MNI: Italian Tax Cuts Delayed As Meloni Distracted - Sources
MNI (ROME) - Italian Prime Minister Giorgia Meloni has been caught off guard by U.S. President Donald Trump’s policies in areas such as Ukraine, leading some within her coalition to complain of sagging political momentum in areas such as planned reductions in income tax thresholds, government sources told MNI.
Meloni had hoped that Italy could serve as a bridge between Europe and the new U.S. administration, but Trump’s plans for a deal with Russia have left Rome in an uncomfortable position given its unequivocal support for Kyiv. The issue has also drawn the prime minister away from domestic priorities, sources said.
“Something was expected for the income tax but has been left in the desk for a bit,” on source told MNI.
The government had been expected to announce this week the removal of one of Italy’s three remaining income tax thresholds as of 2026, but was forced to
delay the move due to internal coalition disagreements between Meloni’s Brothers of Italy Party and junior party Forza Italia on the one hand, and the League on
the other.
The push to reach an agreement on tax could resume in as soon as one or two weeks, though it may have to wait until the international panorama looks clearer for Meloni, the sources said.
"I think they don't have a clear idea of how to move now,” one said.
DETERIORATING OUTLOOK
Officials have become increasingly worried about the Italian economic outlook for 2025 after a flat second half of 2024 as exporters are hit by a slowdown in Germany downturn, the country’s biggest market. Italian industrial output has declined for more than 24 months in a row.
“We are lucky we have the NextGenEU because if not the situation will be much worse”, one of the sources said, referring to the EU’s post-Covid recovery programme which has provided the country with about EUR200 billion, mainly for infrastructure projects.
Italy would support European Commission moves to allow member states to exceed borrowing limits stipulated in the bloc’s fiscal rules in order to expand defence spending, by activating national escape clauses, the sources said. The country is also arguing for more joint-borrowing to fund defence, though officials conceded that this looks an unlikely prospect, particularly given an expected swing to the right in German elections this weekend. (See MNI: EU Eyes National Escape Clauses To Boost Defence Spending)
Meanwhile Meloni is trying to avoid any public comments regarding U.S. tariffs and their potential impact on the Italian economy, sources said, adding that her government had hoped for favourable treatment from Trump over exports to the U.S., with which Italy averaged a trade surplus of EUR43 billion a year from 2022 to 2024, according to data from the Italian Institute for the Study of International Politics.