Italy: populist Giorgia Meloni's budget focused on energy

"I am very satisfied" with this draft budget, Ms. Meloni told the press, adding that this document "makes political choices" and concentrates resources "on two main priorities".

These two priorities are "growth, that is to say securing the productive fabric" as well as "social justice, that is to say attention to families, to people with the lowest incomes and to the most fragile categories," she said.

Giorgia Meloni would like to avoid at all costs the misadventure of the last populist government formed in 2018 by the 5 Star Movement and the League (extreme right), engaged in a battle with Brussels on the deficits before backtracking in the face of the outcry in the markets.

"Italy will respect the" European rules, she promised during her general policy speech at the end of October.

The budget devotes more than 21 billion euros to support measures for households and businesses in the face of soaring energy prices, out of a total of 35 billion euros in expenditure.

Among the measures are aid for the payment of electricity bills and enhanced tax credits for companies whose energy costs have continued to rise.

To free up additional resources, Giorgia Meloni had raised the country's public deficit forecast for 2023 to 4.5% of GDP in early November, against 3.4% forecast in September by the government of Mario Draghi.

The budget is "prudent and realistic" as well as "sustainable for public finances", taking into account the economic situation, in particular international, had assured the government in a press release Monday evening.

- Pragmatism and realism -

"So far, the government has shown pragmatism and realism" and recognizes that its electoral promises cannot be achieved all at once, but "will be spread over the period of the mandate" of five years, notes Lorenzo Codogno , ex-chief economist of the Italian Treasury.

"With the global economy slowing and interest rates rising, they are forced to remain cautious," he told AFP.

"It is a prudent and responsible budget, in continuity with the Draghi government, apart from a few symbolic measures which have little impact on the accounts but are addressed to the electorate", comments for AFP Giuliano Noci, professor of strategy at the Polytechnic school of Milan.

Flagship measure of the coalition, the extension of a flat tax of 15% for auto-entrepreneurs with annual incomes of 100,000 euros instead of 65,000 currently, will thus stop at 85,000 euros initially.

While Ms. Meloni has pledged to "reduce the tax burden on businesses and households", the rebate will be limited to 2% for salaries up to 35,000 euros per year, as under Mario Draghi, and will increase to 3% for income below 20,000 euros.

Tax amnesties, which were among the electoral promises, were decreed in particular for tax debts of less than 1,000 euros contracted before 2015.

At the same time, the ceiling for cash payments is increased to 5,000 euros, against 2,000 euros currently, a very controversial measure because it could, according to its detractors, encourage tax evasion and corruption.

Another delicate measure, likely to displease in Brussels, is the advancement of the retirement age, which is established at 62 years on the condition of having contributed for 41 years.

Without this transitional measure, the retirement age would have increased from 64 to 67 in 2023, as provided for by a reform dating from 2011.

To finance these measures, the Meloni government intends to cut citizenship income, aid to the poorest received by 2.5 million people, and reduce the funds granted to beneficiaries deemed able to work.

Another source of financing, the taxation of the "surplus profits" of the energy giants introduced in March by the Draghi government will increase from 25% to 35%.