Deficit: Istat figures due today – 3 per cent at risk. Extra spending on energy and defence hangs in the balance
Only an exit from the procedure results in the additional deficit being excluded from the accounts
With just a few hours to go before Istat’s announcement, due at 10 am this morning, the prospect of bringing the 2025 deficit below 3 per cent of GDP – and thereby exiting the EU’s excessive deficit procedure – appears challenging. The possibility of ‘freely’ utilising the safeguard clause in the EU Pact – which allows Italia to plan for a deficit of up to 36 billion over two years for investment in energy (14 billion) and defence (22) – depends on that figure; and the overall scale of the budget therefore depends on it.
But at stake, above all, is a political objective long cherished by the Government – and one which, surprisingly, was not achieved in April – as the crowning achievement of a fiscal discipline that has already met with considerable success on the markets and amongst rating agencies. The possible confirmation that the deficit did not fall below the Maastricht threshold may also create some complications for the budget bill – the last one before the general election: not directly, because the procedure has not currently resulted in any sanctions, and therefore its abandonment does not in itself free up resources. However, remaining in the corrective arm may lead to second thoughts regarding the activation of the extra deficit for energy and defence, and thus regarding the manoeuvre whereby loading some expenditure already provided for in the trend estimates onto the derogation frees up scope for new measures: as happened last year with the restructuring of the National Recovery and Resilience Plan (PNRR), which, in this way, had provided 5.1 billion to the budget bill.
The uncertainties stem from the figures, which kept the calculators busy right up to the last minute. In April, Istat had calculated a 2025 deficit of 3.073 per cent of GDP, that is, 1.64 billion above 3 per cent and 2.99 billion above 2.94 per cent, which, when rounded, according to the orthodox interpretation, ensures compliance with the Maastricht threshold, under which countries must maintain a deficit ‘below’ 3 per cent of GDP. These are significant figures, more so than the second decimal place might suggest.
It was yet another dramatic twist involving the Superbonus that threw the Italian accounts off balance; in the end, it had ballooned to 8.4 billion – four times the government’s estimates. Such a surge in activity, which only came to light retrospectively through taxpayers’ declarations, immediately aroused suspicion, prompting the Revenue Agency and the Guardia di Finanza to launch an immediate large-scale crackdown on illegitimate tax credits: as early as the first three months of the year, 4.1 billion in fraudulent bonuses had been uncovered, some of which were factored into the April figure. The work is still ongoing, but the rules of the European statistical system require the figures to be frozen at a specific date: with the possible consequence of recording a deficit higher than the actual figure, as it also includes tax credits in the process of being cancelled.
It was said that the implications of invoking the energy and defence clause depend on this morning’s table. This is because, under EU rules, only by abandoning the corrective arm of the Pact can the additional deficit be excluded from the calculations of the relevant balances; in other cases, however, it remains in the calculation, further complicating the process of bringing the deficit below 3 per cent. A setback could therefore reignite political doubts about the activation of the clause, particularly regarding the (majority) part dedicated to defence: which represents a strategic pivot in a Europe facing the growing threat of Russian hybrid attacks, but is not exactly a source of widespread support – a precious asset just a few months ahead of a highly uncertain election.
