The Italian Council of Ministers, led by Prime Minister Giorgia Meloni and Economy and Finance Minister Giancarlo Giorgetti, has officially approved Italy's Medium-Term Fiscal Structural Plan (Piano Strutturale di Bilancio di Medio Termine, PSB). The seven-year blueprint outlines Rome's binding fiscal trajectory under the European Union's reformed Stability and Growth Pact, committing to bring Italy's budget deficit below the Maastricht 3.0% GDP threshold by 2026.

Under the approved fiscal framework, Italy targets a headline budget deficit of 3.8% of GDP in 2024, narrowing to 3.3% in 2025, and falling to 2.8% in 2026. Achieving these targets is designed to allow Italy to formally exit the EU's Excessive Deficit Procedure (EDP), which the European Commission initiated earlier this year following post-pandemic fiscal overruns driven by construction tax credits.

Anchoring Fiscal Credibility Under the EU's New Stability Framework

To maintain fiscal consolidation without strangling economic momentum, the plan establishes a multi-year cap on net primary expenditure growth, restricting increases to an average trajectory of approximately 1.5% annually. Economy Minister Giorgetti affirmed that spending prudence would be paired with aggressive digitization of tax collection and measures against value-added tax evasion.

Despite fiscal consolidation, government ministers emphasized that key social priorities, including public healthcare allocations, structural income tax cuts for middle-income wage earners, and birthrate-support initiatives, will remain fully funded through targeted expenditure reviews across federal ministries.

“This structural budget blueprint combines seriousness and fiscal credibility, ensuring Italy exits the EU excessive deficit procedure while protecting social priorities and productive investments.”

Balancing Expenditure Restraint with Strategic National Investments

The PSB will be submitted to the Italian Parliament for debate before formal transmittal to the European Commission in Brussels. European economic authorities will evaluate the plan against structural reform commitments, notably milestones tied to the National Recovery and Resilience Plan (PNRR).

Bond markets responded constructively to the cabinet's fiscal roadmap, with the closely monitored yield spread between Italian 10-year BTP bonds and German Bunds remaining stable, reflecting investor confidence in Rome's fiscal discipline.

Sources

Italy Giorgia Meloni Giancarlo Giorgetti Fiscal Policy European Union Italian Economy Eurozone