With the update note to the Def 2017 approved on Saturday, the Council of Ministers significantly revised the forecasts on the trend of the public finances, suggesting what room for maneuver will be for the imminent budget law.
GDP
According to the new government estimates, GDP will grow by 1,5% both this year and in the two-year period 2018-2019. In the Economic and Financial Document approved in the spring, the Executive had forecast growth of 1,1% in 2017 and 1% in each of the next two years.
The new numbers are therefore significantly higher than those on which the Treasury's calculations were based up to now. On the other hand, the data are even more optimistic than those calculated by the major international bodies.
The OECD published estimates this month that speak of a +1,4% for Italian GDP in 2017, followed by a +1,2% in 2018. Last July, the IMF had forecast a +1,4% for this year and +1,2% for the next, while the European Commission was even more pessimistic: +0,9% in 2017 and +1,1% in 2018.
PUBLIC DEBT AND BALANCED BUDGET
Going back to the numbers in the update note to the Def, the real surprise concerns public debt, which starts to fall again from 131,6% of GDP this year to 129,9% next year. The balanced budget, however, slips another year compared to the April forecasts: it should arrive in 2020.
DEFICIT AND MANEUVER ACCOUNTS
In terms of maneuvering, the most important data is the one concerning the deficit-GDP ratio, which is set for 2018 at 1,6%. In reality, according to the new projections, next year's deficit trend has been reduced to 1%: this means that the Government has a space of 0,6 points of GDP to sterilize the VAT increase, an operation which costs around 15,6 billion euros. Considering that the extra 0,6% deficit is worth 10,2 billion (of which 8,5 from the new flexibility granted by Brussels, which has allowed us to reduce the deficit correction from 0,8 to 0,3% of GDP structural), to avoid the increase in VAT, the Executive will have to find another 5,4 billion.
SALES AND COVERS
With the chapter on value added tax closed, other resources will be needed to finance the rest of the measures. There is talk of 4-5 billion to be divided between de-contributions for hiring, the fight against poverty, investments, interventions for the family and the renewal of public employment and law enforcement contracts.
In all, therefore, the maneuver will reach around 20 billion, of which just over 10 in deficit and the rest to be covered in other ways, probably a third with new cuts and two thirds with additional revenues. The tax package to fight tax evasion will intervene on the latter front, which should guarantee around 4 billion thanks to the bis scrapping of tax bills and the possible extension of the electronic invoicing obligation to commercial relations between private individuals.
THE MEASUREMENTS UNDER STUDY
1. Tax relief on hiring
The government should not allocate more than one billion to this intervention for the first year. This is the halving of contributions in favor of companies that hire young people on permanent contracts. The age limit of the workers concerned should be 29 years. According to rumors, there will also be a ceiling on the relief at an altitude of 4 thousand euros. The facilitation will last three years but could be structural. In other words, from 2018 onwards - forever - companies will be entitled to a three-year tax deduction on the stable hiring of young people.
2. Industry 4.0
The dowry for the new industry 4.0 package should be limited to 1,2 billion. It means that the super-depreciation could be reduced, going to 120-130% from the current 140%. Hyper-depreciation, i.e. the overvaluation of 250% of investments in new tangible assets, devices and technologies enabling transformation in key 4.0 purchased or leased, should instead be extended.
3. Government
The chapter of the maneuver dedicated to state-owned companies could absorb up to 1,8-2 billion euros. In addition to the renewal of the contract, the budget law should also contain a package for the police forces.
4. Fight against poverty
The fund for the fight against poverty could be strengthened with additional resources of between 700 million and one billion euros. The goal is to broaden the audience of beneficiaries of the inclusion income.
5. Pensions
The pension chapter risks being removed from the text of the budget, due to excess costs. But even if it were to survive, the Government would not have to allocate more than 500 million to the pension package. A far cry from the 5 billion in two years requested by the unions, who would like to stop the automatic adjustment to life expectancy in 2019 (on the basis of which the retirement age will rise to 67) and greater flexibility in leaving for all women, with a one-year discount for each child up to a maximum of three.
It is much more likely than – how anticipated at the beginning of the month by Marco Leonardi, coordinator of the economic team of Palazzo Chigi - the government limits itself to facilitating women's access to theSocial bee reducing the contribution requirement by a couple of years. It is also possible to intervene on the Rita: “The idea is to strengthen it by calling in the supplementary pension scheme to help – Leonardi told Il Sole 24 Ore – To those who are 63 years of age and are involved in a corporate restructuring, if they have a redundancy incentive or the severance indemnity, we give the possibility of having them detaxed as long as they arrive, through the supplementary pension, at Rita. Rita herself benefits from a 15% tax rate, significantly lower than that of the severance indemnity".
