10 April 2013

Italy: 2013 Economy and Finance Document

Despite the unfavorable economic  environment, decisive fiscal consolidation was pursued to achieve a budgetary balance in  structural terms by 2013. In nominal terms, at 3.0 per cent of GDP the deficit in 2012 was  already in line with EU recommendations.

Rebalancing has been accompanied by amendments to the national regulatory  framework, introducing the principle of budgetary balance in the Constitution. This  followed reforms in European governance and commitments made by the Italian government already in March 2011 with regards to the Euro Plus Pact and the more stringent requirements introduced in the Six Pack. These changes have laid the foundation for achieving a durable budgetary balance.

The current economic climate, still unfavourable, requires that fiscal consolidation and financial stability be accompanied by measures for growth and employment. Following EU Council conclusions of June and December 2012, the European Council of 14 March 2013 recognised the need for a differentiated approach to fiscal consolidation, underlining the possibilities offered by the EU’s existing fiscal framework to balance public investment needs with fiscal discipline objectives to support growth and employment. In line with this approach, the Italian Government has recently adopted a Decree Law to inject liquidity in the economic system by unblocking payments on debts accumulated by the public administration toward its suppliers. This measure is expected to boost demand already in the second half of this year. Spread over a two-year period (2013-2014), it is an extraordinary measure that will not affect the fiscal consolidation process to which the Government remains firmly committed. Taking into consideration that the budget deficit must constantly remain below 3.0 per cent of GDP in the years following the repeal of the excessive deficit procedure, and with a sufficient margin, the government has estimated that the fiscal space used to accelerate payment of the public administration’s  debts is approximately 0.5 per cent of GDP.

Reduced growth in tax revenues from 2015 versus previous years is due to the expire  of the so called “experimental IMU tax” and the increased cadastral values. In case the  experimental setting is not confirmed, future governments will have to make for proper  financing. Based on estimated trends, the primary surplus in nominal terms should gradually increase, reaching 5.7 per cent of GDP in 2017, while the debt / GDP ratio should start to decline rapidly as early as 2014.

Full press release

© Government of Italy