European Commission is puzzled by the Italian government


Financial markets and the European Commission are rather preoccupied with the Italian budget. The country threatens to increase the budget deficit in 2019 to 2.4 percent of the GDP.

This complies with the rule that a deficit may not exceed 3 percent of the gross national product, but too much is spent to reduce the government debt by 130 percent.

The European Commission therefore wants the budget to be adjusted. But what are the measures that increase spending? Last year, the Italian government spent just over 800 billion euros, with revenues lying at around 770 billion euros. The largest cost item is social insurance, as in many other countries.

In total, the coalition of the Lega Nord and the Five Star Movement has proposed a series of measures that will cost 37 billion euros and increase spending by 22 billion euros.

Retirement system is being reformed to allow early retirement

The new budget will make it easier to retire earlier. This is how the ‘100 quota’ is introduced. A working person can retire when his or her age, plus the number of years that person has paid social contributions, is equal to 100. Approximately 400,000 people who are 62 and have worked for at least 38 years can therefore retire earlier. In the previous system, the retirement age was fixed at 65 years.

This new legislation will start in February and will cost around € 7 billion in the 2019 budget.

Basic income is important election promise

The basic income is one of the most important election promises of the Five Star movement. With this measure, the poorest Italians would receive a monthly amount of 780 euros. Furthermore, the poorest pensioners see their income supplemented to 780 euros per month.

These measures cost around 9 billion euros and six million people will see their income rise.

VAT increase reversed

In the previous budget, VAT would automatically be increased to 24.2 percent in 2019 and in 2020 and 2021 still further to 24.9 percent and 25 percent. The new government cancels this measure. This saves no less than 12.5 billion euros in income.

Amnesty for tax evaders

The Lega Nord, traditionally supported from the business world, wanted a remission for tax due. In exchange for a lower tax rate, Italians who have evaded tax in recent years can still declare their income or assets to the tax authorities.

According to the leader of the Lega Nord, this measure provides the state with 20 billion euros over a number of years, although tax revenues are therefore lower than previously expected.

The Five Star movement has always been wary of this remission and recently Lega Nord leader Matteo Salvini had to add water to the wine and promise that the size of the remission would be reduced.

A flat tax for poorer entrepreneurs

The million self-employed and artists in Italy who make less than 65,000 euros a year in turnover are faced with a flat tax of 15 percent.

Fund for victims of the bankrupt banks

A 1.5 billion euro fund has been set up to accommodate investors who have lost money from bankrupt banks.

Extra investments

The Italians are planning to put an additional 15 billion euros extra into the economy over the next three years. According to the government, this is the largest investment plan in Italy ever. This comes on top of the 38 billion euros that will be invested in the Italian economy in the next fifteen years.

By: Leah Kunze

Leah Kunze just graduated MBA and is proud of it. She is interested in automotive industry and innovations. She well be glad to receive a mail to

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