The puzzle of the next maneuver becomes more complicated. Bank of Italy, but also Istat and the Parliamentary Budget Office, raised an alarm during the hearings in Parliament on the Structural Budget Plan. There are three alarm bells: growth will be lower than the government’s optimistic estimates, the social security system risks imbalance with the cut in the tax wedge made structural and the structural budget plan is unclear.
First alert: economic growth is below expectations. The government had set a GDP growth target of 1% for 2024, a target which, in light of the latest findings, appears increasingly distant. According to estimates from the Bank of Italy, real growth will stop at 0.8%, while the Parliamentary Budget Office also underlined that reaching 1% has become more uncertain. Why? The post-Covid driving force, which had characterized a robust recovery in the months following the pandemic, has now run out. Additionally, the global economic slowdown and geopolitical uncertainty further weigh on the outlook. Giovanni Savio, director of national accounts at Istat, declared that Italy has entered a “steady state” phase, a condition of stagnant growth, with very limited development rates. This economic weakness is a worrying sign not only for the sustainability of the fiscal measure, but also for compliance with European constraints, in particular the return of the deficit below 3% of GDP by 2026.
Another alarm bell concerns the decision to make the cut in the tax wedge structural. A measure designed to lighten labor costs and incentivize employment and the economy, but which could however destabilize the social security system in the medium to long term. The head of the economics and statistics department of Bank of Italy, Sergio Nicoletti Altimari, explained that making these reliefs permanent could compromise the balance between contribution income and expenditure for pension benefits, a balance that represents a strong point of the Italian social security system . The Court of Auditors agrees, reiterating the importance of preserving the sustainability of the social security system, especially after the temporary interventions of recent years which have created a certain instability.
A third critical element raised during the hearings concerns the lack of clarity on the financial coverage of the Structural Budget Plan. The Parliamentary Budget Office highlighted the lack of concrete details on the reforms and spending containment measures, which should be the backbone of the plan. At the moment, in addition to the expected 9 billion euro deficit, there is no precise information on how the government intends to cover further expenses, which raises doubts about the overall feasibility of the measure. And then there are Municipalities and Regions, worried that any cuts to transfers or reductions in Irpef rates could weigh on their finances, compromising their ability to provide essential services. The Conference of Regions has calculated that the reduction of the rates from 4 to 3 would have an impact of approximately 1.4 billion euros on regional budgets.
Doubts and alarm bells for the government grappling with the Maneuver. Economy Minister Giancarlo Giorgetti, expected in the Budget Commission at the end of the hearings, could answer or try to answer this evening.
