The European Commission announced Wednesday that Italy is one of seven countries facing a deficit-based excessive deficit procedure. The other countries are Belgium, France, Hungary, Malta, Poland, and Slovakia.
Economy Minister Giancarlo Giorgetti had anticipated this procedure due to the return of EU budget rules. They had been suspended due to the COVID-19 pandemic and the energy-price crises linked to the Ukraine war. However, after Italy posted a deficit of 7.2% last year the procedure was to be expected.
The Commission noted that while Italy’s macroeconomic imbalances have eased and are no longer considered excessive, the country still faces significant vulnerabilities.
“Greece and Italy are now found to be experiencing imbalances after experiencing excessive imbalances until last year as vulnerabilities have declined but remain a concern. Fiscal sustainability risks will be surveyed under the reformed fiscal rules,” the EU executive stated.
Pensions deficit
Additionally, Italy’s pensions and social security agency INPS is projected to be €20billion in deficit by 2032. This is due to demographic shifts leading to a significant decrease in the working population, the CIV Institute reported on Monday.
CIV President Roberto Ghiselli attributed the forecasted deficit to increased longevity and low fertility rates, which have inverted the age pyramid. He noted that positive migratory flows are insufficient to offset the negative natural demographic trends, resulting in a shrinking active population and a growing imbalance between those nearing retirement and new labour market entrants.
“The positive balance of migratory flows is not sufficient to balance the negative natural dynamics,” he continued.
“The downward demographic trend has already caused a considerable imbalance between the cohorts in, or close to, retirement and those entering the labour market, with a tendency for the active population to shrink”.
