Navigating Uncertainty: A Closer Look at Italy’s Three-Year Economic and Financial Document Approved by Parliament

The Economic and Financial Document, which outlines the programmatic framework for public finance for the next three years, has been approved by Parliament. However, this document is the last to do so under the current methods as new European rules come into effect on September 30th. This has led to a two-part approach, with one document focusing solely on evaluating the current framework and another on programmatic planning.

The focus of debate between the Commission and Chamber has been on the impact of building bonuses and the Superbonus on public finances. The majority argues that constraints imposed by these measures will limit spending in the next few years, while the opposition defends economic leverage generated by them. Eurostat’s guidance on how to divide the weight of these measures is expected in June.

The high debt/GDP ratio is seen as a hindrance to growth, with public administration debt projected to exceed 3 trillion euros by 2025. To counteract inflation, a tax wedge cut was enacted through the latest budget law for incomes up to 35 thousand euros until 2024. However, there are concerns about uncertainty regarding future public finances and discussions about avoiding tax increases and extending measures like tax cuts to ensure stability in government spending.

The involvement of European elections adds complexity to decision-making, making it challenging to predict future budgets’ impact. The document has been criticized for its lack of forecasts and delaying important decisions regarding fiscal policy and economic planning until after European elections have taken place.

In summary, while Parliament has approved an Economic and Financial Document that outlines programmatic frameworks for public finance over the next three years under current methods, there are still concerns about uncertainty regarding future public finances due to unresolved issues such as conflicts in Ukraine and Gaza, tension in the Red Sea, inflation, high interest rates, building bonuses designed for economic restart after Covid pandemic’s hardest phase have had an impact domestically.