The Economic and Financial Document has been approved by Parliament, forecasting GDP growth for 2024 at +1%, slightly lower than the 1.2% predicted last autumn in the Nadef. The international geopolitical context, including conflicts in Ukraine and Gaza, tension in the Red Sea, inflation, and high interest rates, has influenced the government’s “prudential” approach to public finances. Domestically, the unloading of building bonuses designed for economic restart after the Covid pandemic’s hardest phase has also had an impact.
This is the last Def that outlines the programmatic framework of public finance for the next three years under the current methods. New European rules coming into force by September 30th will divide the contents into two distinct documents, which has led to the current Def focusing solely on evaluating the current framework, not the programmatic one. This decision has been contested by the opposition, who criticize the delay in important decisions regarding fiscal policy and economic planning until after the European elections.
The focus between the Commission and the Chamber has been on the impact of superbonus and building bonuses on public finances, with concerns about their weight constraining public spending for future years. Debate continues between majority denouncing this constraint and opposition defending economic leverage generated by these measures. Eurostat’s guidance on how to divide these measures’ weight on state budgets is expected in June.
The high debt/GDP ratio is seen as hindering growth; public administration debt is projected to exceed 3 trillion euros by 2025. The tax burden is expected to decrease to 42.1% of GDP in 2024 and then average 42.3% in following three years. The latest budget law focused on extending tax wedge cut for income up to €35 thousand euros until 2024 to counteract inflationary pressures.
There are concerns about uncertainty regarding future public finances; discussions about avoiding tax increases and ensuring extension of measures like tax wedge cuts have been ongoing