The far-right Italian leader has the public deficit under control and is postponing her major reforms.
It was the first real political test of Giorgia Meloni, the leader of the nationalist right of Fratelli d’Italia in power for a month. Designing Italy’s 2023 budget in such a short time was a challenge, constrained by the energy crisis, inflation at 11.8%, a threatening economic environment, not to mention the rising debt burden. His presentation had to demonstrate his ability to hold his majority without immediately meeting the demands of his two allies, the League and Forza Italia. It was for the second most indebted country in Europe (after Greece), to reassure Brussels and the markets.
With spending up by 35 billion euros, of which 21 billion will be used to reduce the energy bill of businesses and households until the end of March, the government has nevertheless maintained a certain rigor: “Excluding interest charges, the primary deficit is lower than expected by Mario Draghi “, explains the economist Carlo Cottarelli. The budget succeeded in identifying two priorities, at least symbolically: support for the productive fabric and aid for families and the lowest incomes. “We have been both careful and courageous, we have made real political choices, some of them unpopular, to help those who need it most“, welcomes the Minister of Finance, Giancarlo Giorgetti. Some see it as an “anti-budget Liz Truss”, in reference to the ephemeral British project, generous but unfunded.
The budget appears above all in the continuity of Draghi’s policy, which explains why the spread (the difference with German rates) has changed little. The deficit is under control at 4.5% of GDP. And a number of initiatives taken by Meloni’s predecessor have been confirmed or reinforced: for example the reduction of 2 points in the tax wedge (part of the compulsory deductions paid by the employee and his employer) for employees up to 35,000 euros of annual income, increased today to 3 points for income below 20,000 euros. This reduction, which will fully benefit employees, is the most expensive measure in this budget (4.2 billion). The Meloni budget reinforces the pronatalist policy (50% increase in the single allowance) and raises the minimum old age, from 524 to 570 euros per month. In this continuity with Mario Draghi, a clear priority for low incomes emerges.
Citizen income saved
No revolution, even if among the new measures is the abolition of social security contributions capped at 6,000 euros for recruitment on permanent contracts of young people under 36, women, or recipients of citizen income, insofar as they relate to new jobs.
The measures on which Meloni had campaigned only appear in a very symbolic way: such as the 15% flat tax, reserved for self-employed entrepreneurs up to 85,000 euros in income. Or the 5% tax on productivity bonuses up to 3,000 euros. Similarly, the citizen income, which the President of the Council of Ministers had promised to abolish for employable beneficiaries, i.e. 660,000 people, is, for 2023, just adjusted. The fear of generating a serious social crisis was too strong. In 2023, this income will only be distributed for eight months, instead of twelve. But, promised Giorgia Meloni, the great reform of the citizen income will take place at the end of next year.
To finance the small measures of the majority without widening the additional deficit, the government will try to free up resources: by raising taxes on the superprofits of energy companies from 25% to 35%. Or by reducing the gasoline subsidy (from 30.5 cents per liter to 18.3).
Major reforms are clearly postponed but Giorgia Meloni swears she will have five years to keep all her campaign promises.
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