(Bloomberg) – Italy’s parliament gave final approval to the 2025 budget just days before the year-end deadline, a victory for Prime Minister Giorgia Meloni.
The Senate passed next year’s budget early Saturday afternoon with 112 votes from the 181 members present.
Mr. Meloni and Italy’s Finance Minister Giancarlo Giorgetti have put together a package aimed at pleasing voters with tax cuts while complying with European Union fiscal rules. The government plans to cut the country’s budget deficit to 3.3% of economic output next year and bring that figure below the regional ceiling of 3% by 2026.
Last-minute changes to the budget include keeping the tax on cryptocurrencies at 26% next year, then increasing them to 33% in 2026 (up from 42% as originally planned).
The debt is still expected to rise through 2026, partly due to high state construction subsidies known as “super bonuses” that Meloni ended when he took office but still weighing on public finances. There is.
The Prime Minister’s pledge to cut taxes for middle- and low-income earners has helped keep him in power, but it means a return to fiscal health will be slow by EU standards.
She has not been helped by the less-than-stellar performance of some of her EU neighbors. France has no plans to keep its huge budget deficit of 6.1% below 3% of GDP until 2027, and Germany’s economy, although within fiscal parameters, is expected to contract this year and stagnate in 2025. There is.
Italy’s economic output has also slowed, but is expected to grow by 0.5% in 2024 and 0.8% next year, according to the country’s statistics office.
Markets have focused on Italy’s relatively healthy situation and political stability, even though the spread between Italian 10-year government bonds and equivalent German bonds, a measure of risk, hit a three-year low earlier this month. , remains below 120 basis points (bp).
Italy’s fiscal efforts are also likely to be boosted by lower borrowing costs, with the Congressional Budget Office estimating that lower yields could save the government 1.7 billion euros ($1.8 billion) next year.
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