Budget Bill: the League stands firm on pensions. Newly recruited young workers to be subject to a 5 per cent flat tax

Yesterday’s latest evening meeting at Palazzo Chigi failed to finalise the precise details of the budget bill. There are two main obstacles standing in the way of the budget bill, which is due to be presented to the Council of Ministers between Tuesday and Wednesday: the European Commission’s response regarding flexibility and the terms of use of the energy clause, and the League’s demands for changes to the pension system. These demands, as confirmed by more than one source to *Il Sole 24 Ore*, have taken the form of a de facto veto: in short, without measures on pensions, the League is threatening not to vote in favour of the budget.

At the table with Giorgia Meloni, who insisted that an agreement be reached soon, were Antonio Tajani, Maurizio Lupi, Giancarlo Giorgetti and the Under-Secretaries Alfredo Mantovano and Giovanbattista Fazzolari. The leader of the Lega, Matteo Salvini, joining via video link from Milan, revived the proposal for ‘quota 64’ and a further freeze on linking pension eligibility requirements to life expectancy. A measure which, even in its most moderate form, would, according to initial estimates, see costs rising rapidly – from 600 million in 2027 to 1.2 billion in 2028, and up to 1.5 billion the following year. This is too much for a budget that must attempt to fit the many priorities dear to the majority parties – ranging from families to the middle class, from young people to the elderly, from strengthening the health service to containing energy costs for citizens and businesses – within the extremely tight margins available. All these items were listed in the statement issued by the majority at the end of the meeting.

Behind the much-heralded consensus on these principles, however, lies a clash over pensions. Salvini, buoyed by a poll suggesting the League would reach 7.5 per cent following a victory on pension reform, is said to have issued an ultimatum which, for the moment, does not appear to have been met by Giorgetti’s counter-proposal – a sort of watered-down version of ‘Quota 103’ designed not to place too great a burden on the public finances. The League’s pressure, two days ahead of the Milan congress, has been met with a very cool reception from its allies. Fdi fears throwing four years of strict fiscal discipline out the window, all the more so on the eve of a potentially crucial rating review by S&P on 13 November: with a BBB+ rating and a positive outlook, a further upward revision would see Italian debt return to the agency’s ‘top tier’ for the first time in 14 years.

The path ahead for measures aimed at young people, on the other hand, appears much smoother. The idea of introducing a flat-rate tax of 5 per cent for those under 30 taking up their first job is gaining increasing traction, a proposal welcomed by Forza Italia, alongside rent relief and first-time buyer schemes linked to salaries and reserved for groups such as teachers and law enforcement officers, who are more likely to be transferred for work.

The government is well aware of the anger that has erupted in recent days at the demonstrations in Milan, Turin and Bologna, and of the need to ‘focus resources on the main economic and social priorities’. Hence the attempt to offer some answers to the middle class – which has re-emerged as a priority – even though the path towards an income tax cut for incomes up to 60,000 euros remains decidedly uphill: the idea of splitting the reduction into two phases also appears to have been shelved immediately. Other measures remain on the table, including a partial tax exemption on thirteenth-month bonuses, the expansion of fringe benefits and welfare provisions, and a flat-rate tax on overtime: these are less structural than a tax cut, but are considered effective in providing immediate relief to a struggling section of the population.