Milan – Italy’s populist coalition has submitted its draft 2019 budget to the European Commission, forecasting an increase in the public deficit to 2.4 percent of gross domestic product.
The increase is essentially due to what the government calls its “people’s budget“, a series of spending, pension and tax changes that will cost 37 billion euros ($43 billion), of which 22 billion will be paid for by expanding the deficit.
Here are the main points:
– Pension reform –
The budget modifies the previous Fornero pension law to make it easier to retire earlier.
It introduces the “100 quota”: a state pension if the number of years of contributions paid plus age equals 100.
Around 400,000 people will then be able to retire at 62, having worked at least 38 years. The law currently sets retirement at 65.
Women will still be able to retire at 58 if employed and at 59 if self-employed, provided they have worked for 35 years.
The reform will come into effect in February and cost seven billion euros in 2019, according to far-right Deputy Prime Minister Matteo Salvini of the League party.
The government hopes that more people retiring will provide more jobs for the young, with unemployment for those aged 15-34 at nearly 20 percent.
– Citizen’s income –
The budget also provides for a universal basic income, the populist Five Star Movement’s (M5S) main campaign promise.
The monthly payment of 780 euros will be made to the least well-off and hopes to help people get back on the job market.
It is only for Italians or foreigners who have been legally resident for at least five years.
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The budget also provides for a “citizen’s pension” which raises the minimum pension to 780 euros a month, “returning dignity to pensioners”, according to M5S leader Luigi Di Maio.
The two measures will affect around 6 million people and cost nine billion euros, with another billion euros to be spent on improving job centres.
– Tax amnesty –
The two ruling parties agreed to a tax amnesty after a heated debate, with the anti-establishment M5S having felt such a measure would favour the rich and be against its ideals.
It will affect anyone who has not paid, declared or under-declared taxes. The treasury expects to reap 2.2 billion euros from people thus putting their books in order in 2019.
– Tax reform –
A flat-rate tax of 15 percent will be applied to more than one million self-employed and artisans with a turnover of under 65,000 euros.
– Bank victims fund –
A 1.5-billion euro fund will be created to compensate small investors who have lost money because of bank bankruptcy or mismanagement.
– Public investments –
Technocrat Prime Minister Giuseppe Conte plans to invest another 15 billion euros in “the biggest Italian public investment plan ever” over the next three years, on top of 38 billion already planned over the next 15 years.
– No VAT hike –
The previous budget set an automatic increase in Value Added Tax, considered a tax on the poor.
The government will cancel the automatic hike, slashing 12.5 billion euros in annual revenue.
– Lower spending –
The budget will slash the cost of running ministries by 500 million euros a year and reduce spending on managing and housing migrants by the same figure.
So-called “golden” pensions of over 4,500 euros net a month will be reduced, saving the government around 330 million euros a year, according to M5S sources.
The government will also raise taxes on gambling and increase privatisations, generating 640 million euros next year.
By Céline Cornu