) – and this is a obvious – and because negotiations on the budget rules themselves are still up in the air. In any case, in the documents published today reference is made to the announcement made last March: in the spring the Commission will propose to Ecofin to open procedures for excessive public deficit on the basis of the definitive data for 2023 for which `states are invited to take this into account in implementing the 2023 budget and in preparing the budget plans for 2024.”
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