Italy's first financial plan under Prime Minister Giorgia Meloni takes a "prudent, realistic and sustainable approach".

This is how Economy and Finance Minister Giancarlo Giorgetti put it when the government announced the fiscal policy framework for its first budget on Friday evening.

After that, it slows down the reduction in new debt compared to the earlier planning, but the deviation is limited.

The new government's first budget aims to avoid worrying the financial markets.

Deficit to decrease next year

Christian Schubert

Economic correspondent for Italy and Greece.

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According to the latest financial planning, the government deficit is to fall from 5.6 to 4.5 percent of gross domestic product (GDP) in the coming year.

3.7 percent are planned for 2024.

For comparison: in 2021, new debt was still 7.2 percent.

A greater reduction in the deficit this year and next would have been possible, but the government would have had to forgo new spending to counteract the energy burden.

This year and next, Italy wants to spend an additional 30 billion euros to relieve households and companies in this area.

Without this new spending, the deficit would be 5.1 percent of GDP this year and 3.4 percent of GDP next year.

In this respect, Meloni is now slowing down debt reduction.

But her predecessor Mario Draghi's original deficit target for this year was 5,

6 percent.

The new government is sticking to it.

It is now becoming clearer that Meloni wants to more or less continue Draghi's course.

She made it clear that all additional expenditure should be aimed solely at reducing the burden of energy prices on households and companies.

If other additional spending is decided, they would have to be financed in the same department, said Finance Minister Giorgetti, so savings are required.

All in all, the government shows little ambition on the austerity front: as part of a general review of ministerial spending, only around 800 million euros are to be saved in the coming year and 1.2 and 1.5 billion euros in the two following years.

The employers' association Confindustria believes that 40 to 50 billion euros could be raised from the tumble of public spending in Italy of more than 1 trillion euros.

"We need a real review of spending and not just a cut in ministerial spending by 4 billion euros," complains association president Carlo Bonomi.

This should then be used to finance tax cuts for employers and employees, the association demands.

The unions were also disappointed:

Accents in the energy sector

Meloni, on the other hand, relies on a course that only provides for retouching here and there.

Tax cuts and additional spending should be kept within limits.

Accents are set in the energy sector alone: ​​The new expenditure against the energy burdens should amount to around 9 billion euros this year and 21 billion euros in the coming year.

Since autumn 2021, Italy has spent around 66 billion euros on this.

Against this backdrop, Italian politicians and the media have slammed Germany's €200 billion "protective umbrella", which comes on top of previously announced spending of around €64 billion, saying the package is unfair because Italy cannot afford such amounts.

Of course, the German additional expenditure relates to a period from September 2021 to the end of 2024.

Italy, which is highly indebted, intends to continue the gradual reduction in overall public debt under Meloni.

By 2024, the debt level is expected to fall from around 145.7 to 142.3 percent of GDP.

Inflation also helps here, because it inflates nominal GDP, which is used to measure the debt ratio.

The strong economic growth this year, which was boosted above all by the good income from tourism, makes an additional contribution: the government expects an increase in GDP of 3.7 percent for 2022, but then only by 0 percent in the coming year, 6 percent.

Meloni also announced that Italy would increase production of its own gas resources.

Italy imports more than 95 percent of its gas, but also has its own fields, mainly in the Adriatic Sea and near Sicily.

In 2021, 3.3 billion cubic meters of gas were produced in Italy.

Now another 1 to 2 billion cubic meters are to be added through new concessions, said Meloni.