MNI: Italy To Hand In Debt Plan On Time, May Adjust-Sources

MNI (ROME) - The Italian government is preparing to submit its fiscal sustainability plan to the European Commission by the Sept 20 deadline, but could make adjustments following revised historical GDP data due on Sept 23, sources close to the governing coalition told MNI.

“We will certainly submit the plan before the October Draft Budgetary Plan (DBP) deadline,” said one source, adding that Italy will not be among those countries using any potential extensions. The European Commission will begin reviewing the plan while it is approved in the Italian parliament, where it could undergo further modifications, sources indicated.

While specific details remain under wraps, the Finance Ministry has confirmed that it aims for the fiscal deficit to fall below 3% of GDP by 2026, with net public expenditure expected to grow by an average of 1.5% annually, aligning with new European fiscal rules.

Though Rome will later submit a seven-year adjustment plan, the government is poised to deliver a five-year plan to both parliament and the European Commission as part of its official documentation. (See MNI: Most EU States To Miss Debt Plan Deadline - Sources)

“This is the structural budget plan, and such plans are always designed for a five-year period, aligned with a government's term,” said one source, noting that the final two years of the seven-year projection are still in development.

Istat’s revised estimates for 2021 nominal GDP are likely reveal an upward adjustment of between 0.9% and 1.2% compared to the March figures. This revision will offer some fiscal breathing room for both this year's deficit and debt levels, the sources said.

The lingering impact of the now-concluded Superbonus scheme, providing subsidies for home improvements, will weigh on the 2024 and 2025 budget deficits before it fully fades out.

WORK IN PROGRESS

The adjustment plan is expected to change between its formal presentation next Monday and its final submission as the DBP in October, as Italy’s next budget law begins to take shape.

The government of Prime Minister Giorgia Meloni is exploring ways to extend temporary income tax cuts for lower-to-middle earners, while reducing another tax threshold, moving closer to the flat tax system that it has promised.

The threshold for the 15% flat tax for the self-employed is likely to be increased above the current EU 100,000, though to fall short of the proposed EUR200,000 mark, sources said.

Pensions remain one of the more complex issues for the upcoming budget, as the government seeks to move away from temporary one-year fixes while avoiding a return to the 2013 regime introduced by former Prime Minister Mario Monti.

One-off family bonuses or tax exemptions are also anticipated to encourage higher birth rates. To boost revenues, the government is considering a new fiscal amnesty, sources added.