Italy's parliament recently approved the 2025 budget, marking a significant victory for Prime Minister Giorgia Meloni and her government. The Senate passed the €30 billion budget bill after authoritative votes, where 112 of the 181 members present endorsed the package. Following the Senate confidence vote, Premier Meloni characterized the budget as "a highly balanced maneuver" aimed at supporting medium-low incomes and families. "Parliament has approved the 2025 budget law, the third since the government took office. It supports families with children, allocates record resources for healthcare, reduces the tax burden and gives a hand to those who produce and create employment and well-being," Meloni stated.
The budget proposes to reduce Italy's deficit to 3.3% of its economic output by next year, with aspirations to drop below the European Union's mandate of 3% by 2026. This plan signals the government's commitment to fiscal discipline amid rising debts attributed to previous economic measures. Notably, the budget retains the taxation on cryptocurrencies at 26% for 2025, delaying the proposed increase to 33% until 2026, which is still lower than the originally envisioned 42% rate. The budget included tax cuts primarily favoring the medium and low-income classes, as part of Meloni's strategy to maintain political support, though this approach may risk slower fiscal recovery.
Meloni faces challenges from Italy's substantial debt levels, particularly following Covid-era expenditures, which saw the country enter a special monitoring program by the EU mandatorily requiring annual deficit reductions. These decisions must balance between delivering on electoral promises made to voters—such as the substantial tax cuts totaling €30 billion—and ensuring the country does not deviate from the stringent fiscal standards expected by Brussels. Amid these circumstances, the prime minister asserted, "Let's keep the accounts in order, without giving up on implementing the electoral program..."
Critics remain skeptical about the budget’s impact on Italy's infrastructure, which has faced severe neglect amid heightened demands for fiscal responsibility. The government's fiscal strategy intertwines adherence to EU targets and the necessity of addressing pressing issues like crumbling infrastructure. Even as the budget outlines efforts to provide support to families and improve social services, there are concerns about long-term sustainability amid Italy's chronic indebtedness.
Economically, the country anticipates modest growth, with projections indicating output will rise by approximately 0.5% for 2024 and 0.8% for 2025, according to the national statistics office. This projection reflects slower growth rates compared to earlier years, yet Italy's fiscal situation appears relatively stable, especially when assessed against the performance of neighboring EU nations. For example, France's deficit is expected to remain at 6.1% until 2027, emphasizing the comparative challenges Italy faces.
Despite the challenges, markets have shown cautious optimism about Italy's financial health, as indicated by the decline of the spread between Italian and German government bonds, reaching its lowest point in three years. Reduced borrowing costs could save the Italian government as much as €1.7 billion next year, bolstering fiscal efforts moving forward. On the other hand, Meloni’s approach of tax cuts and spending increases seeks to address immediate voter concerns but may risk distorting the longer-term path to fiscal sustainability.
Overall, the approval of the 2025 budget reinforces Meloni’s governmental standing as she navigates complex fiscal demands and electoral commitments. The blend of maintaining EU compliance, fostering growth among low and medium-income citizens, and addressing infrastructure deficiencies will be key themes moving forward as Italy positions itself within the European economic framework.
