Structural Budget Plan: Italy's long-term commitment to public finance
The Structural Budget Plan represents a long-term commitment for Italy, setting spending levels and deficit reduction. Parliament is examining the Plan, which replaces the old NaDef and aims to ensure deficit reduction and a sustainable debt ratio
3' min read
3' min read
The Structural Budget Plan that has begun its rapid scrutiny in Parliament represents the new form taken by the public finance programme after the reform of the European Union's economic governance, approved at the end of 2023 after a laborious negotiation between governments and destined to make itself felt from next year. The Plan, abbreviated as Psb, replaces the old NaDef, the Update Note to the Economic and Financial Document with which every autumn the government took stock of public finance dynamics and outlined the room for manoeuvre for the budget law. Unlike its ancestor, however, the Budget Structure Plan is much more demanding, because it commits the country to a five-year programme and sets maximum levels of net primary expenditure for the next seven. The commitment is binding, because it can only be changed due to exceptional events or changes of government: despite this, however, Parliament will get away with a couple of half-days of hearings, which then end with the speech of the Minister of the Economy and the vote on resolutions
The correction of accounts
Pivotal to the Plan, as to the new EU Stability Pact born from the reform, are the ceilings on expenditure increases, agreed between the EU Commission and the Government with the aim of guaranteeing the deficit reduction needed to comply with EU parameters and, above all, on a more substantial level, to bring the public debt/GDP ratio back on a sustainable path of reduction. For Italy, this means an annual cut in the structural deficit of 0.55 GDP points, about 12 billion, in 2025 and 2026, followed by a marginally lighter correction (0.52% of GDP) in the following years (from 2027 to 2031) when the descent of the deficit below 3% of GDP will have taken the country out of the excessive deficit procedure.
Net primary expenditure
The lever to achieve all this is identified by the new European rules in the brake to be applied to net primary expenditure, i.e. total public expenditure adjusted for interest on debt, European transfers (but not NRP loans) and national co-financing, one-offs and cyclical unemployment benefits. This aggregate, which in Italy is worth EUR 1,072 billion per year according to the General Accounting Office, will have to increase on average by no more than 1.5% per year until 2031; which is equivalent to saying that it will have to decrease in real terms, because inflation, albeit moderate in the period, will in any case travel at higher rates, thus drastically reversing the course with respect to the Covid-accelerated expenditure race.
