Italy’s lower house has approved Giorgia Meloni’s budget law, following a confidence vote in which the new prime minister secured wide backing for her economic plans.
The lower house of Parliament voted by 197 to 129 in favor of the right-wing coalition’s proposal. The law is expected to receive final approval by the Senate as soon as Tuesday.
The 2023 budget is worth more than €30 billion ($31.9 billion), focuses mainly on energy measures, including keeping the cost of bills and fuel at the pump in check. Tax cuts for companies and the self-employed also feature.
While spending will be financed with a wider deficit, Meloni has kept her promise to the European Union to spend responsibly without endangering the public finances, and to continue to work toward lowering the country’s mammoth debt.
Italy is currently targeting a deficit this year of 5.6% of gross domestic product. It plans to progressively cut that in future, down to 4.5% in 2023 and then 3% in 2025.
Those numbers are less ambitious than previous targets, but still show a determination to hit the 3% limit normally enforced by the EU. The ceiling is currently suspended.
Funds will also come from a higher windfall tax on energy companies, and cuts in citizens’ income.
Such constraints are likely to increase as the European Central Bank continues to raise interest rates to try to control inflation. Meloni and her allies have criticized the monetary officials repeatedly for squeezing economies like Italy’s that have suffered through the pandemic, and are not being damaged by the energy crisis.
In her first speech in parliament in October, she called the ECB’s rate hikes “rash.” Defense Minister Guido Crosetto, an ally, said more recently that its moves to raise borrowing costs and shrink its bond portfolio, along with the European Banking Authority’s capital recommendations for banks, threaten to inflict a €100-billion credit crunch on Italy.
The yield spread between German and Italian 10-year bonds, regarded as a major risk gauge in the region, widened to 214 basis points last week after the ECB’s decision, the highest since early November. It remains above 200 basis points.
The budget law also includes measures to lower the retirement age — a key promise of Meloni ally Matteo Salvini — along with fiscal incentives for companies to hire, and measures aimed at encouraging Italians to have more children by increasing child benefits and support for large families.
There is also a plan to move ahead with construction of a bridge to Sicily, a long-standing project for the Italian right that has never so far materialized.
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(Chiara Albanese contributed to this report.)
