A year ago, the Italian Prime Minister, Giorgia Meloni, surprised by betting on prudence by approving her first budgets as mandate. But this time things have changed. Yesterday Meloni approved a budget package for 2024 with a cost of 24,000 million that includes aid and a significant tax cut that could set off alarms in Brussels. The Government’s latest forecasts indicate that the budget deficit will increase next year to 4.3% of GDP, partly due to the 15.7 billion euros of additional borrowing to cover these tax cuts, and that the markets did not like it at all.
“It is a very serious and realistic budget and it does not waste resources, but concentrates them on the major priorities in accordance with the vision that the Government has given since the beginning of its mandate”, defended the Prime Minister during a round of press
The intention of the Italian Government is to fight inflation with a cut in the fiscal wedge – the percentage of the income from work that is used to pay taxes on work and contributions – which, according to Meloni, will translate into a salary increase of an average of around 100 euros per month for 14 million Italian workers. It will be six percentage points for those who earn up to 35,000 euros a year and seven for salaries of up to 25,000.
The Italian budgets also include the merger of the first two tranches of the income tax for individuals to one of 23%. Therefore, it will be 23% up to 28,000 euros, 35% up to 50,000 and 43% for more than 50,000 euros. According to the Minister of Economy, Giancarlo Giorgetti, this is the first step towards a single tax, one of the main electoral promises of the right-wing coalition.
In addition, Italy will also allocate 7,000 million to renew contracts in the public sector and increase wages, 2,000 of which will go directly to health workers. Healthcare will also receive another 3,000 million next year with measures aimed at reducing waiting lists.
Meloni has wanted to focus on one of his biggest concerns: the demographic crisis facing Italy, as births last year were once again the lowest since the country’s unification in 1861. Around one billion of euros will be used to encourage the birth rate with measures such as free childcare from the second child onwards or that mothers with at least two children do not pay workers’ social security contributions, which will be assumed by the State.
Likewise, Italian law includes items for the construction of large works such as the bridge to join Sicily and Calabria in the Strait of Messina. Meanwhile, Giorgetti advanced “an ambitious privatization program” that should bring in around 20 billion euros before 2026, starting with the sale of the share of Ita Airways, the airline born from the ashes of the former Alitalia, to Lufthansa. Rome has also confirmed that the global minimum tax of 15% for multinationals with an annual turnover of more than 750 million euros will come into force from 1 January 2024.
