Italy is undergoing a significant transformation in its public finance management with the introduction of the Structural Budget Plan (Psb). This plan replaces the previous Update Note to the Economic and Financial Document (NaDef) and commits Italy to a binding five-year program.
The Psb aims to ensure that Italy adheres to the EU's fiscal parameters, particularly in reducing its structural deficit. The government is tasked with achieving an annual reduction of 0.55 percentage points of GDP in the structural deficit for the years 2025 and 2026, followed by a slightly eased correction from 2027 to 2031.
Central to the Psb are the ceilings on spending increases, which have been negotiated between the Italian government and the European Commission. These ceilings aim to facilitate deficit reduction and address the public debt-to-GDP ratio. Italy's net primary expenditure must not increase by more than 1.5% per year until 2031.
The scrutiny of the Psb in Parliament has been characterized by brief hearings and subsequent votes on resolutions. Modifications to the plan can only occur under exceptional circumstances or changes in government.
The success of the Psb will depend on Italy's ability to foster a conducive environment for investment and economic activity. By adhering to the new fiscal framework, the government aims to restore confidence among investors and international markets. The interplay between fiscal policy and broader economic conditions will be closely monitored by financial institutions and analysts.
Overall, the Psb represents a significant shift in Italy's approach to public finance, with binding commitments aimed at reducing the structural deficit and managing public debt.