Italy’s slowing economy raises pressure on Meloni

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Italy’s national statistics agency has halved its forecast for the country’s growth this year, highlighting the pressure on Prime Minister Giorgia Meloni’s right-wing government to keep public spending in check.

The Eurozone’s third-largest economy is on track to grow just 0.5 per cent this year, down from 1 per cent forecast in June, Istat said in its economic update on Thursday. The agency also slashed its GDP growth projection for 2025 to 0.8 per cent, down from 1.1 per cent six months ago.

The Italian economy’s slowdown comes as Europe’s economic powerhouse, Germany, is in its deepest slump since the early 2000s and as France, the second-biggest economy, is in political turmoil after the parliament on Wednesday ousted the government led by Michel Barnier over his attempt to pass a belt-tightening budget.

Unlike Barnier, Meloni on Thursday succeeded in passing the first part of the 2025 budget, even as the worsening growth forecast adds pressure on her to rein in some of the planned spending for next year. The budget was designed on the basis that GDP would grow by 1 per cent this year and 1.2 per cent in 2025.

Italy, like France, is subject to the EU’s so-called ‘excessive deficit procedure’, which puts its fiscal plans under increased scrutiny to bring the public deficit below the bloc’s target of 3 per cent of GDP. Finance minister Giancarlo Giorgetti has pledged to craft a budget that aims to slash the deficit from 4.3 per cent this year to 3.6 per cent in 2025 and below 3 per cent the following year.

The Italian parliament on Thursday approved a variety of taxation and spending schemes as part of the budget. 

Among the measures given the go-ahead is a one-off €100 Christmas bonus for families, with at least one child, that have household incomes below €28,000 per year. Around 4.5mn families will be eligible to receive the bonus.  

The government also decided to extend a scheme allowing taxpayers to pre-pay their taxes for the next two years, regardless of how much their actual incomes turn out to be.

Opposition parties had proposed nearly 175 amendments to the fiscal decree, but the governing coalition — which has a solid majority in parliament — has rejected all of them.