Confirmation of improvement is forthcoming in Italy’s public finances, pending – on Friday – a decision on Moody’s rating. This is demonstrated by the deficit figures contained in the autumn forecast, illustrated yesterday by Economic Commissioner Valdis Dombrovskis: in the spring, Rome is preparing to exit the EU procedure for excessive deficits. The attached table shows the current year’s deficit at 3% of GDP, which will continue to decline in subsequent years, in line with the government’s Dpb.
DOCUMENT
In the working paper, the unrounded figure is slightly lower than the reference value, namely 2.98%. If “stamped” in April by Eurostat, this percentage could represent the closure of procedures starting in 2024, Dombrovskis explained. But the new Stability Pact regulations are applied for the first time and to understand whether this minimum decimal deviation will be enough to tip the Italian balance sheet (or whether over-rounding will be chosen) we have to wait for a response to the interpretation criteria, the Latvian commissioner refrained. Despite formalities, EU technicians will be guided by common sense, they assured Brussels.
PACKAGE
The commission will then have to entrust its promotion to a six-month monitoring package, which is expected to take place on June 3. The requirements that must be met are basically: not only must the deficit be below the 3% threshold specified in the Pact, but also the deficit must remain lower in subsequent years. EU estimates revealed yesterday put the figure at 2.8% in 2026 and 2.6% in 2027, based on Dpb figures. For three years, Italy is leading the continent’s other two economies: Germany, which is grappling with a surge in public spending (deficits estimated at 3.1%, 4% and 3.8%) and France, which is struggling to maintain discipline in its budget (deficits estimated at 5.5%, 4.9% and 5.3%). Political consequences arise from technical calculations. In fact, the possibility for the government to immediately activate the clause allowing military deficit spending of up to 1.5% of GDP per year, as a temporary exception to the Pact, is contingent on the conclusion of EU procedures on the account. An important part of the EU rearmament plan prepared by Ursula von der Leyen. Next week it is the turn of the report on the Dpb, and in Brussels certain support for measures such as dues paid by banks and insurance companies has not gone unnoticed. Other data, due to the Superbonus effect, Italy’s debt is expected to increase from 136.4% of GDP this year to 137.9% next year, and will only fall slightly to 137.2% in 2027. Debt interest costs will also increase, from the current 87.9 billion to 91.6 billion and then to 96.6 billion. In short, accounts have been promoted and growth has been postponed.
REVIEW
Italy’s GDP is struggling compared to most EU countries, just as the EU and the Eurozone are running faster than expected: from economic forecasts, a picture of “moderate improvement” emerges for the next two years, Dombrovskis said, which is in line with Italy’s measurements. Supported by investments and Pnrr reforms, this year GDP will grow by 0.4%, down from the previous 0.7%, and will increase again in 2026 and 2027. In both cases, GDP is expected to be 0.8%, and will benefit from Pnrr revisions so as not to lose the last Recovery fund, a step closer to the EU’s definitive green light. A figure that within two years will leave Italy at the bottom of the club. “Careful family consumption and increased precautionary savings” weigh heavily, Dombrovskis explained. For the 27 countries, GDP increases will be 1.4% this year and next, and 1.5% in 2027. Spain is double the EU average, reaching +2.9% this year, while Ireland even posted a rise of +10.7%. The reason? A surge in exports (for Dublin, driven by pharmaceuticals) in preparation for American tariffs. This is also the reason for holding this conference in 2025: “In the first three quarters of this year, growth exceeded expectations and will continue to increase at a moderate pace, despite the difficult international context”.
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