Italy's Far-Right Government Secures Final Approval for 30-Billion-Euro Budget: A Boon for Consumers and Businesses

Italy's parliament has given the final green light to the government's 2025 budget, worth around 30 billion euros ($31 billion), which is set to bring significant tax cuts and social security contributions for low- and middle-income citizens. The measures, pushed by the far-right cabinet headed by Prime Minister Giorgia Meloni, won final approval in the Upper House by 108 votes to 63. The center-left opposition had criticized the economic package, arguing it did not meet the premier's pledges to slash taxes for most Italians and boost employment. However, Meloni has staunchly defended the budget, stressing its "wide balance" and its aim to support low and medium-income earners and families with children, while adding resources for the country’s struggling health system.

The budget includes several key measures that are expected to have a positive impact on consumer spending and economic growth:

1. Tax cuts and social security contributions: Over half of the package, worth some €30 billion ($31 billion), is devoted to cuts to tax and social security contributions for low- and middle-income earners. This will leave more disposable income in the hands of consumers, who can use it to increase their spending on goods and services. This increased consumer spending can stimulate economic growth by boosting demand for products and services, which in turn can lead to increased production and investment by businesses.
2. Merging income tax brackets and expanding tax charge reductions: The budget includes a permanent merging of the two lower income tax brackets, so people earning 28,000 euros a year can pay 23 percent instead of 25 percent. Additionally, the budget expands the number of people eligible for a reduction of social or tax charges. These measures will directly reduce the tax burden for low- and middle-income households, further boosting consumer spending and economic growth.
3. Newborn bonus for families: The budget allocates a 1,000-euro bonus per newborn for families earning up to 40,000 euros a year. This measure aims to boost Italy's flagging birth rate and support families with children. By encouraging families to have more children and supporting families with children, this policy can help address Italy's aging population and low fertility rates, which have been contributing to demographic challenges and potential labor shortages in the long run.
4. Energy-efficient appliance bonus and corporate tax rate reduction: The budget includes a bonus for buyers of energy-efficient household appliances, worth up to €100 (rising to €200 for households earning under €25,000). This measure is expected to encourage consumers to upgrade their appliances, leading to increased consumer spending in the short term. In the long term, energy-efficient appliances can help households save on energy costs, potentially freeing up more disposable income for other purchases. Additionally, the budget includes a reduction in the corporate tax rate from 24% to 20%, which is expected to encourage businesses to reinvest part of their profits, leading to increased business investment.



The budget also includes measures to address Italy's fiscal challenges, such as reducing the public deficit to 3.3 percent of GDP in 2025, down from an expected 3.8 percent this year. This is in line with the government's commitment to reduce Italy's debt, which is the second highest in the EU when calculated as a proportion of gross domestic product (GDP).

The budget's focus on healthcare and family support is expected to have a positive impact on Italy's demographic trends and long-term economic stability. The record resources allocated for the healthcare system can help maintain a healthy and productive workforce, while the newborn bonus can help address Italy's aging population and low fertility rates. This approach can help maintain Italy's long-term economic stability by addressing both fiscal sustainability and social welfare.



In conclusion, Italy's far-right government has secured final approval for its 30-billion-euro budget, which includes several measures designed to boost consumer spending, business investment, and economic growth. The budget's focus on tax cuts, social security contributions, and family support is expected to have a positive impact on Italy's demographic trends and long-term economic stability. While the budget includes measures to address Italy's fiscal challenges, the government's commitment to reducing the public deficit and debt remains a key concern for investors. As Italy's economy continues to recover, investors should keep a close eye on the government's fiscal policies and their impact on economic growth and stability.