Meloni bets on prudence in his first Italian budgets

Italy's difficult financial situation does not leave much room for big economic tumbles.

Thomas Osborne
Thomas Osborne
22 November 2022 Tuesday 02:30
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Meloni bets on prudence in his first Italian budgets

Italy's difficult financial situation does not leave much room for big economic tumbles. This is what the Italian Prime Minister, Giorgia Meloni, told her team of ministers, when approving the first budgets of the Italian right-wing Executive: a package in which the change of course with respect to Mario Draghi's government is minimal and, although there are symbolic tweaks to please the electorate –especially the progressive abolition of the subsidy for the unemployed devised by the 5 Star Movement (M5E)– they do not have the impact that many expected.

If Meloni's pulse has not trembled on social issues to show her far-right ideas, from hardening the punishment for rave parties to the pulse of NGOs that save lives in the Mediterranean, on monetary issues the leader of Brothers of Italy has opted for a "prudent and realistic approach" with an expense of 35,000 million euros that leaves little room to fulfill electoral promises and that mostly (21,000 of them) will be destined to help families and companies in the face of rising prices of energy. All this will cause next year's deficit to rise to 4.5% of GDP, an increase compared to the 3.4% forecast in September in a country that already has a very high public debt, close to 150% of GDP.

“I consider that they are courageous, coherent budgets and that they are committed to the future. The two main priorities are growth and social justice, that is, care for families and the most fragile", said the premier at a press conference in which she puffed up her chest for having approved this package just one month after it was approved. swear the office

The issue that will raise more blisters in Italy is the progressive elimination of the citizenship income, the subsidy that represents the great workhorse of the grillini that Meloni wanted to completely eradicate for those who are able to work, but that after hearing from her minister of Work the possible social effects that it would entail for the labor market has opted for an intermediate route. From January, the 660,000 beneficiaries who can work will receive the subsidy for a maximum of 8 months (instead of the current 18 renewable months) and in 2024 it will be completely eliminated for them. They will also be required to participate in job training courses for six months and if they do not accept a first job offer, they will lose the benefit. Giuseppe Conte, leader of the M5E, is furious and has already said that they will organize demonstrations in the streets to protest.

Its partners, the League and Forza Italia, may be happy, but not exultant. Matteo Salvini's party demanded a single type of tax of 15%, the so-called flat tax, but in the end it will only be for the self-employed with an annual income of up to 85,000 euros. "It is a first step, the beginning of a path", has defended the league player. He also called for a reform of the pension system, but, given the lack of resources, the Executive has opted for a softened path: allowing them to stop working at 62 years of age with 41 years of contributions, something that would affect some 50,000 people. Without an intervention, a reform of the stage of Mario Monti would have been applied in 2011 that would bring the retirement age to 67 years. This is the point that could be most problematic for Brussels. Silvio Berlusconi, for his part, asked that the minimum pensions be raised to 1,000 euros and they have been recalculated, but not up to 1,000 euros.

A reduction in VAT on bread and pasta had also been announced, but in the end they have not done so because the Minister of the Economy, Giancarlo Giorgetti, has considered that the benefits for families would be minimal compared to the expense that it would entail. It has been done for menstrual hygiene products and products for children. As planned, a tax amnesty will be carried out for debts of up to 1,000 euros contracted up to 2015 and also that the ceiling to pay in cash will go from 2,000 to 5,000 euros, a controversial measure aimed at reviving consumption but which according to his detractors will favor tax evasion, a chronic Italian disease.

In energy matters, the Italian Government will increase the appraisal of the extraordinary profits of electric companies up to 35%, as allowed by the European regulation, in a similar vein to that of Mario Draghi. There will also be new taxes on tobacco, taxes on plastic and sugary drinks will be suspended and the operation to build a bridge in the Strait of Messina will be reactivated. In addition, they want to encourage the birth rate by increasing the allowance during the first year of the child's life and increasing maternity leave.