ITALY: Govt Committed To Meeting EU Target By '26, But Consensus Disagrees

Only one of the 8 analysts surveyed by Bloomberg expect Italy’s budget deficit to be within the EU’s 3% ceiling by 2026. This follows a pair of source reports from Bloomberg and Reuters this week, which reported that the Government remains committed to reducing its fiscal deficit over the next two years to become compliant with EU fiscal rules. Should markets deem Italy’s budgetary forecasts as too optimistic, it would provide scope for a re-widening of the 10-year BTP/Bund spread. 

• Although the Government is said to be exploring measures such as cost reductions and delayed retirement, sources note that some tax/social contribution cuts will still be delivered/extended as previously pledged.
• Current Bloomberg consensus sees the 2026 budget deficit at 3.7% of GDP, above the Treasury’s forecast of 3.0%.
• In terms of timings, EU member states will need to submit their first “medium-term fiscal-structural plan” by September 20. The EU will then assess these plans alongside the 2025 Draft Budgetary Plans, which need to be submitted by October 15.
• Ratings reviews will also pick up in the autumn, with Fitch and S&P due on October 18 before Moody’s on November 22.