By Giuseppe Fonte
ROME (Reuters) – Italy is ready to act if it exceeds budget targets, but sees no need at the moment, Economy Minister Giancarlo Giorgetti said on Monday, ahead of a new set of economic projections for the government expected this week.
“If there is something to correct we will correct it, but basically we are in line,” he said on the sidelines of an event in Trieste, northeast Italy.
Last September, Italy took measures to reduce the deficit-to-GDP ratio, which is expected to fall from the 4.3% forecast this year to 3.6% in 2025 before returning below the Union’s 3% ceiling European in 2026.
The government is scheduled to meet on Tuesday to approve the Treasury’s Economic and Financial Document (DEF) with updated estimates of GDP and public finances.
Uncertainty remains over the implementation of the expensive home renovation incentives, which have blown a huge hole in state accounts in 2022 and 2023 and exceeded 210 million euros ($217 million).
These incentives underpin last year’s deficit-to-GDP ratio of 7.2%, which far exceeded the government’s target of 5.3%, and threatens to put Italy’s huge public debt on an upward path towards 140% of GDP from 137.3% recorded in 2023.
Officials had previously said the deficit is expected to be around 4.4% of GDP this year and then fall to just below 4% in 2025, not far above targets.
However, Giorgetti underlined that the government is committed to “exactly” achieving the multi-year objectives announced at the end of 2022.
“Our policy is guided by prudence and responsibility,” he said.
Italy will soon have talks with European Union authorities on a fiscal adjustment path it will need to follow to comply with the latest reform of the bloc’s two-decade-old fiscal rules, which sets a slow but steady pace of tax reduction. deficit and debt from 2025. four to seven years.
Given the transition period between the old and new rules, Rome could announce on Tuesday a series of estimates that simply reflect the current economic and fiscal trend, without setting new targets.
Another option under discussion is for the targets to replicate forecasts based on an unchanged political scenario, a separate official said Monday.
Barring any last-minute surprises, the Treasury’s DEF will cut this year’s GDP growth forecast to 1% from the previous 1.2% indicated in September.
For 2025 Rome now expects growth of 1.2%, down from 1.4%.
Both forecasts are higher than those of the European Commission, the International Monetary Fund and the Italian Central Bank, which see Italian growth below 1% in each of the two years.
($1 = 0.9228 euros)