Italy’s parliament on Saturday approved a 2025 budget aimed at placating EU demands to reduce budget deficits in eurozone countries and honoring Prime Minister Giorgia Meloni’s pledge to cut taxes.
More than half of the package, worth about 30 billion euros ($31 billion), will go toward reducing taxes and social security contributions for low- and middle-income earners.
Rome has made a stunning move after Brussels imposed a surcharge on Italy earlier this year over its nearly 3 trillion euros debt, the second-highest share of gross domestic product (GDP) in the European Union. It is necessary to take appropriate fiscal balancing measures.
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Meloni’s far-right coalition has pledged to cut the public deficit to 3.3% of gross domestic product (GDP) in 2025, down from this year’s forecast of 3.8%.
But the budget comes amid a slowdown in growth, with ISTAT’s national statistics office estimating GDP growth to rise by just 0.5% this year, half of what was expected in June.
The approved measures include permanently merging the bottom two income tax brackets, which would allow people with an annual income of 28,000 euros to pay 23% instead of 25%. .
And this budget expands the number of people eligible for reductions in social fees and taxes.
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Meloni’s far-right party, the Italian Brothers, also aims to boost Italy’s sluggish birth rate, with the budget allocating a bonus of 1,000 euros per newborn to families with annual incomes of less than 40,000 euros.
Rome is looking to scrap bonuses for gas-fired boilers under pressure from Brussels, but environmental groups complain there is little room to tackle man-made climate change.
Instead, buyers of energy-efficient household appliances will receive a bonus of up to 100 euros, while households with incomes below 25,000 euros will receive up to 200 euros.
Companies that increase employment and reinvest some of their profits will benefit from a lower corporate tax rate, from 24% to 20%.
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The new measures are partly funded by Italy’s banking sector, which is required to contribute a total of 3.4 billion euros to the 2025 and 2026 budgets.
They have agreed to defer these two years of tax credits to provide liquidity for the Italian state, which will have to be repaid later.
