EU: no new deficit measures for Italy, but fiscal challenges remain
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In its Spring Package for the European Semester, the European Commission has concluded that Italy does not need to adopt further measures under the excessive deficit procedure. The same assessment was made for France, Hungary, Malta, Poland, and Slovakia, while Belgium has been urged to adopt a new corrective path and Romania was found to have failed in implementing effective measures. For Austria, the Commission proposed opening a new procedure.
Despite avoiding further action on the deficit, the Commission notes that Italy continues to face macroeconomic imbalances, citing persistent vulnerabilities that remain “overall significant.”
As part of its country-specific recommendations, the Commission calls on Italy to strengthen fiscal sustainability by: Making the tax system more growth-friendly; Further tackling tax evasion; Reducing the labour tax wedge and harmful tax expenditures, including those related to VAT and environmentally damaging subsidies; Updating cadastral values as part of a broader housing policy reform; Enhancing the efficiency and effectiveness of public spending.
Italy is also urged to increase defense spending and operational readiness, in line with the conclusions of the March 6, 2025 European Council.
In a related analysis, the Commission flags Italy among the EU countries most exposed to climate risks, with high annual costs from climate-related damage to infrastructure. Small and medium-sized enterprises (SMEs) are noted as particularly vulnerable, with climate events significantly affecting their productivity and competitiveness.
Despite avoiding further action on the deficit, the Commission notes that Italy continues to face macroeconomic imbalances, citing persistent vulnerabilities that remain “overall significant.”
As part of its country-specific recommendations, the Commission calls on Italy to strengthen fiscal sustainability by: Making the tax system more growth-friendly; Further tackling tax evasion; Reducing the labour tax wedge and harmful tax expenditures, including those related to VAT and environmentally damaging subsidies; Updating cadastral values as part of a broader housing policy reform; Enhancing the efficiency and effectiveness of public spending.
Italy is also urged to increase defense spending and operational readiness, in line with the conclusions of the March 6, 2025 European Council.
In a related analysis, the Commission flags Italy among the EU countries most exposed to climate risks, with high annual costs from climate-related damage to infrastructure. Small and medium-sized enterprises (SMEs) are noted as particularly vulnerable, with climate events significantly affecting their productivity and competitiveness.