Italy: Italy approves constitutional amendment to enforce balanced budget
April 24, 2012
On 18 April, the government approved the economic plan for 2012. The document revises budget deficit projections for the next four years. While the austerity plan launched by the Monti administration in November envisaged an almost balanced budget by 2013, the current document delays that goal by one year, with the budget deficit expected to reach 0.1% of GDP in 2014. A fully balanced fiscal position is expected to be achieved only in 2015. For this year, the government forecasts a deficit of 1.7%, which is seen to decline to 0.5% of GDP in 2013. In the same document, the government revised its growth assumptions and currently expects the economy to contract 1.2% this year, down from an earlier projection of a 0.4% contraction. Economic authorities left their projections for next year unchanged, when the economy is expected to expand 0.3%. On the same day, the Senate approved a constitutional amendment which will force governments to run balanced budgets from 2014 onwards. The proposal to amend the Constitution was tabled by the former Berlusconi administration last year and was backed by the Monti government, which took office in November. The amendment requires the government to maintain the balance between revenues and expenditure, taking into consideration adverse and positive phases of the economic cycle. Governments will need parliamentary authorization in order to run a deficit and will be able to do so only under exceptional circumstances. An independent parliamentary commission will also be instituted in order to monitor the developments of the state budget.
Author: Armando Ciccarelli, Head of Data Solutions