Italy to finance first budget pledges with €21bn borrowing

Rome:  Italy’s new budget law will extend energy relief measures, introduce small tax cuts and reform pension payments that will require about 21 billion euros ($21bn) of additional borrowing, according to people familiar with the matter.

About a quarter of the total value of Prime Minister Giorgia Meloni’s first budget law will be allocated to expanding a flat tax rate for self-employed people and introducing incentives to employers who keep workers over the age of 63.

The plan will also scale the so-called citizen income cash payments approved by the Five Star Movement, the people said, declining to be identified because the plan isn’t yet public. The total value of the budget is still under discussion and will partly depend on the economic data next week.

While some of the measures will be financed through deficit spending, with the shortfall set to grow to 4.5% of gross domestic product, the government is also studying the introduction of a so-called web green tax — a levy on online shopping deliveries done with polluting engines. A government spokesperson declined to comment.

The updated budget forecasts, which are expected to be approved by the cabinet by November 4, are seen as a compromise aimed at delivering on some initial electoral promises while also extending energy relief measures needed by families and businesses to face record fuel prices over the winter.

The government is rushing to finalize the details of the plan to meet the December 31 deadline by which the parliament needs to approve the budget to avoid a government shutdown.

Meloni will visit Brussels on November 3 for her first meetings with European Commission President Ursula Von Der Leyen and Council President Charles Michel since she became prime minister earlier this month.

-Ranjith Perera-