MNI: Italy To Start Work On Tighter 2023 Budget Early-Official

The Italian government is planning to start work on its 2023 budget earlier than the traditional October date, in a bid to push through a less generous package than seen this year before political manoeuvring ahead of general elections next spring makes striking parliamentary agreements too difficult, a senior government official told MNI.

“The budget could be complicated by politics. We will start earlier this year,” said the source, adding that work could start in September.

The budget will foresee a lower fiscal deficit than this year’s projected 5.6% of GDP, as the jump in spending during the Covid pandemic is reined in and as government financing costs rise, the source said.

While the government could announce more measures to help counteract the impact of a rise in energy prices, these would be funded by taxes or by cuts elsewhere, the source said, adding that Italy hopes the extension of its average debt maturity in recent years will help it cope with rising bonds yields.

The 2023 budget should result in a fall in Italy’s debt-to-GDP ratio, thanks partly to the jump in nominal output driven by inflation, the official said, adding that the country should avoid a technical recession, partly thanks to a revision of Q1 output data into positive territory, in the absence of any new external shock such as an interruption of Russian gas imports.

The budget proposal will also include still-unspecified cuts in income tax, as was the case in 2022, as part of a drive for an overhaul of tax laws, the official said.

Prime Minister Mario Draghi hopes that lowering taxes will help restrain wage claims, after a government attempt to broker a pact between business and unions got nowhere earlier this year, the official said.