La Budget law It's a topic that always heats up. But, beyond the controversy, what is the real impact of maneuver on our economy? And how will it affect public services and the daily lives of citizens? These questions are answered by one studio ofObservatory on Public Accounts (CPI) of the Catholic University, led by Giampaolo Galli.
The analysis focuses on the budget for the three-year period 2025-2027, examining the Budget planning document (Dpb) and its meaning in a broader context. Instead of comparing the Dpb with long-term forecasts, the study chooses to start from 2024, the year from which future choices unfold. Here's what emerges: the maneuver it's definitely restrictive, with objectives of cost containment. Reductions expected in thenet borrowing by half a percentage point in 2025 and 2026, followed by a further decline in 2027. Although this strategy could dampen growth, a narrowing of the spread and greater confidence in the sustainability of public debt could help offset the negative effects. Overall, the public finance framework seems prudent, but there are doubts about revenue forecasts, which may be overestimated.
Fiscal policy becomes more restrictive
The Observatory on Public Accounts underlines that, although the impact of the maneuver is restrictive, some risks could emerge benefits linked to a greater economic stability and the decrease of the spread. The deficit public, i.e. net debt, will fall by half a percentage point of GDP in 2025, with a similar decline in 2026 and a further reduction in 2027. This scenario could lead to a brake on aggregate demand and, consequently, on production in the short term.
Il primary balance, which indicates the surplus after subtracting interest expenditure, will increase by half a percentage point of GDP per year, more than adequately offsetting the projected increase in interest expenditure in 2027. At the end of the three-year period, the primary balance could reach 1,5% of GDP, its highest level since 2019. This improvement is achieved entirely through spending cuts, which are projected to decline by 1,6 percentage points of GDP, thus offsetting the decline in revenues.
The unknown of revenue
One of the most relevant issues concerns the uncertainty about revenue forecasts, which could be overestimated. Spending will remain stable relative to GDP, but the increase in revenues does not come from an increase in the tax burden, which remains unchanged at 42,3%. Growth is concentrated in “other revenues”, which will increase from 3,7% to 4,1% of GDP. However, government documents do not clarify the causes of this increase, making it difficult to understand how the deficit reduction will be achieved.
Furthermore, the CPI analysis highlights how the trend of tax revenue has been revised upwards for the coming years, but the reasons for this improvement remain unclear. The projected increase in revenues in 2024 is in line with employment growth, but nominal GDP is growing less rapidly than expected. As a result, there is uncertainty whether this improvement is due to transitory factors or whether it can be sustained over time.
Spending on public services
A crucial aspect is the spending on public services. For 2025, the government has allocated around 900 million euros to increase healthcare spending. However, the total value of healthcare spending will remain at 6,3% of GDP, a significantly lower level than ten years ago (6,7% in 2014) and similar to that of 2019 (6,4%). Interestingly, the financing of National Health Service will remain at 6,1%. This raises questions about the sustainability and quality of services offered, especially in the healthcare sector, which does not include all expenditure items.
The 2026-27 biennium: what to expect?
While in 2025 the adjustment takes place on the revenue side, in the two-year period 2026-27 the picture changes significantly. revenue will fall by one percentage point of GDP, while the primary expense will be cut by 1,8 percentage points. This is the largest drop in primary spending since 2011. However, without further details on how the government intends to achieve these goals, it remains difficult to assess the impact of these measures on public services.
The need for greater transparency
According to the Observatory, many of the uncertainties reported above would have been resolved if government documents had provided more detailed information. Why not include in the DPB a complete programmatic framework of the various items until at least 2027? Why not publish adequate explanations on the causes of certain variations, especially with regard to the expected increase in health spending? lack of clarity and details complicate the interpretation of the data and raise doubts about the effectiveness of the maneuver.
In the face of such uncertainty and ambiguity, one must ask: are we really aiming for sustainable growth or just an accounting adjustment? The lack of transparency and the fear of measures that could hit essential public services cannot be underestimated. Citizens deserve clear answers and concrete actions, not empty promises. Politics must seriously address the current economic and social challenges, or we risk finding ourselves in a vicious circle of austerity and precariousness, which penalizes the most vulnerable segments of the population.
Summary of measures adopted in the DPB
Here is a summary of the main measures of the DPB relating to expenditure and revenue.
expenses:
- Renewal of Public Administration contracts: allocations for the renewal of staff contracts for the three-year period 2025-2027, with an average impact of approximately 1,6 billion euros per year.
- Security and Civil Protection: refinancing of peace and security missions, and a fund for post-disaster reconstruction, for an average effect of almost 2 billion euros per year.
- Family policies and social spending: measures to support birth rates and refinancing the “Dedicata a te” card, with an average impact of 1,8 billion euros per year.
- Healthcare: hiring of new staff and increased funding for the National Health Fund, with an average effect of 3,3 billion euros per year.
- Pensions: refinancing of measures such as “Quota 103” and the revaluation of minimum pensions, with an average impact of 0,7 billion euros per year.
- Public investments: new resources for development and defense, for an average effect of 2,8 billion euros per year.
- Territorial Authorities: non-detailed support to local public finances, with an average impact of 1,1 billion euros.
- Other expenditure: unspecified items, with an average effect of €2,4 billion per year.
- Review of ministerial spending: 5% cuts to ministerial budgets, with an average impact of 4 billion euros per year.
revenue:
- Measures on banks and insurance: remodulation of taxation, with an average effect of 2 billion euros of increased revenue.
- Extension of Irpef Reform: consolidation of Irpef rates and reduction of the tax wedge, with an average effect of 17,6 billion euros in lower annual revenues.
- Support for businesses: refinancing of the New Sabatini and contribution exemption measures, with an average impact of 2,7 billion euros in lower annual revenues.
