On Monday, the Council of Ministers will meet to evaluate the update note of the Def. This will be the basis that will lead to Budget maneuver 2020, a fundamental law called primarily to defuse the safeguard clauses, which will perhaps represent the most important, but also the most economically substantial part of the next budget.
The new government formed by PD and M5S will be called upon to pass an arduous test, but compared to a few months ago, the prospects appear to be much more optimistic. Despite the worsening of the international economic context, the reduction in interest rates and above all in sovereign risk bode well and represent a new opportunity to put "public debt back on a downward path and restart structural reforms".
These are the basis on which Prometeia bases the forecasts on Italy published in the month of September. The report analyses, one by one, the country's main economic parameters, trying to understand what the Government's room for maneuver will be in view of the next, fundamental, Budget law.
THE ESTIMATIONS ON THE MANEUVER 2020
The hypothesis put on the plate by Prometeia is that of a net Maneuver worth 14 billion euros, a figure that is obtained from the balance between 18 billion of restrictive measures and 4 billion of expansive measures. The sum will be used to contain the deficit, but also to reduce "the tax component of the tax wedge on employee work and a linear cut in tax expenditures". Measures aimed above all at favoring low-income families.
“From a linear reduction of tax deductions and allowances – the only one that is more easily viable and viable in the short term – around 8 billion euros could instead be recovered”, estimates Prometeia.
SPREAD
The improvement in relations between Italy and the European Union has led to a marked reduction in the spread, which fell by almost 100 basis points following the famous press conference held in Papete with which the former interior minister kicked off the government crisis. The differential stood at 239 basis points on August 9, fell to 141 points on September 27, after hitting a low of 133 basis points on September 13.
The lowering of the spread "in addition to the reduction in international rates, has drastically reduced the burden on public debt and, potentially, also on households and businesses", analyzes Prometeia.
The reduction of country risk, together with the more accommodating monetary policy desired by Draghi before his farewell to the ECB, will lead, according to the association chaired by Paolo Onofri, to a yield on ten-year BTPs of 68 basis points on average for the three-year period 2020-2022, “discounting an average spread over the German 118-year bond of 2018 basis points. The weight of interest expense on the budget could thus decrease between 2022 and XNUMX by more than half a percentage point of GDP". Doing a quick calculation, these dynamics could lead to savings of eight and a half billion euros.
DEBT AND DEFICIT
Although the room for maneuver remains slim, Prometeia foresees the opening of a favorable phase during which to start reducing public debt, reaching 131,2% of GDP by 2022.
As regards the deficit, between the decrease in the spread and the compensation of the safeguard clauses, lthe association expects a deficit of 2,1% for next year, with a maneuver, as mentioned, of 14 billion net.
GDP
As for the gross domestic product, Prometeia revises its growth forecasts for 2020 upwards, bringing them to +0,6% from +0,5% in July. A forecast based both on the fact that next year the expansionary effects of the 2019 Maneuver (basic income in primis) will be fully operational and on the promises relating to the desire to reduce the tax wedge.
