By Giuseppe Fonte
ROME (Reuters) – Italy will likely 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 its massive debt, which stands at almost 140% of gross domestic product (GDP), the second highest in the eurozone behind Greece, under control.
“I believe that we will already reach the objective of a balanced primary budget in 2024,” said Minister Giancarlo Giorgetti during an event in Parma, northern Italy.
His comments suggest a slight improvement in the country’s strained state finances, after the Treasury in April forecast a primary budget deficit of 0.4% of GDP for 2024.
This year, the EU placed Italy under the so-called Excessive Deficit Procedure as its overall deficit for 2023 hit 7.4% of GDP, the highest among eurozone countries.
Under its fiscal plan, which will be sent to Brussels in early October after approval by Parliament, the Treasury will confirm a prior commitment to reduce its deficit below the EU’s 3% of GDP ceiling by 2026.
Rome also aims to comply with the bloc’s latest overhaul of fiscal rules, which calls for a slow but steady pace of deficit and debt reduction from 2025 over four to seven years, depending on commitments on reforms and strategic investments.
To this end, the Treasury pledged this week to limit the average annual increase in Italy’s net primary spending, an indicator that measures the spending components under direct government control, to almost 1.5%.
The government will unveil its full budget plan next week, after taking into account the impact of upcoming revisions to economic growth data for 1995-2023 by national statistics office ISTAT.
“The historical series of GDP data will have an upward correction, modest but upward. However, it does not solve our fiscal problems,” said Giorgetti.
Despite the lack of fiscal room for manoeuvre and a 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 force until December and their extension will cost the state coffers around 15 billion euros ($16.75 billion) a year.
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