2018年-PIIE彼得森国际经济研究所_impact-italys-draft-budget-growth-and-fiscal-solvency_19页_478kb

Summary of the Policy Brief: Impact of Italy's Draft Budget on Growth and Fiscal Solvency

Core Content

This policy brief analyzes the impact of Italy's 2019 Draft Budgetary Plan (DBP) on economic growth and fiscal solvency. It discusses the tension between the Italian government and the European Commission over the fiscal policy of the new government, which aims to increase the public deficit to boost social spending, despite Italy's already high debt-to-GDP ratio of over 130 percent. The brief concludes that while the budget may not significantly boost growth, it does not necessarily lead to an immediate crisis, provided that the government manages its fiscal and monetary conditions carefully.

Main Viewpoints

• Fiscal Deficit and EU Rules: The new government's budget increases the structural deficit, violating EU fiscal rules. The European Commission has deemed the 2019 DBP unacceptable.
• Debt Sustainability: The proposed budget may not significantly reduce the debt ratio in the short term, but with high assumed growth, the debt-to-GDP ratio is expected to remain stable over the next three years.
• Investor Reaction: The budget has caused a significant rise in Italian bond spreads over German bunds, raising concerns about future borrowing costs and investment conditions.
• Growth Impact: The fiscal expansion may have limited or negative effects on growth due to contractionary effects on private investment and borrowing conditions.
• Fiscal Multiplier: The fiscal multiplier for the planned expansion is estimated to be between 0.4 and 2, with a best guess of around 1.5, indicating a moderate to limited impact on growth.

Key Information

Budget Plan Overview

• The new government's fiscal plan replaces the previous Stability Programme's modest fiscal tightening with a structural fiscal loosening.
• The structural deficit is expected to increase by 0.8 percent of GDP in 2019, with no further tightening in 2020 and 2021.
• The budget includes several key measures:
  • Reddito di Cittadinanza (RdC): A citizenship income and pension program with a net cost of 0.37 percent of GDP in 2019, decreasing slightly over the next two years.
  • Quota 100: A pension reform allowing early retirement, expected to cost 0.37 percent of GDP annually.
  • Public Investment: Additional funding for public investment at the national and local levels, estimated at 0.19 percent in 2019 and increasing to 0.34 percent in 2021.
  • Flat Tax Reforms: A 15 percent flat tax on self-employed individuals up to €65,000, and a 20 percent tax on those earning between €65,000 and €100,000, expected to cost 0.02 percent in 2019, rising to 0.13 percent in 2021.
  • Tax Reforms and Savings: Measures such as the repeal of business tax harmonization and simplification of taxation are expected to save 0.11 percent of GDP in 2019, decreasing to 0.06 percent in 2021.

Macroeconomic Impact

• Aggregate Demand Effects: The budget is expected to have an expansionary effect on aggregate demand through increased public spending.
• Multiplier Estimates: Based on academic studies, the fiscal multiplier for the planned expansion is estimated to be around 1.5, suggesting a modest growth impact.
• Interest Rate Effects: The increase in bond spreads has already raised borrowing costs for businesses and households, with further tightening expected.
• Investor Confidence: The rise in spreads reflects investor concerns about fiscal policy and the government's ability to manage its debt.

Supply-Side Effects

• Redistribution: The budget aims to redistribute income to the poor, unemployed, and self-employed, but at the expense of the young, future taxpayers, and larger businesses.
• Labor Market Impact: The RdC and the "quota 100" pension reform may have adverse effects on employment and labor force participation, especially in southern Italy.
• Public Investment: While the budget includes additional public investment, its effectiveness is questionable due to institutional inefficiencies in Italy.
• Taxation: The flat tax reforms may not significantly improve the business environment, as they are unlikely to address the structural issue of small businesses in Italy.

Conclusion

The brief concludes with two main points:

1. Pessimistic Outlook: The increased deficit is unlikely to boost growth and may even reduce it due to contractionary effects on private investment and borrowing conditions.
2. Optimistic Outlook: With high growth assumptions and stable spreads, the debt ratio may remain roughly stable over the next three years. However, further doubts or budgetary slippages could lead to unmanageable spreads and a potential crisis.

The government is advised to consider a more fiscally neutral approach to achieve its social objectives without jeopardizing fiscal sustainability.