Italy Expects Downward Revision of 2025 Budget Deficit, Aiming for EU Compliance
Italy's Fiscal Outlook and EU Deficit Compliance Efforts
By Giuseppe Fonte
Optimism Over Deficit Revision
ROME, July 22 (Reuters) - Italy is "cautiously optimistic" about a downward revision of its 2025 deficit, the economy minister said on Wednesday, reviving hopes that the country might later this year exit a European Union infringement procedure for its excessive budget deficit.
Upcoming Eurostat Data and Deficit Targets
Eurostat will publish revised data on member states' 2025 deficits in September. Italy has said for weeks that it hoped for an adjustment to take it to just under 3% of GDP from the 3.1% Rome's statistics bureau ISTAT first estimated in March.
Implications for EU Excessive Deficit Procedure
A lower deficit within the EU's 3% of GDP key ceiling, as the government had previously targeted for 2025, would allow Italy to exit an EU Excessive Deficit Procedure (EDP) this year, provided Brussels is convinced the improvement in its accounts is persistent.
"With cautious optimism, we await the assessments of the relevant authorities," Minister Giancarlo Giorgetti told parliament on Wednesday.
Factors Influencing the Deficit
Impact of Tax Incentives and Illicit Activities
The 2025 deficit factors in the negative impact on state coffers of €8.4 billion in unexpected home renovation tax incentives, a figure Giorgetti said could be trimmed since part of the spending was linked to "illicit activities."
"For these reasons, the [deficit] estimate may be lowered when updated figures are published on September 22," he said.
Multi-Year Budget Framework
Under the latest multi-year budget framework unveiled in April, Italy targeted a deficit-to-GDP ratio of 2.9% this year and 2.8% in 2027.
EU Rules and Future Economic Outlook
Invoking the EU "Escape Clause"
Italy also said it planned to invoke the European Union's so-called "escape clause" from the bloc's budget rules aimed at boosting defence spending and softening energy costs, a decision whose timing could affect the exit from the EDP.
"Parliament will shortly issue guidance to the government" on the clause, Giorgetti said.
Economic Growth and Fuel Duties
The minister also said the latest available information did not alter the economic outlook laid out by the government in April, which pointed to 0.6% growth both this year and next, while adding Rome could restore an excise duty cut on fuels, should petrol and diesel prices remain high.
(Reporting by Giuseppe FonteEditing by Keith Weir)
