Title of Issue
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Amounts as to
which registration
is effective
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Names of
exchanges on
which registered
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N/A
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N/A
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N/A
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*
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The Republic of Italy files Annual Reports on Form 18-K voluntarily in order for The Republic of Italy to incorporate such Annual Reports into its shelf registration statements.
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EXPLANATORY NOTE
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3
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SIGNATURE
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4
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EXHIBIT INDEX
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5
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(a) |
Pages numbered 1 to 5 consecutively.
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(b) |
The following exhibit:
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REPUBLIC OF ITALY
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By:
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/s/ Dott. Davide Iacovoni
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Name:
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Dott. Davide Iacovoni
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Title:
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Director General – Treasury Department – Directorate II
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Ministry of Economy and Finance
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Exhibit No
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Description
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99.(8)
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2019 Stability Programme (Section I of the Economic and Financial Document of 2019, dated April 9, 2019) – English version.*
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*
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Italian version previously filed by paper under cover of Form SE on July 31, 2019.
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ECONOMIC AND FINANCIAL DOCUMENT 2019
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IV
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MINISTRY OF ECONOMY AND FINANCE
|
INTRODUCTION
|
MINISTRY OF ECONOMY AND FINANCE
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V
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ECONOMIC AND FINANCIAL DOCUMENT 2019
|
VI
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MINISTRY OF ECONOMY AND FINANCE
|
INTRODUCTION
|
MINISTRY OF ECONOMY AND FINANCE
|
VII
|
ECONOMIC AND FINANCIAL DOCUMENT 2019
|
Giovanni Tria
|
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Minister of Economy and Finance
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VIII
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MINISTRY OF ECONOMY AND FINANCE
|
I. |
OVERALL FRAMEWORK AND BUDGTARY POLICY OBJECTIVES
|
I.1 |
Recent trends and prospects for the Italian economy
|
I.2 |
Macroeconomic scenario and public finance trends
|
I.3 |
Public finance policy scenario and official macroeconomic forecast
|
II. |
MACROECONOMIC FRAMEWORK
|
II.1 |
The international economy
|
II.2 |
Italian Economy
|
III. |
NET BORROWING AND PUBLIC DEBT
|
III.1 |
Final data and forecasts at unchanged legislation
|
III.2 |
Public finance: policy scenario
|
III.3 |
Financial impact of the measures of the National Reform Programme
|
III.4 |
Trend of debt-to-GDP ratio
|
III.5 |
The debt rule and the other relevant factors
|
IV. |
SENSITIVITY AND SUSTAINABILITY OF PUBLIC FINANCES
|
IV.1 |
Short-term scenarios
|
IV.2 |
Medium-term scenarios
|
IV.3 |
Long-term scenarios
|
V. |
QUALITY OF PUBLIC FINANCES
|
V.1 |
Actions taken and trends for the future years
|
VI |
INSTITUTIONAL ASPECTS OF PUBLIC FINANCES
|
VI.1 |
Recent legislative developments on the reform of the State budget
|
VI.2 |
Budgetary rules for local government
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MINISTRY OF ECONOMY AND FINANCE
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IX
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ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
Table I.1 |
Summary of macroeconomic framework based on unchanged legislation
|
Table I.2 |
Summary of macroeconomic framework based on policy scenario
|
Table I.3 |
Public finance indicators
|
Table II.1 |
Macroeconomic scenario based on unchanged legislation
|
Table II.2 |
Base assumptions
|
Table II.3a |
Macroeconomic prospects
|
Table II.3b |
Prices
|
Table II.3c |
Labour market
|
Table II.3d |
Sectoral accounts
|
Table III.1 |
General government budgetary prospects
|
Table III.2 |
Differences compared to the previous Stability Programme
|
Table III.3 |
Cash balances of the state sector and the public sector
|
Table III.4 |
Flexibility granted to Italy in the Stability Pact
|
Table III.5 |
Cyclically adjusted public finance
|
Table III.6 |
Expenditure to be excluded from the expenditure rule
|
Table III.7 |
Scenario at unchanged policy
|
Table III.8 |
Significant deviations
|
Table III.9 |
Financial impact of the measures in the NRP grids
|
Table III.10 |
Public debt determinants
|
Table III.11 |
General government debt by subsector
|
Table III.12 |
Compliance with the debt rule: forward looking criterion and cyclically adjusted debt
|
Table IV.1 |
Heat map for the variables underlying the S0 indicator for 2018
|
Table IV.2 |
Sensitivity to growth
|
Table IV.3 |
Expenditure on pensions, healthcare, care for the elderly, education and unemployment benefits
|
Table IV.4 |
Sustainability Indicators
|
Table V.1 |
Cumulative effects of the latest measures implemented in 2018 on general government net borrowing
|
Table V.2 |
Cumulative effects of the latest measures implemented in 2018 on general government net borrowing
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Table V.3 |
Cumulative effects of the latest measures implemented in 2018 on general government net borrowing by subsector
|
Table V.4 |
Effects of Decree-Law No. 109/2018 on general government net borrowing
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Table V.5 |
Effects of Decree-Law No. 113/2018 on general government net borrowing
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Table V.6 |
Effects of Decree-Law No. 135/2018 on general government net borrowing
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Table V.7 |
Effects of the 2019-2021 public finance budget and initial measures in 2019
|
Table V.8 |
Effects of the 2019-2021 public finance budget on general government net borrowing
|
Table V.8-A |
Effects of Decree-Law No. 4/2019 on general government net borrowing
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X
|
MINISTRY OF ECONOMY AND FINANCE
|
CONTENTS
|
Table V.9 |
Effects of the 2019-2021 public finance budget and initial measures in 2019 on general government net borrowing by subsector
|
Table V.10 |
Effects of the 2019-2021 public finance budget on general government net borrowing
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Table V.11 |
Effects of Decree-Law No. 4/2019 on general government net borrowing
|
Figure I.1 |
Gross domestic product
|
Figure I.2 |
Relative industrial production index, Germany vs Italy
|
Figure II.1 |
Global composite PMI and world trade
|
Figure II.2 |
Performance of 10-year government securities
|
Figure II.3 |
Brent and futures price
|
Figure II.4 |
PMI and global economic policy uncertainty index
|
Figure II.5 |
Exports of goods and services from Italy and other major EU countries
|
Figure II.6 |
Price competitiveness indexes
|
Figure II.7 |
Exports of Italian goods to major EU countries
|
Figure II.8 |
Exports of Italian goods to major non-EU countries
|
Figure II.9 |
Interest rates for non-financial corporations and households
|
Figure II.10 |
Non-performing loans to residents
|
Figure III.1 |
Public debt determinants
|
Figure III.2 |
Trend of the debt-to-GDP ratio (inclusive and exclusive of support to Euro Area Countries)
|
Figure IV.1 |
Interest expenditure as a percentage of GDP and weighted average cost at issuance
|
Figure IV.2 |
Trend of rates of government security yields at 1, 5 and 10-year maturities
|
Figure IV.3 |
BTP-Bund yield differential: 10 year benchmark
|
Figure IV.4a |
Stochastic projection of the debt-to-GDP ratio with temporary shocks
|
Figure IV.4b |
Stochastic projection of the debt-to-GDP ratio with permanent shocks
|
Figure IV.5 |
The S0 indicator and sub-components
|
Figure IV.6 |
Medium-term projection of debt-to-GDP ratio in alternative scenarios
|
Figure IV.7 |
Debt-to-GDP ratio: comparison of projection scenarios
|
Figure IV.8 |
Sensitivity of public debt to a rise in life expectancy and a reduction of the fertility rate
|
Figure IV.9 |
Sensitivity of public debt to an increase/reduction of the net flow of immigrants
|
Figure IV.10 |
Sensitivity of public debt to macroeconomic assumptions, higher and lower growth of total factor productivity
|
Figure IV.11 |
Sensitivity of public debt to macroeconomic assumptions, employment rate
|
Figure IV.12 |
Sensitivity of public debt to the primary surplus
|
Figure IV.13 |
Impact of reforms on the debt-to-GDP ratio
|
MINISTRY OF ECONOMY AND FINANCE
|
XI
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ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
Figure VI.1 |
Net borrowing and local government debt and contributions to real growth of general government gross fixed investment
|
Chap. |
Performance of Italian exports: obstacles and impact of external shocks
|
Chap. III |
Main measures to relaunch public investment of the fiscal package 2019-2021
|
Chap. IV |
Medium-term fiscal sustainability indicator S1
|
Chap. V |
Measures to fight tax evasion
|
XII
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MINISTRY OF ECONOMY AND FINANCE
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I. |
OVERALL FRAMEWORK AND BUDGTARY POLICY OBJECTIVES
|
I.1 |
RECENT TRENDS AND PROSPECTS FOR THE ITALIAN ECONOMY
|
FIGURE I.1: GROSS DOMESTIC PRODUCT (percentage growth rate)
|
![]() |
Source: ISTAT.
|
MINISTRY OF ECONOMY AND FINANCE
|
1
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
FIGURE I.2: RELATIVE INDUSTRIAL PRODUCTION INDEX, GERMANY VS ITALY
|
![]() |
Source: MEF calculations on ISTAT and Destatis data.
|
2
|
MINISTRY OF ECONOMY AND FINANCE
|
I. OVERALL FRAMEWORK
|
I.2
|
MACROECONOMIC SCENARIO AND PUBLIC FINANCE TRENDS
|
MINISTRY OF ECONOMY AND FINANCE
|
3
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
TABLE I.1: SUMMARY OF MACROECONOMIC FRAMEWORK BASED ON UNCHANGED LEGISLATION (percentage variations, except where
otherwise indicated) (1)
|
|||||
|
2018
|
2019
|
2020
|
2021
|
2022
|
GDP
|
0.9
|
0.1
|
0.6
|
0.7
|
0.9
|
GDP deflator
|
0.8
|
1.0
|
1.9
|
1.7
|
1.5
|
Consumption deflator
|
1.1
|
1.0
|
2.3
|
1.8
|
1.5
|
Nominal GDP
|
1.7
|
1.2
|
2.6
|
2.5
|
2.4
|
Employment (FTEs) (2)
|
0.8
|
-0.2
|
0.2
|
0.5
|
0.6
|
Employment (labour force) (3)
|
0.8
|
-0.3
|
-0.1
|
0.5
|
0.6
|
Unemployment rate
|
10.6
|
11.0
|
11.2
|
10.9
|
10.6
|
Unemployment rate net of the activation effect (4)
|
10.6
|
10.5
|
9.7
|
9.3
|
9.0
|
Current account balance (balance in % of GDP)
|
2.6
|
2.6
|
2.5
|
2.5
|
2.5
|
(1) Discrepancies, if any, are due to rounding.
|
|||||
(2) Employment expressed in terms of Full-time equivalent units.
|
|||||
(3) Number of employees based on the sample survey of the Continuous Labour Force Survey (CLFS).
|
|||||
(4) Estimate of the unemployment rate net of the activation effect of the new labour force incentivised by
Citizenship Income.
|
4
|
MINISTRY OF ECONOMY AND FINANCE
|
I. OVERALL FRAMEWORK
|
MINISTRY OF ECONOMY AND FINANCE
|
5
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
6
|
MINISTRY OF ECONOMY AND FINANCE
|
I. OVERALL FRAMEWORK
|
TABLE I.2: SUMMARY OF MACROECONOMIC FRAMEWORK BASED ON POLICY
SCENARIO (percentage variations, except where otherwise indicated) (1)
|
|||||
|
2018
|
2019
|
2020
|
2021
|
2022
|
GDP
|
0.9
|
0.2
|
0.8
|
0.8
|
0.8
|
GDP deflator
|
0.8
|
1.0
|
2.0
|
1.8
|
1.6
|
Consumption deflator
|
1.1
|
1.0
|
2.3
|
1.9
|
1.6
|
Nominal GDP
|
1.7
|
1.2
|
2.8
|
2.6
|
2.3
|
Employment FTEs (2)
|
0.8
|
-0.1
|
0.3
|
0.6
|
0.5
|
Employment (labour force) (3)
|
0.8
|
-0.2
|
0.1
|
0.6
|
0.6
|
Unemployment rate
|
10.6
|
11.0
|
11.1
|
10.7
|
10.4
|
Unemployment rate net of the activation effect (4)
|
10.6
|
10.5
|
9.6
|
9.0
|
8.8
|
Current account balance (balance in percent of GDP)
|
2.6
|
2.5
|
2.4
|
2.4
|
2.4
|
(1) Possible inaccuracies from rounding.
|
|||||
(2) Employment expressed in terms of Full-time equivalent units.
|
|||||
(3) Number of employees based on the sample survey of the Continuous Labour Force Survey (CLFS).
(4) Estimate of the unemployment rate net of the activation effect of the new labour force incentivised by
Citizenship Income.
|
MINISTRY OF ECONOMY AND FINANCE
|
7
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
8
|
MINISTRY OF ECONOMY AND FINANCE
|
I. OVERALL FRAMEWORK
|
TABLE I.3: PUBLIC FINANCE INDICATORS (as percentage of GDP) (1)
|
|||||||
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
||
POLICY SCENARIO
|
|||||||
Net borrowing
|
-2.4
|
-2.1
|
-2.4
|
-2.1
|
-1.8
|
-1.5
|
|
Primary balance
|
1.4
|
1.6
|
1.2
|
1.5
|
1.9
|
2.3
|
|
Interest
|
3.8
|
3.7
|
3.6
|
3.6
|
3.7
|
3.8
|
|
Structural net borrowing (2)
|
-1.4
|
-1.4
|
-1.5
|
-1.4
|
-1.1
|
-0.8
|
|
Variation in the structural balance
|
-0.4
|
0.0
|
-0.1
|
0.2
|
0.3
|
0.3
|
|
Public debt (gross of support) (3)
|
131.4
|
132.2
|
132.6
|
131.3
|
130.2
|
128.9
|
|
Public debt (net of support) (3)
|
128.0
|
128.8
|
129.4
|
128.1
|
127.2
|
125.9
|
|
Proceeds from privatisation
|
0.0
|
0.0
|
1.0
|
0.3
|
0.0
|
0.0
|
|
SCENARIO BASED ON UNCHANGED LEGISLATION
|
|||||||
Net borrowing
|
-2.4
|
-2.1
|
-2.4
|
-2.0
|
-1.8
|
-1.9
|
|
Primary balance
|
1.4
|
1.6
|
1.2
|
1.6
|
1.9
|
2.0
|
|
Interest
|
3.8
|
3.7
|
3.6
|
3.6
|
3.7
|
3.9
|
|
Structural net borrowing (2)
|
-1.4
|
-1.5
|
-1.6
|
-1.2
|
-1.0
|
-1.2
|
|
Variation in the structural balance
|
-0.4
|
0.0
|
-0.1
|
0.4
|
0.2
|
-0.2
|
|
Public debt (gross of support) (3)
|
131.4
|
132.2
|
132.8
|
131.7
|
130.6
|
129.6
|
|
Public debt (net of support) (3)
|
128.0
|
128.8
|
129.5
|
128.5
|
127.6
|
126.6
|
|
MEMO: Update of the Public Finance Framework (December 2018)
|
|||||||
Net borrowing based on unchanged legislation
|
-1.9
|
-2.0
|
-1.8
|
-1.5
|
|||
Structural net borrowing (2)
|
-1.1
|
-1.3
|
-1.2
|
-1.0
|
|||
Public debt (4)
|
131.7
|
130.7
|
129.2
|
128.2
|
|||
MEMO: Update of DEF 2018 (September 2018)
|
|||||||
Net borrowing
|
-2.4
|
-1.8
|
-2.4
|
-2.1
|
-1.8
|
||
Primary balance
|
1.4
|
1.8
|
1.3
|
1.7
|
2.1
|
||
Interest
|
3.8
|
3.6
|
3.7
|
3.8
|
3.9
|
||
Structural net borrowing (2)
|
-1.1
|
-0.9
|
-1.7
|
-1.7
|
-1.7
|
||
Variation in the structural balance
|
-0.2
|
0.2
|
-0.8
|
0.0
|
0.0
|
||
Public debt (5)
|
131.2
|
130.9
|
130.0
|
128.1
|
126.7
|
||
Nominal GDP based on unchanged legislation (absolute val. x 1,000)
|
1727.4
|
1757.0
|
1777.9
|
1823.3
|
1868.9
|
1914.5
|
|
Nominal GDP based on policy scenario (absolute val. x 1,000)
|
1727.4
|
1757.0
|
1778.6
|
1828.4
|
1875.5
|
1918.9
|
|
(1) Discrepancies, if any, are due to rounding.
(2) Net of one-offs and the cyclical component.
(3) Gross or net of Italy’s relevant shares of the loans to Member States of the EMU, bilateral or
through the EFSF, and of the contribution to the capital of the ESM. At the end of 2018, the amount of these shares was equal to approximately 58.2 billion, of which 43.9 billion for bilateral loans
and through the EFSF and 14.3 billion for the ESM programme (see Bank of Italy, ‘Statistical Bulletin - The Public Finances, borrowing requirement and debt’ of March 15, 2019). The estimates consider
proceeds from privatisation and other financial income equal to 1 percent of GDP in 2019, 0.3 percent of GDP in 2020 and 0 in subsequent years. Moreover, a reduction of the MEF’s liquidities of 0.1
percent of GDP for each year from 2019 to 2021 is assumed. The interest rates scenario used for the estimates are based on the implicit forecasts resulting from the forward rates on Italian government
bonds of the period for the compilation of the present document.
(4) Gross of Italy’s relevant shares of the loans to Member States of the EMU, bilateral or through
the EFSF, and of the contribution to the capital of the ESM. The estimates consider proceeds from privatisation and further savings intended to fund depreciation equal to 1.0 percent of GDP in 2019
and to 0.3 percent of GDP in 2020.
(5) Gross of Italy’s relevant shares of the loans to Member States of the EMU, bilateral or through
the EFSF, and of the contribution to the capital of the ESM. The estimates consider proceeds from privatisation and further savings intended to fund depreciation equal to 0.3 percent of GDP in 2019
and in 2020.
|
MINISTRY OF ECONOMY AND FINANCE
|
9
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
• |
Draft law to delegate to the Government for the adoption of provisions for fighting violence at sporting events (Chamber Act
1603-TER);
|
• |
Draft law containing delegations to the Government for the improvement of Public Administrations (Senate Act 1122).
|
10
|
MINISTRY OF ECONOMY AND FINANCE
|
FIGURE II.1: GLOBAL COMPOSITE PMI AND WORLD TRADE
(index; % var. y/y RHS)
|
![]() |
Source: CPB and Markit.
|
MINISTRY OF ECONOMY AND FINANCE
|
11
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
12
|
MINISTRY OF ECONOMY AND FINANCE
|
II. MACROECONOMIC FRAMEWORK
|
MINISTRY OF ECONOMY AND FINANCE
|
13
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
14
|
MINISTRY OF ECONOMY AND FINANCE
|
II.
MACROECONOMIC FRAMEWORK
|
MINISTRY OF ECONOMY AND FINANCE
|
15
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
FIGURE II.2: PERFORMANCE OF 10 YEAR GOVERNMENT SECURITIES
|
![]() |
Source: Bloomberg.
|
16
|
MINISTRY OF ECONOMY AND FINANCE
|
II. MACROECONOMIC FRAMEWORK
|
FIGURE II.3: BRENT AND FUTURES PRICE
|
![]() |
Source: Thomson Reuters Datastream.
|
MINISTRY OF ECONOMY AND FINANCE
|
17
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
18
|
MINISTRY OF ECONOMY AND FINANCE
|
II. MACROECONOMIC FRAMEWORK
|
MINISTRY OF ECONOMY AND FINANCE
|
19
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
20
|
MINISTRY OF ECONOMY AND FINANCE
|
II. MACROECONOMIC FRAMEWORK
|
MINISTRY OF ECONOMY AND FINANCE
|
21
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
FIGURE II.4: PMI AND GLOBAL ECONOMIC
POLICY UNCERTAINTY INDEX
|
![]() |
Source: Markit, S.R. Baker, N. Bloom & S. J. Davis
www.PolicyUncertainty.com
|
FIGURE II.5: EXPORTS OF GOODS AND
SERVICES FROM ITALY AND OTHER MAJOR EU COUNTRIES (national accounting data, percentage changes, value data)
|
![]() |
Source: Eurostat.
|
22
|
MINISTRY OF ECONOMY AND FINANCE
|
II. MACROECONOMIC FRAMEWORK
|
FIGURE II.6: PRICE COMPETITIVENESS INDEXES (January 2017 indexes = 100,
based on producer prices in manufacturing)
|
![]() |
Source: Analysis based on Bank of Italy data.
|
MINISTRY OF ECONOMY AND FINANCE
|
23
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
FIGURE
II.7: EXPORTS OF ITALIAN GOODS TO MAJOR EU COUNTRIES
(January
2017 indexes = 100, seasonally adjusted data)
|
FIGURE II.8: EXPORTS OF ITALIAN GOODS TO MAJOR
NON-EU COUNTRIES
(January 2017 indexes = 100, seasonally adjusted data)
|
|
![]() |
![]() |
|
Source: Analysis based on ISTAT Coeweb data
|
24
|
MINISTRY OF ECONOMY AND FINANCE
|
II. MACROECONOMIC FRAMEWORK
|
F
O
C
U
S
|
Performance of Italian exports: obstacles and
the impact of external shocks
Among the various aspects relating to the performance of Italian exports, the recent
ISTAT Report14 indicates the factors that have most influenced export company activity
and the transmission of external shocks onto the various sectors. Turnover improved for 43 percent of Italian enterprises, thanks to higher investment and an increase
in employment, including of highly qualified personnel; however, the companies reporting a decrease rose to 22 percent (+2 pp). Manufacturing companies (about one
third) believe that foreign competition was the factor that worsened foreign turnover the most, while the pressure on prices by other Italian companies or bureaucratic
obstacles (including tariff barriers) are considered of little importance (12.4 and 11.1 percent respectively).
Sectoral competition among Italian businesses is a negative factor, especially when it
comes to non-metallic mineral products and leather goods; there is still pressure from foreign competitors in various sectors (oil and wood products, processing of
non-metallic minerals, metallurgy, metal products and machinery). About 40 and 20 percent of the companies in the automotive and metallurgy sectors report having
suffered from the ‘war of duties’.
Moving on to the effect of economic shocks on sector trends, the Social Network Analysis
of international interconnections allows us to determine to what extent the Italian foreign sector absorbs changes pertaining to the economic cycle or technological
progress. Investigations into the relationships of the Italian exporting sectors with Germany, the United States and China for the year 2014 reveal that four industry
sectors (machinery, chemicals, motor vehicles, metallurgy and metal products) have very close import/export ties with these three countries. Other sectors
(construction, non-metallic mineral products and health services) are shown to be significant for foreign sales in relation to their high degree of interconnection with
the markets considered; the service sector appears to be less important.
To summarise, the most advanced sectors of Italian industry and services have a greater
weight in connections with foreign countries than in domestic connections, with connections with Germany and the US being the most significant. For construction and
services (market and public), domestic inter-sectoral ties are predominant.
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ECONOMIC AND FINANCIAL DOCUMENT - SECT.
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FIGURE II.9: INTEREST RATES
FOR NON-FINANCIAL CORPORTATIONS AND HOUSEHOLDS (%)
|
![]() |
Note: The data refer to the harmonized rates applied to new loans
in euros.
Source: Bank of Italy.
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MINISTRY OF ECONOMY AND FINANCE
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II. MACROECONOMIC
FRAMEWORK
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FIGURE II.10: NON-PERFORMING LOANS TO RESIDENTS (as a
percentage of total loans)
|
![]() |
Source: Bank of Italy.
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ECONOMIC AND FINANCIAL DOCUMENT -
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F
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Forecast errors for 2018 and revision of
estimates for 2019 and the following years17
This is an in-depth analysis of the revision of growth forecasts formulated in the
Update to the Macroeconomic and Public Finance Framework published last December.
Firstly, we will analyse the deviations between the values forecast for 2018 and
the final figures published by ISTAT in March. These deviations are shown below in Table R1 (Column C, Forecast error).
Please bear in mind that the previous forecasts for 2018 were formulated in December and included the results of the third quarter and that the ISTAT data
published in March also include subsequent revisions; the differential reported in Column c is therefore attributable to both the fourth quarter forecast error
and the revision of the previous quarters.
As to the GDP, the forecasts were slightly higher than the final ISTAT figures,
mainly due to the 4Q18 performance, which was worse than expected. Based on the analysis of the aggregate demand components, which show worse than expected final
data on investments, the Italian economy was particularly penalized by the slowdown in the manufacturing sector globally and in particular in Germany. Italy’s
production of investment goods is closely linked to global demand and the supply chains in which Germany participates.
For 2019, it is possible to formulate indications on the scenario based on
unchanged legislation of the EFD (Italy’s Economic Planning Document) considering not only the data update but also the new assumptions on the international
macroeconomic scenario.
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TABLE R1: MACROECONOMIC
SCENARIO KEY VARIABLES (seasonally adjusted data)
|
||||||||||
|
2018
|
2019
|
||||||||
Forecasts and results
|
Factors accounting for
revision of the growth estimates (differences of growth rates)
|
Forecast
|
Delta – forecast and other
factors
|
|||||||
Update December 2018
|
Actual
|
Forecast
error
|
Delta -carry-over
effect |
Delta -international
scenario |
Update December 2018
|
DEF 2019
|
DEF –Update December 2018
|
Other
factors
|
||
a
|
b
|
c = b-a
|
d
|
e
|
f
|
g
|
h = g-f
|
i=h-d-e
|
||
GDP
|
0.9
|
0.8
|
-0.2
|
-0.2
|
-0.2
|
1.0
|
0.1
|
-0.81
|
-0.4
|
|
Imports of goods and services
|
1.9
|
1.8
|
-0.1
|
-0.3
|
-0.4
|
2.3
|
2.3
|
0.0
|
0.7
|
|
Household consumption
|
0.6
|
0.6
|
0.0
|
0.0
|
0.0
|
0.8
|
0.6
|
-0.2
|
-0.2
|
|
Gross fixed investment
|
4.0
|
3.2
|
-0.8
|
-0.4
|
0.1
|
2.5
|
0.7
|
-1.9
|
-1.5
|
|
Exports of goods and services
|
0.9
|
1.4
|
0.5
|
0.4
|
-1.0
|
2.4
|
2.1
|
-0.3
|
0.4
|
|
GDP deflator
|
1.1
|
0.8
|
-0.3
|
-0.2
|
0.0
|
1.4
|
0.9
|
-0.4
|
-0.2
|
|
Private Consumption deflator
|
1.1
|
1.1
|
0.0
|
0.0
|
0.2
|
1.4
|
1.0
|
-0.4
|
-0.6
|
Column D (Delta -carry-over effect) shows the difference of the statistical
carry-over effect of 2018 on 2019 between the value estimated in the last official update and the final value; in essence, this value shows how much the 2019
annual forecast would change due to the updating of the 2018 data with the same previous growth assumptions in each quarter of 2019. For the GDP, the carry-over
effect change is negative at -0.2 percentage points. The result below expectations of 4Q18 (-0.1 percent Q/Q) weighs on the carry-over effect. The carry-over on
the growth rate of the GDP deflator is also slightly negative, with repercussions on the nominal GDP estimate.
The revision of the international situation for December is explained in Column
E (Delta - International scenario), which shows the impact on the main variables estimated using the econometric model of the Treasury Department. The effect of
the new international framework is also negative and is affected by the significant downward revision of global demand gauged for Italy.
To summarise, the combined effect of the two variations explains half of the
downward GDP revision as shown in Column I (Other factors), which shows the difference between the actual forecast
revision (Column H = EFD-DBP) and the revision amount suggested by data analysis. The other half of the revision is linked to the still modest trend in GDP
expected for the first half of 2019, which is explained by an increased level of uncertainty and the slowdown in European manufacturing, especially in Germany,
still not fully considered by international exogenous variables.
Table R2 summarizes the impact on GDP growth of international developments,
comparing it with the assumptions made in the December 2018 Update.
Foreign demand dynamics gauged for Italy in the last quarter of 2018 resulted
weaker than those forecast in December and the estimates for 2019 were revised downwards from 3.9 percent to 2.3 percent. Consequently, the negative impact of
global demand on Italian exports and thus on GDP turns out to be greater in 2019, with a reduction in growth of 0.3 percent in 2019 and 0.1 percent in 2020.
However, for 2021, a 0.1 point growth increase is estimated.
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Late 2018 was characterized by a sudden fall of the oil prices ending in
December; while in early 2019, prices rose again. The current projections based on futures contracts foresee a modest reduction in oil price until 2022. In
contrast to December’s predictions, prices are slightly higher over the whole forecast horizon, especially in 2019 and 2020. This would lead to an impact of
-0.1 points on GDP in 2020.
On the exchange rates front, in 2018, there was a depreciation of the euro
against the dollar, which seems to be persisting into early 2019. For the currency forecast, we adopted a technical assumption that requires the exchange rate
to remain unchanged over time and equal to the average of the last 10 working days. The update of the effective nominal exchange rate compared to December
shows a 0.6 percent greater depreciation of the euro compared to other currencies in 2019. The macroeconomic impact is up by 0.1 percentage points on GDP
growth in 2019 and 2020.
The profile of the interest rates on government bonds proves most
accommodating for the economy in the three-year period 2019-2021. Furthermore, a reduction is foreseen in the differential between BTP and ten-year BUND and
improved credit conditions. According to econometric model estimates, these effects would bring a growth benefit of 0.2 points in 2020 and 0.3 points in 2021.
Altogether, the new international setting is less favourable with respect to
the December update in 2019, due to the slowdown in global demand, only partially offset by the benefits deriving from euro depreciation. According to
econometric model estimates, the economy will benefit from 0.4 points growth in 2021 due to the more favourable interest rates.
|
TABLE R2: ESTIMATED
EFFECT OF CHANGES IN INTERNATIONAL EXOGENOUS VARIABLES (IMPACT ON GROWTH RATES)
|
|||||
2018
|
2019
|
2020
|
2021
|
||
1. World trade
|
0.0
|
-0.3
|
-0.1
|
0.1
|
|
2. Nominal effective exchange rate
|
0.0
|
0.1
|
0.1
|
0.0
|
|
3. Oil price
|
0.0
|
0.0
|
-0.1
|
0.0
|
|
4. Interest rate assumptions
|
0.0
|
0.0
|
0.2
|
0.3
|
|
Risk (or sensitivity) analysis of exogenous variables
|
The international scenario envisaged in terms of general macroeconomic trends
contributes decisively to the evolution of the Italian economy, notoriously open towards foreign trade. World trade dynamics, exchange rates, oil prices and
financial market conditions outline the international scenario and the profile of these variables reflects standard projection methods employed at major
national and international forecasting centres. Since these variables appear to have uncertain trends, it seems appropriate to provide an assessment of some
of the risks inherent in the overview at unchanged legislation. Using the ITEM econometric model, we simulated some alternative scenarios with main
international exogenous variables different from those foreseen in the overview based on unchanged legislation, in order to assess possible impacts on the
growth of the Italian economy. We designed four alternative scenarios, each focusing on a specific element of (positive and negative) risk for the national
economy. The first three simulations refer to exogenous variables of the international framework: global demand, nominal effective exchange rate for Italy and
oil price.
The second half of 2018 was characterized by the gradual slowdown in world trade leading to a downward revision of its growth prospects for 2019. For the
current year, the predicted growth rate of global demand for Italy is 2.3 percent lower than both in 2018 and envisaged for this year in the last EFD
Update. In this context, the dynamics of global demand accelerates in 2020 (3.9 percent) and stabilizes in the following two years (3.8 and 3.7 percent,
respectively). However, uncertainty about the growth prospects of some emerging economies leads us to consider a further unfavourable scenario in which the
global demand
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II. MACROECONOMIC
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growth rate gauged for Italy is 0.3 points lower than the baseline scenario in 2019 and one percentage point lower in the following three years18. With regard to the trend in exchange rates, the framework at unchanged
legislation adopts the technical assumption of constant exchange rates over the forecast horizon19; the alternative scenario, on the other hand, uses bilateral forward exchange rates with different contractual maturities
until 2022. This approach gives rise to a lower depreciation of the nominal effective exchange rate in 2019 compared to the baseline scenario (by 0.7 and 0.4
percent, respectively). In the following three years there is instead an overall 3.2 percent appreciation of the euro (understood as a change in the nominal
effective exchange rate) as opposed to the lack of change predicted in the scenario based on unchanged legislation.
The third risk scenario concerns oil prices. The scenario at unchanged
legislation is based on the price of crude oil futures contracts and foresees a gradual reduction in oil price from $64.8 a barrel in 2019 to $61.7 in 2022.
The alternative scenario assumes crude oil prices that are $10 higher than the reference scenario, starting in the second quarter of 2019 (for example, a $72
per barrel oil price is assumed for 2019).
Lastly, with regard to the financial conditions of the economy, a more
favourable scenario is considered compared to the scenario at unchanged legislation. A scenario of greater saver and financial operator confidence is assumed
in which, from the second quarter of 2019, the rate of return on ten-year BTPs is 100 basis points lower than the corresponding baseline scenario. Therefore,
in this scenario, the lower BTP-BUND spread would affect the interest rates charged by banks, making the terms of loans to private individuals more
favourable.
The results of the risk sensitivity analysis of the macroeconomic scenario at
unchanged legislation are shown in Table R1. Reduced growth in global demand weakens Italian export dynamics and leads to a fall in product growth in the
four-year period 2019-2022. In 2022, GDP stands at around 0.7 percentage points lower than the corresponding baseline scenario. The appreciation of the euro
(in particular the nominal effective exchange rate for the Italian economy) and the increase in oil prices may also slow growth in the coming years. In terms
of financial conditions, the assumption of a more favourable scenario associated with lower risk premiums demanded by investors has favourable effects on GDP
as well as on consumption and investment.
In conclusion, due to the uncertainty of the international scenario, three
risk scenarios were assumed that weaken the growth of the Italian economy through less lively foreign demand or a less favourable trend in exchange rates and
crude oil prices. On the other hand, improved financial conditions would generate benefits that would be transferred primarily to domestic demand.
|
TABLE R1:
IMPACT OF RISK SCENARIOS ON GDP (impact on growth rates)
|
|||||
2019
|
2020
|
2021
|
2022
|
||
World trade
|
-0.1
|
-0.2
|
-0.2
|
-0.2
|
|
Nominal effective exchange rate
|
0.0
|
-0.2
|
-0.4
|
-0.3
|
|
Oil price
|
-0.1
|
-0.3
|
-0.1
|
0.0
|
|
More favourable financial conditions
|
0.0
|
0.3
|
0.4
|
0.4
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MINISTRY OF ECONOMY AND FINANCE
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II. MACROECONOMIC FRAMEWORK
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F
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An assessment of the
macroeconomic impact of the Citizen’s Income measures
The purpose of this box is to evaluate the macroeconomic effects of the
Government’s actions concerning citizen’s income and pension adopted by Decree Law 4 of 28 January 2019, later amended and converted into Law 26 of 28
March 2019. Citizen’s Income is an income support scheme for poor households accompanied by measures to encourage beneficiaries to engage in the labour
market and find employment.
The provision defines the intended beneficiaries of the benefit, the
financial eligibility requirements and the total annual sum provided, which depends on the household, income and home ownership status. In 2019, the
Budget Law allocated 7.1 billion of public funding to the scheme, of which 5.6 billion for Citizen’s Income and 274 million for the continuation of the
Inclusion Income. The remaining amount was considered higher expenditure for improving job centres and active labour market policies. In 2020 and 2021,
the overall allocations amount to 8.1 and 8.3 billion, of which 7.2 and 7.4 billion for benefit disbursement and the rest for job centres and active
employment policies. A total cost of 8.3 billion has been forecast for 2022 and the years following.
According to ISTAT estimates, the recipients of citizen’s income and
pension could reach 2.706 million, of which 1.791 million of working age (16-64); of these, 57 percent are either employed or seeking employment. Because
eligibility for Citizen’s Income is subject to actively seeking work, this measure should immediately increase participation in the labour market through
recourse to job centres by persons previously not seeking employment. ISTAT has estimated that the national workforce will increase by 470,000 thanks to
this Government action.
The macroeconomic impact of the Citizen’s Income was evaluated using the
ITEM econometric model. The simulation was drawn as follows: the payment of citizen’s income and pension is assimilated to a current transfer to
households assuming that they will increase compared to the baseline scenario from the second quarter of 2019. The costs of improving job centres are
classified as higher public spending to increase the number of centre operators. In line with the ISTAT estimate, we also assume an exogenous increase in
workforce compared to the baseline scenario from the second quarter of 2019, reaching 470,000 units in the second quarter of 2020 and remaining at this
level in the years following. This increase occurs gradually, also due to the technical characteristics of the ISTAT sample survey, which form the basis
of the statistical employment and unemployment data considered in the macroeconomic forecast.
The assessment involved certain additional assumptions. Firstly, the
assumption of a marginal propensity to consume in relation to disposable income of 0.8, from the very beginning. This level coincides with that implicit
in the model, although in the model it is reached more gradually over time. This decision takes into account the evidence that less well-off individuals,
for whom the measure was put in place, have a higher than average propensity to consume, including in the short term, and the fact that ITEM, as an
aggregate model, is unable to illustrate the variations in behaviour according to individual income. Furthermore, the provision envisages penalties in the
event that the monthly payment of the financial benefit does not result in consumption expenditure for the same month. On the other hand, a 0.8 propensity
to consume is consistent with the hypothesis that some beneficiaries may increase their propensity to save on incomes other than the Citizen’s Income.
Another aspect concerns the trend in average wages and employment. In
general, an exogenous increase in labour market participation should lead to an increase in
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MINISTRY OF ECONOMY AND FINANCE
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ECONOMIC AND
FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
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unemployment and, consequently, wage deflation. Both the increase in
labour supply compared to the baseline scenario and the lower bargaining power of workers due to higher unemployment contribute to this effect in the
model. However, in the simulation of the model, it was assumed that salaries would remain unchanged with respect to the baseline scenario for the first
two years of the simulation horizon, given that the exogenous increase in labour supply associated with enrolment at job centres is initially purely
statistical and will become reality over time. On the contrary, starting from the third year (2021), salaries are allowed to vary endogenously in the
model; these tend to decrease compared to the baseline scenario, in part because the entry level wages for new employees are often lower than the
national average salary. This occurs despite the fact that the provision established a minimum wage (858 euro) to be used as a benchmark for assessing
offers of work, against which refusal to accept a job leads to loss of Citizen’s Income.
Furthermore, it is reasonable to assume that strengthening job centres
may partly improve the functioning of the labour market, with a positive impact on employment from the third year, in addition to that of the first year
pertaining to the greater aggregate demand triggered by the scheme. An increase in the demand for work tends to reabsorb in part the unemployment rate
compared to the baseline scenario and goes hand in hand with lower salary levels. It is hoped that the effect of active employment policies, such as
higher training, together with the effect of the minimum wage defined in the provision as a benchmark for an appropriate job offer, will lift wages
above the baseline scenario in the medium to long term. This would reduce the population eligible for the Citizen’s Income, insofar as more low-income
workers would earn salaries above the income support threshold.
The macroeconomic impact of the Citizen’s Income is shown in Table R1.
The percentage variation in GDP increases by 0.2 percentage points compared to the baseline scenario in 2019 and in 2020 and by 0.1 percentage points in
2021. After four years, in 2022, the level of the product is 0.5 percentage points higher than that of the baseline scenario. Considering that the
overall costs of public funding of the measure ex ante is around 0.4 percentage points of GDP each year, the results recorded in Table R1 reflect an
implicit multiplier on the product of 0.6 in the first year, 1 in the second and 1.1 in the third.
|
TABLE
R1: ASSESSMENT OF THE MACROECONOMIC IMPACT OF CITIZEN’S INCOME (differences in percentage variation rates compared to the baseline scenario)
|
|||||
|
2019
|
2020
|
2021
|
2022
|
|
GDP
|
0.2
|
0.2
|
0.1
|
0.0
|
|
GDP deflator
|
0.1
|
0.0
|
0.0
|
0.0
|
|
Consumption deflator
|
0.0
|
0.0
|
0.1
|
0.0
|
|
Consumption
|
0.5
|
0.2
|
0.1
|
0.1
|
|
Investment
|
0.1
|
0.4
|
0.0
|
0.0
|
|
Exports
|
0.0
|
0.0
|
0.0
|
0.0
|
|
Imports
|
0.1
|
0.4
|
0.0
|
0.2
|
|
Employment
|
0.1
|
0.2
|
0.4
|
0.4
|
|
Participation rate (*)
|
0.4
|
1.2
|
1.3
|
1.5
|
|
Unemployment rate (*)
|
0.4
|
1.3
|
1.2
|
0.9
|
|
(*) Difference compared to the baseline scenario
|
The expansive effect on economic activity is determined by consumption
deriving from higher disposable income due to the income support scheme and greater employment. In
|
34
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MINISTRY OF ECONOMY AND FINANCE
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II. MACROECONOMIC FRAMEWORK
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2022, employment is up by 1.1 percentage points compared to the baseline
scenario, with an increase of 260,000 in work20. The unemployment rate
increases, reaching a 1.3 percentage points higher than the baseline scenario in 2020. This gap gradually narrows n the following years.
|
F
O
C
U
S |
An assessment of the
macroeconomic effects of pension measures
Legislative Decree 4 of 28 January 2019, converted with amendments into
Law 26 of 28 March 2019, includes several retirement pension measures in addition to the Citizen’s Income. The principal regulatory amendment concerns
the new access channel to pensions, introducing the joint requirement of at least 38 years of pension contributions and being at least 62 years of age
(known as ‘Quota 100’). The possibility of early retirement through the ‘Quota 100’ mechanism is only granted to those who meet the requirements between
2019 and 2021. Furthermore, the years of contributions for early retirement is reduced by five months, bringing it to 42 years and 10 months for men and
41 years and 10 months for women. It is also established that these requisites shall not be adjusted for life expectancy increases until 202621. The decree technical report, based on estimates of the early
retirement take-up rate, predicts the greatest number of retirement benefits at the end of each year in relation to the provision, together with the
corresponding annual cost for public finance. In particular, the greatest number of pensions associated with the provision is estimated at 290,000 at
the end of 2019, 327,000 at the end of 2020 and 356,000 and 296,000 at the end of 2021 and 2022. In the first four years, the greatest expense would
amount to 3.8 billion in 2019. 7.9 billion in 2020, 8.4 billion in 2021 and 7.9 billion in 2022. For private employees who benefit from retirement under
the new requirements, early severance indemnity devolved to the INPS management fund must also be considered. The effects of this aspect for public
finance constitute costs of 585 million in 2019, while they are lower in 2020 and 2021; for the following years, the effects are of savings instead.
This box shows the results of the assessment of the macroeconomic impact
of the measure, performed using the ITEM econometric model. The increase in number of pensions was distributed according to type of worker according to
the estimates of the technical report, which distinguishes at the end of each year early retirement figures for employees in the private sector,
self-employed workers and state employees. These methods thus included the exogenous decrease in employment for each of the three sectors.
All other conditions being equal, the contraction in the
number of persons in employment following the new retirement scheme would leads to a corresponding reduction in the workforce. A similar decrease in
both employment and workforce would push the unemployment rate above the baseline scenario. However, the generational turnover, i.e. the replacement
of workers who opted for ‘Quota 100’ with new recruits, pushes in the
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ECONOMIC AND
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opposite direction. If we assume that the new recruits come entirely
from among the unemployed, a replacement rate of 10 percent would be enough to guarantee the unemployment rate stays the same. Therefore, if, as is
plausible, the generational turnover is above 10 percent, the unemployment rate will drop with other conditions being equal.
The results are shown in Table R1. The percentage variation in GDP
remains unchanged in 2019 compared to the baseline scenario, increases by 0.1 percentage points both in 2020 and 2021 and remains unchanged in 2022.
After four years, in 2022, the product level therefore increases by 0.2 percentage points compared to the baseline scenario. The 2019 GDP trend is
negatively affected by the decrease in public sector value added, measured based on employee numbers in the general government sector.
|
TABLE
R1: ASSESSMENT OF THE MACROECONOMIC IMPACT OF SOCIAL SECURITY MEASURES (differences in percentage variation compared to the baseline scenario)
|
|||||
2019
|
2020
|
2021
|
2022
|
||
GDP
|
0.0
|
0.1
|
0.1
|
0.0
|
|
GDP deflator
|
-0.1
|
0.0
|
0.1
|
0.2
|
|
Consumption deflator
|
-0.1
|
-0.1
|
0.1
|
0.2
|
|
Consumption
|
0.1
|
0.2
|
0.2
|
0.0
|
|
Employment
|
-0.3
|
-0.2
|
0.1
|
0.1
|
|
Participation rate (*)
|
-0.1
|
-0.3
|
-0.3
|
-0.3
|
|
Unemployment rate (*)
|
-0.2
|
-0.6
|
-0.8
|
-0.9
|
|
(*) Difference compared to the baseline scenario.
|
The employment trend in the second half of 2019 is affected by the
exit from the labour market of subscribers to the scheme and their partial replacement by new recruits. The replacement rate is estimated by the ITEM
model at around 35 percent. In subsequent years, the percentage replacement estimated by the model stands at between 70 and 80 percent of early
retirement22. The gradual reduction in unemployment compared to the
baseline scenario, reaches 0.9 percentage points in the fourth year (2022). This, together with the fact that lower unemployment generates a slight
upward pressure on wages, has a positive effect on private consumption, which, after three years, is 0.5 percentage points greater than the baseline
scenario.
The results obtained show an increase in labour productivity compared
to the baseline scenario, which reaches 0.5 percentage points in the third year. This increase can be attributed to a greater intensity of use of the
labour factor, especially at the beginning of the simulation period. Subsequently, the gradual introduction of new recruits to the production process
brings productivity back down to baseline scenario levels. The effects on the average salary are initially negative (due to the change in composition
of employees), whereas they become positive later on. This is also reflected in the variation in GDP deflator, slightly lower than the baseline
scenario in the first year, zero in the second and positive in 2021 and 2022.
|
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MINISTRY OF ECONOMY AND FINANCE
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II. MACROECONOMIC FRAMEWORK
|
TABLE II.1: MACROECONOMIC SCENARIO based on
unchanged legislation (percentage variations, unless otherwise indicated) (1)
|
|||||
2018
|
2019
|
2020
|
2021
|
2022
|
|
INTERNATIONAI EXOGENEOUS
VARIABLES
|
|||||
World Trade
|
3.8
|
2.5
|
3.7
|
3.8
|
3.9
|
Oil Price (Brent, USD/barrel, futures)
|
71.3
|
64.8
|
64.6
|
62.9
|
61.7
|
USD/EUR exchange rate
|
1.181
|
1.135
|
1.134
|
1.134
|
1.134
|
ITALY MACRO DATA (VOLUMES)
|
|||||
GDP
|
0.9
|
0.1
|
0.6
|
0.7
|
0.9
|
Imports
|
2.3
|
2.2
|
2.5
|
2.5
|
2.5
|
Domestic final consumption
|
0.5
|
0.4
|
0.6
|
0.6
|
0.6
|
Household consumption and NPISH
|
0.6
|
0.6
|
0.6
|
0.7
|
0.8
|
Government expenditure
|
0.2
|
-0.3
|
0.4
|
0.1
|
0.0
|
Investment
|
3.4
|
0.7
|
1.2
|
1.3
|
1.5
|
- machinery, equipment and
intangible assets
|
2.1
|
0.1
|
1.1
|
1.3
|
1.6
|
- transportation means
|
14.5
|
-1.4
|
1.3
|
1.4
|
1.4
|
- construction
|
2.6
|
1.4
|
1.3
|
1.3
|
1.4
|
Exports
|
1.9
|
2.1
|
2.3
|
2.5
|
2.6
|
Memo item: Current account balance (% of GDP)
|
2.6
|
2.6
|
2.5
|
2.5
|
2.5
|
CONTRIBUTIONS TO GDP GROWTH (1)
|
|||||
Net exports
|
-0.1
|
0.0
|
0.0
|
0.0
|
0.1
|
Inventories
|
0.0
|
-0.2
|
0.0
|
0.0
|
0.0
|
Domestic demand net of inventories
|
1.0
|
0.4
|
0.7
|
0.7
|
0.8
|
PRICES
|
|||||
Imports deflator
|
2.9
|
1.7
|
1.8
|
1.7
|
1.6
|
Exports deflator
|
1.7
|
1.4
|
1.7
|
1.6
|
1.6
|
GDP deflator
|
0.8
|
1.0
|
1.9
|
1.7
|
1.5
|
Nominal GDP
|
1.7
|
1.2
|
2.6
|
2.5
|
2.4
|
Consumption deflator
|
1.1
|
1.0
|
2.3
|
1.8
|
1.5
|
LABOUR
|
|||||
Cost of Labour
|
2.0
|
1.2
|
1.3
|
1.2
|
1.6
|
Productivity (measured on GDP)
|
0.1
|
0.3
|
0.4
|
0.3
|
0.3
|
ULC (measured on GDP)
|
1.9
|
0.9
|
0.9
|
1.0
|
1.3
|
Employment (FTEs)
|
0.8
|
-0.2
|
0.2
|
0.5
|
0.6
|
Unemployment rate
|
10.6
|
11.0
|
11.2
|
10.9
|
10.6
|
Employment rate (age 15-64)
|
58.5
|
58.7
|
58.9
|
59.3
|
59.8
|
Memo item: Nominal GDP
(absolute values in millions of euro)
|
1,756,982
|
1,777,899
|
1,823,329
|
1,868,945
|
1,914,457
|
(1) Discrepancies, if any, are
due to rounding.
|
|||||
(2) Source: ISTAT.
|
|||||
Note: The macroeconomic
scenario relating to international exogenous variables was developed based on the information available as at 9 April 2019.
|
|||||
GDP and components by volume
(chained values in reference year 2010), data not adjusted for business days.
|
MINISTRY OF ECONOMY AND FINANCE
|
37
|
ECONOMIC AND
FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
TABLE II.2: BASE ASSUMPTIONS
|
|||||
|
2018
|
2019
|
2020
|
2021
|
2022
|
Short-term interest rate (1)
|
n.a.
|
-0.01
|
0.85
|
1.75
|
2.39
|
Long-term interest rate
|
2.54
|
2.73
|
3.13
|
3.49
|
3.77
|
USD/EUR exchange rates
|
1.181
|
1.135
|
1.134
|
1.134
|
1.134
|
Change in the nominal effective exchange rate
|
2.8
|
-0.7
|
0.0
|
0.0
|
0.0
|
World GDP, excluding EU
|
3.9
|
3.3
|
3.5
|
3.6
|
3.6
|
EU GDP
|
1.9
|
1.5
|
1.7
|
1.6
|
1.6
|
Global demand weighted for Italy
|
3.9
|
2.3
|
3.9
|
3.8
|
3.7
|
World imports volumes, , excluding EU
|
3.9
|
2.4
|
4.0
|
4.1
|
4.1
|
Oil price (Brent, USD/barrel)
|
71.3
|
64.8
|
64.6
|
62.9
|
61.7
|
(1) Short-term interest rate is understood to
mean the average of the rates applied to 3-month government bonds issued during the year. Long-term interest rate is understood to mean the
average of the rates applied to 10-year government bonds issued during the year.
|
TABLE
II.3a: MACROECONOMIC PROSPECTS
|
||||||
|
2018
|
2018
|
2019
|
2020
|
2021
|
2022
|
Level (1)
|
% Variations
|
|||||
Real GDP
|
1,614,865
|
0.9
|
0.2
|
0.8
|
0.8
|
0.8
|
Nominal GDP
|
1,756,982
|
1.7
|
1.2
|
2.8
|
2.6
|
2.3
|
REAL GDP COMPONENTS
|
||||||
Private consumption (2)
|
969,098
|
0.6
|
0.6
|
0.7
|
0.7
|
0.6
|
Public spending (3)
|
314,173
|
0.2
|
-0.4
|
0.8
|
0.1
|
-0.1
|
Gross fixed investment
|
296,078
|
3.4
|
1.4
|
2.0
|
1.8
|
1.6
|
Inventories (% of GDP)
|
0.0
|
-0.2
|
0.0
|
0.0
|
0.0
|
|
Exports of goods and services
|
517,576
|
1.9
|
2.1
|
2.3
|
2.4
|
2.6
|
Imports of goods and services
|
484,721
|
2.3
|
2.2
|
2.7
|
2.6
|
2.5
|
CONTRIBUTIONS TO REAL GDP GROWTH
|
||||||
Domestic demand
|
-
|
1.0
|
0.5
|
0.9
|
0.8
|
0.7
|
Change in inventories
|
-
|
0.0
|
-0.2
|
0.0
|
0.0
|
0.0
|
Net exports
|
-
|
-0.1
|
0.0
|
-0.1
|
0.0
|
0.1
|
(1) Millions.
|
||||||
(2) Final consumption spending of households and
non-profit private social institutions serving households (I.S.P.).
|
||||||
(3) Public administrations.
|
||||||
Note: Discrepancies, if any, are due to
rounding.
|
38
|
MINISTRY OF ECONOMY AND FINANCE
|
II. MACROECONOMIC FRAMEWORK
|
TABLE II.3b: PRICES
|
||||||
2018
|
2018
|
2019
|
2020
|
2021
|
2022
|
|
Level
|
||||||
GDP deflator
|
108.8
|
0.8
|
1.0
|
2.0
|
1.8
|
1.6
|
Private consumption deflator
|
110.1
|
1.1
|
1.0
|
2.3
|
1.9
|
1.6
|
HICP
|
102.5
|
1.1
|
1.0
|
2.3
|
1.9
|
1.6
|
Public consumption deflator
|
105.3
|
2.1
|
0.7
|
1.2
|
0.0
|
0.4
|
Investment deflator
|
106.6
|
0.5
|
0.6
|
1.6
|
1.9
|
1.7
|
Export deflator
|
107.8
|
1.7
|
1.4
|
1.7
|
1.7
|
1.6
|
Import deflator
|
106.0
|
2.9
|
1.7
|
1.8
|
1.7
|
1.5
|
TABLE II.3c: LABOUR MARKET
|
||||||
2018
|
2018
|
2019
|
2020
|
2021
|
2022
|
|
Level
|
||||||
Employment (national accounts)
|
25,335
|
0.9
|
-0.3
|
0.2
|
0.7
|
0.6
|
Total hours worked
|
43,641,891
|
1.1
|
-0.2
|
0.3
|
0.7
|
0.6
|
Unemployment rate
|
10.6
|
11.0
|
11.1
|
10.7
|
10.4
|
|
Labour productivity measured on the employment
|
63,739
|
0.0
|
0.6
|
0.6
|
0.0
|
0.0
|
Labour productivity measured on hours worked
|
37.0
|
-0.2
|
0.4
|
0.5
|
0.1
|
0.1
|
Compensation of employees
|
706,934
|
3.3
|
1.3
|
1.8
|
1.9
|
2.2
|
Compensation per employee
|
41,265
|
2.0
|
1.2
|
1.5
|
1.3
|
1.6
|
(1) Units of measurement: thousands of units for
employed in national accounts and total hours worked; euro at constant values for labour productivity; millions of euro at current values for
income from employment and euro for labour costs.
|
TABLE II.3D: SECTORAL ACCOUNTS
|
|||||
% of GDP
|
2018
|
2019
|
2020
|
2021
|
2022
|
Net lending/borrowing with the rest of the world
|
2.3
|
2.3
|
2.2
|
2.1
|
2.1
|
Balance of goods and services
|
2.5
|
2.5
|
2.3
|
2.3
|
2.4
|
Balance of primary income and transfers
|
-0.1
|
-0.1
|
-0.1
|
-0.1
|
-0.2
|
Capital account
|
-0.1
|
-0.1
|
-0.1
|
-0.1
|
-0.1
|
Borrowing/surplus of the private sector
|
4.5
|
4.7
|
4.3
|
4.0
|
3.6
|
Borrowing/surplus of the public administrations
|
-2.1
|
-2.4
|
-2.1
|
-1.8
|
-1.5
|
MINISTRY OF ECONOMY AND FINANCE
|
39
|
MINISTRY OF ECONOMY AND FINANCE
|
41
|
ECONOMIC
AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
42
|
MINISTRY OF ECONOMY AND FINANCE
|
III. NET BORROWING AND PUBLIC DEBT
|
TABLE III.1 GENERAL GOVERNMENTS BUDGETARY PROSPECTS (1)
|
|||||||
2018
|
2019
|
2020
|
2021
|
2022
|
|||
Level (2)
|
As % GDP
|
As % GDP
|
|||||
Net borrowing by sector
|
|||||||
1. General government
|
-37,505
|
-2.1
|
-2.4
|
-2.0
|
-1.8
|
-1.9
|
|
2. Central government
|
-44,184
|
-2.5
|
-2.7
|
-2.2
|
-2.0
|
-2.1
|
|
3. State
|
|||||||
4. Local government
|
3,835
|
0.2
|
0.2
|
0.1
|
0.1
|
0.1
|
|
5. Social security funds
|
2,844
|
0.2
|
0.1
|
0.1
|
0.1
|
0.1
|
|
General government
|
|||||||
6. Total revenue
|
816,113
|
46.4
|
46.5
|
47.1
|
47.0
|
46.6
|
|
7. Total expenditure
|
853,618
|
48.6
|
48.9
|
49.1
|
48.8
|
48.5
|
|
8. Net borrowing
|
-37,505
|
-2.1
|
-2.4
|
-2.0
|
-1.8
|
-1.9
|
|
9. Interest payments
|
64,979
|
3.7
|
3.6
|
3.6
|
3.7
|
3.9
|
|
10. Primary surplus
|
27,474
|
1.6
|
1.2
|
1.6
|
1.9
|
2.0
|
|
11. One-off measures (3)
|
1,665
|
0.1
|
0.1
|
0.1
|
0.1
|
0.1
|
|
Selected components of revenue
|
|||||||
12. Total tax revenue
|
503,961
|
28.7
|
28.5
|
29.4
|
29.4
|
29.2
|
|
12a. Indirect taxation
|
253,607
|
14.4
|
14.5
|
15.6
|
15.7
|
15.6
|
|
12b. Direct taxation
|
248,876
|
14.2
|
14.0
|
13.7
|
13.7
|
13.5
|
|
12c. Capital tax
|
1,478
|
0.1
|
0.1
|
0.1
|
0.1
|
0.1
|
|
13. Social security contributions
|
234,964
|
13.4
|
13.5
|
13.4
|
13.3
|
13.2
|
|
14. Income from property
|
13,949
|
0.8
|
0.8
|
0.7
|
0.7
|
0.6
|
|
15. Other revenue
|
63,239
|
3.6
|
3.7
|
3.6
|
3.6
|
3.6
|
|
15.a Other current revenue
|
61,025
|
3.5
|
3.5
|
3.5
|
3.4
|
3.4
|
|
15.b Other capital revenue
|
2,214
|
0.1
|
0.2
|
0.1
|
0.1
|
0.1
|
|
16. Total revenue
|
816,113
|
46.4
|
46.5
|
47.1
|
47.0
|
46.6
|
|
p.m.: fiscal pressure
|
42.1
|
42.0
|
42.7
|
42.7
|
42.5
|
||
Selected components of expenditure
|
|||||||
17.Compensation of employees + intermediate consumption
|
269,793
|
15.4
|
15.2
|
15.1
|
14.7
|
14.5
|
|
17a. Compensation employees
|
171,826
|
9.8
|
9.7
|
9.5
|
9.3
|
9.1
|
|
17b. Intermediate consumption
|
97,967
|
5.6
|
5.5
|
5.6
|
5.4
|
5.4
|
|
18. Total social transfers
|
394,781
|
22.5
|
23.1
|
23.2
|
23.3
|
23.2
|
|
of which: Unemployment benefits
|
13,137
|
0.7
|
0.8
|
0.8
|
0.7
|
0.7
|
|
18a. Social transfers in kind
|
45,888
|
2.6
|
2.6
|
2.5
|
2.5
|
2.5
|
|
18b. Social benefits not in kind
|
348,893
|
19.9
|
20.5
|
20.7
|
20.8
|
20.7
|
|
19. Interest expenditure
|
64,979
|
3.7
|
3.6
|
3.6
|
3.7
|
3.9
|
|
20. Production levies
|
26,113
|
1.5
|
1.5
|
1.5
|
1.5
|
1.4
|
|
21. Gross fixed capital formation
|
37,081
|
2.1
|
2.2
|
2.4
|
2.4
|
2.5
|
|
22. Capital transfers
|
20,839
|
1.2
|
1.0
|
1.0
|
1.0
|
0.9
|
|
23. Other expenditure
|
40,032
|
2.3
|
2.3
|
2.2
|
2.2
|
2.2
|
|
23a. Other current expenditure
|
39,587
|
2.3
|
2.3
|
2.2
|
2.2
|
2.1
|
|
23b. Other capital expenditure
|
445
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
|
24. Total expenditure
|
853,618
|
48.6
|
48.9
|
49.1
|
48.8
|
48.5
|
|
Primary current
expenditure
|
730,274
|
41.6
|
42.1
|
42.1
|
41.6
|
41.3
|
|
Total primary
expenditure
|
788,639
|
44.9
|
45.3
|
45.5
|
45.1
|
44.7
|
|
(1) The values show estimates at unchanged
legislation. Discrepancies, if any, are due to rounding.
(2) Values in millions.
(3) The positive sign indicates one-off
measures to reduce the deficit.
|
MINISTRY OF ECONOMY AND FINANCE
|
43
|
ECONOMIC
AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
44
|
MINISTRY OF ECONOMY AND FINANCE
|
III. NET BORROWING AND PUBLIC DEBT
|
MINISTRY OF ECONOMY AND FINANCE
|
45
|
ECONOMIC
AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
F
O
C
U
S
|
Main
measures to relaunch public investment of the fiscal package 2019-2021
The 2019-2021 fiscal package places the relaunch of
public investment among the main objectives of Government action. In this direction, the measures shall provide for an increase in
the resources to be allocated to public investment compared to previous forecasts and, at the same time, seek to encourage
programming and to strengthen investment planning and achievement, through the removal of administrative and regulatory barriers,
and the establishment of specific support structures.
A substantial proportion of the resources intended
for Italian investment and development is allocated to the funds for investment by central administrations of the State (ministries)
and regional and local authorities. The fiscal package allocates 43.6 billion euro to the central administrations of the State fund
for the period 2019 to 2033, to be divided up on the basis of sector programmes presented by each administration for their relative
areas of expertise. In particular, the fund provides the allocation of 0.7 billion euro in 2019, 1.3 billion in 2020 and 1.6 billion
in 2021. In subsequent years, the allocation of resources increases by over 3 billion euro each year. This provision operates in
continuity with the initiatives to strengthen public investment already pursued by the previous budget laws and is added to that
already established in the 2017 and 2018 Budget Laws. Overall, the resources allocated to the financing of public investment at
central level in the 2017-2033 period amount to over 124 billion euro. The allocation of financial resources for a long time period
helps to facilitate the programming of investments that, by their nature, require a multi-annual timeline, such as large
infrastructures, improvements to public property (including schools and healthcare buildings), land protection, the development of
cutting-edge technologies, research and safety.
A total of 35.1 billion is set aside in favour of
regional and local authorities over the 2019-2033 period and 1.5 billion euro with effect from 2034, to finance: the ‘unfreezing’ of
the administrative surpluses of regional and local authorities (in terms of net borrowing of general government, approximately 0.4
billion in 2020 and 0.7 billion in 2021); multi-annual safety plans for the maintenance and improved safety of roads and schools;
measures to reward regional authority investment and the design review of the works of the underground
|
46
|
MINISTRY OF ECONOMY AND FINANCE
|
line C and the strengthening and extraordinary
maintenance of the underground lines A and B and of the road network of the city of Rome (a total of around 1 billion in 2019, 0,6
billion in 2020 and 1.2 billion in 2021). In addition, greater resources are allocated for constructing healthcare facilities and
modernising technology (4 billion from 2021 to 2033) and for uprating technological infrastructures for electronic reservation
systems for access to health care facilities (0.4 billion in the three-year period 2019-2021).
In addition to such measures, the fiscal package
provides for capital resources for emerging events for a total of 1.4 billion in 2019 and 0.3 billion in 2020. This context
includes, among other things, interventions for the reconstruction of the areas hit by seismic events, the prevention of seismic
risk, the establishment, with the Presidency of the Council, of a fund for investment in the regions and autonomous provinces
affected by the floods of September and October 2018, the implementation of port development plans, for, intermodality and
integration between the city and the port of Genoa following the collapse of the Polcevera Viaduct and the refinancing of the fund
for national emergencies. Additional resources are provided for the mitigation of hydraulic and hydrogeological risk (0.8 billion
in 2019, 0.9 billion in both 2020 and 2021) and the implementation of a first part of the national plan of operations in the water
sector, already provided for in the 2018 Budget Law (0.1 billion annually from 2019 to 2028).
An additional 4 billion euro are also allocated
for the period 2019-2034 for the programming of operations to be financed by the Development and Cohesion Fund.
The budget law ordered the establishment of a
mission structure called 'Investitalia', with the task of coordinating government policies on public and private investment, with
the aim of promoting investment and reducing the execution time of public works. The structure should report directly to the
President of the Council of Ministers in collaboration with the already existing steering committee, called ‘Strategia Italia’. In
order to ensure adequate support to general government, there is also the requirement of establishing an ad hoc structure for the
planning of public assets and buildings, which may be used by the central government and local authorities concerned.
Finally, changes were introduced to adapt the
regulatory system and overcome some of the difficulties of application related to the recent reform of the code of public
contracts. In particular, the raising of the threshold from 1,000 to 5,000 euro, above which public administrations must refer to
the electronic market for their purchases, and the derogation to the procedures for awarding public contracts below the European
threshold (until 31 December 2019, pending an overall revision of the code of public contracts), which raises the threshold for
contracting works using the direct procedure to 150,000 euro and allows negotiated procedures for works from 150,000 to 350,000
euro.
|
MINISTRY OF ECONOMY AND FINANCE
|
47
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ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
TABLE III.2: DIFFERENCES
COMPARED TO THE PREVIOUS STABILITY PROGRAMME (1)
|
||||
2018
|
2019
|
2020
|
2021
|
|
REAL GDP GROWTH RATE
|
||||
Stability Programme 2018
|
1.5
|
1.4
|
1.3
|
1.2
|
Stability Programme 2019
|
0.9
|
0.2
|
0.8
|
0.8
|
Difference
|
-0.6
|
-1.2
|
-0.5
|
-0.4
|
NET BORROWING (%GDP)
|
||||
Stability Programme 2018
|
-1.6
|
-0.8
|
0.0
|
0.2
|
Stability Programme 2019
|
-2.1
|
-2.4
|
-2.1
|
-1.8
|
Difference
|
-0.5
|
-1.6
|
-2.1
|
-2.0
|
PUBLIC DEBT (%GDP)
|
||||
Stability Programme 2018
|
130.8
|
128.0
|
124.7
|
122.0
|
Stability Programme 2019
|
132.2
|
132.6
|
131.3
|
130.2
|
Difference
|
1.3
|
4.6
|
6.6
|
8.2
|
1) Discrepancies, if any, are due to rounding. Forecasts based on
unchanged legislation for the Stability Programme 2018, policy-scenario objectives for the Stability Programme 2019.
|
TABLE III.3: CASH BALANCES
OF THE STATE SECTOR AND THE PUBLIC SECTOR (1)
|
||||||
2018
|
2019
|
2020
|
2021
|
2022
|
||
Level (2)
|
As % of GDP
|
As % of GDP
|
||||
Public Sector
|
-41,107
|
-2.3
|
-3.2
|
-2.4
|
-2.1
|
-1.3
|
Central
government
|
-43,610
|
-2.5
|
-3.4
|
-2.5
|
-2.2
|
-1.9
|
State
sector
|
-45,219
|
-2.6
|
-3.4
|
-2.5
|
-2.2
|
-1.9
|
Local
government
|
2,504
|
0.1
|
0.1
|
0.1
|
0.1
|
0.1
|
Social
security funds
|
0
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
(1) The first row shows policy scenario
objectives, the remaining values describe the trends under unchanged legislation.
(2) Values in millions.
|
48
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MINISTRY OF ECONOMY AND FINANCE
|
III. NET BORROWING AND PUBLIC DEBT
|
F
O
C
U
S
|
The
three-year review of the Medium Term Objective of structural balance
EC Regulation 1466/97 on
‘Strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies’, as
amended in 2011, provides for an MTO review every three years, following the updating of the Ageing Report10. The MTO is the most
stringent of the three different structural balances that serve different but complementary purposes: i) the ‘Minimum
Benchmark’ (MB)11: the minimum structural
|
MINISTRY OF ECONOMY AND FINANCE
|
49
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ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
balance that ensures, with a high degree of
probability, that, in the event of a recession, the nominal deficit does not exceed the threshold of 3 percent of GDP; (ii)
the ‘Medium-Term Objective Implicit Liabilities and Debt’ (MTOILD): the budget balance that ensures the sustainability of
public finances taking into account: a) the effort required to stabilize debt at 60 percent of GDP; b) for countries with a
debt of more than 60 percent of GDP, the extra effort needed to bring the debt within this threshold; c) a percentage (33
percent) of greater expenditure (implicit liabilities) linked to population ageing; finally, iii) for countries in the Euro
area the structural deficit cannot fall below 1 percent of GDP (-0.5 percent for the signatories of the Fiscal Compact).
In the calculation of the new MTO, for Italy
the most stringent criterion is the MTOILD, (case ii), calculated as the arithmetic sum of the three components a), b) and
c). The transition from -0.5 percent to +0.5 percent is principally linked to the updating of the indicator that estimates
the dynamics of ageing-related public spending (cost of ageing), component c. In the past, this component had a high,
negative value and served to reduce the sum of the three components. The new long-term growth and demographic projections
have significantly altered this positive effect: the cost of ageing has risen from -0.4 to 1.1.
|
F
O
C U
S
|
Assessment
of significant deviations from convergence to the MTO and the expenditure rule
The preventive arm of the Stability and
Growth Pact (SGP) requires that the path of convergence to the Medium Term Objective be assessed on the basis of two
criteria: (i) the variation in structural balance and (ii) the expenditure rule.
As regards the structural balance variation criterion, the annual size of the
fiscal adjustment required is extrapolated on the basis of a matrix that considers the following parameters12: (i) the cyclical conditions of the economy
as summarised by the output gap and real growth;
|
50
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MINISTRY OF ECONOMY AND
FINANCE
|
III. NET BORROWING AND PUBLIC DEBT
|
(ii) the level of the debt-to-GDP ratio; and
(iii) the existence of medium-term risks to the sustainability of public finances assessed on the basis of the S1 index13. The annual adjustments modulated on the
basis of cyclical conditions may be reduced by the application of the flexibility clauses14, following the Commission guidelines issued in January 2015.
The matrix
of convergence towards the MTO requires greater balance adjustment for Member States that are in a favourable
economic situation, i.e. when their gap between the actual and potential product is estimated to be at least 1.5 percent. In
this cyclical condition, Member States that pose a risk to the sustainability of the budget or whose debt-to-GDP ratio is
higher than 60 percent, are obliged to implement a structural balance adjustment of at least 0.75 percent of GDP (1 in the
case of real growth higher than potential growth). In periods of normal economic situation (when the gap between actual and
potential product is between -1.5 and +1.5 percent), the States with a high level of debt must implement adjustment greater
than 0.5 percent of GDP. In times of economic recession (i.e. when the gap between the actual and potential product is
between -3 and -1.5 percent), the required adjustment is 0.25 percent of GDP (0.5 when economic growth exceeds potential).
In periods of severe economic recession (when the gap between the actual and potential product is between -4 and -3 percent)
the Member States with high debt must implement balance adjustment of 0.25 percent of GDP. In periods of exceptionally
severe recession, defined as periods characterized by a gap between the actual and real product of less than -4 percent or
in the case of contraction of real GDP, all Member States, regardless of the level of debt, are temporarily exempted from
making budgetary efforts.
The latest Commission output gap projections
(included in the 2018 Autumn Forecast) estimate an output gap for Italy above -1.5
percent as early as 2017. Therefore, according to the Commission estimate, Italy has already enjoyed normal cyclical
conditions for two years. Consequently, the matrix quantifying the fiscal adjustments required according to the cyclical
conditions of the economy and of the level of public debt requires Italy to improve the structural balance each year by at
least 0.6 percentage points of GDP. In the event that the distance between the structural balance and the MTO is less than
the requirement according to the matrix (as happened for Italy in 2015), this distance is taken as a reference for the
necessary adjustment15.
With regard to the expenditure rule, the European regulations16 stipulate that, for the countries that have not yet achieved their MTO, the
aggregate reference expenditure17 may grow
at a rate equal to the difference between the average growth rate of potential GDP18 and the so-called convergence margin. The convergence margin is in turn
calibrated in
|
MINISTRY OF ECONOMY AND FINANCE
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51
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ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
relation to the cyclical conditions of the
economy19 and further revised in the case
of the application of the flexibility clauses.
Finally, it is recalled that the
assessment relating to the path of convergence of the structural balance towards the MTO and evolution of expenditure is
performed both for the individual single year, and for the two-year average. European Regulation No. 1466/97 requires that
a margin of tolerance is applied when assessing whether a deviation from the MTO and the expenditure rule benchmark is
significant. The deviation should be at least 0.5 percent of GDP on an annual basis and 0.25 percent of GDP on a two
yearly basis in order to be significant and activate the corrective arm of the excessive deficit procedure. This means
that, if the margin of tolerance with respect to the annual criterion is used in a given year, it must be offset by
greater structural effort in the following year.
|
TABLE III.4:
FLEXIBILITY GRANTED TO ITALY IN THE STABILITY PACT (1)
|
||||||||
|
2015
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
Output gap EFD 2019
(% of potential GDP)
|
-4.34
|
-3.15
|
-1.80
|
-1.53
|
-1.72
|
-1.56
|
-1.63
|
-1.57
|
Cyclical conditions
|
Exceptionally
bad
|
Very bad
|
Negative
|
Negative
|
Negative
|
Negative
|
Negative
|
Negative
|
Estimated adjustment on
the basis of cyclical conditions and the level of debt (pp of GDP)
|
0.08
|
0.25
|
0.50
|
0.50
|
0.25
|
0.50
|
0.25
|
0.50
|
Flexibility granted (pp.
of GDP) of which:
|
0.03
|
0.83
|
0.39(1)
|
0.00
|
0.18
|
0.00
|
0.00
|
0.00
|
a) for
activation of flexibility clauses:
|
|
|
|
|
|
|
|
|
structural reforms
|
0.00
|
0.50
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
investments
|
0.00
|
0.21
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
b) for
activation of the clauses for unusual events:
|
|
|
|
|
|
|
|
|
refugees
|
0.03
|
0.06
|
0.16
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
security costs
|
0.00
|
0.06
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
costs of protecting and
securing national territory
|
0.00
|
0.00
|
0.19
|
0.00
|
0.18
|
0.00
|
0.00
|
0.00
|
Estimated adjustment
corrected for flexibility clauses and unusual events (pp. of GDP)
|
0.05
|
-0.58
|
0.11
|
0.50
|
0.07
|
0.50
|
0.25
|
0.50
|
Margin of discretion
|
|
|
|
0.30
|
|
|
|
|
(1) In accordance with the calculation procedures established by the European Commission,
for 2017, the calculation of flexibility granted takes into account the structural balance at t-1, the distance from the
MTO and the clauses granted in the last three years, being more favourable than the simple sum of the clauses granted for
the same year.
|
52
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MINISTRY OF ECONOMY AND
FINANCE
|
III. NET BORROWING AND PUBLIC
DEBT
|
F
O
C
U S |
Flexibility
request for exceptional events: early actions
With the Update of the Macroeconomic and
Public Finance Framework in December 2018, the Government asked the European Commission to grant Italy budget
flexibility for the year 2019 for a total of around 3.7 billion (corresponding to just under 0.2 percent of GDP), for an
extraordinary plan of actions to counteract hydrogeological instability and exceptional measures to improve the safety
of the Italian connection network. Main initiatives adopted to date are the following.
Extraordinary plan of
actions to improve the safety of the Italian territory and population against the risks of hydrogeological instability:
Prime Ministerial Decree 'ProteggItalia’
Prime Ministerial Decree of February 20
2019 ('ProteggItalia') adopted the ‘National Plan for the mitigation of hydrogeological risks, the restoration and
protection of the environment’. It aimed to define, among other things, the specific areas and actions to be taken, a
unitary framework concerning the requirements, the distribution among the aforesaid areas and actions to be taken, the
system of governance and the schedule of activities. The Prime Ministerial Decree establishes an immediate plan for 2019
outlining the urgent and non-deferrable actions up to the contribution of an overall amount 3 billion euro. The overall
financial resources available amount to over 14 billion. The first 3.3 billion had already been used for the annual
allocation of resources to the Commissioner-Delegates, foreseeing the possibility of financing the planning to be
undertaken in 2019 alone, as well as methods to simplify and speed up procedures, such as the transfer of an advance
share of 30 percent of the allocation for the year 2019 and the immediate reprogramming of unused resources. Even for
ordinary interventions, the Ministry of the Environment has proposed regulatory measures to simplify and rationalize
existing procedures in order to reduce national and regional authorisation times and to tackle planning deficiencies and
to strengthen the governance of the Commissioners. The acceleration measures introduced are intended to allow the actual
implementation of actions for a total estimated expenditure of approximately 2.5 billion in 2019.
Extraordinary plan
for improving the safety and maintaining the infrastructure of the Italian connection network
Under the programme agreement between
the Ministry of Infrastructures and ANAS S.p.A. 2016-2020, following a recon of the security status of the national road
network, the most urgent maintenance and safety measures were identified, with particular regard to bridges, viaducts
and tunnels, with an additional extraordinary maintenance plan for the current three-year period of a total value of
between 1.7 and 2 billion. These resources are in addition to those intended for securing measures to be implemented for
local road networks and public buildings assigned directly to municipal and regional authorities and allocated by the
Budget Law for 2019, which amount to just under 2 billion overall for the three-year period 2019-2021. These measures
described aim to enabling the implementation of actions to improve the network for a total estimated expenditure of
around 1 billion in 2019.
|
MINISTRY OF ECONOMY AND FINANCE
|
53
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ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
54
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MINISTRY OF ECONOMY AND
FINANCE
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III. NET BORROWING AND PUBLIC
DEBT
|
MINISTRY OF ECONOMY AND FINANCE
|
55
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY PROGRAMME
|
TABLE III.5: CYCLICALLY ADJUSTED PUBLIC FINANCE (as
percentage of GDP)
|
||||||||
|
2016
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
|
1. Growth rate of GDP at constant
prices
|
1.1
|
1.7
|
0.9
|
0.2
|
0.8
|
0.8
|
0.8
|
|
2. Net borrowing
|
-2.5
|
-2.4
|
-2.1
|
-2.4
|
-2.1
|
-1.8
|
-1.5
|
|
3. Interest expenditure
|
3.9
|
3.8
|
3.7
|
3.6
|
3.6
|
3.7
|
3.8
|
|
4. One-off measures (2)
|
0.2
|
0.0
|
0.1
|
0.1
|
0.1
|
0.1
|
0.1
|
|
of which: Revenue measures
|
0.3
|
0.5
|
0.2
|
0.1
|
0.1
|
0.1
|
0.1
|
|
Expenditure
measures
|
-0.1
|
-0.6
|
-0.1
|
0.0
|
0.0
|
0.0
|
0.0
|
|
5. Growth rate of potential GDP
|
-0.1
|
0.3
|
0.6
|
0.4
|
0.7
|
0.8
|
0.7
|
|
Factor contributions to potential
growth:
|
||||||||
Labour
|
-0.1
|
0.2
|
0.4
|
0.1
|
0.3
|
0.3
|
0.1
|
|
Capital
|
-0.1
|
0.0
|
0.1
|
0.1
|
0.1
|
0.2
|
0.2
|
|
Total
Factor Productivity
|
0.0
|
0.1
|
0.1
|
0.2
|
0.3
|
0.3
|
0.4
|
|
6. Output gap
|
-3.1
|
-1.8
|
-1.5
|
-1.7
|
-1.6
|
-1.6
|
-1.6
|
|
7. Cyclical component of the budget
balance
|
-1.7
|
-1.0
|
-0.8
|
-0.9
|
-0.8
|
-0.9
|
-0.9
|
|
8. Cyclically adjusted budget balance
|
-0.8
|
-1.4
|
-1.3
|
-1.4
|
-1.2
|
-0.9
|
-0.7
|
|
9. Cyclically adjusted primary surplus
|
3.1
|
2.4
|
2.4
|
2.2
|
2.4
|
2.8
|
3.2
|
|
10. Structural budget balance (3)
|
-1.0
|
-1.4
|
-1.4
|
-1.5
|
-1.4
|
-1.1
|
-0.8
|
|
11. Structural primary surplus (3)
|
2.9
|
2.4
|
2.3
|
2.1
|
2.2
|
2.6
|
3.1
|
|
12. Variation in structural budget
balance
|
-0.9
|
-0.4
|
0.0
|
-0.1
|
0.2
|
0.3
|
0.3
|
|
13. Variation in structural primary
surplus
|
-1.1
|
-0.5
|
-0.1
|
-0.2
|
0.2
|
0.4
|
0.4
|
|
(1) Discrepancies, if any, are due to rounding.
|
||||||||
(2) The positive
sign indicates one-off measures to reduce the deficit.
|
||||||||
(3) Cyclically
adjusted net of one-off and other temporary measures.
|
56
|
MINISTRY OF
ECONOMY AND FINANCE
|
TABLE III.6: EXPENDITURE TO BE EXCLUDED FROM THE EXPENDITURE RULE
|
||||||
2018
|
2019
|
2020
|
2021
|
2022
|
||
Level (1)
|
% of GDP
|
% of GDP
|
||||
Expenditure for EU programmes fully
covered
by EU funds |
1,575
|
0.1
|
0.1
|
0.1
|
0.1
|
0.1
|
-
of which expenditure for investments fully covered by EU funds
|
708
|
0.0
|
0.1
|
0.1
|
0.1
|
0.1
|
Cyclical expenditure component for
unemployment benefits (2) |
933
|
0.1
|
0.1
|
0.1
|
0.0
|
0.0
|
Discretionary revenue (3)
|
1,124
|
0.1
|
0.2
|
1.0
|
0.1
|
-0.1
|
Revenue increases already identified
by law
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
(1) Values in
millions.
(2) The cyclical
expenditure component for unemployment benefits was calculated using the methodology currently used by the
European Commission, based on the unemployment gap.
(3)
Discretionary contribution revenue is included.
|
TABLE III.7:
SCENARIO AT UNCHANGED POLICIES
|
||||||
2018
|
2019
|
2020
|
2021
|
2022
|
||
Level (1)
|
% of GDP
|
% of GDP
|
||||
Total revenue under unchanged
policies
|
816,113
|
46.4
|
46.5
|
47.1
|
47.0
|
46.7
|
Total expenditure under unchanged
policies
|
853,618
|
48.6
|
48.9
|
49.3
|
49.1
|
49.0
|
Detailed items
of expenditure
|
||||||
Current
expenditure
|
795,253
|
45.3
|
45.7
|
45.8
|
45.6
|
45.4
|
of which:
|
||||||
Compensation
of employees
|
171,826
|
9.8
|
9.7
|
9.6
|
9.4
|
9.3
|
Intermediate
consumption
|
143,855
|
8.2
|
8.1
|
8.1
|
8.0
|
7.9
|
Capital expenditure
|
58,365
|
3.3
|
3.2
|
3.5
|
3.5
|
3.6
|
of which:
|
||||||
Gross
fixed capital formation
|
37,081
|
2.1
|
2.2
|
2.4
|
2.5
|
2.6
|
Investment
grants
|
13,899
|
0.8
|
0.7
|
0.8
|
0.8
|
0.8
|
(1) Values in millions.
|
MINISTRY OF ECONOMY AND FINANCE
|
57
|
ECONOMIC AND FINANCIAL DOCUMENT - SECT. I STABILITY
PROGRAMME
|
III. NET
BORROWING AND PUBLIC DEBT
|
TABLE III. 8: SIGNIFICANT DEVIATIONS
|
||||||
Convergence of the structural balance towards the MTO
|
2016
|
2017
|
2018*
|
2019
|
2020
|
|
Policy scenario
|
At unchanged legislation
|
|||||
Net borrowing
|
-2.52
|
-2.39
|
-2.13
|
-2.37
|
-2.09
|
-1.97
|
Medium-Term
Objective (MTO)
|
0.00
|
0.00
|
0.00
|
0.00
|
0.50
|
0.50
|
Structural
Balance
|
-1.02
|
-1.37
|
-1.40
|
-1.54
|
-1.36
|
-1.21
|
Annual
variation in structural balance(**)
|
-0.75
|
-0.36
|
-0.02
|
-0.14
|
0.17
|
0.36
|
Requested
variation in structural balance
|
-0.58
|
0.11
|
0.30
|
0.07
|
0.50
|
0.50
|
Deviation of
the structural balance from the annual variation requested (<0.5 pp.)
|
-0.42
|
-0.47
|
-0.32
|
-0.21
|
-0.33
|
-0.14
|
Average
variation in structural balance (over two years)
|
-0.30
|
-0.55
|
-0.08
|
0.02
|
0.13
|
|
Average
variation requested
|
-0.26
|
-0.24
|
0.19
|
0.29
|
0.29
|
|
Deviation of
the structural balance from the average variation requested (<0.25 pp.)
|
-0.04
|
-0.32
|
-0.27
|
-0.27
|
-0.16
|
|
Expenditure rule
|
2016
|
2017
|
2018*
|
2019
|
2020
|
|
Policy scenario
|
At unchanged legislation
|
|||||
Rate of growth
of the reference aggregate expenditure (***) (%)
|
0.89
|
0.25
|
1.79
|
1.72
|
0.54
|
0.40
|
Benchmark
modulated on the prevailing cyclical conditions (***) (%)
|
1.29
|
-0.35
|
0.50
|
1.31
|
0.50
|
0.28
|
Deviation of
aggregate expenditure from the annual variation requested (<0.5 pp.)
|
0.10
|
-0.31
|
-0.56
|
-0.18
|
-0.02
|
-0.05
|
Deviation of
aggregate expenditure from the average variation requested over 2 years (<0.25 pp.)
|
0.27
|
-0.10
|
- 0.37
|
- 0.10
|
-0.13
|
|
* In 2018, the
variation requested is 0.3 for discretion margin.
|
||||||
** As regards
the assessment of the convergence towards the MTO and compliance with the expenditure rule, in line with the
procedures agreed at Community level, for the years prior to 2018, the values calculated by the European
Commission in its forecast years are taken as reference.
*** In real
terms up to 2017, nominal terms from 2018.
|
F
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Dialogue with the European Commission on the 2019 Draft Budgetary Plan
In May 2018, in assessing
compliance with the tax rules, the Commission concluded that Italy had failed to comply with the debt reduction
criterion. On the basis of the economic forecasts published by the European Commission in Spring 2018 (Spring
Forecast 2018), the Italian public debt for both 2016 and 2017 failed to pursue a path of reduction such as to
guarantee the achievement of the objective of a debt-to-GDP ratio of 60 percent in 20 years. This deviation also
seemed to be confirmed for subsequent years: in fact, the debt-to-GDP ratio forecast for 2018 and 2019 was
greater than the reference value that would have allowed the gradual convergence towards the debt target
established in the Stability and Growth Pact.
As required by article 126,
paragraph 3 of the Treaty on the Functioning of the European Union (hereinafter referred to as the Treaty), the
Government submitted to the attention of the Commission certain relevant factors justifying the temporary
deviation. In particular: i) the improvement of the growth prospects that would ensure debt reduction, ii)
compliance with the adjustment path towards the MTO in 2017; iii) the launch and implementation of certain
important structural reforms that would strengthen economic growth.
In the final report of 23 May
2018, the Commission went back on its judgement, concluding that Italy was meeting the debt criterion, although
the structural effort for 2018 had to be amplified so as not to deviate from the path of the MTO. On this
occasion, the Commission
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reiterated the crucial nature of
the ex post evaluation of 2018 to be performed in the spring of the following year.
On the occasion of the 2019
Draft Budgetary Plan (DBP), the Government revised the public finance objectives and the economic planning
strategy, expanding them to accompany economic recovery and revive consumption. This strategy immediately
highlighted a deterioration of the structural deficit for 2019 of 0.9 percent of GDP. It is recalled that on
July 13 2018 the Council of the European Union had recommended to Italy a structural adjustment of 0.6 points of
GDP for 2019. In the primary evaluation of the DBP, the Commission encountered the failure to comply with the
adjustment required to converge to the MTO and, on October 23, requested a revision of budgetary plan through a
new DBP. On November 13, the Italian Government submitted a new version of the DBP to the Commission, in which
it confirmed the expansionary fiscal trend.
On November 21 2018, the
Commission adopted a second opinion confirming the particularly serious non- compliance with recommendations
made to Italy by the Council and confirming the risk of significant deviation from the path of adjustment
towards the MTO for 2018 and 2019. Given that Italy's budgetary plan for 2019 substantially modified the
relevant factors analysed in the previous report of May 2018, the European Commission updated the report
pursuant to article 126, para. 3 of the Treaty. As a result of that analysis, the Commission amended its
judgement regarding compliance with the debt criterion in 2017 and proposed the opening of an infringement
proceedings for excessive debt. On November 29, the Economic and Finance Committee drafted an opinion pursuant
to article 126, para. 4 of the Treaty, in which it confirmed the conclusions of the Commission and expressed its
hope for constructive dialogue between the Commission and the Italian authorities. On December 3, the Eurogroup
also shared the Commission's assessment, recommending that Italy adopt the necessary measures to comply with the
Stability and Growth Pact and expressing its support for the ongoing dialogue between the Commission and the
Italian authorities.
The intense negotiations between
the Commission and the Government led to the adoption of additional fiscal measures in the 2019 Budget Law, such
as to enable the Commission to avoid launching infringement proceedings. In the letter of December 18, the
Italian Government reiterated its willingness to make improvements to the final balances included in the 2019
budget, in compliance with the findings of the Commission and further technical evaluations. At that time, the
Government also asked to use the flexibility clause for 2019 to finance a plan of extraordinary action to
counteract hydrogeological instability and to improve the safety of the Italian connection network
infrastructure. In the letter of reply sent on 19 December 2018, the Commission acknowledged the budgetary
measures that the Italian Government intended to submit to Parliament as an amendment to the draft 2019 Budget
Law. The adoption of such measures - including the safeguard clause that foresees the provision of 2 billion
euro and the relative accounts monitoring system - in the 2019 Budget Law (Law No. 145 of 30 December 2018) thus
enabled the Commission to avoid recommending the opening of proceedings for excessive deficit at this stage. The
Commission will continue its fiscal monitoring with particular focus on the execution of the budget for 2019, in
the context of the European semester and the coordination of economic policies at European level.
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• |
an increase
in total expenditure of around 133 billion relating mainly to 'Labour and Pensions’. In particular, we
highlight the costs of introducing the 'Citizen's Income' and 'Quota 100', the two main actions in
support of employment, the fight against poverty and social exclusion. These provisions also comply
with EU Recommendation No. 4/2018 on labour and poverty. We also highlight the measures in favour of
the relaunch of public investment and the Regional and Local Authority Investment Fund.
|
• |
a reduction
in expenditure of around 16.6 billion for the State Budget. One of the most significant measures is
the contribution to public finance by regional authorities under ordinary statute introduced by Law
No. 145/2018 in art. 1, paragraph 841 ('Infrastructure and Development’).
|
• |
a reduction
in revenue of around 47.5 billion during the period under examination. The measures which give rise to
lower revenue for the State Budget refer mainly to 'Public expenditure and taxation' and relate, inter
alia, to the sterilization of the clauses on VAT rate and excise duty in the year 2019, the abrogation
of the optional regime of corporate income tax (IRI; which also has a significant impact in terms of
increased revenue) and the adoption of the flat-rate contribution scheme for natural persons
performing business, artistic or professional activities ('Flat Tax').
|
• |
an increase
in revenue of around 50.8 billion was mainly due to both the repeal of the optional corporate income
tax regime (IRI) and the provisions of the Budget Law on VAT hikes and excise rates (from 2020).
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III. NET BORROWING AND PUBLIC DEBT
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TABLE III.9: FINANCIAL IMPACT OF THE MEASYRES IN THE NRP
GRIDS (IN MILLIONS)
|
|||
2019
|
2020
|
2021
|
|
Administrative efficiency
|
|||
Higher revenue
|
0
|
0
|
0
|
Higher expenditure
|
159
|
303
|
329
|
Lower revenue
|
0
|
0
|
0
|
Lower expenditure
|
9
|
7
|
7
|
Energy and environment
|
|||
Higher revenue
|
223
|
698
|
92
|
Higher expenditure
|
915
|
1,047
|
1,074
|
Lower revenue
|
105
|
1,116
|
959
|
Lower expenditure
|
36
|
83
|
36
|
Federalism
|
|||
Higher revenue
|
0
|
415
|
222
|
Higher expenditure
|
0
|
12
|
10
|
Lower revenue
|
261
|
629
|
506
|
Lower expenditure
|
0
|
0
|
0
|
Infrastructure and development
|
|||
Higher revenue
|
0
|
0
|
1
|
Higher expenditure
|
7,932
|
7,080
|
4,310
|
Lower revenue
|
2,502
|
2,511
|
10
|
Lower expenditure
|
2,723
|
1,956
|
330
|
Innovation and human capital
|
|||
Higher revenue
|
0
|
0
|
0
|
Higher expenditure
|
525
|
865
|
884
|
Lower revenue
|
0
|
0
|
0
|
Lower expenditure
|
88
|
396
|
423
|
Work and pensions
|
|||
Higher revenue
|
299
|
56
|
111
|
Higher expenditure
|
23,729
|
34,469
|
35,436
|
Lower revenue
|
175
|
523
|
817
|
Lower expenditure
|
1,073
|
2,085
|
2,942
|
Market for products and competition
|
|||
Higher revenue
|
234
|
318
|
351
|
Higher expenditure
|
234
|
74
|
0
|
Lower revenue
|
150
|
201
|
201
|
Lower expenditure
|
0
|
0
|
0
|
Financial system
|
|||
Higher revenue
|
1,506
|
15
|
19
|
Higher expenditure
|
556
|
575
|
575
|
Lower revenue
|
45
|
195
|
184
|
Lower expenditure
|
165
|
3
|
2
|
Support for enterprises
|
|||
Higher revenue
|
18
|
2,156
|
1,228
|
Higher expenditure
|
375
|
344
|
206
|
Lower revenue
|
388
|
2,664
|
3,018
|
Lower expenditure
|
391
|
396
|
398
|
Public expenditure and taxation
|
|||
Higher revenue
|
11,261
|
12,255
|
19,275
|
Higher expenditure
|
2,478
|
4,791
|
3,925
|
Lower revenue
|
16,679
|
6,530
|
7,109
|
Lower expenditure
|
893
|
724
|
1,438
|
NB: The effects of Law No. 145/2018 (State Budget for the
financial year 2019 and Multi-annual Budget 2019-2021) in terms of higher/lower revenue and
higher/lower outgoings only refer to Section I.
Source: RGS analysis on data from Annexes 3, the technical reports and information given in
official documents. The resources of action and cohesion programmes and of the various funds allocated
for European measures are excluded.
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III. NET BORROWING AND PUBLIC DEBT
|
FIGURE
III.1: PUBLIC DEBT DETERMINANTS (as a percentage of GDP)
|
![]() |
Source: From 2019, policy scenario
forecasts of the EFD.
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III. NET BORROWING AND PUBLIC DEBT
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TABLE III.10: PUBLIC DEBT DETERMINANTS
(in percentage of GDP) (1)
|
|||||
2018
|
2019
|
2020
|
2021
|
2022
|
|
Level (including
support) (2)
|
132.2
|
132.6
|
131.3
|
130.2
|
128.9
|
Changes compared to
previous year
|
0.8
|
0.5
|
-1.3
|
-1.1
|
-1.3
|
Factors that
determine the variations in public debt:
|
|||||
Primary surplus
(accrual)
|
-1.6
|
-1.2
|
-1.5
|
-1.9
|
-2.3
|
Snowball effect
|
1.5
|
2.0
|
0.0
|
0.4
|
0.9
|
of which: Interest (accrual)
|
3.7
|
3.6
|
3.6
|
3.7
|
3.8
|
Stock-flow
adjustment
|
0.9
|
-0.3
|
0.2
|
0.4
|
0.1
|
of which: Difference between cash and accruals
|
0.2
|
0.4
|
0.0
|
0.0
|
-0.8
|
Net accumulation of financial assets (3)
|
0.2
|
-0.7
|
0.0
|
0.3
|
0.5
|
of which: Privatisation proceeds
|
0.0
|
-1.0
|
-0.3
|
0.0
|
0.0
|
Impact of debt valuation
|
0.2
|
-0.1
|
0.2
|
0.2
|
0.3
|
Other (4)
|
0.3
|
0.0
|
0.0
|
-0.1
|
0.0
|
p. m. Implicit
Interest rate on debt
|
2.9
|
2.8
|
2.8
|
2.9
|
3.0
|
1) Discrepancies, if any, are due to rounding.
2) Inclusive of shares relevant to Italy of loans to the EMU Member States, (bilateral
or through the EFSF) and of the capital contribution of the ESM. Throughout 2018, the amount of
these shares was equal to approximately 58.2 billion, of which 43.9 billion for bilateral loans
and loans through the EFSF and 14.3 billion for the ESM programme (see Bank of Italy,
'Statistical Bulletin - public finance, borrowing requirement and debt' of March 15, 2019). The
estimates consider proceeds from privatisation and other financial income totalling 1 percent of
GDP in 2019, 0.3 percent of GDP in 2020 and 0 in subsequent years. In addition, a reduction in
MEF liquidity stocks is assumed of 0.1 percent of GDP for each year from 2019 to 2021. The
interest rate scenario used for the estimates is based on the implicit forecasts resulting from
the forward rates on the Italian government bonds for
the period of compilation of this present document.
3) Includes the effects of contributions for GLF and the ESM programme.
4) The item 'Other', residual compared to the preceding items, includes: variations in
MEF liquidity; statistical discrepancies; Eurostat reclassifications; contributions in support
of the Euro Area envisaged by the EFSF programme.
|
TABLE III.11: GENERAL
GOVERNMENT DEBT BY SUBSECTOR (1)
(in millions and in
percentage of GDP)
|
|||||
2018
|
2019
|
2020
|
2021
|
2022
|
|
Level including Euro Area financial support (2)
|
|||||
General government
|
2,321,957
|
2,359,097
|
2,401,013
|
2,442,577
|
2,473,609
|
% GDP
|
132.2
|
132.6
|
131.3
|
130.2
|
128.9
|
Central government (3)
|
2,245,888
|
2,285,396
|
2,329,784
|
2,373,801
|
2,407,326
|
Local government (3)
|
126,096
|
123,728
|
121,257
|
118,804
|
116,312
|
Social security funds
|
126
|
126
|
126
|
126
|
126
|
Impact of support in % GDP (4)
|
3.3
|
3.3
|
3.2
|
3.1
|
3.0
|
Level excluding Euro Area financial support (2)
|
|||||
General government
|
2,263,726
|
2,300,866
|
2,342,915
|
2,384,872
|
2,416,404
|
% GDP
|
128.8
|
129.4
|
128.1
|
127.2
|
125.9
|
Central government (3)
|
2,187,656
|
2,227,164
|
2,271,686
|
2,316,096
|
2,350,121
|
Local government (3)
|
126,096
|
123,728
|
121,257
|
118,804
|
116,312
|
Social security funds
|
126
|
126
|
126
|
126
|
126
|
1) Discrepancies, if any, are due to rounding.
|
|||||
2) Inclusive or exclusive of shares relevant to Italy of loans to the EMU Member States,
(bilateral or through the EFSF) and of the capital contribution of the ESM. Throughout 2018 the
amount of these shares was equal to approximately 58.2 billion, of which 43.9 billion for
bilateral loans and loans through the EFSF and 14.3 billion for the ESM programme (see Bank of
Italy 2018 Statistical Bulletin - public finance, borrowing requirement and debt' of March 15,
2019). The estimates consider proceeds from privatisation and other financial income totalling 1
percent of GDP in 2019, 0.3 percent of GDP in 2020 and 0 in subsequent years. In addition, a
reduction in MEF liquidity stocks is assumed of 0.1 percent of GDP for each year from 2019 to
2021. The interest rate scenario used for the estimates is based on the implicit forecasts
resulting from the forward rates on the Italian government bonds for the period of compilation
of this present document.
|
|||||
3) Including liabilities towards the other sub-sectors.
4) Including the effects of the Italian contribution in
support of the Euro Area: contributions to Greek Loan Facility (GLF) programme, EFSF and ESM.
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FIGURE III.2: TREND OF THE DEBT-TO-GDP RATIO (inclusive and exclusive of
support to Euro Area Countries)
|
![]() |
Source: ISTAT and
the Bank of Italy. From 2019, policy scenario forecasts.
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The debt rule
The debt
rule was introduced to European Regulation from the so-called Six Pack and was transposed at
national level with the implementing law of the principle of budgetary equilibrium in the
Constitution (Law No. 243/2012). Fiscal discipline on debt became fully operational in 2015,
after a period of transition started for Italy in 2012, with the exit from the procedure for
excessive deficits.
The debt
rule requires that, in order to ensure the debt-to-GDP ratio is reduced at a satisfactory
pace towards the threshold of 60 percent of GDP, the programming of the public budget must
comply with at least one of the following criteria:
a. the part of debt in excess of the
reference value of 60 percent of GDP should be reduced on an annual basis to 1/20 of the
average of the values of the three years prior to the current value (backward-looking
criterion) or in the two years following the year of reference (forward-looking
criterion).
b. the excess debt in relation to the
backward-looking benchmark must be attributable to the economic cycle (using an index that
expresses the debt-to-GDP ratio that would have been obtained if in the preceding three
years the numerator had been adjusted according to the impact of the economic cycle and
the nominal GDP denominator had grown at the same pace as the potential GDP).
Starting
from the 2016 Stability Programme, compliance with the debt rule based on the
backward-looking configuration or that adjusted according to the economic cycle is fully
evaluated for the consolidated data provided by ISTAT (the Italian National Statistics
Bureau). The evaluation of the debt rule is carried out in relation to the more favourable
benchmark determined based on the criteria described above. Based on current data, the more
favourable benchmark proves to be the forward-looking benchmark in which compliance with the
rule in the reference year is measured by quantifying the gap produced on the basis of the
debt-to-GDP projections for the two subsequent years.
If from
initial analysis there is evidence of non-compliance with the debt or deficit rule, the
Commission prepares an in-depth report pursuant to art. 126.3 of the Treaty on the
Functioning of the European Union (TFEU), in which all the factors33 justifying
the deviation
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are
considered. On this occasion, the country under observation can send its own reasons
justifying the failure to achieve the required fiscal consolidation. In issuing its opinion,
the Commission may conclude that, because of an overall assessment, the country is not found
to be in deviation and does not therefore recommend the launch of excessive deficit
proceedings.
From 2015, the first year in which the European
Commission drew up the report pursuant to art.126.3 of the Treaty in relation to Italy,
the choice of Italian Governments was to draw up and publish a very detailed analysis of
the factors explaining the evolution of public debt and the failure to reach the benchmark34. For a summary of the dialogue between 2015 and 2017, refer to
the box entitled ‘The debt rule and the report on the relevant factors’ found on page 52
of the 2018 EFD Update Memorandum. The assessment carried out by the European Commission
in May 2018 is treated in the following box ‘Judgement of the European Commission on
compliance with the debt rule’.
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III. NET BORROWING AND PUBLIC DEBT
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F
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The judgement of the European Commission on the debt
rule
In its
overall assessment on the evolution of Italian public debt conducted pursuant to art.
126.3 of the TFEU and published in May 2018, the Commission had concluded that the debt
criterion should be considered respected for the moment. The Commission pointed out the
need to implement higher fiscal adjustment for 2018 in order to ensure the path of
convergence towards the MTO. In November, the Commission decided to re-examine compliance
with the debt rule with an update of the report pursuant to art. 126.3 of the Treaty. The
expansive revision of the public finance objectives included in the 2019 Draft Budgetary
Plan had changed the information base on which the judgement of May 2018 was delivered. In
particular, the deterioration of the structural deficit for 2019 announced by the
Government was going in the opposite direction to the fiscal consolidation indicated by
European rules.
In response, the Government therefore put forward a series of
important factors in support of an overall assessment (including quality) of the trend
in public accounts and debt. The first factor is the cyclical situation: in 2018, the
Euro area suffered a slowdown in exports and industrial production; the Italian
manufacturing industry was hard hit by the decline in international trade and the
increasing wave of protectionism. This cyclical situation is added to years of weak
growth during which the restrictive fiscal policies have improved the numerator of the
debt-to-GDP ratio through increasing primary surpluses but have not contributed to
revitalising the denominator (i.e. nominal GDP). In fact, the economy has found it
difficult to return to its full potential, with high rates of unemployment and low
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inflation. The second important factor is focused on the fact that
the Italian economy suffers from a much wider output gap than that identified by the
methodology agreed at European level. Taking into account MEF estimates, the structural
budget is in line with the forecasts of the European fiscal regulations. The third
important factor is based on the urgent need to promote social inclusion and revitalise
public investment. The expansive approach of the fiscal policy proposal in the DBP 2019
supports own key measures such as Citizen's Income and ‘Quota 100’, as well as important
infrastructural investments. The measures, not only of a fiscal nature, envisaged by the
Government aim to stimulate both supply and aggregate demand. Another very important
factor is the fact that debt sustainability, using alternative measures of potential
growth, is not at risk in either the medium or long term. The nature of the public debt
characterised by long maturities and fixed rates ensures a certain resilience to the
volatility of the financial market. Moreover, Italy has a very low level of contingent
liabilities.
In fact,
in its final judgement, the Commission retained that the relevant factors presented by
the Italian Government were not sufficient to justify the failure to adjust public debt.
In particular: (i) the deterioration of macroeconomic conditions did not justify the gap
in relation to the reduction of the debt established by European rule, given the growth
of nominal GDP of more than 2 percent in 2016; (ii) the measures presented by the
Government were a step backwards compared to certain reforms implemented recently,
first and foremost in the area of pension expenditure; and, finally, iii) forecast data
of the Commission and data contained in the DBP2019 underscored the risk of a
significant deviation from the adjustment path towards the MTO recommended for 2018 and
the risk of serious non-attainment of the structural adjustment for 2019 of 0.6 percent
of GDP foreseen by the adjustment matrix agreed within the Stability and Growth Pact and
recommended by the Council to the Italian Government. Overall, therefore, the final
report suggested that the debt criterion as defined by the Treaty and by EC Regulation
No. 1467/97 was to be regarded as not respected and that this justified the launch of an
excessive deficit procedure.
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III. NET BORROWING AND PUBLIC DEBT
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TABLE III.12 COMPLIANCE WITH THE DEBT RULE: FORWARD LOOKING CRITERION
AND CYCLICALLY ADJUSTED DEBT
|
||||||
Scenario
|
||||||
At unchanged legislation
|
Policy scenario
|
|||||
2018
|
2019
|
2020
|
2018
|
2019
|
2020
|
|
Debt in year t+2 (% percent of GDP)
|
131.7
|
130.6
|
129.6
|
131.3
|
130.2
|
128.9
|
Gap in relation to the forward-looking benchmark (% of GDP)
|
6.5
|
5.4
|
4.9
|
6.2
|
5.2
|
4.4
|
Gap in relation to cyclically adjusted debt (% of GDP)
|
8.2
|
7.3
|
4.0
|
7.9
|
7.1
|
3.9
|
F
O
C
U
S
|
Assessment of the impact of measures
relating to Citizen's Income and Quota 100 on
potential GDP and on the output gap
Pursuant
to the European and national legislation in force, the output gap contributes to the
quantification of the cyclically adjusted budget balance and thus to the estimate of the
so-called structural balance. This estimate is a crucial figure in assessing the
European Countries’ compliance with the fiscal rules enshrined in the Stability and
Growth Pact of the European Union and those in force nationally (for Italy, Law
243/2012). An overall assessment of the effects on the economy of the measures relating
to the Citizen's Income (RDC) and to the so-called Quota 100 (contained in Decree Law
No. 4/2019) was presented in a Focus of this Stability Programme and - in a more
articulated manner - in the National Reform Programme, to which we refer. This Focus
concentrates on the estimated impact of the two measures on potential GDP and on the
output gap.
The evaluation is carried out as follows: potential GDP and the
output gap (OG) corresponding to the scenario at unchanged legislation (which includes
the RDC and Quota 100) are calculated and to alternative ad hoc constructed scenarios.
These ad hoc scenarios refer to the macroeconomic scenarios obtained by subtracting
the effects on the economy of the cited measures, estimated using the ITEM econometric
model, from the scenario at unchanged legislation. Macroeconomic scenarios that
exclude the impact of the RDC, Quota 100 and both measures are considered separately.
The impact on potential GDP and on the output gap is thus calculated as the difference
between the estimates produced by the alternative scenario considered and those
produced by the scenario atunchanged legislation, i.e. estimated impact on OG = OG alternative scenario - OG at
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unchanged legislation.
The
calculations made follow the official production function methodology38. One
evaluation component is found upstream of the financial year in the estimate of the
economic impact of the measures. The results obtained show that, overall, the measures
have a positive effect on potential growth; the impact is not immediate but spread
over time. The most important estimate for the purposes of European fiscal
surveillance, however, is not potential GDP, but the output gap; from this point of
view, it is estimated that the two measures have contributed to broadening it, but
only moderately.
Finally,
it is important to emphasize that the effects of the measures on potential growth are
not immediately detectable by performing a comparison between the estimates for the
macroeconomic scenario at unchanged legislation relating to this Stability Programme
and the estimates submitted in previous official documents. Potential GDP is a
function of the overall macroeconomic scenario and is influenced by the trend in gross
domestic product, in turn a function of a changing exogenous scenario of reference.
The
following Focus sections briefly illustrate the characteristics of the methodology for
estimating potential GDP and the output gap and then analyse the impact of the
measures, both separately and jointly. Particular attention is paid on the different
caveats underlying the estimates, a full understanding of which is crucial for
grasping the uncertainty of the precise estimates presented and the purely indicative
intention of the exercise.
Estimate of potential GDP and the output gap
The
output gap is defined as the distance between the real product (Y) of an economy and
its respective potential (
![]() ![]() (1)
The
potential product is the maximum output obtainable from an economy without incurring
inflation and is therefore a non-observable (‘latent’) variable whose estimation
requires a theoretical model. The potential GDP estimation model perfected by the
European Commission is based on a Cobb-Douglas production function. The GDP of the
economy can be represented a product weighed using the factors of production: labour
(L), capital (K) and total factor productivity (TFP, so-called Solow residual). To
summarise
![]() (2)
where
the weight of the labour factor (α) is set at 0.65.
According
to the methodology agreed at European level, the Labour factor is in turn obtained as
follows:
![]() (3)
where
POPW is the population of working-age (15-74), PART is the participation rate, UR the
unemployment rate and HOURS the hours worked per employed individual.
To
switch from real GDP to potential GDP, the actual values (or forecast values for
future years) of the factors of production are replaced by the corresponding potential
values obtained through statistical filters that allow the trend component to be taken
out. In the case of the labour factor, all the variables of the (3) are filtered out
except POPW. The trend
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in
PART and HOURS variables is obtained using a Hodrick-Prescott filter39. To
obtain the unemployment trend, on the other hand, a Kalman filter is used in which
the trend-cycle breakdown is ‘guided’ by an equation illustrating the relationship
between wage inflation and unemployment cycle (according to the Phillips curve
model). The value thus obtained corresponds to the NAWRU (Non-Accelerating Wage Rate
of Unemployment), namely the rate of unemployment to which economic theory
associates an absence of pressures of inflation. To summarise
![]() (4)
Where
![]() The
Capital factor is not filtered because it is assumed that the maximum contribution
to capital potential is given by the full use of the capital stock in an economy
(therefore
![]() To
obtain the potential level of Total Factor Productivity, a Bayesian Kalman filter is
used in which the trend/cycle breakdown is guided by a composite variable of used
capacity (CUBS).
The
potential product is thus given by:
![]() (5)
where
![]() The effects of the measure using the official
methodology
Methodological premises
As
said above, the impact of the adoption of Decree Law No 4/2019 on the output gap is
relevant for considerations regarding the fiscal surveillance carried out within the
context of the European semester. It is the output gap, in fact, that is used for
the cyclical adjustment of the nominal budget balance and to obtain the structural
balance. It is therefore especially important to assess the impact on this value for
the reference year t (currently corresponding to 2019) and the following year
(2020): this is the two-year period subject to greater attention from the European
Commission. However, the effects on the year t-1 (2018)40 and on the last two years
of the planning horizon (2021-2022) are also significant for verifying the
convergence of the structural balance towards the Medium Term Objective.
Another
premise is that the effects of the measures only affect the different components of
the potential product gradually (labour and total factor productivity, as per
equation (5), given that there is a delay in the transfer of an increase in the
actual variables to their trend values (generated by statistical filters). By way of
example, Figure A shows that, considering an immediate and permanent rise in the
participation rate in 2019, its trend component
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trend variable is further delayed if the shock on PART is
modulated gradually over time rather than showing a sudden increase. It is also to
be noted that the different value of the participation rate implies a change of the
filtered variable even in the past (i.e. in the years prior to 2019).
|
FIGURE A: UNFILTERED SERIES OF PARTICIPATION (PART) RATE WITH
SHOCK OF 2.5 PP AND RELATIVE FILTERED SERIES
![]() |
|
![]() Source: MEF analysis.
|
Focusing
our attention on the output gap, as defined by (1) and observing the equations (2)
to (5), it may be inferred that the gap between
![]() More
specifically, considering that the capital K is always equal to its potential value,
the output gap can be broken down into the sum of Labour gap and TFP gap (expressed
in logarithms). In turn, the Labour gap can be broken down into the sum of:
deviation between real hours worked and filtered total hours (HOURSGAP),
deviation between the real participation rate and filtered participation rate (PARTGAP) and
the deviation between unemployment rate and NAWRU (corresponding in (6) to UNEMPLGAP).
Therefore,
YGAP can be represented as follows:
![]() (6)
Citizen's Income
We use this approach to assess, primarily, the effects of the
Citizen's Income. The rewarding element of the measure on the supply side consists
of introducing a proportion of inactive workers to the labour force by increasing
the rate of participation (PART) and, in part, the hours worked per employed
person (HOURS). At the same time, however, the measure also leads to an increase –
at least initially – in the unemployment rate. Those who receive the benefit must
declare themselves willing to work in the immediate future; at this point, no
longer inactive and not finding employment immediately, they would be classified
as
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unemployed42.
In
order to estimate the impact of the Citizen's Income on potential product and the
output gap, by using the official methodology, the potential output was estimated
in relation to a macroeconomic scenario that does not include the effects of the
measure. The estimates are compared with estimates relating to the scenario at
unchanged legislation that, instead, includes the effects of the measure. The
macroeconomic effects to be ‘subtracted’ from the scenario at unchanged
legislation are aligned with the evaluations performed using the ITEM econometric
model shown in the box in Chapter II, ‘An assessment of the macroeconomic impact
of Citizen's Income measures’.
Table
A shows the deviations between the two estimates of potential GDP and output gap
attributable to the measure. The first two rows show the deviations between the
actual and potential growth rates of the two scenarios, the remaining rows
indicate the deviations between the output gap and the different sub-components.
|
TABLE A: DIFFERENCE IN TERMS OF REAL GROWTH, POTENTIAL GROWTH, OUTPUT GAP
AND ITS COMPONENTS, BETWEEN SCENARIOS WITH AND WITHOUT CITIZEN'S INCOME
|
|||||||
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
||
Real
Growth
|
0.0
|
0.0
|
0.2
|
0.2
|
0.1
|
0.0
|
|
Potential
Growth
|
0.1
|
0.2
|
0.2
|
0.0
|
0.4
|
0.2
|
|
Output
gap
|
0.1
|
-0.1
|
-0.1
|
0.1
|
-0.2
|
-0.4
|
|
Labour
gap
|
0.0
|
-0.2
|
-0.4
|
-0.2
|
-0.3
|
-0.3
|
|
Unemployment gap
|
0.2
|
0.1
|
-0.1
|
-0.5
|
-0.5
|
-0.4
|
|
Hours worked gap
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
|
Participation rate gap
|
-0.2
|
-0.3
|
-0.2
|
0.3
|
0.2
|
0.2
|
|
TFP
gap
|
0.1
|
0.1
|
0.3
|
0.3
|
0.1
|
-0.1
|
The
scenario that includes the effects of the measure shows a higher GDP growth rate,
fully aligned with the ITEM evaluation, totalling on average around 0.15 percent
in the period 2019-2021. The variations in potential GDP are not immediately
aligned (year on year) to those in the underlying GDP and are, always on average,
greater. Reverse variations are also encountered for potential GDP, as can be
seen from the difference of 0.3 percentage points in potential growth in 2018 in
the scenario that includes the effects of the Citizen's Income.
The output gap increases in absolute value, becoming more
negative from 2017 and for the whole forecast horizon (with the exception of
2020). With reference to the financial year under examination, the broadening of
the output gap - denoted by minus signs Table A43 - is due to the
increase in the Labour gap. Within this Labour gap, the component that has the
greatest impact is the Unemployment gap. Figure B shows how, by comparing the
macroeconomic scenario that includes the Citizen's Income (‘with RDC’) and an
alternative scenario without the measure (‘without RDC’), a sudden increase in
the unemployment rate corresponds to a proportionally smaller variation in the
NAWRU. The increase in unemployment, greater than the increase in NAWRU, is
characterized as cyclical unemployment. In contrast, the Participation gap acts
in the opposite direction to the
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Unemployment
gap since the significant increase in participation rate is assigned by the HP
filter to the cyclical component (Figure C).
In
most of the simulation, the overall widening of the output gap compared to the
simulation without RDC is limited by a narrowing of the TFP gap. The upstream
evaluation performed using the ITEM model attributes to the measure a positive
variation in productivity as a result of its expansive effect; more precisely,
the increase in GDP is higher - in an initial phase - than the increase in
employment. However, once reflected in the production function methodology, the
increase in TFP is greater than that of its trend component.
|
FIGURE B:
COMPARISON BETWEEN THE UNEMPLOYMENT RATE SERIES IN SCENARIOS WITH AND WITHOUT
CITIZEN'S INCOME AND THE NAWRU SERIES IN SCENARIOS WITH AND WITHOUT CITIZEN'S
INCOME
|
|
![]() |
|
Source: MEF analysis. | |
FIGURE C:
COMPARISON BETWEEN THE UNFILTERED AND FILTERED SERIES OF THE PARTICIPATION RATE
IN SCENARIOS WITH AND WITHOUT CITIZEN'S INCOME
|
|
![]() Source: MEF analysis.
|
Quota 100
Decree
Law No. 4/2019 in laying down urgent provisions on Citizen's Income and pensions
also provides for the introduction of a measure that allows access to retirement
for workers with at least 38 years of pension contributions and of at least 62
years of age (Quota 100), thus reducing the statutory retirement age.
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For the purposes of evaluating the potential, in order to
better interpret the results that will be shown, we will begin with certain
observations on the impact of the measure on the labour market. An initial and
immediate consequence is the reduction in participation in the age group
affected by the measure (elderly workers) and, in the absence of simultaneous
replacement recruitment; this would result in a corresponding reduction in
employment. However, the number of employed will tend to rise both due to the
effect of ‘replacement’ of retired workers (direct effect), and due to the
general impact of the measure on the economy (indirect effect).
This measure also was evaluated using ITEM (see the Focus
of Chapter II entitled ‘An assessment of the macroeconomic effects of pension
measures’). With reference to the variables that form part of the equation
(5), an initial indication is confirmation of the reduction in Labour factor L (lower employment and reduction of the
rate of participation). However, this effect decreases over time (between 2019
and 2022): in the first place, the lower participation is gradually offset by
a recovery in employment; secondly, the unemployment rate falls as early as
the first year44. Finally, the ITEM model estimates an effect of slight
expansion of the measure on economic growth: the fall in employment observed,
combined with an albeit slight increase in GDP, consequently generates an
increase in productivity (remember (2)).
The same approach used for the Citizen's Income is also
used to assess the impact of the Quota 100 on potential GDP and on the output
gap. In this case too, an alternative scenario to the scenario at unchanged
legislation is constructed using the ITEM evaluations. Table B shows the
effects estimated as the difference between the two potential variable
estimates. An initial result is that, overall, the reduced labour factor and
the increase in TFP offset one another and the effects on the potential
product are substantially neutral, with a slightly negative effect at the end
of the period.
|
TABLE B:
THE DIFFERENCE IN TERMS OF REAL GROWTH, POTENTIAL GROWTH , OUTPUT GAP AND ITS
COMPONENTS, BETWEEN SCENARIOS WITH AND WITHOUT QUOTA 100
|
|||||||
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
||
Real
growth
|
0.0
|
0.0
|
0.0
|
0.1
|
0.1
|
0.0
|
|
Potential
Growth
|
0.0
|
-0.1
|
-0.1
|
0.0
|
-0.1
|
-0.1
|
|
Output
gap
|
-0.2
|
-0.1
|
-0.1
|
0.0
|
0.2
|
0.3
|
|
Labour
gap
|
-0.1
|
0.1
|
0.0
|
-0.1
|
0.1
|
0.2
|
|
Unemployment gap
|
-0.2
|
-0.2
|
-0.1
|
0.1
|
0.3
|
0.3
|
|
Hours worked gap
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
|
Participation rate gap
|
0.1
|
0.2
|
0.1
|
-0.2
|
-0.2
|
-0.1
|
|
TFP
gap
|
-0.2
|
-0.2
|
-0.1
|
0.1
|
0.1
|
0.0
|
In this case too, what happens in terms of output gap is of
less immediate interpretation. The overall result is that, while in an initial
phase it expands, at the end of the period it decreases in absolute value. The
narrowing of the output gap - shown by positive values in the table - is due
in large measure to what happens to the Labour gap, and especially to the
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Unemployment gap. The scenario that includes Quota 100
forecasts, as mentioned before, a progressive reduction in the unemployment
rate. However, only part of the reduction in unemployment rate is considered
structural (the reduction in the NAWRU is lower). This interpretation by the
production function methodology tends to narrow the Unemployment gap in
final simulated years. The increase in productivity recorded by the
simulations helps to raise the potential, by counteracting the effects of
labour component45. However, the TFP component helps to narrow
the output gap: the increase in productivity is considered largely cyclical
by the statistical filter used (the Kalman Filter).
|
FIGURE D: COMPARISON BETWEEN THE
SERIES OF THE UNEMPLOYMENT RATE AND THE NAWRU IN SCENARIOS WITH AND
WITHOUT QUOTA 100
|
|
![]() Source: MEF analysis.
|
Joint effects and conclusions
If the effects of both measures (Citizen's Income and
Quota 100) are considered together, by subtracting the overall effects of
the two measures estimated using ITEM from the scenario at unchanged
legislation, we obtain an intermediate result between the two presented. The
effects on the potential GDP and on the output gap tend to offset one
another but, as shown in Table C, there is a prevailing favourable effect on
the potential growth rate and we see an widening of the output gap in the
first years analysed and in 2022.
|
TABLE
C: THE DIFFERENCE IN TERMS OF REAL GROWTH, POTENTIAL GROWTH, OUTPUT GAP AND
ITS COMPONENTS, BETWEEN SCENARIOS WITH AND WITHOUT CITIZEN'S INCOME AND
QUOTA 100
|
|||||||
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
||
Real
Growth
|
0.0
|
0.0
|
0.2
|
0.2
|
0.2
|
0.0
|
|
Potential
Growth
|
0.1
|
0.1
|
0.1
|
0.0
|
0.3
|
0.2
|
|
Output
gap
|
-0.2
|
-0.4
|
-0.2
|
0.0
|
0.0
|
-0.2
|
|
Labour
gap
|
-0.1
|
-0.1
|
-0.3
|
-0.3
|
-0.2
|
0.0
|
|
Unemployment gap
|
0.0
|
0.0
|
-0.2
|
-0.4
|
-0.2
|
-0.1
|
|
Hours worked gap
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
|
Participation rate gap
|
0.0
|
-0.1
|
-0.1
|
0.1
|
0.1
|
0.1
|
|
TFP
gap
|
-0.2
|
-0.2
|
0.1
|
0.3
|
0.2
|
-0.2
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The estimates presented are subject to various caveats.
Firstly, we note that the joint impact of the two measures is not linear,
i.e. the values in Table C are not exactly the sum of Tables A and B. This
is a characteristic of the methodology underlying the estimation of the
potential. It must also be pointed out that the results are ‘base
dependent’, i.e. the differences in potential observed between the base
scenario (in our case at unchanged legislation) and the comparison
scenario depend on the choice of base scenario. Therefore, starting from a
different macroeconomic scenario would change the results obtained, even
applying the same variations. The estimates are also a function of the
time interval over which the potential product is calculated;
traditionally, with a view to medium term planning, Italy goes as far as
year t+3; the Commission, on the other hand, stops at t+1 (or t+2 in the
case of Autumn Forecast). In conclusion, we recall the question of the
choice of the initial parameters to filter the original variables such as
the priors of TFP and the bounds of the NAWRU. The priors chosen are
consistent with those used to estimate potential GDP in this planning
document. We do not present here a systematic analysis of comparison with
the results obtained by choosing different priors; however, certain tests
performed gave similar results in terms of quality.
Medium-long term
impacts
For the purposes of assessing the impact of the
measures in question on potential GDP, we must consider the effects that
the measures, especially Citizen's Income, will have on the estimate of
the medium term parameter to which the structural unemployment tends to
converge (NAWRU ‘anchor’46 ), a parameter used to estimate
potential GDP in the short and medium term and in sustainability analysis.
Specifically, the amounts derived from the Citizen's
Income received by individuals recorded as unemployed who have declared
income from work within the preceding five years will be considered for
calculating the rate of replacement of unemployment benefits, used to
estimate the NAWRU anchor and positively correlated with this anchor. On
the other hand, structural unemployment is negatively affected by the
Active Labour Market Policies (ALMP), also used to estimate the anchor,
the scope of which is expected to grow due to the effect of the measure in
question. The combined effect of the two opposing trends can be estimated
by means of further analysis. Finally, we recall that analysis on the
effects of the measure, disregarding the context of estimating the NAWRU
anchor, are presented in the National Reform Programme.
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FIGURE IV.1: INTEREST EXPENDITURE AS A PERCENTAGE OF GDP AND
WEIGHTED AVERAGE COST AT ISSUANCE
|
![]() |
Source: MEF analysis.
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IV. SENSITIVITY AND SUSTAINABILITY OF PUBLIC FINANCES
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FIGURE IV.2: TREND OF GOVERNMENT SECURITIES
YIELDS AT 1, 5 AND 10-YEAR MATURITIES
|
![]() |
Source: MEF analysis.
|
FIGURE IV.3: BTP-BUND YIELD DIFFERENTIAL:- 10
YEAR BENCHMARK
|
![]() |
Source: MEF analysis.
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FIGURE IV.4A: STOCHASTIC
PROJECTION OF THE DEBT-TO-GDP RATIO WITH TEMPORARY SHOCKS
|
FIGURE IV.4B: STOCHASTIC
PROJECTION OF THE DEBT-TO-GDP RATIO WITH PERMANENT SHOCKS
|
![]() |
![]() |
Note: The graphs show the 10th, 20th, 40th,
50th, 60th, 80th and 90th percentiles of the distribution of the
debt-to-GDP ratio obtained by stochastic simulation.
Source: MEF analysis.
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FIGURE IV.5: THE S0
INDICATOR AND SUB-COMPONENTS
|
![]() |
Source: MEF
analysis on 2019 EFD, AMECO, WEO, EUROSTAT data.
|
TABLE IV.1: HEAT MAP FOR
THE VARIABLES UNDERLYING THE S0 INDICATOR FOR 2018
|
Short-term risk from tax
variables
|
Net debt (%GDP)
|
Primary balance (%GDP)
|
Cyclically adjusted budget
balance (%GDP)
|
Stabilising primary balance
(%GDP)
|
Gross public debt
(%GDP)
|
Variation in public gross
debt (%GDP)
|
|
Net public debt
(%GDP)
|
Gross requirements
(%GDP)
|
Interest-growth
differential
|
Variation in public
expenditure (%GDP)
|
Variation in final
consumption of PA (%GDP)
|
Short term public debt
(%GDP)
|
||
0
|
1
|
0
|
0
|
1
|
1
|
||
Short-term risk from
macro-financial variables
|
L1. International net
investments (%GDP)
|
L1. Net savings of
households (%GDP)
|
L1. Private sector debt
(%GDP)
|
L1. Private sector credit
flow (%GDP)
|
L1. Short-term debt
of non-financial corporations (%GDP)
|
L1. Short-term debt
of households (%GDP) (*)
|
|
L1. Added value in the
construction sector (total %AV)
|
L1. Current account balance
(3-year backward moving average) (%GDP)
|
L1. Variation (3 years) in
REER (based on the export deflator)
|
L1. Variation in nominal
unit labour cost
|
Yield curve
|
Real GDP growth rate
|
GDP per capita in
PPP (%US$)
|
Note: The colours red and green indicate, respectively,
the variables above and below the optimal threshold,
calculated periodically by the European Commission and
published in the Debt Sustainability Monitor. The code L1
indicates that the variable is reported with the lagged value
of one period.
Source: MEF analysis.
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|
F
O
C U S |
Medium-term sensitivity assumptions
The medium-term simulations
presented below include:
i) A baseline scenario that
incorporates, in the period 2019-2022, the real and
potential GDP growth rates of the macroeconomic scenario
underlying this Economic and Financial Document. For the
years following 2022, in line with the ‘T+10’ methodology
currently used by the European Commission and discussed at
the EPC-Output Gap Working Group (OGWG), the growth rate
of the potential product is projected according to the
production function model, extrapolating the variables
related to the individual production factors using
statistical techniques (e.g. the Total Factor
Productivity, TFP, which in 2030 reaches a growth rate of
around 0.5 percent) or assuming that they converge in 2030
towards structural parameters (e.g. the Non-Accelerating
Wage Rate of Unemployment, NAWRU, which converges to an
anchor value of around 9.76 percent, as shown in Table
R.1). The output gap closes following a linear trend in
the three years following 2022 (it closes to zero in
2025). Again since 2022, the yield curve remains constant
until the end of the forecast horizon, while the growth
rate of the GDP deflator and the inflation rate calculated
on the consumer price index converge to 2.0 percent in
20259. Moreover, in line with the
assumption of unchanged policies, the cyclically-adjusted
primary balance for 2022 remains constant at the reference
level of 2.4 percent of GDP until 2030.
ii) A pessimistic scenario that
assumes a sudden increase in the yield curve of around 100
basis points above the reference scenario curve. This
shock is reabsorbed at the end of 2022. From 2022, the
yield curve remains constant until the end of the forecast
horizon. As a result of the increase in the interest rate
curve as compared to the reference scenario, GDP growth
decelerates by 0.03 in 2019, 0.3 percentage points in 2020
and 0.4 in 2021 and 202210.
The potential GDP series for the years 2019-2022 is
obtained by applying the usual methodology of the
production function agreed at European level11. From 2022, the NAWRU sets
off on a convergence path that ends in 2030 at 1
percentage point above the baseline scenario anchor, while
the TFP growth rate converges to 0.5 percentage points
below the baseline scenario level in 2030, i.e. at a
negative value of 0. The output gap closes following a
linear trend in 2025. Because of lower growth, the primary
surplus12 decreases
correspondingly in the period 2019-2022 and subsequently
remains constant at its structural level until the end of
the forecast horizon. The growth rate of the GDP deflator
and the rate of consumer price inflation converge to 2.0
percent in 2025.
iii) An optimistic scenario that
assumes a sudden reduction in the yield curve of 100 basis
|
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points below the reference
scenario curve. This shock is reabsorbed at the end of
2022. From 2022, the yield curve remains constant until
the end of the forecast horizon. Because of the decrease
of the curve of interest rates, compared to the
reference scenario, GDP grows by additional 0.03
percentage points in 2019, 0.3 percentage points in 2020
and 0.4 in 2021 and 2022. The potential GDP series for
the years 2019-2022 is obtained by applying the
production function methodology agreed at European
level. From 2022, the NAWRU sets off on a convergence
path that ends in 2030 at a value of 1 percentage point
lower than the baseline scenario anchor, while the
growth rate of the TFP converges to 0.5 percentage
points above the level recorded in the baseline scenario
in 2030, i.e. at approximately 1.0 percent. The output
gap closes line-by-line in 2025. As a result of higher
growth, the primary surplus increases correspondingly in
the period 2019-2022 while for the following years it
remains constant at its structural level until the end
of the forecast period. The growth rate of the GDP
deflator and the rate of consumer price inflation
converge to 2.0 percent in 2025.
Table R.1 illustrates
schematically the characteristics of the shocks applied
to the main macroeconomic and public finance variables
underlying the dynamics of the debt-to-GDP ratio.
|
TABLE R.1: SUMMARY
OF MACRO-FISCAL SHOCKS
|
||||||
Scenario
|
||||||
Optimistic
|
Reference
|
Pessimistic
|
||||
Yield curve
|
(a) yield
curve of the reference scenario reduced line-by-line by
100 bp from April to December 2019.
|
(a) yield
curve of the EFD policy scenario (2019-2022)
|
(a) the yield
curve of the reference scenario increases line-by-line
by 100 bps from April to December 2019.
|
|||
b) in December
2022 convergence to yield curve values of the reference
scenario. Constant baseline scenario from 2023.
|
b) Constant
yield curve from 2023
|
b) in December
2022 convergence to yield curve values of the reference
scenario. Constant baseline scenario from 2023.
|
||||
GDP
|
a) -0.03 p.p. growth
for 2019; -0.3 p.p. for 2020 and -0.4 p.p. for 2021-2022
|
(a) baseline scenario
of Update to EFD 2018-2021
|
a) +0.03 p.p. growth
for 2019; +0.3 p.p. for 2020 and +0.4 p.p. for 2021-2022
|
|||
b) Convergence from
2022 to 2030 to a NAWRU value of 1 p.p. lower than the
baseline and to a TFP growth rate of 0.5 p.p. higher
than the baseline.
|
b) Convergence by
2030 to parameters of the OGWG T+10 scenario (NAWRU at
9.8%, TFP growth rate at 0.5%)
|
(b) Convergence from
2022 to 2030 to a NAWRU value of 1 p.p. higher than the
baseline and a TFP growth rate of 0.5 p.p. lower than
the baseline.
|
||||
Primary surplus
|
(a) restatement of
the primary surplus on the basis of elasticities
(sensitivity analysis) over the period 2019-2022
|
(a) primary surplus
of the policy scenario of the Update to EFD (2019-2022)
|
(a) restatement of
the primary surplus on the basis of elasticities
(sensitivity analysis) over the period 2019-2022
|
|||
(b) in 2023-2030 a
constant structural primary surplus at the level of 2022
|
(b) in 2023-2030 a
constant structural primary surplus at the level of 2022
|
(b) in 2023-2030 a
constant structural primary surplus at the level of 2022
|
||||
Inflation
|
(a) increase as in
the optimistic scenario in the period 2019 to 2022
|
(a) baseline scenario
from 2019 to 2022
|
(a) reduction as per
low growth scenario in the period 2019 to 2022
|
|||
(b) convergence to 2%
between 2022 and 2025
|
(b) convergence to 2%
between 2022 and 2025
|
(b) convergence to 2%
between 2022 and 2025
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TABLE
IV.2: SENSITIVITY TO GROWTH (percentage values)
|
|||||||
|
|
2019
|
2020
|
2021
|
2022
|
Average
2023-2029
|
2030
|
Optimistic
scenario
|
1.3
|
3.1
|
3.1
|
2.9
|
3.2
|
3.4
|
|
Nominal
GDP growth rate
|
Baseline scenario
|
1.2
|
2.8
|
2.6
|
2.3
|
2.9
|
2.6
|
|
Pessimistic
Scenario
|
1.2
|
2.5
|
2.1
|
1.7
|
2.7
|
1.8
|
Optimistic
scenario
|
0.3
|
1.1
|
1.2
|
1.2
|
1.2
|
1.3
|
|
Real GDP
growth rate
|
Baseline scenario
|
0.2
|
0.8
|
0.8
|
0.8
|
0.9
|
0.6
|
|
Pessimistic
scenario
|
0.2
|
0.5
|
0.3
|
0.4
|
0.7
|
-0.1
|
Optimistic
scenario
|
0.5
|
0.7
|
1.0
|
0.8
|
1.0
|
1.3
|
|
Potential
GDP growth rate
|
Baseline scenario
|
0.4
|
0.7
|
0.8
|
0.7
|
0.8
|
0.6
|
|
Pessimistic
scenario
|
0.3
|
0.5
|
0.7
|
0.5
|
0.5
|
-0.1
|
Optimistic
scenario
|
-1.7
|
-1.4
|
-1.2
|
-0.8
|
-0.1
|
0.0
|
|
Output gap
|
Baseline scenario
|
-1.7
|
-1.6
|
-1.6
|
-1.6
|
-0.2
|
0.0
|
|
Pessimistic
scenario
|
-1.6
|
-1.6
|
-2.0
|
-2.1
|
-0.4
|
0.0
|
Optimistic
scenario
|
-2.3
|
-1.7
|
-1.0
|
-0.3
|
0.0
|
0.2
|
|
Net
borrowing
|
Baseline scenario
|
-2.4
|
-2.1
|
-1.8
|
-1.5
|
-1.0
|
-0.7
|
|
Pessimistic
scenario
|
-2.4
|
-2.5
|
-2.7
|
-2.8
|
-2.0
|
-1.7
|
Optimistic
scenario
|
-1.4
|
-1.0
|
-0.4
|
0.2
|
0.0
|
0.2
|
|
Cyclically
adjusted net borrowing
|
Baseline scenario
|
-1.4
|
-1.2
|
-0.9
|
-0.7
|
-0.8
|
-0.7
|
|
Pessimistic
scenario
|
-1.5
|
-1.6
|
-1.6
|
-1.6
|
-1.8
|
-1.7
|
Optimistic
scenario
|
1.3
|
1.7
|
2.4
|
3.1
|
3.6
|
3.6
|
|
Primary
surplus
|
Baseline scenario
|
1.2
|
1.5
|
1.9
|
2.3
|
3.0
|
3.2
|
|
Pessimistic
scenario
|
1.2
|
1.3
|
1.4
|
1.5
|
2.5
|
2.7
|
Optimistic
scenario
|
2.2
|
2.5
|
3.0
|
3.6
|
3.6
|
3.6
|
|
Cyclically
adjusted primary surplus
|
Baseline scenario
|
2.2
|
2.4
|
2.8
|
3.2
|
3.2
|
3.2
|
|
Pessimistic
scenario
|
2.1
|
2.2
|
2.5
|
2.7
|
2.7
|
2.7
|
Optimistic
scenario
|
2.7
|
2.7
|
2.7
|
2.7
|
3.3
|
3.6
|
|
Implicit
interest rate
|
Baseline scenario
|
2.8
|
2.8
|
2.9
|
3.0
|
3.4
|
3.7
|
|
Pessimistic
scenario
|
2.8
|
2.9
|
3.1
|
3.3
|
3.6
|
3.7
|
Optimistic
scenario
|
132.4
|
129.9
|
127.4
|
124.4
|
109.2
|
94.4
|
|
Public
debt
|
Baseline scenario
|
132.6
|
131.3
|
130.2
|
128.9
|
117.2
|
106.6
|
|
Pessimistic
scenario
|
132.9
|
132.6
|
133.0
|
133.3
|
125.8
|
120.3
|
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FIGURE IV.6:
MEDIUM-TERM PROJECTION OF DEBT-TO-GDP RATIO IN
ALTERNATIVE SCENARIOS
|
![]() |
Source: MEF.
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STABILITY
PROGRAMME
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98
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STABILITY
PROGRAMME
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AND SUSTAINABILITY OF PUBLIC FINANCES
|
TABLE IV.3 EXPENDITURE FOR PENSIONS,
HEALTHCARE, CARE FOR THE ELDERLY, EDUCATION
AND UNEMPLOYMENT BENEFITS (2010-2070)
|
|||||||||||||
|
2010
|
2015
|
2020
|
2025
|
2030
|
2035
|
2040
|
2045
|
2050
|
2055
|
2060
|
2065
|
2070
|
Total expenditure
|
49.9
|
50.3
|
49.1
|
49.9
|
51.9
|
54.0
|
55.5
|
56.4
|
56.3
|
55.5
|
55.0
|
54.5
|
54.2
|
of which:
|
|||||||||||||
- Age-related
expenditure
|
27.5
|
27.9
|
27.7
|
27.6
|
28.7
|
29.8
|
30.7
|
30.9
|
30.1
|
28.9
|
28.1
|
27.5
|
27.0
|
Pension
expenditure
|
14.8
|
15.7
|
15.8
|
16.0
|
16.8
|
17.8
|
18.3
|
18.1
|
16.9
|
15.6
|
14.7
|
14.1
|
13.8
|
Healthcare expenditure
|
7.1
|
6.7
|
6.6
|
6.6
|
6.9
|
7.1
|
7.4
|
7.6
|
7.8
|
7.8
|
7.9
|
7.8
|
7.7
|
of which LTC - health
|
0.8
|
0.7
|
0.7
|
0.7
|
0.7
|
0.8
|
0.9
|
0.9
|
1.0
|
1.1
|
1.1
|
1.1
|
1.1
|
LTC -
social/assistance
|
1.0
|
1.0
|
1.0
|
1.1
|
1.1
|
1.2
|
1.2
|
1.3
|
1.5
|
1.6
|
1.6
|
1.6
|
1.6
|
Education
expenditure
|
3.9
|
3.6
|
3.5
|
3.3
|
3.2
|
3.1
|
3.1
|
3.3
|
3.3
|
3.4
|
3.4
|
3.3
|
3.4
|
Unemployment
benefits
|
0.7
|
0.9
|
0.8
|
0.7
|
0.7
|
0.6
|
0.6
|
0.6
|
0.6
|
0.6
|
0.6
|
0.6
|
0.6
|
- Interest
expenditure
|
4.3
|
4.1
|
3.6
|
4.4
|
5.5
|
6.3
|
7.0
|
7.7
|
8.4
|
8.8
|
9.1
|
9.2
|
9.3
|
Total Revenue
|
45.6
|
47.7
|
47.0
|
46.8
|
46.8
|
46.8
|
46.8
|
46.7
|
46.7
|
46.7
|
46.7
|
46.7
|
46.7
|
of which: Property income
|
0.6
|
0.7
|
0.7
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.5
|
0.4
|
0.4
|
ASSUMPTION (%)
|
|||||||||||||
Labour productivity growth rate
|
2.6
|
0.3
|
0.4
|
0.2
|
0.6
|
0.9
|
1.2
|
1.6
|
1.6
|
1.6
|
1.6
|
1.6
|
1.5
|
Real GDP growth rate
|
1.7
|
0.9
|
0.6
|
0.8
|
0.3
|
0.4
|
0.5
|
1.1
|
1.3
|
1.6
|
1.2
|
1.4
|
1.1
|
Male participation rate
(20-64) |
78.4
|
79.5
|
80.4
|
80.3
|
80.2
|
80.3
|
80.3
|
80.6
|
80.6
|
80.5
|
80.5
|
80.4
|
80.4
|
Female participation rate
(20-64) |
54.6
|
57.8
|
60.7
|
62.6
|
63.7
|
64.2
|
64.5
|
64.6
|
64.7
|
64.7
|
64.7
|
64.7
|
64.8
|
Total participation rate (20-64)
|
66.3
|
68.6
|
70.5
|
71.4
|
72
|
72.3
|
72.5
|
72.8
|
72.8
|
72.8
|
72.8
|
72.8
|
72.8
|
Unemployment rate
|
8.4
|
11.9
|
11.2
|
9.3
|
8.5
|
8.1
|
7.8
|
7.6
|
7.4
|
7.4
|
7.3
|
7.3
|
7.3
|
Population of age 65 and over/ total
population
|
20.4
|
21.7
|
23.1
|
24.7
|
27.1
|
29.8
|
32.1
|
33.5
|
33.8
|
33.7
|
33.4
|
32.9
|
32.8
|
Elderly dependency ratio
(65 and over/[20-64]) |
33.6
|
36.4
|
39.1
|
42.5
|
47.9
|
54.8
|
61.8
|
66.3
|
67.7
|
67.5
|
66.6
|
65.4
|
65.4
|
Notes: (1) For
the four-year period 2019-2022, growth
assumptions were adopted in line with the
indications of the macroeconomic scenario at
unchanged legislation underlying the EFD 2019.
For the following period, the scenario is
adopted that the EPC-WGA prepared for the
age-related expenditure forecasts for the 2018
round. (2) Until 2018, expenditure on social
benefits refers to National Accounting data.
For the period 2019-2022, the forecast values
are in line with those underlying the forecast
of the public finance scenario. (3) Paragraph
256 of Budget Law No. 145/2018 established the
‘Fund for the revision of the early retirement
system and to encourage the hiring of young
workers’, which has a budget of 7,000 million
per year from 2024. The greater financial
burden resulting from the social security
provisions of Decree Law No. 4/2019 are
financed by the substantial zeroing of the
expenditure allocation under examination until
2023. In the following years, under unchanged
legislation, the above-mentioned expenditure
authorisation includes increasing residual
amounts reaching around 5 billion euro per
year from 2028. In this context, these
residual allocations, not yet defined by law,
are not attributed to specific structural
measures in the field of pensions. (4) The
forecast is based on the reference scenario
methodology. (5) For 2010, the data does not
discount the different accounting of the
interest expense, entirely excluded from the
aggregate of health expenditure for an annual
amount of between 250 and 300 million. (6) The
aggregate includes ISCED levels 1-8 according
to the OECD classification (ISCED 2011 level).
It does not include expenditure for adult
education (lifelong learning) and pre-school
(pre-primary). (7) Rounding up to the first
decimal place may lead to inconsistencies with
the values shown in the table.
Source: MEF
data processing using the Long Term Forecast
Model of the State General Accounting Office.
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F
O
C
U
S
|
Medium-long term
trends of the Italian pension system
In implementation of
the provisions included in the 2019 Budget
Law (Law No. 145/2018), Decree Law No.
4/201926 has established, on
an experimental basis and only for the
period 2019-2021, a new channel of early
retirement that can be accessed by all
workers who meet the following combined
requirements: age of at least 62 years and
at least 38 years’ accrued contributions.
The law envisages
different rules for retirement for workers
in the private sector and for those in the
public sector. For the former,
postponement is foreseen of the first
effective date of pension benefits of
three months from the date of meeting
these combined requirements. For workers
in the public sector, with the exception
of the school sector, for which specific
provisions apply, access to pension
benefits is finalised 6 months after these
combined requirements have been met27.
Decree Law No. 4/2019 provides for further
measures in the field of pensions. In
particular, the regulations impose a
reduction to the
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|
2018 level, i.e. 42
years and 10 months for men and 41 years
and 10 months for women, of the years'
contribution requirement for the channel
of early retirement independent of age
and the freezing, for the period
2019-2026, of the related adjustments to
life expectancy. This channel is also
subject to the system of starting dates,
so that the right to start receiving the
pension is finalised 3 months after
meeting the contributions requirement.
The non-application
of life expectancy adjustments for the
period 2019-2026 is also foreseen for
so-called ‘early-starting’ workers who
are eligible for retirement once they
have accrued at least 41 years'
contributions28. Finally, Decree
Law No. 4/2019 strengthens the ‘Women's
Option’ measure by allowing female
workers who reach 58 years of age by 31
December 2018 for employees and 59 years
for self-employed workers and at least
35 years of contributions to take early
retirement, with the calculation of
retirement benefits29
entirely under the contribution system.
Despite having a
significant financial impact, the new
rules introduced by Decree Law No.
4/2019 have the purpose of making access
to early retirement temporarily easier.
The extension of the
contribution system to all workers,
including those who, according to the
previous legislation, would have
received a pension calculated according
to the wage system (i.e. those who had
more than 18 years of contributions as
at 31/12/1995), is confirmed with effect
from 2012. Moreover, in line with the
regulatory and institutional structures
found in most European countries, the
Italian pension system maintains two
channels of access to retirement30:
(a) an old-age pension with at least 20
years' contributions and a legal age
requirement that, for 2019, is 67 years31;
(b) early retirement, with 20 years'
contributions, allowed up to three years
before the old-age pension age for
workers hired after 1 January 1996 and
subject to reaching a sufficiently high32
level of pension contributions, or
regardless of age and date of
recruitment but with a longer
contribution period.
Starting in 2013, all
age requirements (including those for
access to the social allowance) and
contribution requirements for access to
early retirement, regardless of age, are
indexed to changes in life expectancy as
measured by ISTAT. Aside from that
recently established by Decree Law No.
4/2019, which, for the channel of early
retirement independent of age, requires
the non-application for the period
2019-2026 of the adjustments for life
expectancy; for all the other
requirements for access to retirement,
these adjustments are made every two
years, according to a procedure entirely
administrative in nature33.
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MINISTRY OF ECONOMY AND
FINANCE
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103
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ECONOMIC
AND FINANCIAL DOCUMENT - SECT. I STABILITY
PROGRAMME
|
Moreover, from
2013, the calculation of the
conversion coefficients34 at the time of
retirement was extended to the
old-age requirement age plus four
years.
According to this
regulatory framework, the figure
below shows the forecast of pension
expenditure as a percentage of GDP
at unchanged legislation35, based on the
EPC-WGA Baseline scenario36.
|
FIGURE R.1: PUBLIC
EXPENDITURE FOR PENSIONS AS A
PERCENTAGE OF GDP
|
|
![]() |
|
Notes: The EPC-WGA Baseline
scenario incorporates, in the short
term, the general trends indicated
in the 2019 Stability Programme.
Source:
Long Term Forecast Model of the
State General Accounting Office.
|
After the growth
recorded between 2008 and 2014,
exclusively due to the continuation
of the recessionary phases of the
economic cycle, from 2015, thanks to
the more favourable economic growth
and to the gradual continuation of
the process of raising the minimum
retirement requirements and the
pro-rata application of the
contribution calculation system, the
ratio of pension expenditure to GDP
decreases for around three years.
Subsequently, the ratio of pension
expenditure to GDP begins a long
period of growth that lasts until
2042, reaching a peak of 18.4
percent. In the first phase, this
increase is explained in part by the
slowdown in the dynamics of
short-term gross domestic product
and that assumed in the
|
104
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MINISTRY
OF ECONOMY AND FINANCE
|
IV. SENSITIVITY
AND SUSTAINABILITY OF PUBLIC
FINANCES
|
EPC-WGA Baseline37
scenario and, in part, by greater
recourse to retirement, because of the
measures provided for by Decree Law
No. 4/2019. In a second phase, after
2030, the growth in the ratio between
pension expenditure and GDP is
attributable to the increase in the
number of pensions compared to the
number of employees due to the
retirement of the baby boom
generations, which is only partly
offset by the increase in the minimum
pension requirements and by the effect
of limiting the pension amounts
exerted by the gradual application of
the system for calculating
contributions over the entire working
life.
After the peak in
2042, the ratio of pension expenditure
to GDP falls rapidly to 16.9 percent
in 2050 and 14.7 percent in 2060,
converging to 13.8 percent in 2070,
with an almost constant deceleration
over the entire period. The rapid
reduction in the ratio between pension
expenditure and GDP in the final phase
of the forecast period is due to the
generalised application of the
contribution calculation, which is
accompanied by the stabilisation and
subsequent trend reversal of the ratio
between the number of pensions and the
number of people in employment.
This trend is
explained both by the gradual exit of
the baby-boom generations and by the
automatic adjustment of the minimum
retirement requirements according to
life expectancy.
The figure below
presents the forecast of pension
expenditure as a share of GDP under
unchanged legislation and compares it
with that which would have occurred as
a result of the schemes preceding the
main reform measures. Compared to the
immediately preceding legislation, in
the period 2019-2036, the measures
found in Decree Law No. 4/2019 and in
the Budget Law for 2019 (Law No.
145/2018) included in the scenario at
unchanged legislation generate an
increase in the incidence of pension
expenditure as a percentage of GDP
equal of an average 0.2 points per
year, progressively decreasing from
the first years of the forecast, where
there is a greater incidence of
expenditure as a percentage of GDP. In
the long term, thanks to the overall
reform process implemented from 2004,
the average retirement age (taking
into account both the old-age
retirement age and the requirements
for early retirement) increases from
60-61 during the period 2006-2010 to
about 63 in 2017, 67 in 2040 and then
about 68 in 2050. Cumulatively, the
lower expenditure to GDP ratio
resulting from the overall reform
process launched in 2004 amounts to
around 60 percentage points of GDP by
2060.
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MINISTRY OF ECONOMY AND
FINANCE
|
105
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ECONOMIC
AND FINANCIAL DOCUMENT - SECT. I STABILITY
PROGRAMME
|
FIGURE R.2: PUBLIC
EXPENDITURE FOR PENSIONS AS A
PERCENTAGE OF GDP UNDER DIFFERENT
REGULATORY ASSUMPTIONS
|
|
![]() |
|
Notes: The EPC-WGA Baseline
scenario incorporates, in the short
term, the general trends indicated
in the 2019 Stability Programme.
Source: Long Term Forecast
Model of the State General
Accounting Office.
|
106
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MINISTRY OF ECONOMY AND
FINANCE
|
IV.
SENSITIVITY AND
SUSTAINABILITY OF PUBLIC
FINANCES
|
FIGURE IV.7: DEBT-TO-GDP
RATIO: COMPARISON OF PROJECTION
SCENARIOS
|
![]() |
Source:
MEF analysis based on the Long
Term Forecast Model of the State
General Accounting Office.
|
MINISTRY OF ECONOMY
AND FINANCE
|
107
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ECONOMIC AND
FINANCIAL DOCUMENT -
SECT. I
STABILITY
PROGRAMME
|
108
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MINISTRY
OF ECONOMY AND FINANCE
|
IV. SENSITIVITY AND
SUSTAINABILITY OF PUBLIC
FINANCES
|
TABLE
IV.4: SUSTAINABILITY
INDICATORS (points of GDP)
|
|||||||
|
EFD
2019
|
2018
Fiscal Sustainability
Report
|
EFD
2018
|
Debt
Sustainability Monitor
2017
|
EFD
2017
|
2015
Fiscal Sustainability
Report
|
EFD
2016
|
S1
Index
|
|||||||
Total
adjustment
|
6.1
|
9.4
|
6.4
|
6.7
|
3.9
|
4.2
|
3.9
|
of which:
|
|||||||
For
debt/GDP ratio
stabilisation
|
-0.8
|
2.0
|
-1.6
|
0.4
|
-2.8
|
-1.4
|
-2.8
|
For the
adjustment delay
|
1.1
|
1.6
|
1.3
|
1.1
|
0.7
|
0.7
|
0.7
|
To reach
the 60% target
|
5.1
|
4.9
|
5.6
|
5.1
|
5.6
|
5.1
|
5.6
|
For
ageing costs
|
0.8
|
0.9
|
1.0
|
0.1
|
0.3
|
-0.2
|
0.3
|
S2
Index
|
|||||||
Total
adjustment
|
0.2
|
2.9
|
0.2
|
0.6
|
-1.9
|
-0.9
|
-1.9
|
of which:
|
|||||||
For
debt/GDP ratio
stabilisation
|
-0.6
|
1.8
|
-1.3
|
0.5
|
-2.0
|
-0.8
|
-2.0
|
For
ageing costs
|
0.8
|
1.1
|
1.5
|
0.1
|
0.1
|
-0.1
|
0.1
|
Source:
MEF data analysis.
|
MINISTRY
OF ECONOMY AND FINANCE
|
109
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ECONOMIC AND
FINANCIAL DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
FIGURE
IV.8: SENSITIVITY OF
PUBLIC DEBT TO A RISE IN
LIFE EXPECTANCY AND A
REDUCTION IN THE
FERTILITY RATE (as a
percentage of GDP)
|
![]() |
Source:
MEF analysis based on
the Long Term Forecast
Model of the State
General Accounting
Office.
|
110
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MINISTRY
OF ECONOMY AND FINANCE
|
IV. SENSITIVITY
AND SUSTAINABILITY OF
PUBLIC FINANCES
|
FIGURE
IV.9: SENSITIVITY OF
PUBLIC DEBT TO AN
INCREASE/REDUCTION OF
THE NET FLOW OF
IMMIGRANTS (as a
percentage of GDP)
|
![]() |
Source:
MEF analysis based on
the Long Term Forecast
Model of the State
General Accounting
Office.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
111
|
ECONOMIC
AND FINANCIAL
DOCUMENT - SECT.
I STABILITY
PROGRAMME
|
FIGURE
IV.10: SENSITIVITY
OF PUBLIC DEBT TO
MACROECONOMIC
ASSUMPTIONS, HIGHER
AND LOWER GROWTH OF
TOTAL FACTOR
PRODUCTIVITY (as a
percentage of GDP)
|
![]() |
Source:
MEF analysis based
on the Long Term
Forecast Model of
the State General
Accounting Office.
|
FIGURE
IV.11: SENSITIVITY
OF PUBLIC DEBT TO
MACROECONOMIC
ASSUMPTIONS,
EMPLOYMENT RATE (as
a percentage of GDP)
|
![]() |
Source:
MEF analysis based
on the Long Term
Forecast Model of
the State General
Accounting Office.
|
112
|
MINISTRY
OF ECONOMY AND
FINANCE
|
IV.
SENSITIVITY AND
SUSTAINABILITY
OF PUBLIC
FINANCES
|
FIGURE
IV.12: SENSITIVITY
OF PUBLIC DEBT TO
THE PRIMARY
SURPLUS (as a
percentage of GDP)
|
![]() |
Source:
MEF analysis based
on the Long Term
Forecast Model of
the State General
Accounting Office.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
113
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
FIGURE
IV.13: IMPACT OF
THE REFORMS ON
THE DEBT-TO-GDP
RATIO (as a
percentage of
GDP)
|
![]() |
Source: MEF analysis based on the Long Term Forecast Model of the State General Accounting Office.
|
F
O
C
U
S |
Guarantees
granted by the
State
As at 31 December 2018, the stock of guarantees granted by the State had reached 74.4 billion, or 4.2 percent of GDP. The increase of approximately 6.5 billion compared to the previous year is mainly due to the increase in GACS (+6.3
billion) and
guarantees for
non-market risks
in favour of
SACE (+5.8
billion). The
increase was
also due to the
guarantees
relating to bond
issues by Cassa
Depositi e
Prestiti
S.p.A. and
guarantees in
favour of
households for
first homes and
small and
medium-sized
enterprises,
which increased
by a total of
7.3 billion
compared to
2017. Overall,
guarantees
granted to
financial sector
institutions,
including banks,
GACS and those
relating to Cassa
Depositi e
Prestiti,
amounted to
approximately 21
billion (1.2
percent of GDP),
down by 4.2
billion compared
to 2017. In
particular, the
absence of
guarantees in
favour of
Italian banks
(-12.5 billion)
more than offset
the increase in
GACS.
|
TABLE
R.1: PUBLIC
GUARANTEES (in
millions)
|
|||
2018
|
|||
Level
|
As a % of
GDP
|
||
Guarantee
stock
|
74,379
|
4.2
|
|
of
which: financial
sector
|
20,850
|
1.2
|
|
114
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MINISTRY
OF ECONOMY AND
FINANCE
|
IV.
SENSITIVITY
AND
SUSTAINABILITY
OF PUBLIC
FINANCES
|
The
following
components
contributed to
the total
amount:
•
Central
Guarantee Fund
for small and
medium-sized
enterprises.
This is an
industrial
policy
instrument of
the Ministry
of Economic
Development
that benefits
from the State
guarantee and
operates
through three
distinct
actions:
direct
guarantee,granted
to banks and
financial
intermediaries;
reinsurance/counter-guarantee
for guarantees
awarded by
Confidi and
other
guarantee
funds;
co-guarantee
granted
directly in
favour of the
financing
subjects and
jointly with
Confidi and
other
guarantee
funds or
guarantee
funds
established
within the EU
or co-financed
by it. It has
taken on a
central role
in
counter-cyclical
economic
policy
measures. As
at 31 December
2018, the
residual debt
guaranteed
amounts to
approximately
25,735
million.
•
TAV
S.p.A.
The Ministry
of Economy and
Finance
guarantees
that Ferrovie
dello Stato
S.p.A. will
fulfil its
obligations
towards TAV
S.p.A. in
relation to
the
concession,
construction
and management
of the High
Speed system.
This is a
guarantee
aimed at
securing the
financial
resources from
the market
needed to
build the
high-speed
network. As at
31 December
2018 the
residual debt
guaranteed
amounted to
approximately
1,352 million.
•
GACS
(Guarantee on
the
securitisation
of
non-performing
loans).
This is a tool
that the
Treasury makes
available to
credit and
finance
operators to
facilitate the
disposal of
non-performing
bank loans.
The State only
guarantees the
senior
segments of
the
securitised
Non Performing
Loans
portfolios,
i.e. the
safest ones,
which
ultimately
bear any
losses arising
from
sub-expected
loan
recoveries:
the riskiest
segments
cannot be
repaid unless
the senior
tranches
guaranteed by
the State have
been repaid in
full in
advance. The
price of the
guarantee is
market-based,
as also
recognised by
the European
Commission,
which agrees
that the
scheme does
not provide
for State aid
that could be
detrimental to
competition.
As at 31
December 2018,
the residual
debt
guaranteed is
7,734 million.
•
Guarantees
provided by
local
authorities.
The data
relating to
guarantees
granted by
local
authorities
are provided
by the Bank of
Italy, which
collects them
through the
information
transmitted,
by means of
supervisory
reports,
directly from
the financial
institutions
that benefit
from them. As
at 31 December
2018 the
residual debt
guaranteed
amounted to
approximately
2,750 million.
•
Italian
banks.
These
guarantees are
granted by the
State on the
Italian banks’
liabilities in
relation to
bonds issued
by credit
institutions.
As at 31
December 2018,
the residual
debt
guaranteed
amounted to
approximately
8,616 million.
•
Bond
issues by
Cassa Depositi
e Prestiti
S.p.A..
By Decree of
the Minister
of the Economy
and Finance
No. 2545027 of
24 December
2015, a State
guarantee was
granted on the
bond issues of
Cassa
Depositi e
Prestiti
S.p.A. for a
maximum amount
of 5 billion,
in order to
ensure that
the resources
were raised
for the
performance of
public
financing
activities. As
at 31 December
2018,
guarantees
were granted
for a total of
4,500 million.
•
Guarantee
fund for first
homes
(art. 1,
paragraph 48,
letter c of
the Stability
Law 2014),
which
guarantees 50
percent of
mortgage loans
for the
purchase,
renovation and
energy
efficiency
improvements
of buildings
used as main
residence. In
2018, compared
to 46,784 new
loans granted
by the banking
system for a
total of 5,230
million, new
guarantees
were granted
for
approximately
2,615 million,
thus the
guarantees
outstanding
amount to
4,348 million.
•
Guarantee
for non-market
risks in
favour of
SACE.
The State
reinsures,
upon
consideration,
part of the
non-market
risks already
assumed by
SACE S.p.A.
for
transactions
involving
strategic
sectors of the
Italian
economy or
companies of
significant
national
interest in
terms of
employment
levels,
turnover or
repercussions
for the
national
productive
economic
system, which
determine high
concentration
risks for SACE
towards
individual
counterparties,
groups of
connected
counterparties
or destination
countries and
amount to
18,944
million. The
estimate is
preliminary
insofar as it
is based on
data available
as at 30
September
2018.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
115
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ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
•
State
guarantees in
favour of
ILVA. The
guarantees are
granted on
loans of up to
400 million
issued by the
banking system
in favour of
the
commissioner
of ILVA
S.p.A., in
order to
perform the
investments
necessary for
environmental
remediation,
as well as
those intended
for research,
development
and
innovation,
training and
employment. As
at 31 December
2018,
guarantees
were granted
for a total of
400 million.
In
comparison
with its main
European
partners, in
2017 Italy was
confirmed as
one of the
countries with
the lowest
level of
public
guarantees.
The stock of
guarantees, as
in most EU
countries, is
smaller than
observed in
the two years
following the
financial
crisis of
2011, due to
the
progressive
reduction of
guarantees in
favour of the
financial
system, which
were
substantial in
the countries
most affected
by the crisis.
In 2017, Italy
was one of the
countries that
made the least
use of
guarantees to
manage the
financial
crisis and
only a small
proportion of
the total
guarantee
stock was
directed at
the banking
sector
(approximately
1.2 percent of
GDP vis-à-vis
total3.9
percent
overall).
|
FIGURA
R.1: PUBLIC
GUARANTEES IN
EU COUNTRIES
(% of
GDP)
|
|
![]() |
Source:
Eurostat.
|
116
|
MINISTRY
OF ECONOMY AND
FINANCE
|
TABLE
V.1 -
CUMULATIVE
EFFECTS OF THE
LATEST
MEASURES
IMPLEMENTED IN
2018 ON
GENERAL
GOVERNMENT NET
BORROWING (before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
Decree-Law
No. 55/2018
(converted by
Law No.
89/2018)
|
0
|
0
|
0
|
0
|
Decree-Law
No. 87/2018
(converted by
Law No.
96/2018)
|
4
|
29
|
0
|
0
|
Decree-Law
No. 91/2018
(converted by
Law No.
108/2018)
|
0
|
1
|
0
|
0
|
Decree-Law
No. 109/2018
(converted by
Law No.
130/2018)
|
30
|
15
|
12
|
16
|
Decree-Law
No. 113/2018
(converted by
Law No.
132/2018)
|
3
|
8
|
9
|
7
|
Decree-Law
No. 135/2018
(converted by
Law No.
12/2019)
|
0
|
0
|
1
|
0
|
NET
BORROWING
|
38
|
52
|
22
|
23
|
% of
GDP
|
0.0
|
0.0
|
0.0
|
0.0
|
BORROWING
REQUIREMENT
|
8
|
42
|
22
|
23
|
% of
GDP
|
0.0
|
0.0
|
0.0
|
0.0
|
NET
BALANCE TO BE
FINANCED
|
40
|
120
|
11
|
19
|
% of
GDP
|
0.0
|
0.0
|
0.0
|
0.0
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
117
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
TABLE
V.2 -
CUMULATIVE
EFFECTS OF THE
LATEST
MEASURES
IMPLEMENTED IN
2018 ON
GENERAL
GOVERNMENT NET
BORROWING (before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
Incremental
resources
|
748
|
1,920
|
1,518
|
1,368
|
Higher
revenue
|
181
|
523
|
627
|
674
|
Lower
expenditure
|
567
|
1,397
|
890
|
694
|
-
current
expenditure
|
274
|
585
|
301
|
258
|
-
capital
expenditure
|
292
|
811
|
590
|
436
|
Use of
resources
|
710
|
1,868
|
1,496
|
1,346
|
Lower
revenue
|
276
|
662
|
659
|
596
|
Higher
expenditure
|
434
|
1,207
|
837
|
749
|
-
current
expenditure
|
153
|
396
|
238
|
314
|
-
capital
expenditure
|
281
|
811
|
599
|
436
|
Impact
on net
borrowing
|
38
|
52
|
22
|
23
|
Net
change in
revenue
|
-95
|
-138
|
-32
|
78
|
Net
change in
expenditure
|
-133
|
-190
|
-53
|
55
|
-
current
expenditure
|
-121
|
-189
|
-63
|
55
|
-
capital
expenditure
|
-12
|
-1
|
10
|
0
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
TABLE
V.3 -
CUMULATIVE
EFFECTS OF THE
LATEST
MEASURES
IMPLEMENTED IN
2018 ON
GENERAL
GOVERNMENT NET
BORROWING BY
SUBSECTOR
(before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
CENTRAL
GOVERNMENT
|
22
|
153
|
98
|
139
|
-net
change in
revenue
|
-46
|
-85
|
53
|
167
|
-net
change in
expenditure
|
-68
|
-238
|
-45
|
28
|
LOCAL
GOVERNMENT
|
52
|
-19
|
-11
|
-41
|
-net
change in
revenue
|
-6
|
-1
|
11
|
15
|
-net
change in
expenditure
|
-58
|
18
|
22
|
56
|
SOCIAL
SECURITY FUNDS
|
-36
|
-82
|
-65
|
-74
|
-net
change in
revenue
|
-43
|
-53
|
-95
|
-103
|
-net
change in
expenditure
|
-7
|
29
|
-30
|
-29
|
EFFECTS
ON NET
BORROWING
|
38
|
52
|
22
|
23
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
118
|
MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
MINISTRY
OF ECONOMY AND
FINANCE
|
119
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
120
|
MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
TABLE
V.4 - EFFECTS
OF DECREE-LAW
NO.109/2018 ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
INCREMENTAL
RESOURCES
|
210
|
502
|
199
|
130
|
|
|
|
|
|
Higher
revenue
|
53
|
11
|
14
|
17
|
|
|
|
|
|
Sanctions
imposed by the
Italian
Competition
Authority
charged to the
budget
|
49
|
0
|
0
|
0
|
National
Agency for the
Safety of
Railways and
Road and
Highway
Infrastructure
- effects of
taxes and
charges
|
0
|
6
|
9
|
9
|
Other
|
4
|
5
|
4
|
8
|
|
|
|
|
|
Lower
expenditure
|
156
|
491
|
185
|
113
|
|
|
|
|
|
Reduction
of Investment
Fund
|
33
|
185
|
67
|
50
|
Change
in Development
and Cohesion
Fund
|
50
|
142
|
0
|
0
|
Reduction
of Multiannual
Contribution
Fund
|
52
|
50
|
20
|
0
|
Reduction
of Fund for
structural
economic
policy
measures
|
0
|
10
|
50
|
21
|
Reduction
of Special
Capital
Account Fund
|
0
|
21
|
20
|
20
|
Reduction
of payments to
INAIL for
building
innovative
schools and
children's
centres
|
9
|
14
|
14
|
0
|
Reduction
of Special
Current
Account Fund
|
0
|
33
|
1
|
1
|
Other
|
12
|
37
|
14
|
21
|
|
|
|
|
|
USE OF
RESOURCES
|
179
|
487
|
187
|
114
|
|
|
|
|
|
Lower
revenues
|
17
|
29
|
29
|
0
|
|
|
|
|
|
Suspension
of deadlines
for payment of
RAI television
fee, social
security and
welfare
contributions,
premiums for
compulsory
insurance and
payment due
notices in
municipalities
hit by the
earthquake of
21 August 2017
|
7
|
28
|
28
|
0
|
Urban
Free Trade
Zone in the
metropolitan
city of Genoa
to support
businesses
affected by
the disaster
|
10
|
0
|
0
|
0
|
Other
|
0
|
1
|
1
|
0
|
|
|
|
|
|
Higher
expenditure
|
162
|
458
|
159
|
114
|
|
|
|
|
|
Expenditure
to reconstruct
the
infrastructure
and restore
the road
system after
the collapse
of part of the
Polcevera
Overpass
|
40
|
180
|
80
|
0
|
Restoration
and
implementation
of safety
measures for
motorways A24
and A25 after
the
earthquakes of
2009, 2016 and
2017
|
50
|
142
|
0
|
0
|
Provisions
on local
public
transport,
road haulage
and road
conditions for
the city of
Genoa
|
26
|
43
|
0
|
0
|
Increase
of Fund for
reconstruction
operations in
the
municipalities
of
Casamicciola
Terme, Forio
and Lacco
Ameno hit by
the earthquake
of 21 August
2017
|
0
|
20
|
20
|
20
|
National
Agency for the
Safety of
Railways and
Road and
Highway
Infrastructure
|
0
|
14
|
22
|
22
|
Increase
of Multiannual
Contribution
Fund
|
0
|
0
|
0
|
50
|
Design
of innovative
schools and
children's
centres
|
9
|
14
|
14
|
0
|
Optimization
of logistic
traffic flows
in the port of
Genoa
|
8
|
15
|
7
|
0
|
Other
|
30
|
30
|
16
|
21
|
|
|
|
|
|
IMPACT
ON NET
BORROWING
|
30
|
15
|
12
|
16
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
|
|
|
|
MINISTRY
OF ECONOMY AND
FINANCE
|
121
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
TABLE
V.5 - EFFECTS
OF DECREE-LAW
NO.113/2018 ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
INCREMENTAL
RESOURCES
|
101
|
128
|
145
|
147
|
|
|
|
|
|
Higher
revenue
|
25
|
15
|
16
|
14
|
|
|
|
|
|
Fund
for the
reorganisation
of the roles
and careers of
police and
armed forces -
effects of
taxes and
charges
|
24
|
10
|
10
|
10
|
Other
|
1
|
6
|
7
|
4
|
|
|
|
|
|
Lower
expenditure
|
76
|
112
|
128
|
133
|
|
|
|
|
|
Reduction
of Special
Capital
Account Fund
|
17
|
64
|
74
|
74
|
Reduction
of Public
Employee
Contract Fund
|
45
|
15
|
15
|
15
|
Reduction
of Special
Current
Account Fund
|
5
|
6
|
5
|
5
|
Other
|
9
|
27
|
34
|
39
|
|
|
|
|
|
USE OF
RESOURCES
|
98
|
120
|
136
|
141
|
|
|
|
|
|
Lower
revenue
|
22
|
7
|
7
|
7
|
|
|
|
|
|
Fund
for public
employee
contracts -
effects of
taxes and
charges
|
22
|
7
|
7
|
7
|
|
|
|
|
|
Higher
expenditure
|
76
|
112
|
128
|
133
|
|
|
|
|
|
Purchase
and
improvement of
information
systems for
combating
international
terrorism and
financing the
extraordinary
maintenance
and adaptation
of structures
and
installations
- State Police
and Fire
Brigade
|
15
|
49
|
49
|
49
|
Fund
for the
reorganization
of the roles
and careers of
police and
armed forces
|
50
|
20
|
20
|
20
|
Measures
for improving
and
implementing
safety
measures for
prison
facilities
|
7
|
15
|
25
|
25
|
Urban
safety
operations:
installation
of video
surveillance
systems by
Municipal
Authorities
|
0
|
10
|
17
|
27
|
Other
|
4
|
18
|
17
|
12
|
|
|
|
|
|
IMPACT
ON NET
BORROWING
|
3
|
8
|
9
|
7
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
122
|
MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
TABLE
V.6 - EFFECTS
OF DECREE-LAW
NO.135/2018 ON
GENERAL
GOVERNMENT NET
BORROWING (before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
INCREMENTAL
RESOURCES
|
12
|
351
|
273
|
274
|
|
|
|
|
|
Higher
revenue
|
4
|
77
|
103
|
102
|
|
|
|
|
|
Counteracting
VAT avoidance
and evasion in
business
transactions
performed
through online
trading
platforms
|
0
|
72
|
86
|
86
|
Other
|
4
|
5
|
17
|
16
|
|
|
|
|
|
Lower
expenditure
|
8
|
274
|
169
|
171
|
|
|
|
|
|
Reduction
of Fund for
structural
economic
policy
measures
|
0
|
108
|
131
|
78
|
Reduction
of Fund to
meet
non-deferrable
expenditure
|
0
|
0
|
12
|
86
|
Reduction
of Citizen's
Income Fund
|
0
|
90
|
0
|
0
|
Reduction
of Government
Programme
Implementation
Fund
|
0
|
20
|
17
|
0
|
Other
|
8
|
55
|
10
|
8
|
|
|
|
|
|
USE OF
RESOURCES
|
12
|
351
|
272
|
274
|
|
|
|
|
|
Lower
revenue
|
4
|
123
|
158
|
159
|
|
|
|
|
|
Deferral
of effective
date of
reduction in
CIT subsidies
for
non-commercial
bodies
|
0
|
118
|
158
|
158
|
Other
|
4
|
4
|
0
|
1
|
|
|
|
|
|
Higher
expenditure
|
8
|
228
|
114
|
115
|
|
|
|
|
|
Increase
of Government
Programme
Implementation
Fund
|
0
|
72
|
86
|
86
|
Contribution
to Municipal
Authorities to
make up for
lower revenue
due to the
introduction
of the TASI
|
0
|
110
|
0
|
0
|
Plan
for the
transition to
sustainable
energy
|
0
|
1
|
16
|
15
|
Increase
in funds for
urban safety
|
0
|
20
|
0
|
0
|
Other
|
8
|
25
|
12
|
14
|
|
|
|
|
|
IMPACT
ON NET
BORROWING
|
0
|
0
|
1
|
0
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
123
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
TABLE
V.7 - EFFECTS
OF THE
2019-2021
PUBLIC FINANCE
BUDGET AND
INITIAL
MEASURES IN
2019 (before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
2019
Budget Law
(Law
No.145/2018)
|
0
|
-11,586
|
-14,551
|
-9,290
|
Decree-Law
No.119/2018
(cvt. by Law
No.136/2018)
|
7
|
42
|
43
|
55
|
Decree-Law
No. 4/2019 (cvt.
by Law No.
26/2019)
|
0
|
7
|
77
|
54
|
|
|
|
|
|
NET
BORROWING
|
7
|
-11,537
|
-14,431
|
-9,180
|
% of
GDP
|
0.0
|
-0.6
|
-0.8
|
-0.5
|
BORROWING
REQUIREMENT
|
442
|
-12,822
|
-15,554
|
-9,542
|
% of
GDP
|
0.0
|
-0.7
|
-0.9
|
-0.5
|
NET
BALANCE TO BE
FINANCED
|
177
|
-19,450
|
-14,315
|
-14,283
|
% of
GDP
|
0.0
|
-1.1
|
-0.8
|
-0.8
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
124
|
MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
TABLE
V.8 - EFFECTS
OF THE
2019-2021
PUBLIC FINANCE
BUDGET ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
INCREMENTAL
RESOURCES
|
1,797
|
29,691
|
34,862
|
40,276
|
Higher
revenue
|
223
|
14,286
|
21,014
|
25,654
|
Lower
expenditure
|
1,574
|
15,405
|
13,848
|
14,622
|
current
expenditure
|
1,047
|
7,864
|
9,672
|
10,495
|
capital
expenditure
|
527
|
7,541
|
4,176
|
4,126
|
USE OF
RESOURCES
|
1,790
|
41,235
|
49,370
|
49,511
|
Lower
revenue
|
565
|
18,229
|
12,804
|
13,871
|
Higher
expenditure
|
1,225
|
23,006
|
36,566
|
35,640
|
current
expenditure
|
170
|
17,524
|
26,128
|
24,392
|
capital
expenditure
|
1,055
|
5,482
|
10,439
|
11,248
|
IMPACT
ON NET
BORROWING
|
7
|
-11,544
|
-14,508
|
-9,235
|
Change
net in revenue
|
-342
|
-3,943
|
8,210
|
11,784
|
Change
net in
expenditure
|
-349
|
7,601
|
22,719
|
21,018
|
current
expenditure
|
-877
|
9,660
|
16,456
|
13,897
|
capital
expenditure
|
528
|
-2,059
|
6,263
|
7,122
|
Note:
Discrepancies,
if any, are
due to
rounding.
The
2019-2021
public finance
Budget
includes the
effects of the
2019 Budget
Law and
Decree-Law No.
119/2018
converted by
Law No.
136/2018.
|
TABLE
V.8A - EFFECTS
OF DECREE-LAW
NO. 4/2019 ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects;
values in € m)
|
||||
|
2018
|
2019
|
2020
|
2021
|
INCREMENTAL
RESOURCES
|
0
|
11,204
|
16,594
|
17,309
|
Higher
revenue
|
0
|
748
|
672
|
678
|
Lower
expenditure
|
0
|
10,456
|
15,922
|
16,631
|
current
expenditure
|
0
|
10,447
|
15,922
|
16,631
|
capital
expenditure
|
0
|
9
|
0
|
0
|
USE OF
RESOURCES
|
0
|
11,198
|
16,517
|
17,254
|
Lower
revenue
|
0
|
14
|
170
|
278
|
Higher
expenditure
|
0
|
11,183
|
16,347
|
16,976
|
current
expenditure
|
0
|
11,183
|
16,347
|
16,976
|
capital
expenditure
|
0
|
0
|
0
|
0
|
IMPACT
ON NET
BORROWING
|
0
|
7
|
77
|
54
|
Change
net in revenue
|
0
|
734
|
502
|
400
|
Change
net in
expenditure
|
0
|
727
|
425
|
346
|
current
expenditure
|
0
|
737
|
425
|
346
|
capital
expenditure
|
0
|
-9
|
0
|
0
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
125
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
TABLE
V.9 - EFFECTS
OF THE
2019-2021
PUBLIC
FINANCE
BUDGET AND
INITIAL
MEASURES IN
2019 ON
GENERAL
GOVERNMENT NET
BORROWING BY
SUBSECTOR
(before
netting out
induced
effects; in €
mn)
|
||||
2018
|
2019
|
2020
|
2021
|
|
CENTRAL
GOVERNMENT
|
-209
|
-32
|
3,599
|
8,519
|
change
in net revenue
|
-241
|
-4,097
|
7,637
|
11,593
|
change
in net
expenditure
|
-32
|
-4,065
|
4,037
|
3,074
|
|
|
|
|
|
LOCAL
GOVERNMENT
|
298
|
-1,188
|
-4,258
|
-3,983
|
change
in net revenue
|
-1
|
1,084
|
456
|
77
|
change
in net
expenditure
|
-298
|
2,271
|
4,714
|
4,059
|
Table
|
|
|
|
|
SOCIAL
SECURITY FUNDS
|
-81
|
-10,317
|
-13,773
|
-13,717
|
change
in net revenue
|
-100
|
-195
|
619
|
514
|
change
in net
expenditure
|
-19
|
10,122
|
14,392
|
14,231
|
|
|
|
|
|
EFFECTS
ON NET
BORROWING
|
7
|
-11,537
|
-14,431
|
-9,180
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
126
|
MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
MINISTRY
OF ECONOMY AND
FINANCE
|
127
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
128
|
MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
TABLE
V.10 -
EFFECTS OF THE
2019-2021
PUBLIC FINANCE
BUDGET ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
INCREMENTAL
RESOURCES
|
1,797
|
29,691
|
34,862
|
40,276
|
Higher
revenue
|
223
|
14,286
|
21,014
|
25,654
|
Revision
of VAT clauses
and excise
duties for
fuel
|
0
|
0
|
3,910
|
9,182
|
Repeal
of optional
corporate
income tax
(IRI) regime
|
0
|
5,332
|
3,112
|
3,116
|
Repeal
of ACE
|
0
|
228
|
2,373
|
1,453
|
Extension
of facilitated
tax regime to
individuals
with revenue
up to 65,000
euro
|
0
|
232
|
2,150
|
1,229
|
Obligation
to store and
transmit fees
electronically
|
0
|
337
|
1,356
|
1,912
|
Restructuring
of deduction
of start-up
amortisation
and other
intangible
assets
|
0
|
1,308
|
926
|
658
|
Subsidised
definition of
collection
agent charges
|
0
|
37
|
1,083
|
1,385
|
Substitute
tax for
individual
entrepreneurs
and artists
and
professionals
|
0
|
0
|
280
|
1,918
|
Provisions
on gambling
|
0
|
768
|
695
|
695
|
Formalisation
of
infringements,
non-conformities,
irregularities
or fulfilments
of a formal
nature
|
0
|
810
|
540
|
0
|
Web tax
|
0
|
150
|
600
|
600
|
Regulation
of the
deductibility
of credit
write-downs in
the first
application of
IFRS 9
|
0
|
1,170
|
0
|
0
|
Revaluation
of insurance
tax account
|
0
|
832
|
0
|
320
|
Deferment
to 2026 of 10%
deductibility
of credit
write-downs
|
0
|
950
|
0
|
0
|
Extension
of deductions
for building
renovation
energy
efficiency
improvements,
re-greening
and purchase
of furniture
and household
electrical
goods
|
0
|
157
|
697
|
0
|
Revaluation
of value of
non-traded
equity
interests and
land
|
0
|
341
|
185
|
185
|
Broadband
- greater
revenue from
5G frequencies
|
0
|
200
|
200
|
200
|
Flat-rate
tax on income
from letting
commercial
property
|
0
|
0
|
396
|
203
|
Reduction
in CIT
subsidies for
non-commercial
entities
|
0
|
118
|
158
|
158
|
Increase
in tobacco
excise duties
|
0
|
135
|
135
|
135
|
Revision
of the tariffs
of INAIL
premiums and
contributions
for insurance
against
accidents at
work and
occupational
diseases - tax
effects
|
0
|
0
|
174
|
147
|
Pending
litigation
|
0
|
78
|
104
|
104
|
Increase
in rates of
replacement
tax on the
revaluation of
land and
equity
interest
|
0
|
116
|
63
|
63
|
Tax on
the purchase
of highly
polluting
vehicles
|
0
|
62
|
74
|
74
|
Tax on
money
transfers
abroad
|
63
|
63
|
63
|
|
Subsidised
definition of
formal reports
and notices
|
0
|
51
|
68
|
68
|
Change
of accounts of
flat-rate tax
on rents
|
0
|
0
|
0
|
116
|
Balance
and write-off
of collection
agent charges
from 2000 to
2017 for
persons with
ISEE <
20,000 euro
|
0
|
43
|
43
|
17
|
Job
centre
recruitment -
effects of
taxes and
charges
|
0
|
150
|
150
|
228
|
Recruitment
in national
government -
effects of
taxes and
charges
|
0
|
127
|
449
|
547
|
Study
grants for
specialist
trainee
doctors -
effects of
taxes and
charges
|
0
|
11
|
22
|
33
|
Emergency
requirements -
effects of
taxes and
charges
|
0
|
30
|
40
|
0
|
Fund for
international
missions -
effects of
taxes and
charges
|
41
|
0
|
350
|
0
|
Fund for
ordinary
financing of
universities -
effects of
taxes and
charges
|
0
|
10
|
28
|
28
|
Renewal
of public
employee
contracts for
2019-2021 -
effects of
taxes and
charges
|
0
|
315
|
449
|
618
|
Reorganization
of the roles
and careers of
police and
armed forces -
effects of
taxes and
charges
|
0
|
0
|
49
|
49
|
Other
|
182
|
128
|
93
|
151
|
Note:
Discrepancies,
if any, are
due to
rounding. The
2019-2021
public finance
Budget
includes the
effects of the
2019 Budget
Law and
Decree-Law No.
119/2018
converted by
Law No.
136/2018.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
129
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
TABLE
V.10
(CONTINUED 1)-
EFFECTS OF THE
2019-2021
PUBLIC FINANCE
BUDGET ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects; in €
mn)
|
||||
2018
|
2019
|
2020
|
2021
|
|
|
|
|
|
|
Lower
expenditure
|
1,574
|
15,405
|
13,848
|
14,622
|
|
|
|
|
|
Poverty
Fund (share
merged into
the Citizen's
Income Fund)
|
0
|
2,198
|
2,158
|
2,130
|
Local
Authority
Investment
Fund
(reduction for
measures in
favour of
Local
Authorities)
|
0
|
1,080
|
2,342
|
2,249
|
Fund
for reducing
the tax burden
|
0
|
390
|
1,639
|
2,472
|
Reduction
of
ordinary-statute
regional
authority
contributions
to public
finances
(non-transfer
of the
contribution
to boost
public
investment and
achievement of
a positive
budget
balance)
|
0
|
2,496
|
1,746
|
0
|
Pension
indexation
cooling
|
0
|
415
|
1,222
|
2,014
|
Ministry
spending
rationalization
measures
|
819
|
915
|
930
|
892
|
Reprogramming
of State
transfers
|
0
|
2,340
|
0
|
0
|
Reduction
of fund for
implementing
multiannual
contributions
|
0
|
33
|
802
|
992
|
Development
and Cohesion
Fund
|
300
|
1,335
|
0
|
0
|
Rationalization
of expenditure
for the
management of
immigration
centres
|
0
|
400
|
550
|
650
|
Decommissioning
of public
property
|
0
|
950
|
150
|
150
|
Determination
of trend at
unchanged
legislation of
National
Health Service
financing
2019-2021
|
0
|
0
|
175
|
1,000
|
Complementary
programmes for
action and
cohesion plans
|
0
|
850
|
0
|
0
|
Amendment
to research
and
development
tax credit
regulations
|
0
|
0
|
300
|
300
|
Fund
for the
purchase of
cleaning
services in
schools
|
0
|
0
|
280
|
280
|
Repeal
of tax credit
for IRAP
(regional tax
on productive
activities)
taxpayers
without
employees
|
0
|
163
|
163
|
163
|
Reduction
of annual
pensions
exceeding
100,000 euro
gross
|
0
|
138
|
145
|
152
|
Reduction
of structural
resources
provided by
INAIL for the
financing of
investment and
training
projects on
occupational
safety and
health
|
0
|
110
|
100
|
100
|
Reduction
and
reprogramming
of military
expenditure
|
0
|
103
|
120
|
76
|
Deferment
of public
sector
recruitment
|
0
|
198
|
0
|
0
|
Citizen's
Income Fund
|
0
|
0
|
0
|
160
|
Reduction
of Fund to
meet
non-deferrable
expenditure
|
5
|
0
|
0
|
130
|
Investor
Compensation
Fund
|
0
|
26
|
26
|
26
|
Other
|
451
|
1,264
|
999
|
686
|
Note:
Discrepancies,
if any, are
due to
rounding. The
2019-2021
public finance
Budget
includes the
effects of the
2019 Budget
Law and
Decree-Law No.
119/2018
converted by
Law No
136/2018.
|
130
|
MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
TABLE
V.10
(CONTINUED 2)
- EFFECTS OF
THE 2019-2021
PUBLIC FINANCE
BUDGET ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
|
|
|
|
|
USE OF
RESOURCES
|
1,790
|
41,235
|
49,370
|
49,511
|
|
|
|
|
|
Lower
revenue
|
565
|
18,229
|
12,804
|
13,871
|
|
|
|
|
|
Sterilization
of VAT clauses
and excise
duties for
fuel
|
0
|
12,472
|
0
|
0
|
Extension
of facilitated
tax regime to
individuals
with revenue
up to 65,000
euro
|
0
|
563
|
3,971
|
2,603
|
Repeal
of optional
regime of
corporate
income tax
(IRI)
|
0
|
3,345
|
1,876
|
1,857
|
Subsidised
15% taxation
on the
proportion of
income
corresponding
to profits
invested in
capital assets
|
0
|
0
|
1,948
|
1,808
|
Substitute
tax for
individual
entrepreneurs
and artists
and
professionals
|
0
|
0
|
389
|
3,050
|
Extension
of deductions
for building
renovation,
energy
efficiency
improvements,
re-greening
and purchase
of furniture
and household
electrical
goods
|
0
|
121
|
1,292
|
887
|
Revision
of the rates
for INAIL
premiums and
contributions
for insurance
against
accidents at
work and
occupational
diseases
|
0
|
410
|
525
|
600
|
Pension
indexation
cooling - tax
effects
|
0
|
162
|
477
|
786
|
Extension
of
hyper-amortisation
and
super-amortisation
|
0
|
0
|
405
|
810
|
Flat-rate
tax on income
from letting
commercial
property
|
0
|
261
|
369
|
367
|
Up to
40%
deductibility
of IMU for
company
property for
RES and PIT
purposes
|
0
|
0
|
290
|
167
|
Repeal
of increase in
excise duties
for fuels
|
0
|
141
|
146
|
148
|
Subsidised
definition of
collection
agent charges
|
355
|
20
|
13
|
11
|
Formalisation
of
infringements,
non-conformities,
irregularities
or fulfilments
of a formal
nature
|
0
|
130
|
130
|
130
|
Revaluation
of insurance
tax account
|
0
|
0
|
320
|
0
|
Regulation
of
deductibility
of credit
write-downs in
the first
application of
IFRS 9
|
0
|
0
|
130
|
130
|
Review
of the
regulation of
reportable tax
losses
|
0
|
143
|
12
|
102
|
Emergency
requirements
|
0
|
119
|
86
|
35
|
Tax
on the
consumption of
tobacco
substitutes
|
0
|
70
|
70
|
70
|
Reduction
of annual
pensions
exceeding
100,000 euro
gross - tax
effects
|
0
|
62
|
65
|
68
|
Other
investment
support
measures
|
0
|
10
|
48
|
38
|
Balance
and write-off
of collection
agent charges
from 2000 to
2017 for
persons with
ISEE <
20,000 euro
|
0
|
5
|
5
|
25
|
Deferment
of public
sector
recruitment -
effects of
taxes and
charges
|
0
|
97
|
0
|
0
|
Ministry
expenditure
rationalization
- effects of
taxes and
charges
|
6
|
11
|
34
|
34
|
Other
|
204
|
87
|
201
|
146
|
Note:
Discrepancies,
if any, are
due to
rounding.
The
2019-2021
public finance
Budget
includes the
effects of the
2019 Budget
Law and
Decree-Law No.
119/2018
converted by
Law No.
136/2018.
|
MINISTRY
OF ECONOMY AND
FINANCE
|
131
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
Table
V.10
(CONTINUED 3):
EFFECTS OF THE
2019-2021
PUBLIC FINANCE
BUDGET ON
GENERAL
GOVERNMENT NET
BORROWING
before netting
out induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
Higher
expenditure
|
1,225
|
23,006
|
36,566
|
35,640
|
Citizen's
Income Fund*
|
0
|
7,100
|
8,055
|
8,317
|
Pension
System Review
Fund*
|
0
|
3,968
|
8,336
|
8,684
|
Local
Authority
Investment
Fund
|
0
|
1,080
|
2,342
|
2,249
|
Fund
for reducing
the tax burden
|
0
|
390
|
1,639
|
2,472
|
Central
Government
Investment
Fund
|
0
|
415
|
1,185
|
1,700
|
Reduction
of ordinary
statute
Regional
Authority
contributions
to public
finances and
compensation
for Judgement
103/2018
|
0
|
2,496
|
2,496
|
0
|
Renewal
of government
employee
contracts for
2019-2021
|
0
|
650
|
925
|
1,275
|
Measures
in favour of
regional and
local
authorities
for the
maintenance
and improved
safety of
local areas
and public
infrastructure
|
0
|
882
|
655
|
1,234
|
Contribution
to Regional
Authorities
under
ordinary-statute
to boost
public
investment
|
0
|
800
|
908
|
1,033
|
Recruitment
in Government
|
0
|
267
|
929
|
1,128
|
Increase
of Fund for
implementing
multiannual
contributions
|
0
|
0
|
700
|
900
|
Emergency
requirements
|
0
|
959
|
583
|
560
|
Investment
fund for the
mitigation of
hydraulic and
hydrogeological
risks
|
0
|
600
|
800
|
900
|
Use
of the
administration
result for
Local
Authorities
|
0
|
0
|
404
|
711
|
Reprogramming
State
transfers
|
640
|
100
|
600
|
440
|
International
Mission Fund
|
130
|
0
|
1,450
|
0
|
Investor
Compensation
Fund
|
0
|
75
|
325
|
425
|
Other
investment
support
measures
|
0
|
207
|
213
|
216
|
Refinancing
of Special
Current
Account Fund
|
0
|
146
|
148
|
179
|
Fund
for ordinary
financing of
universities
|
0
|
60
|
159
|
159
|
Social
Policy Fund
|
0
|
120
|
120
|
120
|
Baby
Bonus
|
0
|
204
|
240
|
0
|
Refinancing
of Special
Capital
Account Fund
|
0
|
48
|
124
|
135
|
SME
Guarantee Fund
|
435
|
0
|
0
|
0
|
Implementation
of initial
step of the
National Plan
of Operations
in for the
Water Sector
|
0
|
100
|
100
|
100
|
Dependants
Fund
|
0
|
100
|
100
|
100
|
Family
Policy Fund
|
0
|
100
|
100
|
100
|
Implementation
of
technological
infrastructures
for electronic
booking
systems for
accessing
health care
facilities
|
0
|
75
|
125
|
100
|
EU
Directive
Implementation
Fund
|
0
|
75
|
100
|
100
|
Job
centre
recruitment
|
0
|
0
|
0
|
160
|
Contribution
to Regional
Authorities
for supporting
the
independence
of students
with
disabilities
|
0
|
100
|
100
|
100
|
Reorganization
of the roles
and careers of
police and
armed forces
|
0
|
0
|
100
|
100
|
Increase
of Fund to
meet
non-deferrable
expenditure
|
0
|
14
|
11
|
102
|
Study
grants for
specialist
trainee
doctors and
specialist
training
|
0
|
33
|
55
|
78
|
Fund
for the
operation of
schools
|
0
|
0
|
174
|
80
|
Tax
credit for
training costs
|
0
|
0
|
250
|
0
|
Obligation
to store and
transmit fees
electronically
- tax credit
|
0
|
36
|
196
|
0
|
Contributions
for the
purchase of
electric,
hybrid and low
CO2 emission
vehicles
|
0
|
70
|
70
|
70
|
Financing
of healthcare
facility
construction
programmes
|
0
|
0
|
0
|
100
|
Fund
for the
implementation
of safety
measures for
the bridges
over the River
Po Basin
|
0
|
50
|
50
|
50
|
Extension
of Fund to
combat
education
poverty among
children
|
0
|
55
|
55
|
55
|
Government
Programme
Implementation
Fund
|
0
|
44
|
17
|
58
|
Complementary
programmes for
action and
cohesion plans
|
0
|
0
|
150
|
150
|
Programme
for upgrading
the energy
efficiency of
General
Government
property
|
0
|
25
|
40
|
40
|
School
maintenance
and furnishing
services and
increase in
spending limit
for purchasing
cleaning
materials
|
0
|
94
|
10
|
10
|
Contribution
to the
National
Research
Council
|
0
|
30
|
30
|
30
|
Increase
of Fund for
the
enhancement of
urban safety
initiatives
|
0
|
25
|
15
|
15
|
Health
Research
|
0
|
10
|
25
|
20
|
Other
|
20
|
1,402
|
1,356
|
1,083
|
IMPACT
ON NET
BORROWING
|
7
|
-11,544
|
-14,508
|
-9,235
|
Note:
Discrepancies,
if any, are
due to
rounding. The
2019-2021
public finance
budget
includes the
effects of the
2019 Budget
Law and
Decree-Law No.
119/2018
converted by
Law No.
136/2018.
* For
more details
on how the
funds are
used, see
Table V.11
|
132
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OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
MINISTRY
OF ECONOMY AND
FINANCE
|
133
|
ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
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134
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MINISTRY
OF ECONOMY AND
FINANCE
|
V. QUALITY
OF PUBLIC
FINANCES
|
Table
V.11: EFFECTS
OF DECREE-LAW
NO. 4/2019 ON
GENERAL
GOVERNMENT NET
BORROWING
(before
netting out
induced
effects; in €
mn)
|
||||
|
2018
|
2019
|
2020
|
2021
|
INCREMENTAL
RESOURCES
|
0
|
11,204
|
16,594
|
17,309
|
|
|
|
|
|
Higher
revenue
|
0
|
748
|
672
|
678
|
|
|
|
|
|
Provisions
on gambling
|
0
|
407
|
377
|
356
|
Job
centre
recruitment -
effects of
taxes and
charges
|
0
|
58
|
136
|
147
|
Early
disbursement
of severance
indemnity
(TFR)devolved
to the
Treasury Fund
- tax effects
|
0
|
152
|
20
|
4
|
Extraordinary
plan to
improve job
centres and
active
policies -
effects of
taxes and
charges
|
0
|
78
|
63
|
24
|
Right
to redeem
periods not
covered by
contributions
- tax effects
|
0
|
17
|
35
|
54
|
INPS
recruitment -
effects of
taxes and
charges
|
0
|
24
|
24
|
24
|
Women’s
option - tax
effects
|
0
|
0
|
0
|
48
|
Other
|
0
|
13
|
18
|
21
|
|
|
|
|
|
Lower
expenditure
|
0
|
10,456
|
15,922
|
16,631
|
|
|
|
|
|
Reduction
of Citizen's
Income Fund
|
0
|
6,366
|
7,490
|
7,880
|
Reduction
of Pension
System
Revision Fund
|
0
|
3,968
|
8,336
|
8,684
|
Job
centre
recruitment
|
0
|
10
|
0
|
0
|
Other
|
0
|
112
|
96
|
66
|
|
|
|
|
|
USE OF
RESOURCES
|
0
|
11,198
|
16,517
|
17,254
|
|
|
|
|
|
Lower
revenue
|
0
|
14
|
170
|
278
|
|
|
|
|
|
De-taxation
of severance
indemnity
|
0
|
0
|
75
|
93
|
Job
centre
recruitment -
effects of
taxes and
charges
|
0
|
5
|
0
|
147
|
Provisions
on gambling -
accounts
surcharge
recovery, PREU
(sole
applicable
taxes) 2019
|
0
|
0
|
70
|
0
|
Right
to redeem
periods not
covered by
contribution -
tax effects
|
0
|
8
|
18
|
29
|
Other
|
0
|
1
|
7
|
9
|
|
|
|
|
|
Higher
expenditure
|
0
|
11,183
|
16,347
|
16,976
|
|
|
|
|
|
Citizen's
Income and
Pensions
|
0
|
5,633
|
7,159
|
7,391
|
Early
retirement
with 62/38 age
and
contribution
requirement
and freeze
until 2026 on
the adjustment
of
contribution
requirement to
life
expectancy for
access to
early
retirement
|
0
|
3,781
|
7,860
|
8,397
|
Women’s
option
|
0
|
250
|
396
|
538
|
Job
centre
recruitment
|
0
|
120
|
280
|
304
|
Early
disbursement
of severance
indemnity
(TFR) devolved
to the
Treasury Fund
|
0
|
585
|
75
|
14
|
Extension
of ‘APE
sociale’ early
retirement
payment
mechanism
|
0
|
98
|
199
|
168
|
Extraordinary
plan to
improve job
centres and
active
policies
|
0
|
160
|
130
|
50
|
Inclusion
Income - no
longer awarded
from April
2019
|
0
|
274
|
8
|
0
|
Recruitment
for INPS
|
0
|
50
|
50
|
50
|
Freeze
until 2026 on
the adjustment
of the
contribution
requirement to
life
expectancy for
access to
early
retirement
|
0
|
31
|
54
|
50
|
Air
Transport
Solidarity
Fund
|
0
|
125
|
0
|
0
|
Fund
for structural
economic
policy
measures
|
0
|
0
|
117
|
0
|
ANPAL
Servizi Spa -
making
temporary
staff
permanent and
operating
expenditure
|
0
|
21
|
11
|
6
|
Tax
Advice Centres
affiliated
with INPS
|
0
|
35
|
0
|
0
|
Other
|
0
|
21
|
8
|
10
|
|
|
|
|
|
IMPACT
ON NET
BORROWING
|
0
|
7
|
77
|
54
|
Note:
Discrepancies,
if any, are
due to
rounding.
|
|
|
|
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MINISTRY
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AND FINANCIAL
DOCUMENT -
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PROGRAMME
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F
O
C
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S
|
Measures
to fight tax
evasion
In
the course of
2018, the
Italian
Revenue Agency
collected over
16 billion
from
'ordinary'
control
activities, 11
percent more
than in 2017
(14.5
billion). Of
these, 11.25
billion came
from direct
payments on
orders issued
by the
Authority (+10
percent),
approximately
1.8 billion
were the
result of
compliance
promotion (+38
percent) and
3.1 billion
were recovered
by enforced
collection (+4
percent).
On
the other
hand, a
negative 46
percent
variation was
recorded for
recovery
resulting from
'extraordinary'
measures, at 3
billion
against 5.6 in
2017. Of
these, 100
million (-87
percent
compared to
2017) came
from tax
dispute
settlements,
2.59 billion
(-41 percent
compared to
2017) from the
'scrapping' of
Italian
Revenue Agency
tax debts, 300
million (-25
percent
compared to
2017) from
voluntary
disclosure and
50 million
from the
settlement
procedure
referred to in
Article 2 of
Decree-Law No.
119/2018.
Altogether,
in the course
of 2018,
evasion
recovery
activities
recorded
takings of
19.2 billion,
down 4.5
percent
compared to
2017 (see
Figure R.1).
|
FIGURE
R.1: RESULTS
OF THE FIGHT
AGAINST
EVASION: TAX
DUE TO THE
TREASURY AND
NON-TREASURY
TAX REVENUE
(in € mn)
|
|
![]() |
|
Source:
Revenue
Agency.
|
The
Government has
paid close
attention to
its overall
tax compliance
strategy,
focusing its
efforts on the
implementation
of the tax
decree for
transparency,
fairness and
growth (Law 23
of 2014) and
on changing
its approach
towards
taxpayers. In
general, the
fight on tax
evasion was
aimed at
strengthening
and enhancing
preventive
interaction
between tax
authority and
taxpayer, with
the intent of
improving the
propensity
towards
spontaneous
compliance
(the indirect
effect
of fighting
tax evasion),
and of
recovering
revenue
through
investigations
and controls
(the direct
effect
of fighting
tax evasion).
With
the objective
of satisfying
the need to
change its
approach to
tax
administration
and relations
with
taxpayers, and
given the
findings of
the OECD and
IMF reports on
the state of
the Italian
finance
administration,
the Italian
Revenue Agency
made
far-reaching
innovative
changes to its
organizational
system in
2018. The new,
more efficient
set-up
includes three
central
management
offices within
the taxpayers
department,
each of them
in charge of a
specific type
of taxpayer
(natural
persons,
non-commercial
bodies and
self-employed;
small and
medium-sized
enterprises;
big
taxpayers).
This solution,
which
supersedes
the
preceding
operational
approach,
based on
taxpayer type
as opposed to
process type,
is designed
to encourage
consultations
and more
targeted and
thus more
effective
control.
Similarly, the
tasks of the
three central
management
offices are no
longer limited
to the
traditional
function of
guiding and
coordinating
investigations
and controls,
instead, in
line with the
new
organisation,
now include
consultancy,
requests and
litigation,
thus covering
|
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MINISTRY
OF ECONOMY AND
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V. QUALITY
OF PUBLIC
FINANCES
|
the
full
management of
fiscal
relations with
the different
types of
taxpayer.
In
implementation
of the tax
decree and for
the purposes
of monitoring
and producing
an official
estimate of
tax and
contribution
evasion21,
the Government
is obliged to:
i) submit an
annual a
report, as
part of the
budgetary
procedure, on
the results
achieved
concerning
measures to
combat tax and
contribution
evasion; (ii)
use, to write
this report,
the results of
the ‘Report on
non-observed
economy and
tax and
contribution
evasion’
prepared by
the Commission
established ad
hoc by decree
of the
Minister of
Economy and
Finance22.
This report
estimates the
extent and
diffusion of
tax and
contribution
evasion and
provides
official
estimates of
the amount of
revenue
subtracted
from the
public budget.
The
official
estimate of
the total tax
revenue and
social
security
contributions
subtracted
from the
public budget
calculates the
tax gap
between taxes
and
contributions
actually paid
and those that
taxpayers
would have
paid in a
situation of
full
compliance
with current
tax
legislation.
On the basis
of
internationally
established
and shared
practices, the
Commission
quantified the
tax gap of the
main taxes and
contributions,
distinguishing,
where
possible,
between the
tax gap net of
missed
payments
(assessment
gap) and the
tax gap due to
missed
payments
(collected
gap).
Based
on the latest
available
data, for
2016, tax and
contribution
evasion was
estimated at
107,522
million, of
which tax
evasion alone23
was 96,330
million; on
average over
the period
2014-2016, tax
and
contribution
evasion stood
at 108,977
million, and
the tax
component24
alone was
97,607
million. In
2016, the tax
gap increased
by 709 million
compared to
2015, while
gap propensity
decreased by
0.1 percentage
points, down
from 21.2
percent in
2015 to 21.1
percent in
2016;
specifically,
the VAT tax
gap increased
by 412 million
and the IRAP
gap decreased
by 297
million. The
CIT tax gap
increased by
around 909
million and
the PIT gap
increased by
around 1.2
billion (with
a decrease of
115 million
for dependent
workers and an
increase of
1.3 billion
for
self-employed
workers and
businesses).
Moreover,
compared to
2015, the
propensity
towards PIT
evasion fell
by 0.1
percentage
points for
both
self-employed
workers and
businesses and
irregular
dependent
workers,
whilst IRAP
evasion
propensity was
down by 0.4
percentage
points;
however, CIT
evasion
propensity
increased by
1.8 percentage
points.
Further
tax gap
improvements
are expected
in the coming
years because
of the new
measures to
combat tax and
contribution
evasion
introduced
with the
latest
measures.
Starting
on 1 January
2019, the
electronic
invoicing
obligation
came into
force for all
transactions
between VAT
payers (B2B)
and towards
end consumers
(B2C), which
was introduced
by the 2018
Budget Law.
This measure
extends
considerably
the obligation
of electronic
invoicing,
which had
already been
provided in
2015 for
business
transactions
with the
general
government
(B2G) and from
1 July 2018
for public
subcontracting
and the
mineral oils
sector.
Mandatory
electronic
invoicing
carried out
through the
Exchange
System allows
the Financial
Authority to
acquire the
information
included in
the invoices
issued and
received
between
businesses in
real time,
enabling the
tax
authorities
can carry out
timely and
automatic
checks on the
consistency
between
declared and
paid VAT, as
well as
driving
digitisation
and the
simplification
of
administration.
Prior
to the
introduction
of this
obligation, it
would take the
tax
authorities
approximately
18 months to
ascertain the
existence of
an operator
guilty of VAT
fraud.
Immediately
available
electronic
invoices
reduce this
time to three
months, so
that
‘fraudulent
chains' of
economic
operators may
be tackled
more quickly
than in the
past, thus
increasing the
effectiveness
of
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ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
|
this
action to
combat
evasion. The
effect
expected from
the
introduction
of the
electronic
invoicing
obligation is
mainly the
reduction of
evasion by
failure to
declare
(evasion
without
consent). The
effectiveness
of this
instrument may
be attested to
by the initial
risk analyses
based on
e-invoices and
data from the
Invoices and
Receipts
portal, which
in little more
than two
months in 2019
exposed a
complex
fraudulent
system carried
out through
false
invoicing
among paper
mill
companies,
intercepting
and preventing
significant
amounts of
false VAT
credits.
In
addition,
mandatory
electronic
invoicing
presents
numerous
advantages:
automatic
invoice
storage
obligation,
more efficient
accounting
processes when
integrated
with invoicing
systems,
availability
of precise,
real-time data
(not just VAT
summaries)
with the
option of
constant
pre-declaration
dialogue with
taxpayers, and
greater
transparency,
with invoices
made available
in the
Invoices and
Receipts
portal of the
Italian
Revenue Agency
website.
The
Tax Decree25
strengthens
the electronic
invoicing
legislative
framework in
force,
providing for
the obligation
of computer
storage and
telematic
transmission
of receipts to
the Italian
Revenue Agency
for
transactions
with end
consumers
(B2C). The new
obligation is
foreseen from
1 July 2019
for businesses
with a
turnover
exceeding
400,000 euro
and from 1
January 2020
for other
businesses.
The
new
requirement is
introduced
along with
measures
intended to
simplify
administrative
procedures and
the awarding
of tax credits
equal to 50
percent of the
costs
sustained to
adapt or
replace of
fiscal meters,
for a maximum
of 250 euro in
case of
purchase and
50 euro in
case of
adaptation,
for each
instrument.
The
introduction
of the
obligation to
transmit
payments by
computer is
linked to the
‘receipts
lottery’. To
participate in
the lottery,
customers must
provide their
tax code to
sellers, who
will then
transmit the
purchase data
to the Revenue
Agency. This
measure is
intended to
fight tax
evasion by the
non-certification
of payments
agreed between
the buyer and
seller by
introducing of
a ‘conflict of
interests’
between the
two parties
that should
stimulate tax
compliance.
Moreover,
the ‘Dignity
Decree26,
is intended to
simplify and
reduce the
administrative
burden on
taxpayers
without
weakening the
instruments to
combat tax
evasion
adopted so
far. The
institution of
the
'incomemeter'
(redditometro)
will be
subject to
review in
order to gear
it towards
fighting tax
evasion more
effectively;
new elements
indicating
contribution
capacity will
be identified
after
consulting
ISTAT and the
most
representative
consumer
associations.27
The
introduction
of Synthetic
Reliability
Indexes or
SRIs, to
replace sector
studies and
parameters,
responds to
the need to
strengthen the
collaboration
between tax
authority and
taxpayer and
encourage tax
compliance,
transparency
and dialogue.28
The
SRIs are
processed
according to
the analysis
of data and
information
relating to
several tax
periods; with
reference to
the individual
tax periods,
the
positioning of
each taxpayer
in relation to
the
reliability of
his/her/its
tax behaviour.
This is a
simple average
of the result
of applying
elementary
reliability
and
irregularity
indicators and
has a value
ranging from 1
to 10.
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OF ECONOMY AND
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V. QUALITY
OF PUBLIC
FINANCES
|
Viewing
the results of
applying
elementary
indicators and
the synthetic
reliability
index allows
taxpayers who
have a low
degree of
reliability to
change their
behaviour
promptly to
improve their
accounting and
income profile
when declaring
their income,
which gives
them access to
multiple
rewards.
Indeed, a
multiple-level
reward
mechanism is
envisaged in
cases of high
reliability.
The
Government
also focuses
on
consolidating
the governance
of tax
administration,
by
strengthening
the general
coordination
and improving
the strategic
management of
tax agencies,
enabling them
to combat
evasion by
providing
incentives to
comply with
tax
obligations
and promoting
spontaneous
tax
declarations
over the
traditional
ex-post checks
and
investigations.
This objective
must also be
achieved by
simplifying
and digitizing
the fulfilment
of
obligations,
reducing the
tax gap and
improving the
collection
system.
Lastly,
the fight
against tax
evasion and
avoidance has
also been
improved
through
increasingly
effective
international
administrative
cooperation.
The entry into
force of the
international
Common
Reporting
Standard (CRS)
for the
automatic
exchange of
information on
financial
assets held
abroad by
taxpayers
residing in
each of the 92
jurisdictions
that have
subscribed to
international
agreements, as
at 17 August
2017, is very
significant
operating
instrument
that allows
the tax
authorities of
the
participating
States to
receive
information on
financial
accounts held
abroad as at
31 December of
each year by 1
October of the
following
year. The
first
automatic
exchange of
financial data
between tax
authorities
took place in
September 2017
between 47
jurisdictions
whose national
and
international
legal
framework was
in line with
the new
international
standard.
Another 53
jurisdictions
have
undertaken to
carry out the
first
information
exchange by 30
September
2018. The
network of
jurisdictions
subscribing to
the CRS was
subsequently
expanded to
include 8
jurisdictions
that undertook
to carry out
the exchange
by 30
September 2019
or 2020, in
addition to 45
developing
countries
that, though
they are part
of the CRS
network, have
not yet
defined when
they will
start the
exchange. As
regards Italy,
the
international
network
includes, to
date, 103
partners that
have
undertaken to
transmit CRS
data. The data
quality is
especially
high,
considering
the
obligations of
due diligence
that require
the financial
intermediaries
who send the
information to
the tax
authorities to
apply the CRS
rules for
identifying
the holders of
financial
accounts;
these rules
are modelled
on the
international
anti-money
laundering
regulations.
The data from
foreign
sources can be
used to
analyse the
risk of
evasion, by
cross-referencing
the fiscal
data found in
tax registers.
|
F
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C
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|
Public
Aid for
Development
(PDA)
Based
on preliminary
estimates, PDA
in Italy stood
at 4.24
billion in
2018, equal to
0.24 percent
of Gross
National
Income (GNI),
down from the
5.2 billion
recorded in
2017. This
decrease is
attributable
largely to the
considerable
decrease in
expenditure
for the
temporary
reception of
refugees and
asylum seekers
in Italy.
Taking
these (as yet
provisional)
data into
account, the
Government
confirms the
need for Italy
to realign
with
international
standards on
PDA and
continue on
the path
towards the
objective of
0.7 percent of
GNI set in
2015 by the
2030 Agenda
for
Sustainable
Development.
In
this regard,
we reiterate
the need to
ensure, from a
multiannual
perspective,
gradua
increases in
the funds
allocated to
national
authorities
for
cooperative
action towards
development,
in line with
the provisions
of Art. 30 of
Law No.
125/2014, with
particular
reference to
the resources
allocated to
the Ministry
of Foreign
Affairs and
International
Cooperation
(MAECI) for
cooperative
action towards
development.
At
the same time,
we reaffirm
the need to
promote the
greater
coordination
of public
policies in
the area of
international
cooperation,
with the
objective of
improving the
quality and
consistency of
Italy’s action
on the issue
of PDA by
promoting, in
particular,
the
instruments
provided for
by Law No.
125/2014.
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the
provision of a
statement,
annexed to the
budget law,
that, in
relation to
expenditure
and with
reference to
each Ministry,
will
distinguish
between
mandatory
charges,
legislative
factors and
adjustment to
borrowing
requirement,
separately for
current and
capital
account
allocations;
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• |
the
process of
updating of
the ‘actions’
that can take
place both in
the
experimental
stage and
subsequently,
by decree of
the Minister
of Economy and
Finance, while
still allowing
the budget
variation
decrees,
resulting from
the approval
of new laws,
to establish
new actions
and modify
existing ones.
Furthermore,
it was
established
that the
additional
notes to the
State budget
must be drawn
up with
reference
specifically
to the actions
and not to the
elementary
units of the
budget (budget
chapters);
|
• |
the
refinement of
the standards
of flexibility
and regulation
of certain
accounting
situations
close to the
end of the
financial
year;
|
• |
the
preparation,
in relation to
the finalised
revenue, of an
information
annex to the
State
financial
statements,
for each
Ministry and
elementary
unit of the
budget of
revenue and
expenditure,
which
illustrates
the revenue
and spending
for the year
in relation to
the services
and activities
provided by
central
administrations
of the State
in favour of
public or
private
entities, with
separate
indication of
each item of
expenditure;
|
• |
the
revision of
the regulation
of the
so-called
‘spare funds’,
established in
the budgets of
the Ministries
responsible
for national
defence,
public order
and safety and
rescue, to
meet mandatory
charges, by
means of
advance
financial
resources in
favour of the
bodies
responsible
for these
functions, to
fund temporary
cash
deficiencies;
|
• |
the
administrative
review and
management of
the accounts
of central
administrations
of the State
held in banks
and post
offices;
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AND
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OF PUBLIC
FINANCES
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the
reformulation
of the
accounting
principles to
bring them in
line with the
new approach
outlined by
the reform
and, in
particular,
with the new
concept of
spending
commitment and
that of the
qualified
assessment of
revenue;
|
• |
The
establishment,
at the
Ministry of
Economy and
Finance, of a
committee to
define the
methodological
guidelines for
the adoption
of the gender
budget.
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AND FINANCIAL
DOCUMENT -
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OF ECONOMY AND
FINANCE
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143
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IV.
SENSITIVITY
AND
SUSTAINABILITY
OF PUBLIC
FINANCES
|
• |
compliance
with balanced
budget rule
(non-negative
final and
current
account
results in
accrual terms,
and final cash
balance) and
the other
accounting
principles
introduced by
Legislative
Decree No.
118/2011,
consequently
finally
superseding
the
aforementioned
‘twin-track’;
|
• |
simplification
of monitoring
and
certification
requirements,
thus making
more efficient
use of human
resources;
|
• |
option
of planning
own financial
resources in
the
medium-long
term to ensure
the recovery
of local
investment,
including
through
unlimited use
of
administration
surpluses and
multi-year
restricted
funds.
|
• |
local
authorities
can use
borrowing only
to finance
investment
spending,
within the
limits
provided for
by State law;
|
• |
borrowing
transactions
must be
accompanied by
amortisation
plans not
exceeding the
useful life of
the investment
and
highlighting
the costs to
be incurred
and sources of
funds in the
individual
financial
years.
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ECONOMIC
AND FINANCIAL
DOCUMENT -
SECT. I STABILITY
PROGRAMME
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FIGURE
VI.1: NET
BORROWING AND
LOCAL
GOVERNMENT
BORROWING (%
of GDP) AND
CONTRIBUTIONS
TO REAL GROWTH
OF GENERAL
GOVERNMENT
GROSS FIXED
INVESTMENT (data at
2010 prices)
|
|
![]() |
![]() |
Source:
MEF analysis
based on ISTAT
and Bank of
Italy data.
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OF PUBLIC
FINANCES
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contributions
to municipal
authorities
for small
works within
the overall
limit of 400
million for
2019 (Art. 1,
para. 107 to
114);
|
• |
contributions
granted to
ordinary-statute
regions
towards for
public works
to improve the
safety of
buildings and
the local
area, within
the overall
limit of 135
million per
annum for the
period
2021-2025, 270
million for
2026, 315
million per
annum for the
period
2027-2032 and
360 million
for 2033 (Art.
1, para. 134
to 138);
|
• |
contributions
granted to
municipalities
towards public
works to
improve the
safety of
buildings and
the local
area, in the
overall limit
of 250 million
per annum for
the period
2021-2025, 400
million for
2026, 450
million per
annum for the
period
2027-2031 and
500 million
for 2032 (Art.
1, para. 139
to 148);
|
• |
contributions
towards the
construction
of healthcare
facilities,
within the
overall limit
of 100 million
per annum for
2021 and 2022,
300 million
per annum for
the period
2023-2025, 400
million per
annum for the
period
2026-2031, 300
million for
2032 and 200
million for
2033 (Art. 1,
para. 555 and
556);
|
• |
contribution
granted to the
provincial
authorities of
ordinary-statute
regions for
roads and
schools, for a
total of 250
million per
annum for the
period
2019-2033
(Art. 1, c.
889 and 890);
|
• |
investment
contributions
granted to
ordinary-statute
regions of 800
million for
2019, 908
million for
2020, 1,033
million per
annum for
2021-2022 and
468 million
for 2033
(Art.1, para.
833 et seq);
|
• |
investment
contributions
granted under
the Agreements
with Special
Autonomous
Regions, for a
total of 2.486
million in the
period
2019-2033
(Art. 1, para.
126 and 875 et
seq.);
|
• |
contributions
towards
improving
bridge safe,
for a total of
50 million per
annum for the
period
2019-2023
(Art. 1, para.
891);
|
• |
contributions
granted to
Roma Capitale
towards the
extraordinary
restoration of
the surface of
major roads
and the
planning
review for the
completion of
Rome’s Metro
Line C, within
the overall
limit of 95
million for
2019, 85
million for
2020 and 20
million for
2021 (Art. 1,
para. 931 and
933).
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ECONOMIC
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MINISTRY
OF ECONOMY AND
FINANCE
|
147
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IV.
SENSITIVITY
AND
SUSTAINABILITY
OF PUBLIC
FINANCES
|
148
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MINISTRY
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FINANCE
|
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