Spain was promoted, Germany and France received a half-failure. Italy? It must “be ready” to introduce the necessary measures to comply with the EU recommendations. This is what emerges from the focus on the budget strategies of the member countries of the EUParliamentary Budget Office
Upb: Italy ready to take measures to comply with EU recommendations
Among the main countries of the Euro Area, only the Spain appears to be overall in line with all European recommendations. The Commission invited the Germany to reduce energy support measures as soon as possible in 2023 and 2024, while Italy “should stand ready to take the necessary measures within the national budget process to ensure that fiscal policy in 2024 is in line with the Council's recommendations”. The Parliamentary Budget Office writes this in a focus on the budget strategies of member countries. There France “has been invited to take the necessary measures within the national budget process to ensure that budget policy in 2024 is in line with the recommendations”, it continues. The aggregate of net primary expenditure "is not fully in line" with the European recommendation, essentially due to the Super bonus, explains the Upb.
2023 spending higher than estimates, in 2024 eliminate measures against high energy prices
According to the Commission, the most recent estimate of spending for 2023 is higher than estimates carried out in July, at the time of the formulation of the recommendations, for "two factors relating to tax credits for the energy renovation of residential buildings", with use higher than expected in 2023; furthermore, some legislative changes have changed its nature, reducing its expected impact on 2024 spending.
Last May, after the deactivation of the safeguard clause of the Stability Pact, rcountry-specific recommendations with indications on the ceiling on the growth of net primary expenditure distinguished by Member States.
For 2024, Italy respects the ceiling, but the growth of primary spending is assessed as "not fully in line" due to tax credits. Furthermore, the Commission assessed compliance with the EU Council recommendations for 2024 gradually eliminate measures against high energy prices, using savings to reduce the deficit; preserve investments financed with national resources; ensure the absorption of EU funding.
Italy "only partially complies" with the recommendation as it plans to eliminate the measures by 2024, but not to use the savings to reduce net debt.
Likewise France and Germany. For the share of public investments in 2024, the assessments on the autumn forecasts show an increase in Germany and Italy for 2024 (from 2,7% in 2023 to 3% this year).
Italy: growth loses momentum in 2023 with effects on 2023
In its focus, the PBO highlights that in the 2024 Budget Plans (DPB) of the euro area countries, an estimated real GDP growth averaging 0,9 percent for 2023, increasing to 1,7 percent in 2024. Growth is positive in 2023 for all countries except Estonia, Austria and Lithuania, while growth is zero for Finland. For 2024, according to the DBPs, all euro area countries would once again benefit from growth above 1 percent, with an average of 1,7 percent.
For the main economies of the euro area, - notes the PBO - real GDP growth began to lose momentum during 2023 with carry-over effects also on 2024.
Italy's debt remains the second highest in Europe
In relation to the debt-to-GDP ratio, from the DBPs of euro area countries the average level is 90,7 percent in 2023 and slightly decreasing to 90,1 percent in 2024. Twelve countries record a ratio above 60 percent and six countries are at levels greater than 100 percent. For 2024, Italy expects public debt to be substantially stable in relation to GDP compared to 2023, remaining the second highest (140,1 percent) after Greece (152,2 percent), while Estonia continues to have the lowest public debt in relation to GDP (20,9 percent).
Italy's debt-to-GDP ratio for 2023 is lower than what was published in the Def last April thanks to the upward revision of the estimate of the level of nominal GDP for 2021 and 2022, recently carried out by Istat, which it also drags on in the following years. In 2024, Italy's debt-to-GDP ratio is only marginally reduced by 0,1 percentage points of GDP compared to the 2023 estimate. In relation to the debt-to-GDP ratio, from the Dpb of the euro area countries euro the average level is equal to 90,7 percent in 2023 and slightly decreasing to 90,1 percent in 2024. Twelve countries record a ratio greater than 60 percent and six countries are at levels greater than 100 percent.
Inflation
Finally, as regards inflation, in the focus on the budget strategies of the member countries, the PBO underlines that the average inflation rate estimates for the main euro area countries is equal to 5,7 percent in 2023 and 2,9 percent in 2024. “Inflation forecasts, however, show differentiated dynamics and are still characterized by wide uncertainty,” we read.
In Germany, the inflation rate is forecast at 5,7 percent in 2023 and 2,3 percent in 2024, values in both cases lower than those forecast in the PS of last April. The European Commission estimates higher values, equal to 6,3 and 3 percent. For France and Spain, the forecasts of the inflation growth rate for 2023, at 5,7 and 5,9 percent respectively, show values higher than those estimated in the PS while, for 2024, the inflation is expected to record lower or similar levels (2,5 percent in France, 3,6 in Spain). In Italy, the inflation rate is expected to be 2023 percent in 4,5, lower than that forecast in the PS and, for 2024, to settle at levels similar to previous estimates, at 2,9 percent.
