Analysis
Italian economy minister: New budget requires ‘sacrifices from everyone’
As of Thursday, after much empty talk, the public debate about the budget bill has finally begun. The tone was set right from the start by Economy Minister Giorgetti: “We will cut spending.”
Sacrifices for all, spending cuts, privatization, and an ill-defined mandatory “contribution” from businesses which caused a stock market plunge. And, later on, a possible increase in fuel excise taxes as well. As of Thursday, after much empty talk, the public debate about the budget bill has finally begun: the third one put forward by the Meloni government, and the first under the new rules of the European budget pact. This is the beginning of the new austerity.
The tone was set right from the start by Economy Minister Giorgetti, who decided to drop the spin: “We will cut spending,” he said. “As we proceed on the difficult path of deficit reduction, it is clear that we are preparing to approve a budget bill that will require sacrifices from everyone. It will be an effort that the entire country must support: individuals, but also small, medium and large businesses.”
With this austerity rhetoric, which we already know from Monti's time, it’s clear that there will be spending cuts on public services (schools, healthcare, pensions, local government and so on), which will be “called upon to be much more effective and productive. So, to get better results with better spending habits,” Giorgetti said. In layman’s terms: the promised wage increases for public sector workers will be slashed compared to the effective cut in wages during these years of mega-inflation.
The goal is to scrape together an extra €12-13 billion every year to cut the deficit, for the next seven years. This is what the government has agreed on with Brussels. And this is also why there will be a sustained effort to pursue privatizations: “It will be a very eventful autumn and winter,” Giorgetti said, “starting with the Post Office and the Monte dei Paschi bank.”
The second element that Giorgetti mentioned was altogether less clear: the “sacrifices” that will be asked of companies that have made windfall profits, whether from COVID or the new wars, in banking, pharma, energy and the arms trade. Giorgetti proposed to “tax profits and revenues in a fair manner.” He clarified: “We will mainly cut expenses [social expenses, that is, as the cuts from the ‘ministries’ will not be enough], but there will be a contribution to revenues.”
It’s crucial to understand what this “contribution” will consist of. Giorgetti gave one example: “the profits of the defense industry, which is doing particularly well today.” It’s certainly true that Italy is the third largest suppliers of arms to Israel. The same should apply for the banks, which have proposed their own solution to the government: a one-time, non-retroactive tax. Giorgetti’s lack of clarity on this “contribution” caused the stock market in Milan to plunge by 1.5 percent. That was a signal that certain interests are not to be touched.
More evidence of the coming austerity came on Thursday from the controversy over a prospective increase in excise taxes on fuel. This provision was announced in the Structural Budget Plan (PSB), the framework for the next budget law. In three lines tucked away in a text hundreds of pages long, the government wrote that it would increase taxes on diesel to rebalance them with those on gasoline: “Use the alignment of the excise rates for diesel and gasoline and/or policies to reorganize the present energy concessions,” the document says. This “alignment” is supposedly intended to meet the needs of the “energy and environmental transition.” In reality, this government, which is hostile to the Green Deal like all right-wingers, intends to use this provision to take action on fuel taxation as required by both the NRP and the never-fulfilled pledge to reduce environmentally harmful subsidies. Until Thursday, Meloni & Co. had never displayed such “green” impulses to justify a confused and shambolic reform to raise these much-hated taxes.
An increase in the fuel excise would amount to a €3.1 billion hit against consumers, Assoutenti argued. According to Federconsumatori, each motorist would pay an extra €112 per year. Unimpresa warned that this would set off a new inflationary spiral. Assotir said this would cost truckers €350 million per year. According to Codacons, households would end up paying €7.5 billion in higher retail prices.
In short, the announcement was met with panic. The Economy Ministry was forced to deny what they themselves had written in the PSB, calling the assessments being put out “completely misleading.” They claimed the changes will be set out in the framework law for tax reform and will “not consist in the simplistic choice to raise excise taxes, but in an adjustment.” In Undersecretary Federico Freni’s interpretation, this means that total fuel taxes will remain unchanged, but the proportions between diesel and gasoline will change.
This backpedaling was not convincing to the opposition forces. Elly Schlein (PD) accused the government of planning a “three-billion-euro Meloni tax” while showing the paragraph in the PSB for the cameras. She also recalled a video made by Giorgia Meloni in 2019 in which she promised to abolish excise taxes altogether, something she has not done in the last two years and will definitely not happen in the future, with or without “adjustments.”
“The three billion that Meloni would get could have been found by taxing windfall profits,” Peppe De Cristofaro (Green Left Alliance) pointed out. “Instead, the citizens are being hit.”
Something, at least, became clear from Thursday’s controversy: the government's much-heralded (and always vague) intention to reform the so-called “tax expenditures” (tax breaks) in the budget law is beyond its means to achieve.
Thus, it has no choice but to cut spending to revive “growth”: the same catastrophic recipe from 15 years ago. Nothing has changed. This is what will happen to an already impoverished country relying on small individual and business income to get by. Once again, it’s every man for himself.
Originally published at https://ilmanifesto.it/giorgetti-getta-la-maschera-tagli-e-sacrifici-per-tutti on 2024-10-04