Italy recorded the highest budget deficit-to-GDP ratio in the European Union last year, according to Eurostat, the bloc’s statistics arm, as reported by Reuters on Monday.
Italy’s fiscal deficit for 2023, which has widened to 7.4 per cent of GDP from an earlier estimate of 7.2 per cent, is more than double the 3.5 per cent average of the 27 EU countries, underscoring the significant challenges the Treasury faces in managing the country’s public finances.
Eleven countries, including France, with a deficit of 5.5 per cent reported deficits above the EU’s 3 per cent GDP ceiling. The European Commission is expected to invoke its deficit infringement procedure for these states, as stated by Italian Economy Minister Giancarlo Giorgetti.
Other countries with deficits above 5 per cent last year were Hungary (6.7 per cent), Romania (6.6 per cent), and Poland (5.1 per cent), all of which are outside the 20-nation eurozone.
The latest upward revision of Italy’s deficit underscores the government’s miscalculations regarding the impact of costly fiscal incentives for energy-saving home improvements.
The Superbonus scheme, which offered to pay homeowners 110 per cent of the cost of energy-saving renovations, has cost more than 160 billion euros ($170 billion) as of April 4, far exceeding any previous government estimate.
Italy’s central bank, addressing parliament on the Treasury’s multi-year budget framework, stated that the Superbonus cost almost 4 per cent of GDP in 2023 alone, more than five times what Rome had estimated last April.
The bank cautioned the government to learn from past mistakes when introducing new incentives and expressed concern that Rome’s plan to extend temporary tax cuts until 2025 could heighten uncertainty in public finance trends.
Italy’s public debt, the second largest in the euro zone as a proportion of output, is projected to follow a rising trend towards 140 per cent of GDP through 2026, according to the latest Treasury forecasts.
