Meloni’s 2025 budget appeases Brussels but raises specter of austerity 

Critics complained that the spending plan prioritizes political concerns over desperately sought funds for strained public services.

Dec 29, 2024 - 09:00

Italian Prime Minister Giorgia Meloni stuck rigidly to the Brussels script on Saturday with a cost-cutting budget that included just enough largesse to please her base — but did little to satisfy concerns over crumbling infrastructure.

After months of arduous negotiations, a majority of Italy’s senators voted in favor of a spending plan for 2025 that would put the country within striking distance of tough EU targets for deficit consolidation, while making good on more than €10 billion in tax cuts promised to core voters as well as increased resources for new parents.

Meloni has had to square bold electoral spending pledges with Italy’s chronic indebtedness, aging population and patchy growth. Earlier this year, the pool of available funds was constrained further after Italy was placed in a special monitoring program by the EU requiring it to lower its deficit by 0.5 percent annually in the wake of Covid-era profligacy.

But in contrast to France and Germany, where budget disagreements have led to fierce political disputes and the collapse of both countries’ governments, Meloni’s relatively stable majority, and divisions in the opposition, allowed her to push her plans through the legislature.

The premier even ended up with more room to maneuver than expected, thanks in part to the successful winding-down of a costly tax incentive for homeowners, an increase in tax intake and a more favorable treatment of Italy from financial markets, which are now charging less interest on Rome’s sovereign debt.

“Imagine what would have happened if [what occurred in Germany] happened in Italy,” said Nicola Calandrini, a senator with the ruling Brothers of Italy coalition, in the final hearing in the Italian Parliament’s upper house on Saturday. “Instead, Italy is a credible country — in spite of the opposition.”

But critics complained that the budget lays the groundwork for a new painful round of austerity. Along with an estimated €11 billion in ministerial and municipal cuts over the next three years, education and research were left with meager allowances, and a pension increase amounts to just €1.90 a month, falling short of campaign promises.

Most prominently, increases to health care spending fell far short of targets recommended by watchdogs and international bodies. In a daily podcast, Italian journalist Francesco Costa drew a line between the lack of funding and the recent grisly death of a woman in Palermo who was forced to wait eight days in an emergency ward without being seen to. 

To be sure, it was a squeeze to find the funds. Budget planning was made more difficult by a late-stage slowdown in growth, mounting troubles in the manufacturing sector, and the slower-than-expected response to a partial tax amnesty intended to encourage the payment of back taxes. Much of Meloni’s fiscal legroom, meanwhile, has been limited to EU funds earmarked for post-pandemic recovery programs, which have been disbursed more slowly than expected. A push to hit NATO defense spending targets narrowed the available funds further.

And yet, some argued that the government still found enough money to satisfy less urgent — and more political — priorities.

Along with the tax cuts and parental subsidies, a proposed windfall tax on banks was watered down to avoid irking the pro-business flank of the ruling coalition. The mooted imposition of a larger tax on cryptocurrency gains was diluted and delayed. Earlier this month, outcry ensued after the mysterious addition (and equally mysterious withdrawal) of a norm that would have increased certain ministers’ salaries by €7,000. As much as €15 billion, meanwhile, has been earmarked for a bridge linking Sicily and the Italian mainland that is seen by some as a vanity project.

“Another bloodbath will hit the household bills of struggling families in January, which will increase for over 3 million vulnerable people, many over 75 and disabled,” 5Star Movement leader Giuseppe Conte said in a post on X on Saturday. “But you know, the high cost of living of citizens is not a problem for this government, which prioritizes the difficulties of the ‘poor’ ministers who demand salary increases.”

“They’re cutting spending for social services, health care, schools and public transport, but they’re spending €15 billion for the bridge over the strait of Messina and for investments in arms,” added Green and Left Alliance lawmaker Angelo Bonelli. “It’s the worst budget of all time.”

Others groused that the bill was hurried through the Senate, the Italian parliament’s upper chamber, after getting the green light from lawmakers in the lower house earlier this month. Opposition lawmakers had come equipped with some 800 amendments but were given almost no time to discuss them, they said.

“Meloni is violating all the rules of parliament … you put party before country,” Senator Matteo Renzi, leader of the center-left Italia Viva party and a former Italian prime minister, said Saturday in a direct address to the opposition.

But otherwise, Renzi added, he didn’t have much else to criticize — “because there is nothing in this budget.”

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