Italy targets primary budget balance in 2024, economy minister says

By Giuseppe Fonte

ROME (Reuters) – Italy will probably balance its primary budget this year, excluding interest payments on government debt, the economy minister said on Friday, as Rome prepares a medium-term fiscal plan for approval by the European Commission.

The country aims to achieve a significant primary surplus over time to keep in check mammoth debt running at almost 140% of gross domestic product (GDP), the second-highest level in the euro zone behind Greece.

“I believe that as early as 2024 We will achieve the goal of a balanced primary budget,” Minister Giancarlo Giorgetti said during an event in Parma, northern Italy.

His remarks suggest a slightly improving trend for the country’s strained state finances, after the Treasury in April forecast a primary budget deficit of 0.4% of GDP for 2024.

Italy was put under a so-called Excessive Deficit Procedure by the EU this year, as its 2023 headline deficit came in at 7.4% of GDP, the highest among the euro zone countries.

Under its fiscal plan, to be sent to Brussels by early October after parliament’s approval, the Treasury will confirm a previous commitment to bring its deficit below the EU’s 3% of GDP ceiling in 2026.

Rome also intends to comply with the latest reform of the bloc’s fiscal rules, which requires a slow but steady pace of headline deficit and debt reduction from 2025 over four to seven years, depending on commitments regarding reforms and strategic investments.

To this end, the Treasury committed this week to limit to almost 1.5% the average annual increase in Italy’s net primary expenditure, an indicator that measures spending components under the government’s direct control.

The government will unveil its whole budget plan next week, after factoring in the impact of upcoming revisions to economic growth data for 1995-2023 by national statistics bureau ISTAT.

“The historical series of GDP data will have an upward correction, modest but upward. However it does not solve our fiscal problems,” Giorgetti said.

Despite the lack of fiscal leeway and the commitment to rein in the deficit, Giorgetti said he aimed to make permanent temporary cuts to social contributions and tax cuts for low and middle-income earners.

Both measures are currently in place until December and extending them will cost state coffers about 15 billion euros ($16.75 billion) per year.

($1 = 0.8957 euros)