Italy Aims for Primary Budget Balance in 2024, Says Economy Minister

By Giuseppe Fonte

ROME (Reuters) – Italy is likely to balance its primary budget this year, excluding interest payments on government debt, according to the economy minister. The country is preparing a medium-term fiscal plan for approval by the European Commission.

Italy’s objective is to achieve a significant primary surplus over time to manage its enormous debt, which currently stands at nearly 140% of gross domestic product (GDP) – the second-highest level in the eurozone, surpassed only by Greece.

Minister Giancarlo Giorgetti announced during an event in Parma, northern Italy, "I believe that as early as 2024 we will reach the goal of a balanced primary budget." His comments indicate a slight improvement in the country’s challenging financial situation, particularly following the Treasury’s April forecast of a 0.4% primary budget deficit for 2024.

This year, Italy was placed under an Excessive Deficit Procedure by the EU, as its 2023 headline deficit reached 7.4% of GDP, the highest among eurozone countries.

The upcoming fiscal plan, expected to be submitted to Brussels by early October after parliamentary approval, will reaffirm the commitment to reduce the deficit below the EU’s 3% of GDP limit by 2026.

Additionally, Rome plans to adhere to the recent reform of the bloc’s fiscal regulations, which mandates a gradual reduction of deficit and debt from 2025 over a span of four to seven years, depending on commitments related to reforms and strategic investments.

To facilitate this, the Treasury pledged this week to limit the average annual increase in Italy’s net primary expenditure to approximately 1.5%, a metric that reflects government-controlled spending components.

The government will unveil its comprehensive budget plan next week, after taking into account upcoming revisions to economic growth data for 1995-2023 as reported by the national statistics bureau.

Giorgetti noted, "The historical series of GDP data will see a modest upward correction. However, it does not resolve our fiscal challenges."

Despite limited fiscal flexibility and the commitment to manage the deficit, Giorgetti aims to make current temporary reductions in social contributions and tax cuts for low and middle-income households permanent.

These measures are currently in effect until December, and extending them would cost the state approximately 15 billion euros annually.