"The scams are among the biggest this republic has ever seen," Italian Finance Minister Daniele Franco told journalists in Rome on Friday evening.

Prime Minister Mario Draghi admitted: "We are in this situation because we have set up a system that provides for very few controls." The top Italian politicians spoke of a mega-subsidy for the construction industry, which is unlikely to exist in any other country: The so-called "Superbonus 110" allows some property owners in Italy to replace their boilers, do thermal insulation, install solar systems and make the house earthquake-proof without paying a cent.

Christian Schubert

Economic correspondent for Italy and Greece.

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Italy introduced the generous tax credit of 110 percent of the contract value in 2020, when the pandemic was raging and the economy was to be stimulated.

The left-wing populist Five Star Movement in particular campaigned for the huge subsidy in order to boost the construction industry and at the same time to modernize the country's backward and outdated building stock.

The subsidy has cost the Italian state more than 38 billion euros since 2020.

Of course, the salty bill is made easier by the fact that Italy will receive almost 14 billion euros from the European recovery fund for increasing energy efficiency.

"Let's see how you can renovate your house for free!"

However, as it turns out more and more, the super bonus has undesirable side effects.

The Italian judiciary has now confiscated tax credits worth 2.3 billion euros on suspicion of fraud, as Draghi reported on Friday evening.

Estimates say that the damage could also amount to 4 billion euros.

The head of the Italian tax authority, Ernesto Ruffini, reported a “worrying overall picture” to a parliamentary commission last week: Criminal organizations operating throughout Italy had traded with non-existent tax credits.

"In some cases, the proceeds of the scam were transferred overseas," Ruffini said.

The manipulations also affect various housing premiums.

A weak point is

"Let's see how you can renovate your house for free!" says a government website.

She calculates how the transfer of the tax credits can work quite legally: the homeowner's tax credit can be transferred to a construction company, for example, which then reduces the bill to zero because it uses the tax reduction itself.

It's unclear how often the renovations cost property owners absolutely nothing, but no one disputes that the subsidy is massive.

More controls are to come

Draghi wanted the super bonus to expire last year.

But parties from left to right pushed through an extension of the popular tax credit.

From 2024 onwards it is to be gradually reduced.

In addition to the fraud, there have also been massive price increases for work on energy efficiency.

In addition, many dubious construction companies have entered the business.

According to research by “Corriere della Sera”, 64 new companies entered the market every day in the second half of last year.

The Labor Inspectorate reported that in the second half of last year, 91 out of 100 construction sites visited failed to comply with contract, insurance and safety regulations.

Of 13,000 violations, half involved inadequate safeguards against workers falling, including no double belays, improper installation of scaffolding, worn equipment, or missing warning signs.

The number of accidents at work, which is already high in Italy, has therefore increased.

The proponents of the super bonus see the problems, but point to its broad stimulating effect on the economy.

Tens of thousands of jobs have been created;

Italy's strong growth of 6.5 percent last year can also be attributed to the Superbonus.

Draghi has now promised more controls.

The government wants the mechanism to work,” he said.