La update note to Def provides for a deficit/GDP ratio “Al 2,4% in 2019, al 2,1% in 2020 and at1,8% in 2021”. This was confirmed on Wednesday evening by the Prime Minister, Giuseppe Conte, at the end of the summit at Palazzo Chigi in which agreement was found on the framework for the next budget law.
“We will send the Additional Note to Brussels and to Parliament,” added Conte, specifying that on the debt/GDP ratio forecasts speak of a drop “from the current 130,9% a below 130% in 2019 and al 126,5% in 2021 ".
The Minister of the Treasury, Giovanni Tria, confirmed: “As regards the debt, we expect one reduction of four percentage points over the three-year period. In the last three years, the cumulative decrease in the debt/GDP ratio was 0,6 points”.
The head of government then added: “We will achieve all these results not giving up what we wrote in the Government Contract: we believe that those clauses we wrote were not just electoral promises. It is a bold and serious move. The country is restarting".
Unfortunately, at the end of Wednesday evening's press conference, Conte and Tria did not accept questions from journalists. The Government has therefore not provided any explanation as to why the Def does not contain - apparently - nor forecasts on GDP trends, nor details on financial coverage of the individual measures envisaged by the yellow-green contract.
However, the vice president of the pentastellato Council, Luigi Di Maio, announced that the news on pensions and basic income will arrive by March 2019: “Everything starts in the first three months of 2019, give me time to set up the job centers and a software to manage them. With a 2,4% deficit/GDP we are able to finance everything, not to pretend, we have found the covers. There are 10 billion, which are 9 for citizens' income and pensions and one for employment centres, every year for three years”.
Di Maio then provided some details on the contents of the maneuver: “VAT will not increase: there was talk of a reformulation of the VAT, but there isn't. The VAT will not increase on anything. Let's cut the concessions of the banks that they've had too many and now they'll start to have a little less. We refinance hyper-depreciation, super-depreciation and Industry 4.0 which are measures that will help businesses, in addition to the lowering of IRES for those who invest and those who hire; and the more stable the contract, the lower the IRES will be”.
However, a small mystery has opened up precisely on the VAT. In the government's indications on the deficit/GDP for the three-year period - contained in the Update Note to the Def - the stop to the VAT increase (safeguard clause) would be foreseen only for 2019. Despite Deputy Prime Minister Di Maio's repeated assertions that the safeguard clause would be defused "forever", the Update Note leaves it unchanged for 2020 and 2021 at a total cost of around 20 billion; that is, these are revenues that remain counted for the purpose of reducing the deficit from 2,4% in 2019 to 2,1% in 2020 and 1,8% in 2021. The problem of how to finance the abolition will therefore arise again in the Subsequent Budget Laws.
Finally the banks. The government's statements, as we have seen, go towards penalizing the credit institutions to which the deductions on interest expense would be cut. What the government does not say officially but according to government sources reported by the press the cost for the banks would be quantifiable at about 1 billion. The resources would thus be transferred to the relief fund for savers affected by the banking crises.
In the absence of figures, the general manager of the Bank of Italy Salvatore Rossi - questioned on the sidelines of a conference - abstained from comments "The numbers are not there, we are waiting for those and the tables" said Rossi adding that on Monday there will be a hearing of the Bank of Italy in Parliament and in that seat the bank will express "its opinion".
Updated at 11:33am Thursday, October 4, 2018
