Budget law and flexibility clauses: what the maneuver provides

What should be the main interventions of the Budget Law have already been mentioned several times. For those under 35 there is a 5% flat tax on salary increases and the possible extension of the contribution exemption for hiring. For all employees there would be another readjustment of the Irpef, which would drop from 43% to 33% between 40 thousand and 50 thousand euros. It will then be necessary to establish whether there are margins for some of the parties' requests, such as the flat tax for shops, the tax relief on thirteenth wages, Quota 64 of the Northern League and the flat tax for the self-employed up to 100 thousand euros. As always, it is also difficult to resolve the pension issue, the adjustment of which to the cost of living requires 10 billion euros, one of the main reasons why Italy is asking the EU for more flexibility than that granted.

In a short time you will need to understand where to find all the necessary funds. Much depends on what emerges in a series of fundamental meetings, starting with Ecofin (the meeting of the economic ministers of the 27 EU states within the European Council) on Friday 9 October in Luxembourg. This is the opportunity that could sanction the activation of the flexibility clause on energy and defence, now that Italy has decided - despite the deficit procedure - to follow up on the request sent to Brussels. At that point, the European Commission - as stated in the Dpfp - will verify whether the conditions exist to move forward: "exceptional circumstances", the significant impact on public finances and, through a Debt Sustainability Analysis (DSA) exercise, compatibility with medium-term fiscal sustainability. On the table of Ecofin itself there would also be the request for further flexibility made by Italy and other countries due to the impact of inflation on net spending.

The activation of the energy safeguard clause should unlock 14.4 billion euros over the next two years for families, students, businesses, public offices and infrastructures, with a similar amount for defence. Therefore, if the Budget for 2027 cannot be expansive (but at the same time it should not require major "squeezes"), for 2028 and 2029 the prospect of much larger margins opens up, for around ten billion, as can already be read in the Prime Ministerial Decree. "In 2028 there will be approximately 3.5 billion, 0.3% more net spending, and in 2029 6.5 billion, 0.5% more", summarizes the economist Carlo Cottarelli.