EU dictates agenda to Italy: Deficit correction by 2026 and reforms by 2028

Brussels –Two years to return to the three per cent deficit/GDP ratio threshold and a maximum of four years to complete those reforms that the EU has been asking for and demanding for more than 11 years: swift justice, the efficiency of public administration, updating of the cadastre. All with precise limits on public spending, specified year by year. Ecofin Council approves specific recommendations for Italy, de facto put under receivership. The Meloni government will now have to stick to the program drafted in and with Brussels, under penalty of fines.

Deficit Reduction and Spending Control

Meanwhile, putting the accounts in order. “The Council recommends that Italy end the excessive deficit situation by 2026,” reads the end-of-session document. This means bringing the deficit/GDP ratio back to within three per cent and archiving the excessive deficit procedure initiated last June. To do this, spending must be kept in check. To that end, “Italy should ensure that the nominal growth rate of net spending does not exceed 1.3 per cent in 2025 and 1.6 per cent in 2026.”.
However, there is more than only the deficit issue, which cannot be exceeded again once brought back within the thresholds. There is also the question of debt.

Here, the calls for a reduction have never been lacking, and they are not lacking this time either. In the name of stability of the tricolour accounts, the spending line is being dictated to the government for the years to come: nominal government spending shall not increase beyond 1.9 per cent in 2027, shall be limited to 1.7 per cent in 2028 and 1.5 per cent in 2029.

The reform agenda, complete with timetable

For the government and its majority, the homework does not end here. Annex 2 to the text contains the list of interventions. So, for example, by the fourth quarter of 2028, pending cases awaiting first and second trials must be reduced, and the duration of pending trials must be reduced. This is the justice reform the EU demanded of Italy back in 2013.

Still on the subject of long-standing reforms yet to be done, there is the public administration chapter. In approving the European Commission’s recommendations, the Ecofin Council sets the fourth quarter of 2026 as the deadline for ensuring full vertical and horizontal mobility in public administration. This is to be translated into a mechanism whereby “at least 20 per cent of annual vacancies for top officials” are to be filled through a system of “performance-related promotion.” A similar mechanism will cover horizontal mobility, that is, simple officials moved from one office to another: here, the merit hiring quota is set at 15 per cent of annual vacancies. Public sector reform has also been demanded of Italy for more than a decade.

Another never-ending story raised by the EU Green agenda is that of cadastre reform. Updating cadastral values, which are stuck in the 1970s, is already mentioned in the 2013 specific recommendations. Since nothing or almost nothing has been done, now the Meloni government will have to get busy. Specifically, the government is ordered to update the mapping by the fourth quarter of 2027 to include properties that are not registered today, and by the fourth quarter of 2028 to “update the cadastral values for property taxes for buildings that have undergone energy efficiency or housing renovations, financed in whole or in part by public funds, since 2019″.

Under special surveillance

Turning a blind eye will not be possible, not anymore and not this time. The Commission will have to monitor Italy’s progress, and based on these reports the Council will decide whether or not to resort to the hard line. Meloni is reminded that Italy has asked for a seven-year fiscal adjustment path instead of staying on a four-year consolidation trajectory, and this implies reforms. Otherwise, what little flexibility there is might be lost. “The council recommends that Italy fully implement the set of reforms and investment commitments to preserve the extension of the adjustment period.”

Move ahead with the NRRP

All this should not distract attention from the Recovery Plan (NRRP). Here, the Commissioner for the Economy, Valdis Dombrovskis, wants to be extremely clear: “It becomes increasingly important to continue with the implementation of the Recovery Facility,” and thus with the implementation of national strategies financed through the Recovery Fund. A call that applies to everyone, and to Italy even more so since it is the main recipient of resources.