ROME:The Italian Senate approved the government’s 2025 budget on Saturday, finalizing the package just before the year-end deadline. Prime Minister Giorgia Meloni’s third budget aims to reduce the fiscal deficit to 3.3% of GDP in 2025, down from 3.8% in 2024, while cutting taxes for low and middle-income earners.
The EU has pressured Italy to reduce its deficit after significant overshoots in 2022 and 2023, with a target to bring it below the EU’s 3% GDP limit by 2026. However, Italy’s public debt, the second highest in the eurozone, is expected to rise through 2026, largely due to the delayed impact of costly state subsidies for energy-saving building work, known as the “super-bonus.”
The Treasury predicts Italy’s debt will increase from 134.8% of GDP in 2023 to 137.8% in 2026 before slightly decreasing. The budget was approved by the Senate in a final vote of 108 to 63, following approval by the Chamber of Deputies last week.
The budget increases the deficit to 3.3% of GDP, borrowing an additional 9 billion euros to fund tax cuts and expansionary measures. Italy’s economy has stagnated recently, with 2024 growth expected to fall short of the government’s 1% target, though EU post-COVID recovery funds have helped.
Italy’s fiscal consolidation could benefit from lower borrowing costs, as the parliamentary budget office predicts significant savings on sovereign bonds, amounting to 1.7 billion euros in 2025 and 17.1 billion euros by 2029.
