MNI BRIEF: European Commission Okays Italy Budget Draft

The European Commission today okayed Italy’s Draft Budget Plan as being in line with EU’s Fiscal Policy Recommendations, but criticised the country for failing to take further measure to crack down on tax evasion and to make its pension system more affordable.

Italy’s fiscal stance will be neutral in 2023, with the growth of nationally financed current expenditure running below growth in potential output, said the Commission, which repeated guidance to other EU states by urging Rome to target measures to mitigate high energy prices at more vulnerable households and businesses, and to withdraw support as price pressures ease.

“Around one-half of the measures do not appear targeted to vulnerable households or firms, and most of them do not fully preserve the price signal to reduce energy demand and increase energy efficiency,” the Commission said.

The Commission criticised Italy for failing to reduce the tax burden on labour and for budget measures including allowing more scope for cash payments, which might facilitate tax evasion, and the renewal of early retirement schemes. (See MNI: Italy Knows Budget Over-Optimistic On Nominal GDP-Sources)