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Italy confirms tax cuts in 2024 budget plan

Italian Prime Minister Giorgia Meloni outlined her proposed 2024 budget on Monday, with the focus on tax cuts and funding for larger families - despite market concerns about Italy's public debt.

Italy confirms tax cuts in 2024 budget plan
Italian Prime Minister, Giorgia Meloni announced Italy's budget plan on October 16th, 2023. (Photo by Tiziana FABI / AFP)

Announcing the draft budget bill for 2024, Meloni’s government on Monday morning unveiled a plan including some 24 billion euros in support for low- and medium-income families and companies after months of high inflation.

There was concern in the financial markets at the lack of focus on getting Italy’s public finances in order, but Meloni insisted at a press conference on Monday it was a budget that was “very serious and realistic and which does not waste resources, but concentrates them on the main priorities”.

KEY POINTS: How will Italy’s 2024 budget affect your finances?

These priorities included renewing a reduction in salary tax contributions for those earning up to 35,000 euros a year, at a cost of around 10 billion euros.

Meloni said this would put an average of 100 euros a month more into the pockets of 14 million Italian employees.

As part of its wider plan of promised tax reform, the government merged the first two tax brackets, meaning those earning up to 28,000 euros a year will benefit from a rate of 23 percent, down from 25 percent.

Meloni also outlined plans to address issues keeping a large number of women in Italy out of work, with her administration under pressure to help boost Italy’s low birth rate.

She said women with at least two children will be exempted from social security contributions, and promised “free” nursery places from the second child.

“We want to dismantle the narrative that says having children is a disincentive to work,” she said. “We want to encourage those who bring children into the world and who want to work”.

READ ALSO: What is Italy’s government doing about the falling birth rate?

Companies that hire mothers and young people will also pay reduced corporation tax, she said.

The measures, financed with 15.7 billion euros in additional debt and unspecified spending cuts, were intended to “defend the purchasing power of families”, the prime minister said.

Transport Minister Matteo Salvini appeared to state at the press conference that the budget included financing for his controversial plans to build a bridge over the Strait of Messina – a project that was abandoned by previous governments due to spiralling costs.

“I can announce that there is coverage for a fixed connection from Sicily, to Italy and to Europe,” Salvini said, though he didn’t specify where the funds would come from.

Commentators have warned of high public spending as the government seeks to fulfil electoral promises, particularly ahead of European Parliament elections next year.

Meloni drew praise for her cautious first budget, but commentators have warned of risks ahead as she and her partners seek to fulfil expensive promises, particularly ahead of European Parliament elections next year.

Nicola Nobile from Oxford Economics said Meloni’s government was showing its “true colours” with a “sharp shift in fiscal strategy”.

“The decision not to maintain a conservative fiscal approach will keep financial markets very nervous,” he said.

The draft budget bill will now be sent to Brussels for review before being voted on by Italy’s lower and upper houses of parliament, and it could face a long series of amendments before that process is complete.

Meloni last week urged lawmakers supporting her government to be “prudent” when presenting amendments to the bill.

Economy minister Giancarlo Giorgetti, one of the most moderate and pro-European members of the cabinet, has said it is not Brussels that worries him.

“What scares me is not the assessment of the EU but those of the markets who buy public debt,” he said in mid-September.

“Every morning I wake up and I have a problem — I have to sell (Italy’s) public debt and I have to convince people to have confidence.”

However, the increase in the deficit is mainly linked to ballooning costs of so-called superbonus scheme, a tax incentive for home renovations introduced in 2020, which Meloni said would cost Italy another 20 billion euros next year.

“The drift in Italy’s deficit … is largely due to the superbonus bill, which isn’t the responsibility of the current government,” said Gilles Moec, chief economist at Axa group.

However, he told AFP: “We do not detect any real desire on the part of Meloni’s government to control the deficit by renouncing certain electoral promises, such as the reduction in the tax burden.”

As a result of the government’s plans, Italy’s debt is forecast to fall only slightly, from 140.2 percent of GDP in 2023 to 139.6 percent in 2026.

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EU

Socialists target far right in EU vote campaign launch

Europe's Socialists launched their campaign for June's European Parliament elections in Rome on Saturday with a focus on warding off "ghosts from the past" from an ascendant far right.

Socialists target far right in EU vote campaign launch

Left-wing MEPs, national lawmakers, party chiefs, EU commissioners and heads of government gathered at their congress before a European vote seen as the most important in decades.

Ukraine is struggling to fend off Russian troops two years after Vladimir Putin launched his invasion and surging support for “illiberal” right-wing groups is predicted.

“The very soul of Europe is at risk,” Spanish Prime Minister Pedro Sanchez told the delegates.

“The ghosts of the past are again at the gates of our institutions: hate, greed, falsehood, climate denialism, authoritarianism,” he added, warning of their “digital weapons” and “powerful allies” inside and outside Europe.

German Chancellor Olaf Scholz hit out at “right-wing populists running election campaigns against our united Europe and its core values” who are on the rise in democracies worldwide.

Raphael Glucksmann, the head of the French Socialist list, called the vote “the most important European elections in history” as Putin’s war “hammers” the continent.

The prospect of Donald Trump returning to the White House after the US presidential election in November may mean “we will have to stay alone, alone in front of war”, he warned.

Sanchez met Scholz before the congress to discuss the war in Ukraine, which he said was “entering a delicate phase”.

“We must show our commitment and determination. The security and freedom of Europeans are at stake,” the Spanish premier wrote on X, formerly Twitter.

Farmer anger 

The Party of European Socialists is the second-largest force in the European Parliament behind the conservative European People’s Party.

Three months from the elections, the two groups are gearing up for campaigning against a surging far right that could surf on a wave of discontent, notably from the agricultural sector, and make major gains.

French Socialist Party chief Olivier Faure said he feared the far right would harvest votes from angry farmers by claiming environmental and agricultural interests were at odds.

“We must constantly remember that the enemy of agriculture is not ecology, it’s liberalism,” he said, calling on European Socialists to offer hope to counter the far right’s message.

Veteran Dutch politician Frans Timmermans charged that the centre right “believes there is a future for them in aligning themselves with the extreme right”.

The Socialists also designated Luxembourg’s Nicolas Schmit as their candidate for European Commission president against incumbent Ursula von der Leyen, who is expected to run again for the job.

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