Austerity Measures in Government Plans
The Controversy Surrounding the Recent Economic and Finance Document
The recent Economic and Finance Document (DEF) published by the government is still sparking debates due to the unusual choice of not disclosing programmatic budget forecasts.
Traditionally, the DEF, to be decided by the government by April 30th every year, has always included not only an estimate of how the main macroeconomic variables would evolve in the current context but also a programmatic section expressing its intentions regarding budget balances for the following years, in consideration of the upcoming budget law.
So, why did the government decide to omit these programmatic figures?
One possible explanation provided in the document itself is related to the revision of the Stability and Growth Pact by the European Union.
According to the official statement, this phase is considered transitional, and without an agreed-upon budget trajectory, it would make little sense to publish programmatic forecasts at this point.
However, this reasoning seems at odds with the government’s narrative of an improved Stability Pact – if it is truly an improvement, why not present better numbers right away? Moreover, it clashes with the upcoming adjustments likely to align with the predetermined figures post-European elections.
The end of the Superbonus scheme, reclassified as payable credits spread between 2020 and 2023, eliminates the excuse of burdening public accounts.
As often happens, the government has inflated growth estimates well beyond other institutions’ forecasts.
The recently approved DEF projects a 1% growth for this year and 1.2% for the next.
Contrastingly, the International Monetary Fund’s spring estimates for Italy forecast a 0.7% GDP increase this year, matching the prediction for 2025.
This discrepancy represents 0.3% and 0.5%, translating into billions.
Implicitly, the same DEF confirms rumors of a potential excessive deficit procedure.
Simulations on public debt evolution, a key parameter in the upcoming Stability Pact, suggest deficit reduction to “ensure compliance with both the minimum annual structural budget balance adjustment required in the event of an Excessive Deficit Procedure opening.” In summary, even without programmatic details, this DEF reveals several key points: the return of austerity under the new Stability Pact, exaggerated growth forecasts, expected budget cuts (total public administration expenditure decreasing from 55% of GDP last year to 51.1% this year).
Postponing the impact with reality until after the elections seems futile in this context.
