A bold ambition. The Italian Government led by Giorgia Meloni plans to reduce the public deficit from 2026 to 2.8% of GDP, well below the 3% ceiling set by the Stability Pact, the Italian Ministry of Economy announced on Friday.
Rome aims to reduce the public deficit to 3.8% of GDP this year, compared to 7.2% in 2023, a more ambitious objective than the 4.3% ratio foreseen in the latest government forecasts from April. These commitments appear in the seven-year recovery plan for public accounts presented to the Council of Ministers by the Minister of Economy, Giancarlo Giorgetti, which Italy must send to the European Commission.
Increase in public spending
Beset by a European excessive deficit procedure, like six other member states, including France, Italy explains in its recovery plan how it intends to return to normality from 2026.
“The Government intends to reduce the deficit/GDP ratio to 3.3% in 2025 and 2.8% in 2026, which will allow us to exit the excessive deficit procedure,” he points out. Italy foresees in its plan an average increase of close to 1.5% per year in its net public spending during the recovery period. In detail, this spending is expected to increase by 1.3% in 2025, 1.6% in 2026 and 1.9% in 2027.
“Comply with the new rules”
After a review of the accounts by the National Institute of Statistics (Istat) and the Bank of Italy, the public debt ratio was reduced by 2023 to 134.8% of GDP, compared to the 137.3% previously estimated, indicates the ministry. However, this rate remains the highest in the European Union, behind that of Greece. In the coming years, the Italian debt ratio should continue to increase before starting to decrease from 2027, the ministry says without providing figures.
This trajectory of the ratio is, according to Rome, “in accordance with the new rules” of the Stability Pact, “which foresee that an average percentage point of GDP will be reduced” per year “after exiting the procedure.” due to excessive deficit. Italian debt has been inflated by the heavy legacy of the “Superbonus”, a green bonus system for construction launched in 2020 by Giuseppe Conte’s government that caused deficits to explode.
Source: BFM TV
