Italy to confirm commitment to meet EU deficit ceiling by ’26

Italy is set to reaffirm its commitment to reduce its deficit-to-GDP ratio below the European Union’s 3 per cent ceiling by 2026, sources close to the matter told Reuters.

The Treasury’s medium-term structural budget plan, to be presented by mid-September, will outline Italy’s strategy to align with EU fiscal rules after being placed under an Excessive Deficit Procedure earlier this year.

Under the new framework, Italy must cut its structural budget deficit by 0.5 per cent to 0.6 per cent of GDP annually. The government aims to reduce the fiscal gap to 3.6 per cent of GDP in 2025 and to 2.9 per cent in 2026, down from 7.4 per cent in 2023, the highest in the eurozone.

This high deficit was partly due to the costly Superbonus scheme for energy-saving home improvements.

The structural budget plan will also address extending current social contribution and tax cuts for those earning up to €28,000 annually, at a cost of about €15 billion.

Additionally, there are discussions about further tax cuts for individuals earning up to €60,000. The government has yet to detail how these measures will be financed. The plan must be submitted to EU authorities by September 20.