A higher net primary expenditure in 2023 than forecast (despite the Italian estimates for 2024 being below the required threshold); the failure to use the savings from the elimination of support for energy (1% of GDP) to reduce the deficit and the limited scope of the effects of the cut in taxation on labour: these are the elements that led the European Commission to judge the Document Italy’s budget plan «not fully in line with the Council recommendation of 14 July 2023». The European executive therefore invites Italy to “stand ready to adopt the necessary measures within the national budget process to ensure that fiscal policy in 2024 is in line with the recommendation”.
Italy is part of the group of nine “postponed” eurozone countries, together with Austria, Germany, Luxembourg, Latvia, Malta, the Netherlands, Portugal and Slovakia. However, Belgium, Finland, France and Croatia risk not being in line. Seven were promoted: Cyprus, Estonia, Greece, Spain, Ireland, Slovenia and Lithuania.
Returning to Italy, the Commission – in its autumn package – writes that growth in nationally financed net primary expenditure should respect the recommended maximum growth rate in 2024. However, if net expenditure in 2023 had been the same predicted at the time of the recommendation, the resulting growth rate of net spending in 2024 would be higher than recommended. In detail, on 14 July the Council recommended that Italy guarantee a prudent budget policy, in particular by limiting the nominal increase in net primary expenditure financed at national level in 2024 to no more than 1.3%. According to the Commission’s 2023 autumn forecast, Italy’s net primary expenditure is expected to increase by 0.9% in 2024, a rate lower than the recommended maximum.
However – explain the Brussels technicians – the current estimates of net primary expenditure financed at national level in 2023 are higher than what was expected at the time of the recommendation (by 0.8% of GDP). This is mainly due to two factors regarding the Superbonus tax credits: the Commission’s 2023 autumn forecast revised upwards their impact on the 2023 deficit following a higher-than-expected uptake and reflecting information contained in the Budget planning document; and to legislative interventions that change the nature of the tax credits, which implies that they have no expected impact on 2024 spending. In essence, the debt burden has been offloaded onto 2023, relieving the 2024 accounts, also thanks to the interpretation provided by Eurostat on payable credits.