Italy reduces the deficit: a step forward towards achieving budget balance
Italy has made significant progress in reducing the public deficit. According to the latest data issued by the National Institute of Statistics (Istat), the country reduced the deficit to 3.4% of GDP in the second quarter, compared to 5% in the same period in 2023. This improvement represents a milestone. An important turning point in Italian public finance management.
Increasing tax revenues is key to reducing the deficit
The decrease in the deficit is mainly due to increased tax revenues. In the second quarter, general government revenues totaled €247.4 billion, up from €242.5 billion the previous year. Meanwhile, spending fell by 1.3 percent to 265.5 billion euros. This dual dynamic contributed to improving the budget balance.
Back to primary surplus, first since 2019
A particularly encouraging indicator is the return to a positive primary budget balance. For the first time since the fourth quarter of 2019, this balance (before debt burdens) returned to surplus, reaching 1.1% of GDP compared to -0.8% the previous year. This development reflects stricter management of public finances in Italy.
Ambitious goals for 2026
The Italian government has no intention of stopping here. It recently announced its intention to reduce the public deficit below the ceiling of 3% of GDP set by the European Stability Pact starting in 2026. This commitment, more ambitious than previous expectations, is included in the public documents of the fiscal consolidation plan that Italy must submit. To the government. European Commission.
Future challenges: rising debt and tax pressures
Despite this progress, Italy still faces important challenges. The country remains the worst in the EU in terms of public deficit, at 7.4% of GDP in 2023. Furthermore, public debt stands at 137.3% of GDP, the second highest level in the EU after Greece. The tax burden, which rose to 41.3% of GDP in the second quarter of 2024, could also be a challenge in terms of economic competitiveness.
Conclusion: A delicate balance between consolidation and growth
Italy appears to be on the right track to improving its public finances, but there is still a long way to go. The government will need to maintain a delicate balance between fiscal consolidation and supporting economic growth. The coming quarters will be crucial to determine whether this positive trend continues and whether Italy is able to achieve the ambitious targets for 2026.
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Francesca Bianchi graduated in Economic Law from the University of Milan and holds a Master’s degree in Financial Risk Management. She has worked for several years in major international banks, specializing in European banking regulations, such as MIFID II and IFRS 9. Passionate about sustainability and ESG (environmental, social and governance) regulations, Francesca is committed to helping companies comply with new European laws. . His contributions to ComplianceJournal.it are widely appreciated for their clarity and analytical depth.
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