The draft detailed budget submitted by the government of Giuseppe Conte to the Italian parliament on the evening of Thursday 4 October predicts that the structural deficit will shrink by 0.8% of GDP between 2018 and 2019.
If Rome's predictions are correct, the structural deficit will then stabilise between 2019 and 2021, at 1.7% of GDP. This trajectory would therefore run entirely counter to the rules of the preventive arm of the Stability and Growth Pact, with which Rome must comply. Under these rules, Italy must reduce its structural deficit by 0.6% of GDP a year.
These figures confirm the doubts of Pierre Moscovici, the Commissioner for Economic and Financial Affairs, as to whether the nominal deficit forecasts are in line with the rules on structural deficit (see EUROPE 12107).
This is the first time that the structural deficit figures have been put forward by Giovanni Tria, the Italian finance minister, or by any other member of the government. In a letter to the European Commission dated 4 October, Tria, who calls for “open and constructive” dialogue with the institution, refers only to the nominal deficit forecasts.
However, these are different from those announced by Rome on 27 September (see EUROPE 12106). The Italian government is now predicting a nominal deficit of 2.4% of GDP in 2019, 2.1% of GDP in 2020 and 1.8% of GDP in 2021, whereas the initial estimates were for a rate of 2.4% of GDP for all three years.
Among the key measures announced by the government, it would appear that the citizenship income will cost the State €9 billion in 2019, as against €7 billion to reduce the retirement age by means of the '100' quota (62 years of age and 38 years of contributions, 63 years of age and 37 years of contributions, etc,).
Concerning debt, an issue directly related to the reduction of the structural deficit, Rome predicts that the government debt ratio will fall between 2019 and 2021, from 131.2% of GDP to 126.7%.
This draft budget must now be debated at the Italian Parliament, before being submitted to the Commission by 15 October. (Original version in French by Lucas Tripoteau)