November 21, 2023, 4:00 p.m
The Economic Commissioner: “It is not a rejection, but a reminder to make better use of the common European resources.” The Commission: The reduction in energy funding is not aimed at reducing the deficit
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Brussels warns Italyalong with 8 other countries including Germanysince the Exercises 2024 “It does not fully comply” with the EU Council’s recommendations. The invitation to Rome is to “be ready” to take the necessary measures. According to the European executive, Italy is also in crisis again macroeconomic imbalance According to the procedure, in-depth reviews must be carried out with eleven other countries, including Germany. Gentiloni: “It is not a rejection, but a request to be prudent and to use resources.”
The abolition of energy subsidies does not lead to a reduction in the deficit In the budget, the savings from the phasing out of energy support measures “are not fully utilized to reduce the public deficit” and this “risks not being fully consistent with the Council recommendation,” writes the European Commission in its opinion on Italy’s programmatic document.
The goal of increasing spending was only nominally met On July 14, the Council, based on the Commission’s proposals, recommended to Italy the target of increasing net public spending by no more than 1.3% in nominal terms from 2023 to 2024. On this point, Italy is nominally in line with the recommendations, as according to the Commission’s autumn economic forecasts, net public spending will increase by 0.9% in 2024 compared to 2023, well below the 1.3% limit.
Expenses are rising significantly above expectations Essentially, however, the Commission notes in the start-up package for the European Semester presented in Brussels that the increase in spending was much larger than it appears. The 1.3% target was actually based on spring economic forecasts, which called for significantly smaller spending increases in 2023 than later.
Significant increase in public spending Because after the Italian government decided to reclassify the tax credits provided for in the construction superbonus, which are payable from 2023 and become irrecoverable in 2024, there was a sharp increase in applications for the superbonus in 2023, with a significant increase in primary public expenditure, which corresponds to 0.8% of GDP more than forecast in the spring.
In practice, the Commission calculates that Italy would have exceeded the limit by 0.6% of GDP if the 2024 spending ceiling recommendation had been made on real data from 2023 and not on the basis of spring forecasts. This is despite the fact that in 2024 the super bonus tax credits will no longer be due, which will result in a significant reduction in net public spending compared to 2023. “Therefore – we read in paragraph 15 of the Commission’s opinion on the budget plans of Italy’s net primary public expenditure is assessed as not fully in line with the recommendation.”
The conclusion on this point is: “According to the Commission’s forecasts, growth in net nationally financed primary expenditure in 2024 is expected to be in line with the maximum recommended growth rate. However, if net spending in 2023 had been as high as currently forecast in the recommendation, the growth rate resulting from net spending in 2024 would be above the recommended.”
Gentiloni: not a rejection, but a call for prudence Commenting on the EU’s warning, EU Economic Commissioner Paolo Gentiloni said: “By definition we have a constructive relationship, both with the Italian government and with EU governments in general. In the case of the draft budget, our opinion says that this is not entirely in line with the recommendations: it is not a rejection, but a call for budgetary prudence and a call to make the best possible use of common European resources to use. I think that the assessment of the Italian budget is very clear, but not a rejection, an invitation in both directions”.
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