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A big bonus, Fitch sees more gloom from the government: debt estimates have worsened

A big bonus, Fitch sees more gloom from the government: debt estimates have worsened

The Meloni government's estimates still fall short of the super bonus costs. After every new negative update, the Minister of Economy, Giancarlo Giorgetti, uses a new name to describe the economic impact of construction subsidies on state accounts: the latest one is “the monster”. This entity causes the general budget to spiral out of control, with debt and deficit estimates changing for the worse with each new document compared to the previous one. After Istat, it is now the turn of the credit rating agency Fitch, which further worsens the figures presented by the government in the benchmark: the government's main economic planning document is already “twice” outdated, two weeks after its publication.

Def “Censored” was born twice: What happens to Meloni's government numbers with Superbonus

The economic and financial document, Def, is already outdated. The document must be submitted by April 10 of each year And it shows The main programmatic lines of the economic policies of the executive branch. In 2024, two weeks after the presentation, the figures for the Meloni government's most important economic document of the year are already out of date.

In Def, for 2023, Giorgetti presented a GDP growth of 0.9 percent, debt-to-GDP ratio of 137.3 percent, debt worsening of 7.2 percent, 40 billion compared to expectations due to the cost of super bonuses and construction bonuses. The account has now risen to 219 billion euros. But the debt estimates were again short-lived: ten days later, the Census Institute had worsened them by 0.2%, another $4.6 billion. The reason is always the same: credits generated by the super bonus.

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It should be remembered that Def 2024 was “censored” precisely because of the Superbonus effect, as well as the new rules of the new European Stability Pact, because it did not refer to the programmatic part, but only the direction. In practice, the state tells us it does not know how much it will be able to spend. Accordingly, the expected growth for the year 2024 is 1%, which is worse than +1.2% for NADEF, and the confirmed deficit is at 4.3%, while the public debt rises to 137.8% of GDP.

For two years the projections provided by the State General Accounting Office have not been reflected in reality and with each update the estimates are revised, and much worse.

The accountant who will take responsibility for the Superbonus gap

The errors were dramatic regarding build rewards: Def 2023 calculated the total cost of the super reward at 67 billion, a number that reached over 81 billion per an update note to Def three months later, in September. In November, construction bonuses reached €160 billion in spending, including €105 billion for the super bonus. Def 2024 then brought the total cost to $219 billion. The same happened in 2022, when contacted the Parliamentary Budget Office for confirmation: In June, spending had already depleted the total allocation for the biennium 2022-2023.

Super bonuses, and building bonuses in general, still cost more than the technicians at Giorgetti's Ministry of Economy had expected. The implications are all for the stability of public accounts: with the new deficit figures, Italy in 2023 was the country with the worst data in the EU.

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Italy's deficit compared to other European countries, Eurostat graph

Moreover, public debt will continue to grow, as the government expects, but Fitch believes it will get worse again.

Fitch on Italian debt: “Super bonus spending leads to an upward trajectory”

The above expected growth in Superbonus costs puts Italian public debt on an “upward trajectory”, reducing room for maneuver for expenditures announced by the government, such as the confirmation of the Irpef cut and the €20 billion tax levy. Again, forecasts may not confirm the truth of the facts. According to Def 24, debt will rise from 137.3% in 2023 to 139.6% of GDP in 2027. He doesn't think so Thus: “We expect a slightly steeper debt trajectory, with the debt-to-GDP ratio reaching 142.3% in 2027, given our less favorable macro and fiscal assumptions.”

Effects of Super Bonus on Public Debt, Fitch ChartHowever, the Meloni government says it wants to confirm the reduction in the tax wedge to improve Italians' salaries, but according to Fitch: “This would make complying with the restrictions imposed by the reactivation of EU tax rules more difficult.”

I'll explain to you (numbers in hand) why Meloni won't keep her promises

“I would like to make it clear in the room, and I hope it is clear: the bonus building is not a new element in our system, it has been around since at least 1996 – said Giorgetti during the general discussion on defense in Montecitorio – in the form of tax deduction, to a reasonable extent, they contributed In replenishing the Italian construction stock as well as in growth in an abnormal and completely unjustified measure of 110, with the discount on the credit transfer bill, they have created a monster that has destroyed public finances in recent years and in the years to come.”

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Giorgetti then stressed that based on “the observations coming from the opposition regarding the lack of funding for healthcare, culture and schools, how nice it would be if this led to a significantly higher GDP, but how bad it would be if it created a serious dilemma about who.” He has to make decisions, whether to put money on the super bonus or limit transfers to health care, school and culture.” He concluded: “Unfortunately whoever decided on this type of policy decided to put them on the super bonus and somehow take them from someone else, fueling debt.”

At the same time, the constitution approved by the government is already outdated, and doubts are multiplying about how the next budget law will be implemented under the new stability pact.

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